African insurance penetration drops on falling income, low technology adoption

The falling income of average citizens in Africa, poor technology adoption and infrastructural challenges are major factors causing poor penetration of insurance.

According to industry authority, increasing level of poverty across the continent makes people focus on basic needs of survival with little or no attention to uptake of insurance.

This according to them were major reasons for drop in insurance penetration in the continent, from 2.78 percent in 2019 to 2.0 percent in 2020, whereas the global industry recorded improved growth from 7.20 percent in 2019 to 7.40 percent in 2020.

Tope Smart, president, African Insurance Organisation (AIO) attributed the low insurance penetration to low income, low awareness level, failure to embrace digital technology, high level of financial exclusion, lack of infrastructural & distribution channels, lack of domestic skills and a shortage of data, even as insurers also battle brain drain.

Smart, speaking at the Insurance Retreat for Africa, organised by the Government of Zanzibar at the Madinat el Bahr, Zanzibar stated that regulators are not keeping pace with innovation, as timing and implementation of regulatory changes need improved reasonably.

He also stressed the lack of consumer trust, stating that presence of weak companies erode trust; pricing and other market related issues, culture related issues, fragmentation and over competition were hindrances to the insurance penetration on the continent.

He noted that while in 2019 the global average penetration rate was 7.20 percent that of Africa was 2.78 percent. In 2020, while the global average went up to 7.40 percent, that of Africa came down significantly to about 2 percent.

Smart charged relevant stakeholders to address these barriers in a bid to galvanise insurance sector in Africa to a level comparable to other regions in the world.

Read also: NAICOM clears telcos, others as insurance distributors

“If the issues highlighted are critically addressed, the result will lead to a significant growth of the insurance sector. It is also important to mention that the underlying economic growth forms the most important catalyst for growth and good enough, the outlook for GDP growth is strong across markets,” he pointed out.

The coming up of the African Continental Free Trade Area (AFCFTA), an initiative of the African Union, he said, is a game changer for the Insurance sector.

Since Insurance plays a major role in the economic development of the continent, he said, the expected increase in intra-African trade through AFCFTA would lead to higher insurance penetration across the region.

To him, “the potential to increase life insurance growth is noteworthy. “In many markets apart from South Africa, non-life represents at least 65 percent of total premium income with even some up to 85 percent (Tanzania & Uganda). Given this scenario, the potential opportunity to expand life insurance is very great.”

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