Highlighting Growth Drivers For African Insurance Markets
AIO President, Tope Smart
African Insurance Markets need a clear direction to maximize their potential and accelerate growth; in this article, EDET UDOH highlights the core Mandate of the Establishment of African Insurance organizations (AIO) as a foundation for insurance growth in the continent and some key growth drivers.
The African Insurance Organisation (AIO) was established in 1972 as a non-governmental organization recognized by many African governments to become a centre of competence and an advocate for the needs of the African insurance industry, especially in information and knowledge sharing.
Since then, and in order to achieve this mandate, AIO conducted a comprehensive study to better understand and align with the expectations of its members, the AIO members and non-members see the organization as the natural body that represents the African insurance sector.
The body is also mandated to drive insurance penetration and market growth through strategic initiatives such as advocacy, research, training, event, reputation management and capacity building.
Findings have shown that Africa as an emerging market with a lot of potential in terms of population and demographics is still lagging behind and yet to take advantage of the potential to maximize its growth and change the narrative, especially in the area of insurance acceptance and penetration whereby penetration rate in some countries is abysmally low.
Experts who spoke to this medium on how to accelerate growth in Africa Insurance Markets include the Secretary-General, African Insurance Organisation (AIO), Jean Baptiste Ntukamazina; Regional Communications Officer, Allianz Africa, Sara Benazouz; the Managing Director, Allianz Nigeria, Adeolu Adewumi-Zer; the Managing Director, AfriGlobal Insurance Brokers Limited, Casmir Azubuike; Assistant General Manager, Sales and Corporate Communications, Sovereign Trust Insurance Plc, Segun Bankole and the former President, Independent Shareholders Association of Nigeria (ISAN), Chief Sunny Nwosu.
They suggested amongst others that African insurance companies should increase access through digital innovation and disruption; accelerate growth through competition; push for strong partnerships with fintech and mobile money; use regulatory supervision to get to consolidation; ensure long-term growth prospects through Pan-Africanization; develop agriculture insurance and climate risks insurance amongst others.
They believe that the digitization of Africa insurance markets will enhance the appeal and affordability of risk transfer products in Africa. They are also of the belief that underwriting and risk management will benefit from improved access to data and analytics and at the same time, technology will help streamline the insurance value chain and enhance the efficiency of administrative processes.
Increasing access through digital innovation:
The main factors promoting digitization are the increasing mobile phone penetration, a large number of young people, a growing middle class and compulsory insurance schemes. Although there is a strong consensus that digitization will boost insurance sales, insurers are still cautious as to when these effects will materialize.
In general, to enable digitization to achieve the intended goals, we must start with a fundamental aspect of simplifying before digitizing. This is needed to reduce the complexity of processes and products to offer our customers, a unique and optimal customer experience, wherever they are.
Accelerating growth through competition, innovation, and disruption:
Competition among players has already led to significant innovation and disruption in the African insurance market, with insurers leveraging technology to target specific segments or services and cut costs. Innovative partnerships between insurers and online platforms are also becoming more commonplace. We expect this trend to accelerate. In some instances, African countries may even leapfrog more developed markets.
In East Africa, for example, Blue Wave in Kenya is servicing the mass market, making microinsurance products accessible via mobile phone. Founded in 2019 with $300 thousand in seed funding, Blue Wave generates revenue by collecting administration fees from every subscriber and a commission from each premium. The company partners with insurers and aggregators such as mobile network operators, as well as banks and microfinance institutions, to sell its products. In the meantime, Insurtech platforms such as Bismart, WazInsure and Kakbima as well as Bimalab are connecting customers to insurers, providing services such as quote comparisons, direct sales, and the tracking of policies and claims. Other countries lagging behind in technology are expected to step up adoption in order to accelerate growth.
Improved regulatory supervision:
Several African governments are strengthening regulatory and capital requirements of insurance companies to ensure their solvency and sustainability. This is expected to help create stronger and larger companies as well as boost job creation and capability building in the industry. Such reforms are also crucial to building consumer trust and public awareness, which lay the groundwork for governments to achieve a transformation agenda. It is time that other African countries improve their regulatory framework and supervisory strategies.
Long-term growth prospects through Pan-Africanization:
While regional players will possibly benefit from greater integration as a result of expansion, for international players, the primary goal is to capture long-term growth. Sanlam, for example, has, through the purchase of Saham, gained a foothold in more than half of all African countries, and a top-five position in six markets outside of South Africa, while Allianz has made acquisitions in Morocco, Nigeria, and, more recently, Kenya. French multinational AXA has a presence in nine African countries, while Old Mutual has a presence in 13 African markets.
The African insurance sector is ideally positioned to provide immediate solutions, such as trade credit insurance, a financial instrument that helps African companies export to high-risk markets within Africa to be able to benefit from the opportunities of the Africa Continental Free Trade Area (AfCFTA). African Insurance sector is in it, providing security, economic and financial stability and enabling the development of societies and economies in Africa through its risk expertise and risk transfer solutions.
The AIO can explore opportunities to collaborate with national governments in improving financial literacy and inclusion for rural dwellers. The body will as well be a platform for cross-pollination of ideas between operators and regulators, together with strategic partnerships.
Agriculture insurance and Climate risks insurance:
There is an increasing need to invest in agriculture given its importance for food security, especially in view of the increase in global population. Indeed, agriculture production makes up a substantial portion of the continent’s GDP, yet only a small portion of the producers are insured – the smallholder famers’ segment. Agriculture insurance plays an important role in sustaining agricultural production, making the farmers bankable, contributing to employment, curbing rural-urban migration and building overall resilience of the farming sector and the whole value chain.
In an interview, the AIO President, Tope Smart, said his administration is working assiduously to actualize its agenda of increased awareness; adoption of digitalization; collaboration with other markets; collaboration with government and regulators and building customers trust.
Smart who emphasized the need for unity amongst the players in the continent said, “We need to bridge this gap by addressing all the challenges confronting us as a sector in Africa. With determination and commitment, we can do this.”
While calling on African insurers to renew their trust in AIO executives, he expressed optimism for better African insurance industry in the years to come, stating that the insurance industry is growing bigger, stronger, and more resilient. “Together, we are working on several projects which we believe will bring us closer and make us stronger and better,” he added.
Driving Growth, Ensuring Returns on Investment
According to former President, ISAN, Chief Sunny Nwosu, “There is no doubt that leading an organization such as AIO is a herculean task, therefore the President of AIO is expected to work in close partnership with the various blocs and all the stakeholders in all the markets in the continent; he must give a listening hear to all views and opinions as would be expressed by the different segments of the various markets to bring them together to ensure they work for the achievement of the objectives of the Pan-African body.
Also, apart from attempting to ensure the implementation of his administration’s plans, the president must not forget the core mandate of the establishment of AIO even as he must work assiduously to meet the expectations of the insurance players and other stakeholders, which is to drive growth and ensure returns on investment.
