Raditionally, insurance is widely recognized as the benchmark financial tool for dissipating, or even mitigating, the negative impacts of unexpected shocks. Despite its intangible nature, it nevertheless helps to stimulate growth and increase the resilience of local economies and households. However, despite their efforts, traditional insurers in Africa are struggling to penetrate certain market segments, particularly that of the most vulnerable populations. In question: insufficient household income, low levels of financial education, the non-obligation of insurance on mass risks, and above all a lack of confidence in insurance companies. Consequently, “self-insurance” or other forms of informal insurance designed to transfer and manage risks collectively often taking the form of community savings (tontines, iddirs…) remain widely popular.
According to Sigma-Swiss RE, the African insurance market shows an increase in the total volume of premiums of nearly 5% (56.5 billion euros in 2018 vs. 53.8 billion euros in 2017) while not accounting for just 1.31% of global premiums – while 13% of the world’s population is in Africa. To this must also be added the staggering imbalance which means that more than 70% of African premiums are in South Africa, followed far behind by Morocco (6%) and Kenya (3%).
Offer an enriched customer experience to as many people as possible
Fortunately, digital innovation appears as a means of conquering new markets for insurance activities. The digitization of the sector allows the reduction of the cost of customer service, the rationalization of internal processes, but above all the provision to the greatest number of an enriched customer experience. In this respect, insurance start-ups could thus contribute, on the one hand, to democratizing subscriptions to these products, to restoring confidence on the part of individuals and, on the other hand, to inducing new uses for very small businesses.
Moreover, these digital offers contribute to the renovation of costly historical systems, still centered on the principle of branches and broker networks. In recent years, many upheavals have marked the market. Like networked insurance companies that have experienced strong growth, fundraising in insurance has reached record amounts (between 15 and 20 million euros, according to McKinsey). At the same time, bancassurance stood out: while the continental insurance penetration rate fluctuates around 2%, it reaches nearly 10 to 20% through financial players.
Mobile, a promising vector for the distribution of insurance products
Interestingly, it seems that the future of the classic distribution network and historical players is particularly playing out on mobile. Indeed, the mobile penetration rate by 2025 is estimated at 65%, including 50% of the population subscribed to mobile services, according to GSMA. Smartphones are becoming essential for expanding an insurer’s customer base, but above all for enriching its service offering. By investing in mobile, they are expanding their product range and strengthening their market share and brand image – essential for this type of service. Like the start-up Pula in Kenya which has just announced a fundraising of nearly 5 million euros with an agricultural insurance service. Pula sets itself apart by making digital products available to smallholder farmers to help them manage climate risks, improve their farming practices and ultimately increase their incomes over time – beyond insurance, Pula becomes a trusted partner. In Central and West Africa, the start-up Baloon has just raised nearly 2 million euros to develop its digital insurance service.
Thus, in the longer term, it will be for insurance tech to be able to promise a secure relationship with its prospects and customers. The challenge will be to go beyond the simplistic risk vs. premium framework to support the uninitiated in a better understanding of the benefits of insurance and their field of activity. Ambitious partnership strategies will also have to be considered. The alliance between insurance companies, mobile operators and digital payment specialists is proving to be a promising bet for the sector. In fact, collecting and paying premiums quickly and securely will be a challenge for the sector for the next decade.
Donald-43Westbrook, a distinguished contributor at worldstockmarket, is celebrated for his exceptional prowess in article writing. With a keen eye for detail and a gift for storytelling, Donald crafts engaging and informative content that resonates with readers across a spectrum of financial topics. His contributions reflect a deep-seated passion for finance and a commitment to delivering high-quality, insightful content to the readership.
