Overview of Insurance and Insurtech in Africa by Richie Santosdiaz for The Fintech Times
Fintech Insurtech Middle East & Africa Weekend read

Overview of Insurance and Insurtech in Africa

The Middle East and Africa (MEA) region offers a strong potential in insurance and, specifically insurtech. The Fintech Times looks at the African continent in particular with regards to its insurance market.

An overview of the insurance industry was highlighted in the recent report from The Fintech Times, Fintech: Middle East and Africa 2021 Report, where it discussed various facts in the current state of the continent that is home to over 1.3 billion people.

Africa Is uninsured but has potential to grow  

First, Africa is generally less developed than more advanced economies (it is home to some of the world’s poorest countries) and this is reflected in the insurance industry where penetration is some of the world’s lowest. It is also home to a young population as well. For instance, even though Nigeria has an active and emerging fintech scene, the country’s insurance penetration is a lowly 0.4 per cent. Indeed, for much of Africa generally, a combination of factors – from the low income of customers to the large unbanked sector – has resulted in relatively low insurance levels. The report highlighted this, which originally was researched by a report from Deloitte.

The continent has a potential insurance market value of $68billion in terms of gross written premiums, which would put it at the eighth largest in the world. This was originally researched from a report from McKinsey. However, this is not consistent throughout the continent and is heavily concentrated in one country – South Africa. The country in the report says that around 80 per cent of the premiums of Africa are held just there. The remaining is dominated by six “primary insurance regions in Africa”: French-speaking Francophone Africa, English-speaking Anglophone West Africa, Southern Africa, North Africa, East Africa, and Angola.

South Africa has the largest in Africa, as well as one of the world's largest, rate of insurance penetration
South Africa has the largest in Africa, as well as one of the world’s largest, rate of insurance penetration IMAGE SOURCE GETTY

The $68 billion market for Africa if comparing it to other emerging regions shows the potential growth the continent can have, in addition to it being fragmented at present in particular with South Africa. For instance, a report by Swiss RE  highlighted that Latin America and the Caribbean’s insurance market to be at $157 billion in 2019, while Asia (not counting China) had a nearly $200 billion market ($194 billion) in 2019.

South Africa has one of the world’s highest penetration rates of insurance, accounting for an estimated 80 per cent of the continent’s total gross premiums. In Sub-Saharan Africa, South Africa, where its penetration represented 13.8 per cent of gross domestic product in 2017, was followed in second by Namibia at 7.6 per cent of GDP while Kenya ranked third at 2.6 per cent of GDP the same year.

Despite the high penetration in South Africa, it is still pretty much uninsured. For instance, if one looks at individual product penetration, such as auto insurance, only 35 per cent of cars in the country are covered.

To note, the McKinsey report highlights that the growth in Africa’s insurance sector is being driven primarily by economic development and growth rather than deepening market penetration. The exceptions are Morocco and Ghana, with the ladder’s matching to its current GDP while the former’s growth being driven through agent networks.

The continent does have its own local health insurance providers and multinational ones

In terms of insurance companies as a whole, when looking at the wider MEA region, Africa is home to home-grown insurance firms. These include (mainly in South Africa) the likes of Old Mutual, Liberty Holdings, and Momentum Metropolitan Life Assurance, as well as Morocco’s RMA and Wafa Assurance.

Other global providers such as American-headquartered Cigna, which according to its website via its Cigna Africa subsidiary have been servicing more than 200,000 members in Africa. They have a solid infrastructure in place that includes local case managers in South Africa and Kenya, a new office in Kenya and an outpatient direct payment network with local health care providers.

Various non-African and also African-headquartered insurance companies cater to the wider African continent; insurtech looks to help further digitalise and help serve the uninsured
Various non-African and also African-headquartered insurance companies cater to the wider African continent; insurtech looks to help further digitalise and help serve the uninsured IMAGE SOURCE GETTY

Another multinational insurance firm in Africa is Munich, Germany headquartered Allianz, via their Allianz Africa subsidiary, that is present across 12 African countries such as Nigeria, South Africa, Egypt, Morocco and Kenya, and has been established in the region since 1912, according to its website.

French multinational AXA also has a presence in Africa, such as in Egypt, Nigeria, Algeria, Morocco – to name a few according to its website.

There are also other companies such as American multinational Metlife that cater to parts of Africa via hubs such as Dubai, United Arab Emirates (UAE). Dubai, the commercial hub of the UAE generally is home to around two-thirds of global Fortune 500 multinational regional MEA hubs.

Insuretech can help fill the gap

This is where fintech innovations have been able to help. Not unique to South Africa but insurtech solutions can help customers directly by price comparing various products that otherwise would have been difficult to do.

A combination of the still large proportion of Africans uninsured overall coupled with the overall digital transformation happening global (even before pre-COVID-19 times) gives a young population such as the African continent the chance to see its own digital insurance transformation.

First, insurtech can and is being developed to help those who are not able to access insurance at all. For instance, Kenya-based PULA won the “InsureTech of the Year” award at the recent African Insurance Awards. The company helps access insurance easily particularly for smallholder farmers and during its growth has seen it partner with the World Food Programme to insure 3.5 million farmers across 10 African countries. Similar to the unbanked with what other wider fintech solutions are helping, particularly noticeable in the MEA region, insuretech will see much more of this in the continent.

Second, the overall digital transformation which is also happening in the insurance industry, hence the term insurtech, has been clear and has huge potential in Africa as well. For instance, The Mauritius Union Assurance (MUA) won the “Insurance Company of the Year” at the African Insurance Awards via its own digital transformation of its services and client centric services and growth over the last three years. MUA is one of many in the continent that are also digitally transforming the way insurance is done in the continent – as is the trend globally.

At present, a sizeable proportion of insurtech startups in Africa are in the microinsurance & digital brokerage sector. Many that are also growing include in the B2B data analytics, ancillary revenues & insurance add ons to small and medium enterprises (SMEs), and vertical SaaS solutions. Examples of insurtechs include Egypt’s Amanleek and ClickMare, Ghana’s WorldCover, Kenya’s Bismart and InsureAfrika, Nigeria’s Airtel, and South Africa’s CompareGuru and Naked Insurance. To highlight, all those countries were also ranked as tier-two emerging fintech hubs in the recent Fintech: Middle East and Africa 2021 report.

Globally as a whole, global insurtech market revenue was estimated to be valued at $5.48 billion in 2019 and is expected to reach $10.14 billion by 2025, growing at a compound annual growth rate (CAGR) of 10.80% during the period 2019-2025. North America is the largest market globally for insurtech and the Asia-Pacific region, at present, shows the fastest growth.

With the overall growth of not only insurance but in particular insurtech, Africa’s young and uninsured population can see potential growth.

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