31 Aug 2021 / Article

Insurance: meeting the challenges of Africa’s insurance market

Despite growth in revenue, the insurance sector struggles to woo African customers. Market segmentation, digitisation and government involvement are but some of the ways to develop this key sector for structuring Africa’s economies.


Despite revenue climbing steadily since 2015, with a 7.5% annual increase recorded by the association of African national insurance companies (FANAF) across its zone, the insurance sector struggles to win new customers on the continent. South Africa is still the only mature market in sub-Saharan Africa. “Aside from the scale of its economy and its relatively high income per capita, uptake in South Africa can be explained by the non-provision of a state pension. This leaves people no alternative but the private sector”, pointed out Junior Ngulube, former vice chairman of Sanlam Pan Africa and panel member at the Africa Financial Industry Summit held last March, which was attended by several leaders in the insurance sector. “Though average income per capita in other African countries is still far lower than that of South Africa, it is nevertheless growing quickly and represents a huge potential market,” Mr Ngulube added.

Why then are so few consumers interested in insurance? Rashidat Adebisi, chief client officer at AXA Mansard Insurance in Nigeria, suggested to her colleagues that the question should be put differently: “We should be asking, ‘Why is insurance of such little interest to consumers?’. African customers were quick to embrace mobile phones and new digital solutions. The problem therefore stems from us and the answer, I believe, is pretty straightforward: methods used by insurance firms are too detached and out of date to win over loyal customers.”

Costly internal barriers for insurers

One of the chief factors hampering penetration on the continent appears to be the marketing language used by insurance companies, which is ill-adapted to the African context. “Consumers feel uneasy because the language used by insurance companies is unclear and lacks transparency” said Souleymane Gning, CEO of Assuraf, a Senegalese aggregate insurance platform (also called assurtech). “Firms have done little to make themselves comprehensible and explicit for customers. This lack of clarity gives rise to numerous disputes when policy holders claim compensation. Very often they have misunderstood the subscription and are under the false impression that their insurance covers certain risks. They then feel betrayed by the company, which in turn tarnishes the sector’s reputation”.

The problem of language is compounded by the price. More than half the targeted population lives below the poverty line and the corresponding insurance offer is not consistent with their income. “Companies can only cater for this population by tailoring products to their context and standard of living and by marketing them differently” said Souleymane Gning. “Micro-insurance provides a possible solution. Technology could also be a useful means to develop integrated insurance services into products consumed on a daily basis”.

Lastly, restricted access also acts as a barrier. Despite the multi-channel distribution of its services, the insurance sector needs to keep pace with the digital world where it has been lagging far behind. Not only would up-to-date online services reach a population that is increasingly connected to social media and new platforms, but digitisation would make branches operate with greater efficiency and accuracy. “In terms of interaction, our major competitors are companies such as Airbnb and Uber, which provide services in a couple of clicks”, said Junior Ngulube. “If we continue with our poorly interactive websites, we will never be competitive in this segment”.


Putting the customer back at the core

“The need to analyse customer requirements and sticking points and set up tailored solutions is urgent,” said Tijsbert Creemers, director and partner at Boston Consulting Group. “Broadly speaking, company executives must rethink insurance in Africa and put the customer at the core of their reflection. Crucially, this approach requires understanding context, trends in consumption and cultural differences. Copy and paste solutions must be avoided at all cost.” Rashidat Adebisi also stressed this point: “The ecosystem in which these people live and the corresponding proposal of an insurance offer has not been efficiently analysed. Focus has concentrated on the affluent who can easily afford insurance instead of the low-income populations with a real need for coverage.”

The sector must adopt a different approach to marketing. “We need to redefine our market segmentation, which will enable us to provide the services our customers require,” explained Rashidat Adebisi. “We can also build up interaction with customers through added value services, such as information sharing, birthday greetings, and other initiatives that bring us closer together.” For her, this new approach must unquestionably involve a “financial literacy” phase to educate people about different financial services and their significance.


Little government involvement

Corneille Karekezi, CEO of the Africa Re reinsurance company, believes that governments also have a pivotal role to play. “Finance ministers don’t do enough! The insurance sector is neglected compared to other sectors. Developing insurance services should be a priority for any government so it can share the financial burden in times of catastrophe. Moreover, African states should use insurance companies to cover their populations through mechanisms, such as insurance subsidies. All this helps promote the idea of insurance among populations.”

The absence of any social security protection in many African countries points to the colossal task ahead, which is of course incumbent on public authorities. “Government regulators can also educate populations about financial services by making it mandatory to subscribe to certain insurance products, as is the case in Europe. They would then be responsible for overseeing compensation in the event of incidents relating to policy holders. Public authorities could also contribute to developing the sector as partners, particularly by providing companies with data and statistics, which would enable them to refine their products”, said Souleyman Gning. But insurance companies have no say in such matters, though some lobbying might move things in the right direction.



Read more

21 Oct 2021 / Article

How Africa can win in the era of protectionism and trade wars

02 Jul 2021 / Article

The secret to growing Africa’s mobile money market

09 Apr 2019 / Report

Expert presentation : Can the rise of regional markets spark agro-industry competitiveness?