By 2050 around 2.2 billion people it is forecasted will be added to the global population and more than half of that growth - 1.3 billion people - will occur in Africa, a new UN population report shows.
While Sub-Saharan Africa has the youngest population in the world poverty is, however, rife among its youths with more than 70% living on less than $2 USD per day.
It goes without saying therefore that insurance uptake in the continent is still very low compared to other regions yet as data has shown the continent is beset with numerous risks.
“Africa is indeed very characterised by its youth, which is an incredible source of innovation regarding the way of working, consuming and living. It is our collective responsibility to protect them and give them the future they deserve: this is part of the insurance role.” Vrolijk told Business Insider.
There is no doubt that Africa is blessed with immense resources and skills and with the right business environment the continent can blast off like a spaceship.
To get there, however, Vrolijk says insurance companies will need to expand from their traditional roles and take on more challenging but equally rewarding roles of shaping Africa’s future which he says is full of promise.
“Africa is a continent full of promises. To seize them, insurance companies have to intensify their investments into the local economic growth and need to better structure their activity. One of the biggest weaknesses in the insurance industry is the low trust that the populations have towards their insurer. We need collectively to have our customers trust that insurance acts as a security for the ones we love and the goods we own. The insurance sector will gain this trust again when all insurers have in-time and simple processes on paying premiums and collecting claims.” says Vrolijk.
With the growth of the middle-class, Insurance companies are guaranteed to have their doors open as more and more clients sign up for covers. This can only, however, happen if insurance companies fully endorse their double roles of protecting the individuals as well as investing in the economy.
“The banking and insurance sectors are expecting the emergence of the so-called middle-class to increase their penetration. In most countries, this expectation is not happening yet, with little economic dynamics of the middle class and the SMEs. This narrative can be changed, with insurance companies fully endorsing their double roles of protecting the individuals and investing in the economy, along with the action of the public authorities.”
Allianz Africa has a wide footprint on the continent from Morocco to Madagascar through West and East Africa. In all these markets there are almost as many local regulators, local partners, local business practices as Allianz Africa entities except for the Conférence Interafricaine des Marchés d'Assurances (CIMA) zone.
Africa is a continent, not a country and doing business in Sub-Saharan Africa is different in each respective market but there are also tons of similarities.
Regarding the lines of business, Africa (excluding South Africa) is mainly a property and casualty story.
“Motor and health are the main market drivers, for the individual as well as corporate policies, with strong potentialities still to be exploited. Still, micro and crop insurance are amongst the areas where insurers can leverage the huge potential in terms of coverage for the non-insured population,” says Vrolijk.
The continent also continues to witness an increase in minimum paid-in capital for insurance companies.
Regulatory requirements were recently modified in (CIMA) zone where local insurers must now obtain local regulatory approval to have more than 50% of a risk reinsured abroad. The amendment also expressly prohibits certain classes of business from being reinsured abroad.
Ghana and Rwanda have also since adopted the amendment while Nigeria has postponed it.
Vrolijk says these regulations, unfortunately, affect the small and medium-sized markets where the expected return on equity and the limited economic perspectives are too weak/low for international insurance groups to remain (pro-active) in those markets.
“Those regulations aim to concentrate the markets towards insurers with strong solvency and balance sheets/capacity. The capital requirements enable larger local retention and capacity on corporate risks and promote best practices among insurers.”
Another trend Africa is likely to witness soon is the creation of more climate change covers by insurance companies as the reality of global warming and climate change become more and more apparent.
Kenya, for instance, could soon introduce insurance cover against losses incurred by households due to disasters and weather-related events, which have been increasing due to climate change.
Last year, a new insurance scheme, the African and Asian Resilience in Disaster Insurance Scheme (ARDIS), was launched to help up to four million poor people in Africa and Asia deal with climate disasters.
The insurance scheme — covering droughts in Kenya, Malawi, Mali, Zambia and Cambodia, and tropical cyclones in Myanmar — provides support to women farmers and their families, with plans to expand to cover floods.
Mozambique, Zimbabwe and Malawi are still recovering from powerful cyclones up to 200 kilometres per hour and storm surge floods of up to 6 metres which battered the region last month, leaving a massive trail of destruction and deaths in its wake.
In total, more than 2.6 million people across southeast Africa have been affected by Cyclone Idai, one of the worst weather-related disasters recorded in the southern hemisphere.
Vrolijk says going forward insurance companies have no option but to rise to the occasion to mitigate this risk by developing climate-related covers.
“In this ambition, the insurance companies have to develop dedicated solutions through latest available technologies (e.g. droughts & flood prevention) to protect and to enable the non-urban population to grow their businesses.”
For many consumers across Sub-Saharan Africa, the mobile phone is not just a communication device but also acts as a vital tool to access various life-enhancing services. Mobile adoption in the region has grown rapidly in recent years: overall subscriber penetration in Sub-Saharan Africa reached 44% in 2017, up from just 25% at the start of this decade.
The trend is likely to continue with more and more insurance companies coming on board by tailoring their services to be easily consumed with the touch of a button.
“We foresee Digital to be a key channel to grow the insurance markets. Many initiatives are being piloted across the continent, with limited success so far in West & East Africa. There is a huge potential to be leveraged, with customers paying their premiums as well as filing their claims with payment, directly on mobile. To succeed, we as insurers have to first identify the channel specificities, to make the process it clearly understood and trusted by our customers. says Vrolijk.
