There are indications in the African insurance market that the access rate has dropped from 2.78 per cent in 2019 to two per cent in 2020.
This as the global average penetration rate was 7.20 per cent in 2019 and later increased to 7.40 per cent in 2020.
The president, African Insurance Organisation (AIO), Tope Smart, who spoke at the just-concluded Insurance Retreat for Africa, organised by the Government of Zanzibar and held at Madinat el Bahr, Zanzibar, said: “In 2019, while the global average penetration rate was 7.20 per cent that of Africa was 2.78 per cent. In the year 2020 while the global average went up to 7.40 per cent that of Africa came down significantly to about 2 per cent. According to him, this is a great concern to us as a region.”
He attributed the low insurance penetration on the continent to low income, low awareness level, failure to embrace digital technology, high level of financial exclusion, lack of infrastructural and distribution channels, lack of domestic skills and a shortage of data, even as insurers also battle brain drain.
Stating that regulators are not keeping pace with innovation, as timing and implementation of regulatory changes need to be looked into, he stressed that, lack of consumer trust as the presence of weak companies erode trust, pricing and other market-related issues, cultural related issues, fragmentation and over the competition, were hindrances to the insurance penetration on the continent.
He charged relevant stakeholders to address these barriers in a bid to galvanise the insurance sector in Africa to a level comparable to other regions in the world.
“If the issues highlighted are critically addressed, the result will lead to significant growth of the insurance sector. It is also important to mention that the underlying economic growth forms the most important catalyst for growth and good enough, the outlook for GDP growth is strong across markets,” he pointed out.
The coming up of the African Continental Free Trade Area (AFCFTA), an initiative of the African Union, he said, is a game-changer for the Insurance sector.
Since Insurance plays a major role in the economic development of the continent, he said, the expected increase in intra-African trade through AFCFTA will lead to higher insurance penetration across the region.
To him, “the potential to increase life insurance growth is noteworthy. In many markets apart from South Africa, non-life represents at least 65% of total premium income with even some up to 85% (Tanzania & Uganda). Given this scenario, the potential opportunity to expand life insurance is very great.”