Africa’s insurance industry is undergoing a period of significant disruption, with insurtech companies leading the way. These innovative startups are leveraging technology to improve customer experiences, increase efficiency, and offer new types of insurance products.
According to a new report by Deloitte, digital innovation holds great potential for insurance providers to achieve growth and to develop new business models and services that are geared towards unlocking the bottom-of-the-pyramid (BoP) insurance market. The report states that digital plays an important role in product design, product distribution and service delivery in the insurance industry. It can speed up the time to market for new products, reduce the cost of the service and unlock markets which were previously perceived to be unviable.
The report also highlights the need for organisations to shape their business culture to fully leverage digital technologies and to unlock new opportunities. It cites examples of successful digital initiatives in Africa’s insurance industry, such as mobile microinsurance, peer-to-peer insurance, and blockchain-based smart contracts.
Another report by Brookings argues that increased penetration rates for insurance throughout African markets are directly connected to Africa’s overall development. The report shows that insurance can have positive effects on growth through six mechanisms: improving financial stability for businesses and households; mobilizing savings for public and private investment; reducing pressure on the government to provide public goods such as pensions; encouraging trade and entrepreneurship; mitigating risks and enhanced diversification; and improving social living standards.
The report also suggests that insurance premium thresholds are associated with positive economic growth in Africa. It notes that Rwanda’s Universal Health Coverage (UHC) scheme, which increased enrollment and utilization of health facilities, is an example of how insurance can improve social outcomes.
However, despite these advantages, Africa’s aggregate insurance penetration rate in 2019 was only 2.78 percent, compared to the global average insurance penetration rate of 7.23 percent. This indicates that there is still a huge untapped potential for insurance growth in the continent.
A recent article by McKinsey predicts that Africa’s insurance market is set for takeoff, driven by rising incomes, urbanization, and demographic changes. The article states that competition among players has already led to significant innovation and disruption in the African insurance market, with insurers leveraging technology to target specific segments or services and cut costs. Innovative partnerships between insurers and online platforms are also becoming more commonplace. The article expects this trend to accelerate and recommends that insurers focus on customer-centricity, operational excellence, and digital transformation to succeed in the African market.
The article also mentions some of the challenges that insurers face in Africa, such as low awareness, regulatory barriers, and fraud. It suggests that insurers should collaborate with regulators, industry associations, and other stakeholders to overcome these hurdles and create a conducive environment for insurance growth.
As the African insurance industry continues to evolve and innovate, it is expected to play a vital role in creating inclusive prosperity in the region. By providing protection and security to millions of people and businesses, insurance can help them cope with uncertainties and risks, and enable them to pursue their aspirations and opportunities.
Source: News Day
