The President of the African Insurance Organisation (AIO), Mr. Tope Smart, has expressed concerns over the drop in insurance penetration from 2.78 percent in 2019 to two percent in 2020.
Mr. Smart spoke at the insurance retreat for Africa organiZed by the government of Zanzibar at Madinat el Bahr, Zanzibar recently.
“In 2019, while the global average penetration rate was 7.20 percent, that of Africa was 2.78 percent. In the year 2020, while the global average went up to 7.40 percent, that of Africa came down significantly to about two percent. This should be of great concern to us as a region,” he said.
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, shortage of data, and the challenge of brain drain facing insurers.
He said lack of consumer trust as the presence of weak companies eroded trust, pricing, and other market-related issues, cultural related issues, fragmentation, and over-competition were hindrances to the insurance penetration on the continent.
He urged relevant stakeholders to address such barriers to raise the insurance sector in Africa to a level comparable to other regions in the world.
Smart said, “If the issues highlighted are critically addressed, the result will lead to a 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.”
According to him, the African Continental Free Trade Area, an initiative of The African Union, is a game-changer for the insurance sector.
He said, “Since insurance plays a major role in the economic development of the continent, the expected increase in intra-African trade through AFCFTA would lead to higher insurance penetration across the region.
“The potential to increase life insurance growth is noteworthy. In many markets apart from South Africa, non-life represents at least 65 percent of total premium income, with even some up to 85 percent (Tanzania and Uganda). Given this scenario, the potential opportunity to expand life insurance is very great.”
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