A report by management consulting company McKinsey & Company reveals that there is hope for the African insurance industry, valuing it at $68 billion.
The report stated titled, ‘Africa’s insurance market is set for takeoff’, stated that although the pandemic slowed the expected growth in the industry, it does not “alter the pattern and potential of future growth”.
It added that when the continent’s peculiarities are taken into consideration, combined with a strategic approach and a colloboration of regulators, there could be a burst of significant value unlocked in the industry.
The report also stated that the industry’s “immaturity’ points to a “significant scope for growth” in the sector.
South Africa, according to the report makes up for over 70 percent of African insurance’s premiums.
Adding that 54 percent of premiums in South Africa are for life insurance, while non-life insurance takes the bulk in the industry in West, North, and East Africa.
The report stated, “However, this impact is expected to delay rather than alter the pattern and potential of future growth. And in some cases, the crisis may accelerate existing trends—notably the shift toward digital and remote channels, which has the potential to offer new opportunities to both insurers and consumers.
“We believe that a strategic approach that takes into account the unique characteristics of African markets and looks to collaborate with regulators to drive reform and safeguard consumers could unlock significant value not just for industry players but for society more broadly at this critical time.
“The African insurance market’s immaturity points to significant scope for growth Africa’s insurance industry is valued at about $68 billion in terms of GWP and is the eighth largest in the world—although this is not equally distributed across the continent.
“In the Southern Africa region, 54 percent of premiums are for life insurance. Non-life insurance, however, plays a larger role in Anglophone West Africa, North Africa, East Africa, and even more so in francophone Africa.
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“The level of maturity in these six regions is low, relative to global reference countries, as measured by insurance density (premium per capita).
“While most African countries have experienced double-digit insurance growth in CAGR in local currency over the last five years, this has mostly been driven by economic growth, rather than deepening market penetration.”
It stated that the Pension Reform Act of 2014 created a paradigm shift in the insurance industry in the country, benefiting both consumers and the insurance industry alike.
“In 2018, oil and gas insurance and marine and aviation insurance accounted for 34 per cent and 11 per cent, respectively, of nonlife gross premiums in that country. In Ghana, the Ghana Oil and Gas Insurance Pool (GOGIP) almost doubled from $25 million in 2016 to $48 million in 2019 and represents approximately 15 percent of total nonlife premiums in that country.
“Insurance in Africa is on the move, and several trends show promise for the sector. Our analysis highlights five that will be pivotal in determining how the sector evolves in a post-pandemic world.
“And where penetration is occurring, it is mostly accompanied by structural reforms. Market liberalisation and deregulation, the enforcement of compulsory insurance, increased access through wider distribution, public–private partnerships, and regulation to support innovation and access have all been shown to build consumer trust and develop more resilient insurance industries with better-protected populations in comparable markets.
“And the Pension Reform Act of 2014 in Nigeria has benefited both consumers and the insurance industry alike, leading to a 70 percent growth in the sale of pension products in that country between 2012 and 2017.
“The shift to digital channels in Africa is well underway, and with that comes greater expectations of service delivery. While we are seeing a number of insurers starting to digitise customer journeys, significant opportunities still exist to accelerate this in many markets.
“The COVID-19 pandemic has accelerated this trend, by driving demand for digital and remote channels, and we expect this to continue beyond the crisis,” it stated.
