Insurance in Africa – towards a more innovative sector ? A sector that has been growing steadily for several years, the African insurance market benefits from an environment that is conducive to its development. The digitization of the insurance industry is also highlighted in this context.

A market in full mutation

A sector that has been growing steadily for several years, the African insurance market benefits from an environment that is conducive to its development: with extremely strong growth possibilities throughout the continent, the insurance sector has significant room for improvement, mainly in the “retirement”, “individual health” and “life insurance” sectors. Recent regulatory requirements on the “solvency of local players” should also “contribute to the development of larger and stronger companies”, which presages several “promising trends”.

According to a December 2020 McKinsey study on insurance in Africa, the sector is “unevenly distributed” across the continent. Valued “at about $68 billion in premiums (GWP),” the insurance sector remains “highly disparate in terms of size, composition, growth and degree of consolidation, with 91% of premiums concentrated in just ten countries.” The study adds that the largest African market is South Africa, which accounts for “70% of total premiums.

With “double-digit average annual growth rates” for “most African countries,” the African insurance market has “immense development potential. Faced with this observation, several “trends” are highlighted by the McKinsey report. First of all, the emphasis is placed on “economic growth” and the implementation of “structural reforms” in African countries, considered to be conducive to the growth of the sector: “liberalization and deregulation of the market”, “implementation of compulsory insurance”, “facilitated access thanks to a wider distribution”, or the development of “public-private partnerships”. The study recommends that insurance companies “collaborate” with African governments to “shape” reform programs.

New technologies, the future of insurance?

Insurance in Africa – towards a more innovative sector?

Insurance in Africa, towards a more innovative sector? The digitization of the insurance industry is also highlighted by the study, which describes it as an “engine of growth”. To ensure this development, investments in digitalization are essential to “boost” the sector, a digitalization that has already seen a strong increase due to the Covid-19 pandemic. Finally, in the continuity of digitalization, a multiplication of “partnerships between traditional insurers” and “the world of Tech”, would allow the creation of a ground conducive to “innovations”, already motivated by the “competition between players”.

Insurance in Africa, towards a more innovative sector?

Offering connected and accessible services represents the new strategy of insurance on the continent. Thanks to digital innovation and the digitization of the sector, insurance activities will be able to allow “a reduction in the cost of service to customers”, “a rationalization of internal processes”, but “above all, the provision of an enriched customer experience to the greatest number”. Indeed, the challenge for insurance start-ups is to “democratize” subscriptions and “restore” the confidence of Africans towards the players. In addition, these new digital offers “contribute to the renovation of costly historical systems, still centered on the principle of branches and broker networks. For example, according to McKinsey, fundraising in the insurtech sector has reached “between 15 and 20 million euros”, “record amounts”.

The future of the insurance sector in Africa will be played out through the digital sector and more particularly through the mobile sector: on a continent where 660 million people have a smartphone, it is now essential to focus on digital innovations: “smartphones are becoming essential to expand an insurer’s customer base, but above all to enrich its service offering. By investing in cell phones, they are expanding their product range and reinforcing their market share and brand image – essential for this type of service.

Insurance in Africa: new risks, outdated recipes

To truly enter a sustainable growth trajectory, the African insurance industry needs to break out of the status quo culture by being agile. As is often the case in business, our insurers tend to reproduce the recipe that has always made them money. The problem is that this recipe has become outdated, even obsolete in the face of the transformations of the insurance industry.

However, despite these challenges, many insurance companies continue to rely on traditional recipes that have become obsolete. They need to rethink their business models to better adapt to rapidly changing customer needs and emerging risks. Insurers must also invest in cutting-edge technologies such as artificial intelligence and data analytics to better assess risks and improve operational efficiency.

Ultimately, the insurers that will succeed in this ever-changing environment will be those that have the ability to quickly adapt to new market realities while offering innovative products that meet customer needs … at any price.