How Tech Is Boosting Insurance Penetration Across Africa

Written by Tom Jackson

Insurance penetration is incredibly low across Africa, but tech solutions are beginning to play a part in increasing access to this service for Africans.

The figures are dismally low when it comes to insured Africans. South Africa, which accounts for almost 80 percent of all insured individuals across the continent, has a penetration rate of 17 percent, according to PwC.

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While South Africa has shown some traction, it simply has not caught on in other parts of Africa.

Kenya is sixth best with a rate of 2.83 percent. In Ghana it is just 1.1 percent. Nigeria may be Africa’s largest economy, but its insurance penetration rate is just 0.3 percent.

What accounts for the low insurance penetration rate?

Well, firstly, the western concept of insurance has not proven attractive to Africans, and insurers have failed to meet customer demands and expectations. An old service has been provided on old business models, effectively pitting the consumer and insurer against each other, as insurers stand to benefit by denying claims. Insurance has also traditionally been difficult to understand, difficult to acquire, and not transparent.

“Insurance lags most other industries in terms of offering consumers a complete online self-service experience. Most insurers’ legacy systems are unable to cope with true digital-only customer interactions, and the cost and difficulty of updating or replacing systems leaves many traditional players stranded,” said Ernest North, co-founder at South Africa’s Naked Insurance, an artificial intelligence (AI)-driven car insurance provider.

“Consumers have low trust in the industry, particularly when it comes to transparency and fairness of premium pricing and claims. High levels of fraudulent claims perpetuate negative customer experiences by making it necessary for insurers to make use of hands-on claim validation processes. These processes are unpleasant and invasive for the consumer and costly for the insurer, which passes the costs on through higher premiums.”

insurance penetration
Tech solutions are aiming to raise Africa’s low Insurance penetration. Photo by rawpixel on Unsplash

Daniel Guasco, CEO of Click2Sure, a full stack digital insurance platform, says customers are tired of being hounded by brokers and call centres.

“There are also instances where customers could be covered but they can’t easily access cover due to distribution being broken. In turn affinity partners like retailers, financial services providers and mobile networks have large customer bases who can’t be accessed easily or cost effectively via physical humans and call centres,” he said.

A sector that has lacked disruption for too long, however, is finally starting to see some change. Whether in the distribution of insurance, or the administering of it, tech is being used to drag the industry into the modern age.

“All insurance businesses are having to look how technology can drive their business forward, lower the time and lower the resources required to service and sell,” says Nick Evans, CEO of South Africa’s wiCover, which designs, builds and operates insurance distribution platforms.

Anthony Miller, co-founder of Simply, which designs and sells simple life insurance products for the mass market, agrees.

“Tech is having a huge impact on the wider insurance space. Many people think insurtech equals online distribution of insurance. This is a huge misperception. In reality, insurtech is just the evolution of insurance. All insurance companies are now tech companies. The better they are at tech, the better they’ll do,” he said.

Insurtech is essentially all the ways technology is making insurance better, faster, simpler, cheaper, and more reliable, with examples including cloud-based insurance systems with disruptive cost models, internet of things sensors feeding data into real-time risk management systems, and predictive claims models.

This is potentially great news for both insurers, customers, and investors.

“Traditional Insurance companies have opportunities to build new products and services on top of new technology layers that are targeted at the African market. The products would focus on lower cost, but hugely scalable into a market that has very low penetration,” said Evans.

“Investors have a real opportunity to capitalise on the growth of insurance technology as it opens up the African market and increases penetration. Africa has a young population, a technology and digital savvy generation that can benefit hugely from access to early microinsurance products that can mature with them as their needs grow.”

There is still more to do, however, to ensure more people get insured. Adelaide Odhiambo is CEO of Kenyan company Blue Wave, which distributes insurance products. She says there are outstanding issues to be addressed.

“Technology has certainly made insurance more reachable but it is yet to address such core pertinent issues as the huge gap on consumer education around how insurance actually works,” she said.

Guasco agrees the hard work is still to be done.

“There are some great examples of both new technology firsts and incumbent insurers who are innovating with both insurance products and mechanisms of distribution, but I would still estimate well over 95 percent of all insurance is being written by a broker or call centre, meaning there is huge opportunity for disruption,” he said.

Tom Jackson is co-founder of Disrupt Africa, a news and research company focused on the African tech startup ecosystem.

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