Tech drives insurance shift across Africa

The insurance industry in Sub-Saharan Africa is evolving rapidly, driven by technology, innovation and economic growth.

This is a key finding of a new report by Standard Bank and Step Advisory, titled The Rapid Evolution of Insurance in Africa. It provides a deep dive into how the industry is adapting to the continent’s unique challenges to provide solutions to a new market of clients.

Key themes highlighted in the report show that Africa is rich with opportunity:

Customers are empowered to engage with insurance in new ways as the economy continues to grow

The International Monetary Fund has predicted that GDP in Sub-Saharan Africa will grow by an average of 3,7% in 2021 and 3,8% in 2022. Coupled with this growth, is an expected rise in disposable income, creating improved business prospects across the region. New channels of engagement are emerging and as the value of protecting against risk becomes more apparent, the reach of insurance across the continent is expanding.

“In some African countries, insurance penetration is happening so rapidly that Growth Written Premium (GWP) – the total value of premiums written by an insurer – is surpassing GDP growth,” says Deon De Klerk, Standard Bank Group head of insurance. “Ghana saw GWP grow by 13% in 2020, compared to a GDP growth of only 0.4%. In Zambia despite GDP contracting by 2.8%% in 2020, GWP growth reached 27.8%.”

The rise of microinsurance

This category of insurance offers protection to lower-income households, who historically have had low levels of access to financial services.  Products are simpler, premiums are lower, and companies are embracing technologies that leverage the power of Africa’s high mobile phone usage to penetrate the market. Through the use of mobile money, anyone with a cellphone can pay for financial services and receive claim payouts.

There are examples of such mobile-based microinsurance products across Africa. Zimbabwe’s Ecosure offers funeral, hospital and personal accident covers starting at $0,20 a month. In Nigeria, WellaHealth has a basic care plan for $1 a month. 

The health insurance industry in Africa    

Historically, health insurance and access to care beyond that provided by public facilities was a luxury affordable to a few. This however is changing as digital tools are making medical cover cheaper and more accessible to broader segments of the population. 

For example, telemedicine uses technology to deliver health care from a distance. In turn, this is creating telehealth ecosystems that combine health care with insurance offerings. 

BIMA is one of the innovators in this space providing 24/7 access to doctors via the use of telemedicine and offering microinsurance solutions and personalised health programs that are accessible via an app, WhatsApp, and SMS.

Innovating insurance for the agriculture sector

Agriculture contributes an estimated 14% to Sub-Saharan Africa’s GDP, but due to climate change, the sector and the people it supports are threatened by the increasing frequency and severity of extreme weather. In Africa, parametric solutions are merging both agricultural and insurance technologies to better support both small- and large-scale farmers as they mitigate these risks.

Parametrics, which are also known as index-based solutions, use big data, satellite imagery and sensors to provide real-time monitoring of environments. This live monitoring is allowing for claims to be validated quickly and payouts to be made almost immediately. 

Says De Klerk: “Powering this era of innovation in Africa’s insurance industry is the strategic use of partnerships. Across the continent financial service providers, technology companies and mobile network operators are working in unison to drive access, affordability, and inclusivity to the African insurance market. What this research has shown is that true change comes from collaboration and this is what is making the greatest difference across the African continent.”