Tracing the Insurance Development
in Africa
With special emphasis on
Micro-insurance
Presented by Parimal Bhattacharya
Insurance in Africa
Due to limited time available, let us right away
start with a comparison of Insurance Scenario of
Africa in 2005 and in recent times.
In 2005, the African continent had a life premium
of $ 28 Bn and a non-life premium of $ 12 Bn.
The level of Insurance Penetration was 3.33%
for life and 1.47% for non-life. The Insurance
density was $ 30.7 for life and $13.5 for non-life
Comparative Status of Population and
GDP Among Select Countries in 2005
(Source: Swiss Re publication for 2005)
COUNTRY
POPULATION
IN Mn
LIFE PREMIUM
GDP IN Bn USD
IN Mn USD
NL PREMIUM
IN Mn USD
AFRICA
KENYA
34
34
153
348
NAMIBIA
2
2
350
150
SA
47
240
26000
7300
EGYPT
74
100
300
460
NIGERIA
132
90
70
500
MOROCCO
32
51
370
1100
TUNISIA
10
29
50
540
AFRICA
872
1216
28000
12000
WORLD
6450
44,450
1974000
1450000
Penetration and Density
Life
Insurance
Country
Penetration
Premium/
GDP
KENYA
0.78%
NAMIBIA
5.90%
SA
10.80%
EGYPT
0.34%
NIGERIA
0.09%
MOROCCO
0.71%
TUNISIA
0.17%
WORLD
4.30%
Insurance
Density
Premium per
capita
$5
$172
$558
$4
$0.50
$11.7
$4.8
$300
(Source: Swiss Re publication for 2005)
Non-life
Insurance
Insurance
Penetration
Density
Premium/
Premium per
GDP
capita
1.79%
$10.20
2.46%
$73
3.00%
$156
0.52%
$6.2
0.62%
$3.7
2.76%
$35.3
1.90%
$53.9
3.20%
$220
Non-life premium has grown by 4% in 2009, 5.8 in 2010 and 4.9% in 2011 It
stood at USD 22 Bn, which is 1.1% of world premium. While Life premium saw
a growth of 1.3% in 2011 and stood at USD 46 Bn after seeing a fall of 11% in
2010. That is 1.8% of world premium.
Overall situation as of 2010: (Source: Swiss Re publication for 2010)
COUNTRY
SOUTH
AFRICA
EGYPT
NIGERIA
MOROCCO
TUNISIA
KENYA
NAMIBIA
TOTAL AFRICA
WORLD
GROSS
DOMESTIC
LIFE
POPULATION PRODUCT in Bn PREMIUM in
in Mn
USD
Mn USD
50.50
84.5
158.3
32.4
10.4
40.9
2.2
1,031.3
6,917.0
364.00
219.0
208.0
91.0
44.0
32.0
11.0
1,727.0
63,048.0
38667.00
647.0
157.0
825.0
113.0
337.0
610.0
42,796.0
2,507,715.0
NON LIFE
PREMIUM
in Mn USD
9965.00
938.0
844.0
1,759.0
662.0
661.0
277.0
19,686.0
1,816,524.0
Worldwide position 2010
GROSS
DOMESTIC
LIFE
PRODUCT in Bn PREMIUM
USD
in Mn USD
NON LIFE
PREMIUM in
Mn USD
COUNTRY
POPULATI
ON in Mn
NORTH AMERICA
344.10
16,068
557,007
718,847
LATIN AMERICA
AND CARIBBEAN
583.70
4,848
54,458
73,453
EUROPE
811.00
20,066
955,553
657,520
ASIA
4,111.30
18,948
858,466
304,980
AFRICA
1,031.30
1,727
42,796
19,686
35.50
1,392
39,436
42,038
6,917.00
63,048
2,507,715
1,816,524
OCEANIA
WORLD
2010 contd.
INSURANCE PENETRATION
LIFE BUSINESS
NON LIFE
BUSINESS
TOTAL
BUSINESS
NORTH AMERICA
3.47
4.47
7.94
LATIN AMERICA AND
CARIBBEAN
1.12
1.52
2.64
EUROPE
4.44
2.99
7.43
ASIA
4.54
1.59
6.12
AFRICA
2.48
1.14
3.62
SOUTH AFRICA
10.62
2.74
13.35
OCEANIA
2.83
3.02
5.85
WORLD
3.98
2.88
6.86
COUNTRY
2010 contd.
INSURANCE DENSITY in USD
LIFE BUSINESS
NON LIFE
BUSINESS
TOTAL
BUSINESS
1,618.6
2,088.9
3,707.6
93.3
125.8
219.1
1,098.8
740.3
1,839.1
ASIA
209.0
73.2
282.2
AFRICA
41.5
19.1
60.6
SOUTH AFRICA
765.2
197.2
962.4
1,109.3
1,182.6
2,291.9
362.5
262.6
625.2
COUNTRY
NORTH AMERICA
LATIN AMERICA AND
CARIBBEAN
EUROPE
OCEANIA
WORLD
2010 contd..
Low Market penetration (2010, %)
16
14
12
10
Life
8
Non-life
Total
6
4
2
0
North America Latin America &
Caribbean
Europe
Asia
Oceania
Africa including
SA
SA
World
2010 contd..
Low Density (2010, %)
4000
3500
3000
2500
Life
2000
Non-life
Total
1500
1000
500
0
North America Latin America &
Caribbean
Europe
Asia
Oceania
Africa including
SA
SA
World
Africa highlights
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Recent progress
Long term opportunities
Nine sub-Saharan nations among 15 to grow fastest up to
2015 (Ghana, Tanzania, Zambia, Mozambique, Angola, Liberia,
Niger, Rwanda, Sierra Leone). ….forecast by IMF
By 2020, half of African household to have income above
subsistence level, as per Mckinsey
Economies to go beyond ores and oil. E.g. Agriculture
(Ethiopia), Telecommunication (Kenya)
Insurance industry growing at a faster pace than the economy
in the recent past
Uncertainty remains a major concern.. on-going issues with
legal security, political and economic stability as well as
sustainable profitability
Comparison with Macroeconomic indicators
(Rate of Growth between 2005 and 2011)
Positives seen in the last decade
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liberalization of world trade, increasing efficiency,
advances in Information Technology and the integration of
world financial system
unprecedented positive impact on global growth and
development of insurance
Unparalleled economic, cultural, and recreational
opportunities.
New opportunities for insurance business in Africa; as the
African market is now open for global exploration and
competition.
Regulations have created a fairer playing-field for
institutions to reach their growth targets..Recent
survey by Pricewaterhouse Coopers Inc, concluded
from responses of the 27 Companies surveyed
Challenges
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economic consequences of the Global Crisis for the
Insurance Industry especially in Africa
new challenges for insurance regulation
Insurance regulation in Africa is largely compliance based
‘one cap fits all’ approach predominates.
same set of rules applied to all
No cognizance for the risk profile
This model is costly in terms of:
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finance,
manpower and
time
Added to the cost element is the loss of required
effectiveness.
Challenges contd..
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Capital inadequacy resulting in low retentions and
high demand for reinsurance.
Globalization & Competition from foreign companies
Basic insurance and reinsurance products on offer.
Lack of customized insurance solutions to suit local
requirements.
Weak and unsophisticated supervision (environment
for unethical practices to thrive)
Many African Countries have weak economies with
resultant low Insurance penetration due to lack of
disposable income, ignorance and inertia
Some countries are beginning to embrace recapitalization, Mergers and
Acquisitions (e.g Ghana, Nigeria, Gambia, Kenya to name a few)
Development and scope of
Micro-insurance in Africa
(Findings of a study conducted in 2009 by the International Labour Organization’s (ILO’s) Microinsurance Innovation Facility and the
Microinsurance Centre)
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Definition “an insurance product accessible either by price or delivery
channel to people earning less than approximately USD 2 per day”
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In 2005, just over 0.3%, or 3.5 million low-income people in Africa were
accessing microinsurance in eighteen countries out of forty-one that
were considered for the study (South Africa was not included in the
study).
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14.7 million people, or about 2.6% of the population living under USD 2
per day, in 32 countries covered by microinsurance products
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South Africa alone, represents 8.2 million, or almost 56% of the total
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Of the 14.7 M, 10.3 M are covered by products other than credit life
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The total microinsurance premiums received in 2008 amount to about
USD 257 million, out of which 88% was collected by regulated insurers.
(Number covered in thousands, 2009)
Observations
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Africa remains dominated by life insurance products as
seen in Figure above.
Of the potential markets, credit life covers close to 9.5%,
and other life products cover about 3.2%.
Health products, those which are often cited as the most
in need, only cover about 0.3% of the low-income
population,
property and agriculture only about 0.2% and 0.1%
respectively of the potential markets.
there is still great potential for microinsurance expansion
and growth in Africa
Range of available products in some countries, such as
Kenya, Namibia, Senegal and Cameroon, while others are
dominated by few specific product lines
Observations contd.
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Microinsurance has been available to some low-income
people in Africa for a number of years in various forms
Cooperative Insurers have serviced a market that spans
the income ranges since the 1970s.
In the 1980s, community-based health insurance schemes,
especially in West Africa,
In the mid-1990s, commercial insurers began to enter the
market offering specialized microinsurance products.
Over the last ten years insurance has developed into a
widely recognized financial intervention to help Africa’s
low-income populations to manage their financial risks
Observations contd.
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Except for North Africa, the regions are more similar in their
offering of health microinsurance
North Africa looks specifically at the non-life products.
The strength in health in Senegal, Benin, Mali, Cameroon and
Guinea is directly related to health mutuals
Kenya and Uganda it is driven by a mix of community-based
schemes and commercial providers
Southern and Eastern Africa dominate the microinsurance
landscape with 8.8 million and 4 million lives covered
This leaves only 1.9 million covered in Central, North, and
West Africa.
This can be explained partly due to the strength of life
microinsurance in South Africa, as well as the engagement of
commercial insurers in microinsurance in the East and South
Microinsurance is on the rise
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A comparison with 2005 indicates that the number of lives
covered almost doubled in three years.
The growth seems to be more substantial in recent years.
Half of the schemes were growing at a rate higher than 30%
per year
“Insurers” are defined here as institutions that manage
insurance risk. These include:
Regulated insurers include commercial insurers and
cooperative or mutual insurance companies, regulated by the
insurance regulations
Health mutuals and community-based microinsurance
programs
Microfinance institutions (MFIs), non-governmental
organizations (NGOs), hospitals and others that manage their
own unregulated insurance programs
Share of various Risk Carriers…
In Millions, year 2009
Observations
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Regulated insurers dominate the life landscape
1.5 million receiving credit life insurance primarily from their
MFI
Health mutuals focusing entirely on health care financing
1.2 million covered by health mutuals, and 0.8 million covered
by regulated insurers and other risk carriers.
It is important to support the development of various models
to expand microinsurance across the low-income market
Some institutional types may be better at focusing on poorer
target groups while others might be more effective in the
slightly less poor markets
African micro-insurers offer a wide variety of microinsurance
products.
Though life insurance is clearly predominant, efforts to provide
other products are an important response to market demands
Other insurers can learn from this
This will greater variety of mass sales of these other products
Observation contd
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Total of 9.1 million people had life cover
Of these, Funeral and personal accident insurance cover
about 6.2 million
High funeral cover numbers are related to cultural issues
in South Africa.
This shows that cultural factors play an important role in
microinsurance market development.
Swiss Re (Sigma3 2009) reports South Africa as having the
third highest life insurance penetration in the world.
Term life policies (4.8 million) are popularly offered in
many African countries.
Endowment policies (0.8 million) are comparatively lesser
Observation contd.
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Credit life insurance, is commonly a required purchase
with microcredit and other borrowing.
It touches the most people in Africa – 7 million –
Easy to require borrowers to purchase it
It can be very profitable, especially since borrowers are
often not aware that they have purchased insurance with
their loan
At least 25% of those covered by credit life enjoy an addon that accrue to their surviving family.
Health products cover at least 1.9 million people
1.3 million enjoy comprehensive Health packages, mostly
delivered by health mutuals or specialized commercial
players.
Agriculture Insurance and Business
Property
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Less than 80,000 covered between livestock, crop and
various agriculture related index products.
This shows there is need to find better tools for farmers.
Recent developments in index microinsurance products
offer the potential of a major breakthrough for
agriculture.
These products are still being tested and generally have
limited acceptance
Less than 0.3 million access non-agriculture related
property insurance.
Business property cover stands out in this group, but still
with only 140,000 policyholders.
The way forward…
If microinsurance is to prove effective as a risk
management strategy for low-income households
in Africa, risk carriers will need to better reflect the
demands of the market in their product offerings,
while still ensuring viability.