Africa provides vast potential for micro-insurance

Micro-insurance coverage has expanded dramatically globally from the 78 million low-income people identified in 2007 to the current estimates suggesting the sector is approaching 500 million lives covered today.

This growth has been largely driven by both the active involvement of governments to better help citizens protect themselves against risks and the availability of payment systems, which has made it easier to collect premiums from low-income households and enabled a host of new players to get involved in micro-insurance.

However, despite global growth in micro-insurance and its increasing prominence on the international agenda, micro-insurance on the African continent continues to lag behind, with only 25 million low-income people covered. Africa nevertheless provides vast potential for micro-insurance.

In an effort to further realize this potential, the ILO’s Microinsurance Innovation Facility and the Centre for Financial Regulation and Inclusion (Cenfri) are collaborating with USB Executive Development (USB-ED), the public executive development and training company of the University of Stellenbosch Business School (USB), to present this year’s programme in Microinsurance Business Strategies for African markets.

The training programme will be the first of much collaboration by the Microinsurance Innovation Facility and Cenfri, who have recently partnered to increase the availability of better insurance products for a greater number of low-income households in Africa.

The program is to be presented in Cape Town, South Africa from 24 to 27 July and will include recent developments in the microinsurance space such as the PACE (Product, Access, Cost, Experience) client value tool, presented by ILO Microinsurance Innovation Facility Team Leader, Craig Churchill.

The tool was created by the Facility to help practitioners in micro-insurance to improve their insurance offering’s value proposition to clients by comparing insurance offerings with other means of protection from similar risks.

“Lessons can be drawn from South Africa’s experience as an early mover with 8,2 million lives covered in 2009, as well as several other countries in Africa that are picking up steam in micro-insurance. These include Ghana, Zimbabwe and Kenya.

“Learning from the experiences of practitioners and regulators in these countries, as well as drawing on key lessons from countries outside of Africa, will be fundamental in reaching the vast untapped market of Africa,” Churchill said.

Cenfri director, Anja Smith, believes distribution is critical to achieving this end and expressed the need to start imagining a distribution landscape where some distributors become ‘one-stop shops’.

“Distribution partners in micro-insurance should not only sell policies and collect clients’ money, but also allow clients to make changes to their policies and become the point where claims are paid. If not, we risk losing client value where it ultimately matters,” Smith said.

It is estimated that less than 30% of low-income adults in South Africa have any form of insurance, while in the rest of Africa the untapped market for micro-insurance could be as much as 40% of the adult population. African insurance markets (excluding South Africa) typically contribute no more than 2% of GDP and serve less than 5% of the population.

For companies to extend their reach in the micro-insurance market, the following will be required:

  • The development of alternative distribution channels that reach beyond, the broker, agent and employment networks;
  • The development of products that fit the profiles and needs of the low-income clients:
  • Successful navigation of increasingly complex and uncertain regulatory environments; and
  • A fundamental reinvention of the delivery of insurance.

The programme is aimed at banking and insurance professionals, mobile network operators, retailers and technology providers, policymakers, consultants, expert advisers and researchers in the areas of micro-insurance or low-income financial services.


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