It is clear that non-life insurance is not taking off in Africa: Africa represents about 17% of the world’s population (increasing), for 3% of the world’s GDP (underestimated by the calculation method and increasing) and only1% of non-life insurance premiums (stable). Penetration rates are the lowest in the world and past growth in premiums collected is more proportional to economic growth than to an increase in penetration rates.
Yet, insurance development is both a marker and a driver of a country’s economic and human development. Moreover, insurance companies represent an important source of financing for economies, as they invest a large part of the premiums collected from policyholders in the capital or real estate markets, in order to guarantee their solvency and their ability to cover claims, whatever they may be. Non-life insurance companies
are also among the fundamental institutional investors in ecosystems, although they account for a smaller share than life insurers or pension funds, banks or development finance institutions.
« Africa remains the second most promising continent in terms of the growth potential of its insurance markets. And it is on this continent that the world’s largest reservoir of growth potential for insurance is to be found.»
Yet, despite this vicious circle (on the one hand, too few insurance premiums to finance economic growth and, on the other, non-life insurance activity driven by that same economic growth), Africa remains, behind Latin America but ahead of Asia, the second most promising continent in terms of the growth potential of its insurance markets.
And it appears to be the largest reserve of growth potential for insurance in the world.
The reasons for this low penetration rate are multiple, and many of them (political, cultural and economic) are outside our direct field of competence. For this reason, we will limit our analysis to only those factors that fall within our area of expertise.
One only has to note, for example, that the economic crisis caused by the COVID pandemic had the immediate effect, particularly in certain African countries, of reducing all non-vital expenses, starting with insurance, to understand the limits of an analysis of strategic and technical aspects alone.
On the other hand, when the need for coverage seems so great and there is an offer that can satisfy it, at least in part, one wonders why insurance is not fulfilling the economic, financial and societal roles that it is being asked to play and for which it has already invested heavily? What is the reason for this failure?
The Myths of the Thief-Insurer and the Stolen-Insured
When the need for coverage seems so great and there is an offer that can satisfy it, why does insurance fail to fulfill the economic, financial and societal role it is asked to play and for which it has already invested a lot? What is the reason for this failure? Our observation as analysts and observers of the sector can be summed up in one word: mistrust.
This mistrust is not unique to Africa. To be convinced of this, we need only consult the debates that have animated the political, economic, sociological and philosophical actors of many countries around the impacts of the COVID 19 crisis. Insurance is systematically ignored, and its fundamental mechanisms misunderstood, from the private individual to the highest levels of governments.
The Myth of the «thieving insurer» is well entrenched throughout the property and casualty insurance industry. If the risk has not been realized, the premium has been «confiscated» and when a loss occurs, the coverage (for which the insured has paid) is never sufficient.
In France, for example, the industry faced a lot of media criticism in 2020 attacking the sector for its positions on compensation under COVID.
The French Federation of Insurance had to do a lot of teaching to explain to policyholders – but also to public authorities – that the fundamental role of the insurer was to manage the pooling of risks, and not to insure against the impacts of a systemic crisis. The federation’s new «base line» now perfectly reflects this new communication challenge: «mobilizing the energies of the insurance sector to move society forward with confidence».
« How to mobilise the energies and important potentials of the African insurance industry to move the different insurance markets in full confidence? »
Request our premium content “Why is non-life insurance not taking off in Africa?” and:
- Deconstruct together the myths of the “thieving insurer” and the “stolen policyholder”.
- Discuss the reasons to believe in short-term development
- Assess the concrete actions that would enable an insurance company to achieve sustainable and profitable growth