AIO Adopts Customer Awareness, Digitization To Grow Insurance Market

AIO Lists Benefits of Digitalisation to African Insurance MarketTHISDAYLIVE

Yemisi Izuora

Given the obvious under performance of the insurance Industry in Africa compared to other sectors like the Telecommunications and Banking industries, the new leadership of the African Insurance Organization, AIO, has adopted fresh strategies to reverse the trend.

Mr. Tope Smart, the newly inaugurated 23rd President of the Organization in his acceptance speech, disclosed that aside a few markets such as South Africa, Morocco, Kenya, Egypt, Malawi, Zambia and Ghana, no other market in Africa has up to 1 per cent penetration rate.

According to Smart, “In 2019, Insurance penetration rate in Africa stood at 2.98%, where as global average penetration rate stood at 7.23%.

Though Africa’s GDP increased from $2.368trillion in 2018 to $2.448trillion in 2019,  total  direct  premium  written  decreased  from $69.46billion to $68.2billion.  Also in 2019, while global premium growth was 3%, Africa recorded a negative growth of -3%.”

Under the new plan, he said that in the next one year, a lot of effort shall be dedicated towards increasing consumer awareness about the benefits of Insurance.  Though he noted that ironically COVID-19 triggered awareness level as many became aware of the importance of Insurance during the period, however more efforts shall be made not only to sustain this momentum, but also to increase same by collaborating with various markets to organize sensitization programmes that will ultimately lead to increase in consumer awareness.

In addition, the strong economic growth of the past decades has helped to reduce poverty and increased the middle class in Africa.  The effect of higher disposable income will translate into growth for Insurance business.

Also to be noted is the changing cultural norms and the declining influence of the extended family as a form of informal insurance means that people should take care of themselves which will make people buy insurance.

The President also observed that the Insurance sector in Africa has been slow in embracing technology.

The coming of COVID-19 and the subsequent lockdowns have made it imperative for the sector to upscale technology, digital technology in particular and COVID-19 has triggered the value of digitalization.

While this is a positive development, the implementation has been slow with IT’s spending still going towards maintaining legacy systems, he said pointing that the benefits of digitalization cannot be over emphasized.  “Among other things, it helps in accessing new customer segments, launch new products and improve the appeal and affordability of Insurance products among other things.  Efforts shall be made to appeal to all member companies to embrace full digitalization.” he said.

The new leadership he said will encourage more collaboration among markets, as one

thing that has been missing in markets across Africa is absence of collaboration among different markets.  According to him, “Collaboration among markets will lead to growth as this presents an opportunity to share experience among markets.  We shall work with various markets to enable us achieve this goal .  A strategic approach that takes into account the unique characteristics of each market, different growth prospects will be adopted and mechanism for collaboration will be worked out.”

He also emphasized on collaboration with Governments and Regulators as he notes that one of the ways to increase penetration in Africa is to have Governments across Africa buy into the Insurance project.  “We shall work with various Governments across the region in order to gather support for Insurance.  Government support by way of initiating policies as well as enforcement of compulsory insurances will go a long way in increasing penetration.”

“One very strong enabler to deepen insurance penetration is regulatory reform.  It is therefore important that the issue should be given prime consideration.  A strategic approach to collaborate with regulators to drive reform and safeguard consumers could unlock significant value for the Industry players and the society at large.”

On increased level of consumer trust, Smart said one of the major barriers to the growth of Insurance in Africa is lack of consumer trust.  He said, “A good number of consumers who are aware of the benefits of Insurance protection are yet to embrace Insurance due to lack of trust.  Efforts shall be made through training and education to reverse this trend.  Building consumer trust through meeting claims obligations timeously shall be encouraged and operators shall be advised to adopt this so as to increase the penetration rate.”

“From the foregoing, it is clear that Africa’s low insurance penetration is still its largest opportunity.  Though the region’s Insurance sector has grown over the years, this growth is being driven primarily by economic growth rather than deepening market penetration.  Steady economic growth in most countries combined with a largely underdeveloped Insurance sector have positioned the continent as the second fastest growing region for Insurance globally after Latin America.  Prior to COVID-19, the Insurance market was expected to grow at compound annual growth rates of 7% per annum between 2020 and 2025. However, the market will struggle to attain the growth rate due to the pandemic as a lot of consumers are cutting back on discretionary expenditure (Insurance inclusive) due to dwindling income.”

The President also said the industry will align itself with the African Continental Free Trade Area (AFCFTA) which he described as a good initiative that is supposed to be a game changer.  “Among other things, markets and economies across the region will be reshaped leading to  the creation of new industries and the expansion of key sectors.  Insurance markets across the region will benefit from this pact and this will consequently increase the penetration rate.”

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