Yemisi Izuora
A survey of 125 insurance regulators and executives in Sub-Saharan Africa conducted by U.K-based professional services firm EY, FinChannel reveals that Zambia ranks No. 1 in Sub-Saharan Africa in growth opportunity for insurers, followed by Nigeria, Ghana and Kenya.
The report also observed that partnering with mobile phone carriers will be key for growth in the sub-Saharan Africa insurance industry.
Many African consumers use mobile phones to conduct financial transactions, and up to 74 percent of survey respondents said mobile and online underwriting platforms will be important growth drivers for the insurance industry in Africa.
Just one in 10 Ghanaians own any kind of insurance. The country has been the focus of foreign investors who used competition among mobile phone providers to offer free insurance to differentiate themselves in the market, according to the EY report.
But almost a third of respondents said it is difficult to find qualified agents. Identifying technical talent who can build web and mobile applications geared toward insurance is a challenge, the report finds.
Zambia, Ghana and Kenya will offer the most attractive mix of risk and rewards for insurers over the next three years, and other sub-Saharan markets will present new opportunities due to demographic transformation and sustainable economic expansion, according to the EY report, “Waves of Change: Revisited — Insurance Opportunities in Sub-Saharan Africa.”
An EY survey evaluated risk potential and growth opportunities for insurance premiums in seven English-speaking markets in East and West Africa: Ghana; Kenya; Malawi; Nigeria; Tanzania; Uganda; and Zambia. The risk and opportunity matrix was created by analyzing economic conditions and potential hazards in each of the seven countries in the survey.
Zambia ranks No. 1 in Sub-Saharan Africa in growth opportunity for insurers, followed by Nigeria, Ghana and Kenya. Ghana offers the least amount of risk, followed by Zambia and Kenya. Nigeria, the continent’s largest economy, ranks No. 7 in the amount of risk posed to insurers.
“Significant population growth, rapidly rising incomes and the relatively low penetration of insurance products suggest great potential for both life and non-life products in sub-Saharan Africa,” said Steve Osei-Mensah, financial services advisory leader at EY for East and Central Africa.
“There are also openings for insurers to introduce innovations in motor insurance, end-to-end mobile insurance purchases, consumer education and fraud prevention. While insurers will need to address challenges involving talent, market volatility, regulation and technological capacity, among others, there are opportunities for growth in the region.”
With 40 percent of its population living in cities, Zambia offers the most attractive mix of opportunity and risk over the next three years, according to the research. Consolidation in the industry is helping Zambia’s insurance grow, the report said.
The number of insurance brokers decreased from 48 in 2014 to 39 in 2015.
Based on the research, Ghana’s insurance market is expected to see 8.5 percent annual growth between 2014 and 2018, expanding from $400 million to $600 million US.
Kenya is the most mature market of the seven countries included in the report. Its insurance market is forecast to grow from $1.8 billion in 2014 to $2.2 billion by 2018.
“Insurance executives have reason to be optimistic about these markets,” said Rohan Sachdev, leader for global insurance emerging markets at EY.
“As a greater percentage of the population moves to urban areas and gains affluence, insurance purchases to cover health care and items such as cars are more likely.
The sub-Saharan economies are among the world’s fastest growing, and foreign investors are recognizing the opportunities these markets present.”
Sub-Sahara’s economic outlook remains strong despite lower oil and agricultural commodity prices and economic slowdowns in other parts of the world. The report said 41 percent of insurance executives and regulators surveyed believe GDP growth is the most important driver of future premium growth in the region.
Other key drivers of premium growth include product innovation (22 percent), regulatory changes (15 percent), competition (11 percent) and technological changes (10 percent).