By Rosemary Onuoha
The African Insurance Organisation, AIO, has decried the low level of insurance penetration in Africa, saying that the continent can boast of only about 1.4 per cent of total world premium.
President of AIO, Mrs. Lamia Ben Mahmoud who made the assertion at the 43rd Conference and Annual General Assembly of the AIO in Marrakech, Morocco last week noted that there is clear predominance of developed countries on the insurance market. Mahmoud said, ‘This weakness is even more apparent regarding our African countries with a modest share not exceeding 1.4 per cent of total premiums written in the world and a low penetration in the economy with a premium/GDP ratio not exceeding 1 per cent in some countries, below the average rate of 2.7 per cent recorded in 2014 for the entire continent.’ She said that there is need to develop between insurers and reinsurers a solid partnership that can help to improve access to insurance services and building a strong and complementary African insurance industry.
According to her, that is a challenge and a goal despite the economic difficulties experienced by our region. ‘Insurance penetration is still a hard nut to crack, the share of insurance premiums as a percentage of GDP, has remained exceptionally low. In some countries it only amounts to less than 1%, well below the global emerging market average of 2.7% in 2014, while Africa’s share of the global insurance market is 1.1% for non-life and 1.8% for life but this is a demonstration of the enormous growth potential within the industry African insurance industry, an indicator that the insurance market is still widely untapped. ‘In order to insure Africa’s future, we must devise strategies aimed at facing the continent’s numerous challenges today. Within the past decade, the continent has been hit by some major challenges which have to a large extent disfavored economic growth and affected the insurance sector tremendously.
Here, I am referring to the recent drop in fuel prices, in fact, the price per barrel in January 2016 stood at approximately a quarter of its market value two years ago, and at the lowest point since 2003. On the list of challenges could be added cyber criminality, political instability, insecurity with some new waves of terrorist attacks, climate change, food security challenges for the continent’s population tomorrow etc. ‘We still suffer from a shortage of skilled and experienced insurance professionals, as a result, large and complex risks are not retained within Africa, but are ceded to foreign insurance markets because specialist risk management capabilities and high quality security are not sufficiently available leading to a consequent premium flight which threatens the viability of the domestic insurance industry. ‘Moreover, there is still wide spread ignorance on the benefits of insurance. Added to this list is an acute insufficiency of product differentiation. Every company should continue to act to promote expertise.
We emphasise in this area on the need to strengthen the diversification of training in scientific and technical issues by leveraging new tools and instruments imposed by the development of technology to ensure greater communication of their knowledge and know-how. ‘The challenges are many and daunting; especially in a context where the one size solution is outdated as customers now expect personalized insurance solutions. It is true that some of the solutions to these problems require a multidimensional approach with the input of other key actors required.
Through Microinsurance, extending insurance cover to the unserved segment of the population will increase insurance penetration in Africa, but the sector has to see an over hauling in its regulation. ‘We must play a frontline role in the quest for solutions to these challenges. We have a number of factors that militate to our favour notably Africa’s favourable demographics and wealth of natural resources (including 60% of the world’s uncultivated arable land), there is an enormous growth potential.