Africa’s worsening insurance gap


The Africa Rising paradigm might not be what it once was, but the continent is moving forward technologically and on the whole is becoming increasingly sophisticated.

Living Standards are increasing globally. With this comes a need for insurance.

A recent article on Moneyweb claims that globally the lowest economic rungs are rising: “The ‘Bottom Billions’ earn R14.50 to R140/day (US$1 to US$10/day), yet collectively they have US$5trillion in purchasing power and US$7.4trillion in wealth.

Harnessed correctly, this group represents the world’s next big growth engine,” says Bank of America Merrill Lynch in a recent report called the ‘Bottom Billions.’

“This is because changing population dynamics – such as urbanisation and better access to education – means that a healthy segment of this population could be uplifted to the lower-middle class, that so-called economic sweet-spot where significant numbers of people are earning more than R140/day (US$10/day). Demographic forces will drive these changes over the next 15 to 20 years.

“Firms and investors would be wise to pay attention to these changes: those at the bottom of the pyramid are the largest socio-economic group in the world.  People are living longer, more children are going to school, and more people have access to clean water and basic sanitation. The digital revolution is connecting people across societies and countries. This progress goes hand in hand with increasing incomes, leading to the highest standards of living in history.”

An article on Bizcommunity entitled ‘Strategic Marketing Africa unpacks insurance industry opportunities’ states: “According to the quarterly journal of the African Marketing Confederation (AMC), the continent’s insurance landscape is one of extreme contrasts in terms of the size and sophistication of individual markets.

Africa is one of the world’s great untapped markets for insurance products and services.

However, the challenge for the industry’s marketers is overcoming mistrust and a lack of consumer understanding.

“South Africa dominates with an insurance penetration of 14% of GDP. Only five other African countries achieved penetration of over 1%: Namibia (7.2%), Mauritius (6%), Morocco (3.2%), Kenya (2.9%) and Tunisia (1.8%).  Reflecting the scale of the challenge is the reality that the region’s biggest economy, Nigeria, has an insurance penetration of a mere 0.3%.”

The first step for insurance companies wanting to enter an African market is to properly understand the consumer and business sector insurance needs – and specifically the barriers to purchasing insurance products in each market.

One of the best ways of testing the market is through needs-driven research.

Freshly Ground Insights (FGI) has experience in conducting this sort of market research project for the insurance industry.

The target respondents of this survey includes all socio-economic segments and business types, and focuses on anyone or any company that has insurance currently; and anyone or any company that is able to afford and benefit from insurance.

This type of research can measure not only market potential for the insurance sector, but also determine which type of product would do best in which markets – and how these product offerings should be structured.

It could also identify the barriers to entry, such as mistrust of the insurance industry, and find out the reasons for this.

These challenges could then be addressed in a carefully tailored marketing strategy and through educational initiatives.

With experience in over 24 countries of Africa for over eight years, FGI has conducted over 450,000 interviews using electronic devices and scripted over 500 questionnaires that vary from five minutes to two hours in duration.

It has a vast network of expert field teams across the continent with local insight into each market.

FGI conducts comprehensive field training with support services, and its teams are ready to execute top quality data collection projects.

FGI is expert in sample designs for nationally representative samples and in obtaining ethic approvals, and ministerial, regional and local permissions.

Technology-enabled solutions allow for a fast turnaround of quality data, and rigorous data quality assurance and back-check procedures ensure robustness.