Africa insurance records 20 per cent growth

KAMPALA, Tuesday

Africa’s insurance sector has grown 15 to 20 per cent over the last five years, but the market is stymied by traditional ideas that limit access to many people, the World Bank has said.

Only five to six per cent of Africa’s more than 800 million people have insurance, excluding South Africa, and property policies and urban dwellers dominate the industry, said Vijayasekar Kalavakonda, a senior insurance specialist at the bank.

"The trend in the overall insurance sector is that it has an average growth rate of 15 to 20 per cent, but from a very low base," Kalavakonda told Reuters in an interview late on Monday.

"There seems to be a bankruptcy of ideas (for reaching the poor and uninsured). People in the insurance industry are predominantly traditionalists. They have not looked at non-traditional business," he said.

Africa has one of the lowest access rates to financial products, health care and other basic services in the world. Steady growth rates, however, have boosted investor interest, who increasingly eye the continent as the last frontier market.

Kalavakonda said compulsory insurance — like automobile and credit-linked personal accident — were driving non-life insurance growth. Import/export policies also contributed.

But life insurance had seen tiny growth, hampered by low savings rates and unsuitable product design for Africa’s poor, Kalavakonda said.

Regional insurance

The continent leaned toward regional insurance companies with a few international companies, but market size restricted their arrival, he said at a meeting in the Ugandan capital on how to extend insurance to the poor.

"For the insurance industry to grow, it has to start investing into the personal lines of insurance," he said. "There’s this huge, uninsured market out there."

He said other avenues to access the rural and poor were community-based organisations, church groups and retailers. Kalavakonda said there was a need for private-public partnerships to slash the cost of reaching the poor.

"The private sector is not going to make the investment to study the market, because the returns are not so big," he said.

—Reuters