OppORTuNiTiES RifE fOR miCROiNSuRaNCE in AfricA
Candidate attorney, Siba Jonas, and associate, Lauren Kent, from Norton Rose South Africa, provide us with microinsurance lessons from Africa. 7KH $IULFDQ PLFURLQVuUDQFH PDUNHW LV largely untapped. The International Labour Organisation (ILO) reports that 14.7 million lives were microinsured, out of a potential 700 million, representing 2.6 per cent of the target population.
7KH FRPELQHG DQQuDO LQFRPH RI ORZincome African households is around $500 billion, according to the World Bank, meaning there is significant potential for growth. $ VuFFHVVIuO PLFURLQVuUDQFH UHJLPH requires clear communication. The ILO found that the microinsured often claim their premiums if the product was not needed, signifying a fundamental lack of understanding of the product.
Millions of Africans find themselves trapped in dire circumstances due to short- term strategies used to eke out an existence. Microinsurance is set to effect real change on the continent. Through knowing the market, developing innovative products and educating consumers, insurers can capitalise on
the opportunities presented in the African market.
,Q GKDQD, DQ DZDUHQHVV FDPSDLJQ EDFNHG by government and private institutions has been rolled out, together with various industry workshops and training programmes. A policy paper is being developed as a result.
,Q (JySW, 8JDQGD DQG :HVW $IULFD, QDWLRQDO and regional workshops have been held as an introductory step.
,Q (WKLRSLD DQG ZDPELD, JRYHUQPHQWV DUH developing microinsurance strategies to encourage wider deliberation and capacitybuilding initiatives.
Premium collection and payment
,Q BuUNLQD )DVR, DJHQWV ZKR FROOHFW premiums are recruited and trained from the local community, lending credibility and trust. While this is costly and timeconsuming, with potential for fraud, issuing the insureds with smart cards and agents with handheld computers at the collection points is helping mitigate these risks.
8VLQJ H[LVWLQJ UHWDLOHUV’ LQIUDVWUuFWuUH DQG customer loyalty to distribute products and collect premiums is successful in South Africa. In Kenya, mobile technology is used to pay for anything from taxi to insurance premiums, which is deducted from available airtime.
7R RYHUFRPH FKDOOHQJHV RI DIIRUGDELOLWy, insurance mistrust, poor delivery infrastructure and insufficient regulations, one insurer introduced a comprehensive product for low-income Kenyan families. In conjunction with the National Health Insurance Fund, the family insurance product provided cover to a policyholder, spouse and all dependants for hospital expenses, loss of income, disability benefits, accidental death and funeral expenses for an annual premium of $50.
/DFN RI uQGHUVWDQGLQJ DQG WUuVW LQ microinsurers and their products.
/DFN RI ILQDQFLDO PHDQV WR SDy SUHPLuPV regularly, on time, or at all.
DLIILFuOWLHV ZLWK WHFKQRORJLFDO LQIUDVWUuFWuUH, which hinder insurers in their development and rolling out of products.
/DFN RI VuLWDEOy TuDOLILHG VWDII WR GHYHORS and market products and administer processes.
5HOLJLRuV DQG FuOWuUDO FRQVLGHUDWLRQV may limit the demand for traditional insurance products, particularly in North Africa, where Islam, the predominant religion, considers commercial insurance objectionable.
DLIILFuOWLHV ZLWK SUHPLuP SDyPHQW DQG collection.
7KH GHVSHUDWH QHHG IRU FRQVuPHU education to impart basic reading and mathematical skills, as well as an understanding of microinsurance.
While opportunities abound, insurers should study their chosen African market(s) carefully before committing to significant investment.