A global management consultancy services firm, McKinsey & Company, has predicted a bright future for the insurance sector in Nigeria and some other African countries, describing Africa as one of the world’s hot regions for insurance penetration.
In a report entitled “Africa’s insurance market is set for takeoff,” released by the global firm on Sunday, the company said it has noted that steady economic growth in most countries combined with a largely underdeveloped insurance sector have positioned the continent as the second-fastest-growing region for insurance globally after Latin America.
The report pointed out that the coronavirus pandemic which had profoundly affected both lives and livelihoods has seen consumers cutting back on discretionary expenditure, including insurance, in the face of income and market volatility.
The report reads:
“The African insurance market’s immaturity points to significant scope for the growth of Africa’s insurance industry which is valued at about $68 billion in terms of GWP and is the eighth largest in the world—although this is not equally distributed across the continent.
“The Pension Reform Act of 2014 in Nigeria has benefited both consumers and the insurance industry alike, leading to a 70 percent growth in the sale of pension products in that country between 2012 and 2017.
“The shift to digital channels in Africa is well underway, and with that comes greater expectations of service delivery. While we are seeing a number of insurers starting to digitise customer journeys, significant opportunities still exist to accelerate this in many markets.
“The COVID-19 pandemic has accelerated this trend, by driving demand for digital and remote channels, and we expect this to continue beyond the crisis.
“However, the impact of the coronavirus is expected to delay rather than alter the pattern and potential of future growth. And in some cases, the crisis may accelerate existing trends, notably the shift toward digital and remote channels, which has the potential to offer new opportunities to both insurers and consumers.
“We believe that a strategic approach that takes into account the unique characteristics of African markets and looks to collaborate with regulators to drive reform and safeguard consumers could unlock significant value not just for industry players but for society more broadly at this critical time.”
The report further noted that markets in the region have been inconsistent in terms of size, mix, growth, and degree of consolidation, with 91 per cent of premiums concentrated in just ten countries.
“In the Southern Africa region, 54 percent of premiums are for life insurance. Non-life insurance, however, plays a larger role in Anglophone West Africa, North Africa, East Africa, and even more so in francophone Africa.
“The level of maturity in these six regions is low, relative to global reference countries, as measured by insurance density premium per capita.
“While most African countries have experienced double-digit insurance growth in CAGR in local currency over the last five years, this has mostly been driven by economic growth, rather than deepening market penetration.”