Landscape of Microinsurance in Africa 2018: focus on selected countries
Author: Alice Merry for the Microinsurance Network
Date: October 2019
The 2018 Landscape of Microinsurance in Africa is based on data collected on the microinsurance activities of 100 insurers in Africa in 2017. Through their microinsurance activities, these insurers collectively covered a total of 15 million lives — almost 2% of the estimated 700 million people in the low-income bracket in the continent — and brought in total premiums of US$ 420 million, representing less than 1% of overall insurance premiums in Africa.
This study suggests that the African microinsurance market experienced a period of considerable change since the last study was carried out based on 2014 data. Health products experienced a boom since 2014 have consolidated into two distinct branches – insurers supporting comprehensive public schemes, on the one hand, and simple, complementary health products like hospital cash and health value-added services on the other. In particular, hospital cash products (simple insurance products that offer a cash pay-out per night spent in hospital) have proved remarkably successful.
When the last Landscape study was conducted in the region in 2014, a new freemium model of distributing free insurance products and paid top-ups through mobile network operators (MNOs) was reaching its peak. Many schemes were signing up a million or more customers at a time, leading to a boom in the number of lives covered through microinsurance on the continent. By 2017, this model had largely collapsed and, with it, many large schemes covering millions of customers.
Nonetheless, this sudden rise and fall in the number of lives covered likely disguises a slower and more durable growth through other models, as illustrated in the case study of Zambia in Chapter 3 of the study. Several MNO-linked schemes abandoned the freemium model and proved successful by focusing on paid products. This is likely to continue as increased mobile money use facilitates premium payments. In addition, new distribution opportunities are emerging through digital platforms, such as digital marketplaces, e-commerce and ride-hailing platforms. These are already being used by 12% of the insurers in this study.
Claims ratios remain relatively low in most business lines apart from livestock and crop insurance. Nonetheless, the median claims ratio across all product lines of 45% represents a welcome return to previous levels, after the median claims ratio dropped to 25% in 2014.