February 3, 2022

INSURANCE: AIO picks holes in regulatory capacity against decline in penetration

INSURANCE: AIO picks holes in regulatory capacity against decline in penetration

By Rosemary Iwunze

Insurance industry leaders in Africa have picked holes in the regulatory capacity to deal with the declining insurance penetration in the continent.

President of AIO, Mr. Tope Smart who decried the development, noted that African average insurance penetration rate dropped to two per cent in 2020 from 2.78 per cent in 2019. This is even as the global average penetration rate went up to 7.40 per cent in 2020 from 7.20 per cent in 2019.

Speaking at the Insurance Retreat for Africa 2020, organised by the Government of Zanzibar at Madinat el Bahr, Zanzibar, Smart said: “In 2019, while the global average penetration rate was 7.20 per cent, that of Africa was 2.78 per cent.

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“In year 2020 while the global average went up to 7.40 per cent that of Africa came down significantly to about two per cent. This should be of great concern to us as a region.”

He attributed the low insurance penetration on the continent to; low income, low awareness level, failure to embrace digital technology, high level of financial exclusion, lack of infrastructural & distribution channels, lack of domestic skills and a shortage of data, even as insurers also battle brain drain.

Stating that regulators are not keeping pace with innovation, as timing and implementation of regulatory changes need to be looked into, he stressed that, lack of consumer trust and presence of weak companies erode trust, pricing and other market related issues, cultural related issues, fragmentation and over competition, were hindrances to the insurance penetration on the continent.

He charged relevant stakeholders to address these barriers in a bid to galvanise insurance sector in Africa to a level comparable to other regions in the world

“If the issues highlighted are critically addressed, the result will lead to a significant growth of the insurance sector.

“It is also important to mention that the underlying economic growth forms the most important catalyst for growth and good enough, the outlook for GDP growth is strong across markets,” he pointed out.

The coming up of African Continental Free Trade Area (AFCFTA), an initiative of African Union, he said, is a game changer for the insurance sector. 

Since insurance plays a major role in the economic development of the continent, he said, the expected increase in intra-African trade through AFCFTA will lead to higher insurance penetration across the region.

“The potential to increase life insurance growth is note worthy.    In many markets apart from South Africa, non-life represents at least 65 per cent of total premium income with even some up to 85 per cent (Tanzania & Uganda).

“Given this scenario, the potential opportunity to expand life insurance is very great.”

Vanguard News

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