The Commissioner for Insurance, Mr. Fola Daniel, has expressed dissatisfaction with the level of insurance penetration across the African continent, saying huge insurance gaps have persisted because most Africans do not know the benefits of insurance.
He stated this in spite of the enormous growth opportunities across the continent that were recently identified by AM Best Co, a firm that provides news, credit ratings and financial data products and services for the insurance industry.
Daniel expressed his worry while fielding questions from newsmen during the recent 2013 African Insurance Organisation (AIO) conference and general assembly in Cairo, Egypt. “We have huge insurance gap, which means only few Nigerians and Africans are buying insurance because they do not know the benefits,” he said.
He noted that with the exception of the South African insurance industry which contributes significantly to the country’s Gross Domestic Product (GDP), other markets across the continent are contributing very little to their respective nations’ GDP notwithstanding the huge potentials for insurance growth.
“I feel the only country where insurance is contributing significantly to its GDP is South Africa where their insurance contribution is one of the highest in the world and yet we have lots of opportunities in Africa. We have economies that are growing very fast, population that is not touched by insurance as a risk management mechanism,” the commissioner said.
Proffering a solution to the problem, Daniel said “we need to come up with more products that are people-related and more people will begin to see insurance as a means of managing their risks. If more people do this, the insurance gap will reduce significantly and it will impact on our GDP all over Africa.”
Meanwhile, AM Best Co said the insurance markets in Africa’s 54 countries are diverse and reflect disparities in economic conditions and the approaches of the policymakers in individual countries and regional blocs.
The firm described how the African insurance and reinsurance markets offer potential for growth, given anticipated development of GDP in the region. Each country has different drivers for heightened insurance demand, ranging from economies dominated by the oil and gas and mining industries, to large populations, it observed.
A.M. Best also highlighted challenges faced by African insurers and reinsurers including competitive environments as well as the ongoing global financial uncertainty and political risk in many parts of the region.
In its research on three of Africa’s largest insurance markets, South Africa, Nigeria and Kenya, the firm said an increase in minimum capital levels has resulted in some industry consolidation even as some markets were over-crowded.