The rapidly changing insurance industry on the continent is seeing several promising trends emerge in a post-pandemic world.

The insurance sector in Africa is valued at around $68 billion in premiums (GWP), and is unevenly distributed across the continent, assesses the latest report from consultancy firm McKinsey on insurance in Africa.

The markets are very disparate in terms of size, composition, growth and degree of consolidation, with 91% of premiums concentrated in just ten countries. South Africa is the main market and accounts for 70% of total premiums.

Faced with the immense development potential of the African insurance market, and while most African countries have experienced an average annual growth rate of double digits, McKinsey analysts have looked at the trends to follow and how companies insurance companies can hope to enroll.

* Structurally reformed economies to grow

On a continent where the insurance penetration rate is generally very low, it is clear that the growth of the sector is driven by economic growth and/or the implementation of structural reforms in the country.

The insurance penetration rate in the different regions of the continent. © McKinsey report "The African insurance market is ready to take off"

“Market liberalization and deregulation, the introduction of compulsory insurance, easier access through wider distribution, public-private partnerships, and regulation to support innovation have proven to be boost consumer confidence and help build more resilient insurance industries,” the McKinsey report says.

Insurers have significant leeway to collaborate with regulators

Analysts highlight the example of Nigeria, and the implementation of a pension reform in 2014 which has benefited both consumers and insurance players. A 70% growth in sales of retirement products in this country, between 2012 and 2017, is directly attributed to him.

As such, the consultancy recommends that insurers “work with governments and regulators to help shape their reform agendas. He adds, “Insurers have significant leeway to work with regulators on issues such as security, solvency and compliance requirements, as well as anything related to the tax benefits of insurance. savings and retirement products. »

* The digitization of insurance, a growth driver

The digitization of services is well and truly underway in Africa. Particularly in the field of insurance, where an increasing number of insurers have taken the route. “There is still great potential for accelerating the process in many markets,” the report points out.

And in this niche, the continent is particularly dynamic with the arrival of “insurtech” on the market (insurance technology companies). While McKinsey analysts highlight the South African Naked Insurance, which offers a 100% digital car and home insurance solution, other players have established themselves elsewhere on the continent. This is particularly the case of Baloon, available in West and Central Africa (Côte d'Ivoire, Senegal, Cameroon, Gabon, Niger), which has joined forces with the French insurance giant Axa to distribute its digital.

The consulting firm recommends on this point to increase investments in the digitalization of services to boost the sector. This is all the more so as the Covid-19 pandemic has contributed to the increase in demand for digital and remote access.

“We expect this to continue beyond the crisis. It is likely that the use of online banking services and mobile banking in several African countries will show a net increase of 20% to 40% after the crisis and that the use of mobile payments will increase considerably, especially in regions where the cell phone use is currently below average,” the report's authors say.

McKinsey Report_insurance in Africa 2 © McKinsey Report. The acceleration of the digitization of services on the continent since the Covid-19 crisis.

* Multiplication of insurance and tech partnerships

As a logical continuation of digitalization, McKinsey analysts are focusing on accelerating partnerships between traditional insurers and the world of tech. “Competition between players has already led to innovation and disruption in the market,” analysts note. “If innovative partnerships between insurers and online platforms increase, we expect this trend to accelerate. »

Further, in some cases, African countries could even overtake more developed and mature markets, the authors believe.

The case of MicroEnsure, based in several countries in Africa, and which operates according to a partnership model, is totally in line with the trend. MicroEnsure collaborates with nearly 70 insurance companies, a dozen telecom partners, and around 90 financial service providers and microfinance institutions to offer insurance offers accessible to low-income customers. About 85% of their clients have never had an insurance product before.

* Consolidation and birth of pan-African leaders

Another development underway: several governments are tightening regulatory and capital requirements for insurance companies to ensure their solvency and sustainability.

Thus in the countries of West Africa and Central Africa, of the Cima zone (Inter-African Conference on Insurance Markets), the regulator now requires companies to maintain a minimum capital of 3 billion F CFA (5.5 million dollars) for mutual insurance companies (compared to 800 million) and 5 billion CFA francs (9.1 million dollars) for public limited insurance companies (instead of 1 billion) .

According to McKinsey, the move “should help create stronger and bigger businesses as well as spur job creation and build industry capacity. »

To meet these new capital requirements, a consolidation of smaller players is expected, especially in non-life insurance markets which remain very local and fragmented, the report says. But such rules can also lead to movements out of countries in which such an investment would no longer be as profitable, or even to the reorientation of future investments in other geographical areas with less restrictive standards.

* Long-term growth prospects and “pan-Africanization”

Final highlight of the report: Over the past six years, established insurers have tended to diversify across the continent. And this expansion should continue with new investments in Africa.

“Local players will eventually benefit from greater integration through expansion, but for international players such as Sanlam, Allianz, Old Mutual and Axa, the primary objective is to capture long-term growth,” explain the authors of the report.

And to cite the example of the South African Sanlam which, thanks to the takeover of the Moroccan Saham Finance, is now present in more than half of African countries and has climbed into the top 5 across six markets outside the South Africa. Or Allianz, and its acquisitions in Morocco, Nigeria and, more recently, Kenya. Axa is present in nine African countries, while Old Mutual is present in 13 African markets.