The survey of 125 insurance executives and regulators in the Sub-Saharan region evaluated growth opportunities for insurance premiums and risk potential in seven key English-speaking markets in East and West Africa: Ghana; Kenya; Malawi; Nigeria; Tanzania; Uganda; and Zambia. The risk and opportunity matrix was created by analyzing economic conditions and potential hazards in each of the seven countries in the survey.

Zambia ranks first in Sub-Saharan Africa in growth opportunity for insurers, followed by Nigeria, Ghana and Kenya. Ghana offers the least amount of risk, followed by Zambia and Kenya. Nigeria, the continent’s largest economy, ranks seventh in the amount of risk posed to insurers.

Steve Osei-Mensah, East and Central Africa Financial Services Advisory Leader at EY, says:

“Significant population growth, rapidly rising incomes and the relatively low penetration of insurance products suggest great potential for both life and non-life products in Sub-Saharan Africa. There are also openings for insurers to introduce innovations in motor insurance, end-to-end mobile insurance purchases, consumer education and fraud prevention. While insurers will need to address challenges involving talent, market volatility, regulation and technological capacity, among others, there are opportunities for growth in the region.”

Zambia, Ghana and Kenya lead in attractiveness

Zambia offers the most attractive mix of opportunity and risk over the next three years, according to the research, as 40% of its population lives in cities, higher than any nation in the survey except Nigeria and Ghana. Consolidation is helping Zambia’s insurance industry grow on a firmer footing, the report finds, with the number of insurance brokers decreasing to 39 in 2015 from 48 in 2014.

The research expects 8.5% annual growth for Ghana’s insurance market between 2014 and 2018, expanding from US$400m to US$600m. Just 1 in 10 Ghanaians own any kind of insurance, though the country has been the focus of foreign investors who have harnessed competition among mobile phone providers to offer free insurance as a market differentiator, the report finds.

Kenya is the most mature market among the seven countries included in the report, which forecasts that its insurance market will grow to US$2.2b by 2018 from US$1.8b in 2014. Respondents from Kenya view regulatory changes and mobile underwriting platforms as potential growth drivers in the coming years, the report finds.

Rohan Sachdev, Global Insurance Emerging Markets Leader at EY, says: “Insurance executives have reason to be optimistic about these markets. As a greater percentage of the population moves to urban areas and gains affluence, insurance purchases to cover health care and items such as cars are more likely. The Sub-Saharan economies are among the world’s fastest growing, and foreign investors are recognizing the opportunities these markets present.”

GDP expansion will drive premium growth in sub-Saharan Africa

Despite lower oil and agricultural commodity prices and economic slowdowns in other parts of the world, the Sub-Saharan region’s economic outlook remains strong, the report finds. Forty-one percent of insurance executives and regulators surveyed believe GDP growth is the most important driver of future premium growth in the region. Product innovation (22%), regulatory changes (15%), competition (11%) and technological changes (10%) are other key drivers of premium growth.

Larger populations and the movement of people from rural to urban areas will also promote growth for insurers. The number of Africans joining the working-age population (ages 15 to 64) will exceed that from the rest of the world combined by 2035, according to the report, providing new opportunities for insurance penetration.

New technologies will reach new customers

Cross-industry collaborative insurance products, such as partnering with mobile phone carriers, will be key building blocks for growth, according to 75% of respondents. Seventy-four percent say online underwriting platforms and 73% say mobile underwriting platforms will be important growth drivers, as many consumers use mobile phones to conduct financial transactions.

Face-to-face sales remain critical

Personal connections still matter, even as digital platforms become increasingly important to insurers. Agents and brokers in all seven countries surveyed account for at least 50% of policies sold, because customers still require education about insurance coverage.

Finding talent as insurers grow in these markets remains a challenge, with 30% of respondents saying it is difficult to find qualified agents. Identifying technical talent who can build mobile and web applications geared toward insurance is also a challenge, the report finds.

Source: Financial