The African insurance market is experiencing transformative changes driven by the rise of insurtech and fintech start-ups, with significant potential for growth highlighted in a recent report by Deloitte. The report, authored by Takalani Sikhavhakhavha and Lauren Lanz of Deloitte Africa, points to a combination of a burgeoning youthful population and increasing mobile phone penetration as catalysts for this insurance boom.
According to the report, sub-Saharan Africa's population is expected to surge from 1.2 billion to an estimated 2.5 billion by 2050. Coupled with a projected 50% growth rate in cellphone penetration by the end of 2025, these demographics present unprecedented opportunities for the insurance sector to expand its reach, particularly in underserved areas. With a penetration rate of only 11.54% in South Africa, the majority of the continent's market remains relatively untapped.
Deloitte's findings indicate that while the COVID-19 pandemic delayed some expected growth in the insurance realm, it has also exposed the industry's resilience and potential for future development. The report outlines how insurance providers can harness mobile technology to create microinsurance products targeted at those who have historically been overlooked in terms of coverage.
“Players without an insurance license are increasingly moving into the insurance space, competing with existing insurers and providing new ways of servicing and reaching customers. Regulators are creating supportive environments that promote innovation and financial inclusion, which could ultimately lead to increased insurance penetration,” the report details.
As African governments begin to recognise the impact of insurtech and fintech start-ups on financial inclusion and economic growth, regulatory initiatives such as sandboxes and innovation hubs are being established. These frameworks are designed to foster collaboration between emerging start-ups and established insurance players.
Notably, the Financial Sector Conduct Authority (FSCA) in South Africa has launched an innovation hub intended to support insurtech and fintech establishments. This initiative aims to facilitate regulatory compliance and encourage industry partnerships, thereby creating an environment that not only promotes greater insurance penetration but also supports innovation across the sector.
Deloitte's report underscores the global trend toward sector convergence, noting that businesses from varying industries are increasingly collaborating. This trend promises to further transform the insurance landscape in Africa, blending technology-driven solutions with traditional insurance frameworks to meet the needs of an evolving market.
Source: Noah Wire Services