Pension and Individual life insurance businesses are vital to the growth of Africa’s insurance business, whose penetration as a percentage of GDP is below the world average.
McKinsey’s report shows that the two insurance segments are the fastest growing lines in the business, despite starting from a smaller base compared to non-life insurance.
Individual life insurance contributes a vast opportunity for growth owing to its under penetration compared to non-life insurance. 2018 Data from Swiss Re shows that life insurance accounts for30% in gross Written Premiums in Francophone Africa, 44% in Anglophone West Africa, 44% in Southern Africa, 2% in Angola, and 37% in East and North Africa. Among all regions, South Africa and Southern Africa have higher life insurance numbers than non-life insurance, at 80% and 54%, respectively.
Other areas for growth include commercial insurance, which is already performing strongly in some countries. For example, oil and gas insurance grew by 9% annually, whereas marine and aviation insurance surged by 10% annually between 2014 and 2018. Ghana showed similar trends, where the Oil and Gas Insurance pool jumped from $25 million in 2016 to $48 million in 2019.
Overall, insurance penetration across different regions in the continent is still low. South Africa has the largest insurance penetration in terms of the total Gross Written Premiums as a fraction of nominal GDP. The region leads by 12.4%, followed by Southern Africa at 2.2% and North Africa at 1.3%. Francophone Africa and East Africa tie at 1.2%, while Angola and Anglophone West Africa trail at 0.6% and 0.3%, respectively.
McKinsey suggests stimulating growth through structural reforms, where market liberalization, compulsory insurance, and deregulation drive pentation. The report also calls for better access through innovation and broader distribution, innovative partnerships, strengthening consolidation, and pan-Africanization to drive growth in the sector.
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