Infomineo : Microinsurance sector : An overview of the market development and distribution strategies in Africa

Executive summary :

Home to more than 700 million low-income citizens, Africa is considered a major market for micro-financial offerings, including microinsurance. According to the 2018 Landscape of Microinsurance in Africa study conducted by the Micro Insurance Network, only 2% of Africa’s low-income population is currently served by microinsurers.

Africa’s low coverage offers opportunities for microinsurance  

Low cost premiums

Microinsurance at its core is a type of insurance offering designed for affordability and inclusivity. This means that microinsurance only targets low-income clients, who cannot access mainstream insurance services or equivalent government programs. Despite operating with the same revenue and business model as traditional insurance providers, microinsurance companies serve these marginalised populations by offering suitable coverages for specific types of risks in exchange for low premiums.

Developing innovation

To better understand the microinsurance dynamics and progress in Africa, there needs to be a focus on two key elements. The first is the emergence of microinsurance and the type of products marketed in Africa, which will help categorise and explain the recent sector growth in the continent. The second point is the innovation in distribution channels, which highlights the type of efforts and initiatives made by microinsurance stakeholders to increase their profitability.

Microinsurance in Africa: Context of emergence

As a division of microfinance, microinsurance began to appear in the African market as a form of charity which was part of global financial aid programs introduced by international organisations. Other market players also started to offer cheap insurance policies to a specific type of clientele. These players include private insurers, mutual insurance companies and funds, microfinance institutions, NGOs, governments or semi-public bodies, etc.

Africa: an attractive market

Two key main factors drew some of these players to the microinsurance market in Africa.

First, the great success that microfinance practices had in Africa, in addition to a relatively low competition level compared to the traditional insurance market.

Second, there was a significant insurance gap that needed tailored products to answer certain types of risks that were not covered by traditional insurance offerings.

This led microinsurance programs to focus on the following types of products:

– Credit life and life insurance;

– Funeral insurance products;

– Health insurance; and

– Crop and livestock insurance.

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