Hollard Insurance Group, a South African insurer with an annual turnover of over R15bn (about $1bn), has been growing its international footprint in a number of markets, including China, Australia, Mozambique, Zambia, Botswana, Namibia and Ghana.

Part of its African expansion has come from selling insurance through third-party traders, such as retailers and telcos. Its partners include some of South Africa’s largest retailers – such as Pep, Edgars, Ackermans, Game, Spar and Truworths – which all have an African expansion strategy.

How we made it in Africa’s Kate Douglas spoke to Frans Prinsloo – MD of Hollard International’s Africa and Asia business – about selling insurance to emerging-market consumers and the state of the African insurance industry.

Below is the edited extract.

Is selling insurance through retailers a common model in developed nations?

Yes, it is. So I think you have a number of very traditional insurers and players on a global stage that operates mostly through traditional broker channels. And then you have a number of insurers that sort of focus on these kinds of retail partnerships – I think the most well-known is Tesco in the UK environment, where Tesco has partnered up with insurers. There are a number of players that focus on that specifically.

What are some of the benefits of this strategy?

You have got very good distribution. So I think the key thing is around distribution. You utilise the infrastructure of the retailer – which you can do in a number of areas, especially if it is a credit retailer because then you have got an account base and you can sell into that account base and get payment through that mechanism. But it is also through bricks and mortar distribution, and then client lists. So you can work a client list through a retailer magazine or retail internet advertising, and things like that.

Tesco has been a great example where they have partnered [with insurers] in the UK. You also have the tyre brands.. Remember in the UK there is a requirement that your car has to go through a roadworthy [test] every year… and a tyre distribution company can do a roadworthy as well. And that also presents an opportunity because then you have got the client face-to-face, and you can talk to them about the insurances. So those are some of the key advantages that you have.

What about specifically targeting the lower-income consumer? Does Hollard still work through Take it Eezi, the rural and township based vendor network?

That is still being ultilised in South Africa specifically. I think if you look especially at Africa and emerging consumers, often your insurance brands are not as strong as some of your retail, mobile or banking brands. So it often helps to also look for a trusted brand which customers often interact with, and utilise that brand to also get to a client base, especially an emerging client base that hasn’t dealt with [insurance companies before]… But they often deal with the mobile phone brand and, through their mobile phone, interact on a daily basis with a network. And that network then provides a trusted brand that [insurers] can interact with clients and deal through them. And that enables you to, firstly, quite cost effectively reach your client and also, the most important thing, to collect premiums. So you would utilise either a mobile app or a bank account mobile money initiative to collect premiums, and you can do that quite cost-effectively.

And has this strategy of working with telecos been utilised by Hollard in African markets?

Yes, certainly. We have done an initiative in Ghana, where we sold funeral insurance through MTN Mobile Money – and that has worked really well in [reaching] customers who in the past didn’t have access to insurance. You can utilise their mobile money account to purchase insurance, and because your method of reaching the client and collecting premium is quite cost-effective, you can then provide a superior price on a product to your customer.

Another example is the venture we have got in Botswana with the Botswana Post Office, where we utilise their infrastructure to get to far-reaching areas, through the post office network, to provide people with access to insurance. And those people, in the past, never had access to insurance.

With most of your South African retail partners expanding into other African markets, is Hollard following them?

Yes. So a good example would certainly be the Edcon Group – which has operations in Botswana, Namibia, Zambia, and they have recently set up in Ghana as well. So certainly in those markets Hollard also underwrites products depending on what the requirements are for each store. Again, a good example of that is from an Edgars environment – they offer credit sales in Botswana and Namibia, but not in a Zambia. So then your offerings and way of collecting premiums and interacting with the client is very different in those markets. So again it is really tailor-made to what the requirements of the retailer is and then, quite importantly, also what the insight is into the consumer – because you have always got to deliver a product that provides them value for money. Then you have got to adapt this in each market to what fits the regulatory environment and also the requirements of your client.

Let’s talk about that regulatory requirement on the continent, outside of South Africa. Is this a limitation to the growth of the insurance industry in these markets?

There certainly are regulatory challenges… I mean Africa is not a one-size-fits-all. You’ve got 54 different states with different requirements, but you have also got a lot of different languages. So let’s use a good example: Mozambique is mostly Portuguese-speaking. So one of the requirements are that you have got to deliver insurance products and policies to the clients in Portuguese. But the insurance framework is also heavily influenced through the past and the history, where Portugal was quite involved – so you would see more of a Portuguese influence in their legislation… And then in some countries in West Africa, you will see a big French influence as well.

But more and more the regulatory environment is getting to a landscape where the playing fields are being levelled… There is the International Association of Insurance Supervisors that is trying to get more to uniform application to insurances in all of these environments. So people are moving towards it, but at the moment it is very different in different markets.

But how restrictive are these regulatory environments? Would the insurance industry be growing faster if obstacles were removed?

There is obviously quite a lot we would like to see changed, but I think that change is doable and the insurers have a very important role to play to influence regulators and show them examples of how it can work. A good example is that we are currently lobbying and in discussions with a regulator in Ghana to show [them] there is opportunity to unlock and grow the market.

One of the keys things in all of these African markets is your insurance penetration is extremely low. So if you compare a South African market where insurance penetration is about close to 10% of GDP, from an insurance penetration perspective other markets are below 1% in Africa. It is a combination of consumer education, growth of a middle class and asset accumulation. But an important thing is also supply side innovation and how innovative you can be to get customers, rather than purely looking at traditional channels. So that’s why alternative distribution channels provide such a good opportunity. An example is East Africa’s Kenya, where in the past you weren’t allowed to have an insurance product being sold in the same banking hall as where bank products were sold – you had to do it separately. So in a lot of instances you had banks that were providing their clients with a banking solution, but they had to move across the street to an insurance environment where insurance was sold – you couldn’t do it as a one-stop-shop. That was changed around 18 months or two years ago, where the regulators now allowed the sale of these products in the same banking hall. And that is now starting to open up the market and ensure growth of insurance products and, more importantly, protection of assets for people in those markets.

Are there insurance products that do particularly well in certain African countries, but not in others?

A mistake a lot of people make is to compare [other African markets] to South Africa – which you can’t. In the South African market, the life [insurance] market is five or six times bigger than the short-term insurance market. If you look at the rest of Africa, you turn that around and your general insurance and short-term insurance, is much bigger than the life insurance space…

There are also cultural issues that come to play. So in a market like Nigeria, funeral policies are not selling fantastically because of the cultural nature of the Nigerian market, where a lot of people see it as a taboo to talk about death and death insurance. Where in a market like Ghana, again funeral insurance is quite a big thing at the moment, and we are seeing a faster growth on funeral insurance than other insurances.

But in other countries it is the other way round. Again it depends on a lot of local factors that one needs to [understand], so good market and consumer insights are vital in these markets in order to offer the right product.

Are you optimistic about the future of Africa’s insurance industry?

We are very bullish on the African insurance market and the opportunities that have been offered. Certainly the growth in your middle class and the growth of these economies are quite exciting – although some are growing faster than others. But there are definite trends from country to country.

If I take West Africa, with Nigeria and Ghana as an example, the drop in the oil price is certainly going to have a big influence in those markets, especially from a business insurance perspective and impact on the rest of the economy. In countries heavily reliant on resources there will be a big impact on growth, from a corporate perspective and also an employment perspective – and that most definitely is going to have an impact on the growth and sales of insurance products, be it corporate, commercial, or personal.

Where if you move towards East Africa and you look at markets, specifically Kenya, that is not so reliant on resource-based growth and is far more entrepreneurial – you see a totally different trend where you have got a much more diverse economy. You will see growth in services and IT sectors which again provides a much better base for selling small commercial [insurance] and growth in personal insurance products because you are not going to have a massive impact on those economies from a growth perspective.

Another example is Zambia, which is an economy that is heavily driven on the copper price and you’ve seen the currency take a big smack and a number of copper mines closing. So it is going to have a massive impact in terms of unemployment, especially in the Copperbelt.

So it is very difficult in African markets to talk about trends that will apply to all of these countries. You have got to look at these regions and countries very specifically.