Insurance heavyweights such as Allianz eyeing growth in Africa

By Conrad Onyango, bird story agency

Technological advancement, urbanisation, and a growing working and educated population is proving too tempting for regional and international insurance giants to resist as they tie the knot to grow a continental insurance market.

Africa’s insurance market is the most underserved in the world – but activity in the sector is on the increase, a trend that could signal a new phase of growth.

A number of insurance firms operating in the market – including German giant, Allianz – are either consolidating their operations, entering into joint ventures, rebranding or tapping into technology to widen their presence or scope of product offerings, in battle for a share in the nascent but growing market.

A Sanlam-Allianz tie-up is the latest joint venture in the market, combining the German giant, present in 170 countries, with the largest insurance company in Africa. The venture will see the two firms combine their Africa operations to form one of the largest non-banking financial services entities on the continent – with a combined group equity value of €2 billion.

The two firms announced they would leverage each other’s strengths to unlock synergies that would boost customer experiences and launch innovative solutions in the market.

“The joint venture will create value for all stakeholders through greater economies of scale, broader geographic presence, larger combined market share, and a more diversified product offering,” the companies said in a statement.

The Sanlam-Allianz joint venture will boast a presence in 29 countries and aims to increase life and general insurance penetration, accelerate product innovation and drive financial inclusion in high-growth African markets, the statement said.

Other activity in the sector includes a rebrand for Old Mutual. After seven years of trading as UAP Old Mutual, that joint venture has begun a phased rebrand to market itself as one brand – Old Mutual – in the East African market. The rebrand will allow this “African-born” entity that has operated on the continent since 1845, to tap into “a growing regional investment and business hub”.

Like Sanlam-Allianz, Old Mutual has also affirmed its commitment to grow into a pan-African entity through product innovation and providing cover for multinationals.

“East Africa is growing as a regional investment and business hub, with this growth comes new opportunities for alternative investments, innovation, and expansion, and as Old Mutual Kenya we are ready to partner with Kenyan customers, communities, and stakeholders to ensure we harness this potential,” the firm said.

Already, operations in Rwanda are being rebranded to Old Mutual and this will be followed by Kenya, Uganda, South Sudan and Tanzania operations – an exercise expected to be complete in 2023.

“Since 1845, Old Mutual has supported individuals, businesses and communities through civil wars and world wars as well as the Spanish Flu pandemic, the Great Depression, and many political crises and economic turbulence across the continent,” the insurer said when it turned 175, in 2020. It can now add Covid-19 to its list of crises, underlining the level of experience in African markets that some of the regional insurers bring to a relationship with outside investors.

Also angling for the East African market is the Mauritian insurance company, MUA, following its takeover of the non-life activities of Saham Kenya and the successful integration of the two entities in 2021.

MUA has operations in Mauritius, Kenya, Tanzania, Uganda, Seychelles and Rwanda. With the consolidation of its Kenyan activities, it also hopes to increase its share in the market and is banking on its pan-African outlook and brand (it was previously a part of Sanlam) to win customers.

“With an experienced management team, a strong reputation in the market and extensive operational knowledge, Saham Kenya’s full amalgamation into MUA is complimentary and opportune,” MUA said in a statement.

MUA said its strategy is to provide simple and affordable insurance and to be caring and attentive to the needs of its clients.

The latest moves by all players highlight a bruising battle for the East African market.

Research firm, Research and Markets projects Africa’s insurance market to grow at a compounded annual growth rate of 7% to 2026, and is seen significantly raising its value beyond the $70 billion recorded in 2020.

Among the key factors driving the industry in the African region, the research firm says, is the huge opportunity of entirely untapped markets, both to regional and global players.

“Key players from the global market seek to exploit these untapped regional opportunities, along with exploring ventures in concentrated markets,” according to Research and Markets.

South Africa is considered a highly competitive market due to the presence of well-capitalised local players, who currently control 70% of the continent’s insurance premiums, according to McKinsey.

The North Africa region, with 8.8% and East Africa, with 3.3%, are in second and third places respectively. The Francophone Africa market has a combined share of 2.7%, southern Africa outside of South Africa 2.6% and Anglophone West Africa, 1.9%, respectively.

The limited share of some of the continent’s largest populations highlights the opportunities, once insurance becomes something seen by those populations and a necessary – and affordable – purchase.

South African health insurer and Africa’s second-largest insurer, Discovery Limited, broadcast its intentions in the pan-African market by announcing the availability of its health insurance cover in five new African markets – Zambia, Nigeria, Ghana, Kenya and the Democratic Republic of Congo.

Rising literacy levels, the research firms said, is expected to boost awareness of the benefits of insurance – opening up lucrative opportunities for players.

“Rapid urbanisation, emerging middle class, and growing working population, along with improving internet connection and technological advancements, are some of the other factors catalysing the growth of the insurance sector in the African region,” said Research and Markets.

Audit firm, KPMG in its Global Insurance CEO Outlook 2021, also shares the same sentiments and shows that the top leadership of insurance firms across the globe have their eyes fixed on collaborations, sustainability and digital transformation as key elements of their growth strategies.

According to KPMG, the majority of CEOs (68%) are planning to increase investments in disruption, detection and innovation processes to tap into accelerated digitisation in the industry.

“Its critical that organisations develop digital investment strategies that drive growth, improve customer experience and lower costs but also increase protection,” said KPMG global head of insurance advisory, Mark Longworth.

The McKinsey Global Insurance Report 2022, points to insurtech driving innovation and disruption in the industry. Already, global investments in insurtech has grown 14-fold, from $1 billion in 2004 to $14.6 billion in 2021. “More than 40% of insurtechs are focused on the marketing and distribution segments of the insurance value chain, enabling them to solve customer pain points through a digitally enhanced client experience that could pose a competitive threat to incumbents,” according to McKinsey.

In Africa, insurtech is finding a footing on the heels of a fintech boom.

According to Briter Intelligence there are more than 75 active start-ups operating across different insurance verticals – from API development to car and crop insurance.

South African agtech and AI company, Aerobotics, for example, has rolled in de-risking insurance tools to its offering, while Nigeria’s digital logistics startup, Kobo360, has made its KoboCare insurance tool available to drivers.

Big insurance firms have also begun tapping into tech platforms, with Old Mutual being among the strategic investors in insurtech platforms like CoverGo, a platform that lets firms build and launch insurance products and streamline policy administration and claims.

All of these developments are seen boosting insurance penetration on the continent from its current level of 3%; with South Africa at 13.7% (according to Statista), insurance firms moving into the space are clearly seeing its upside potential.

/bird story agency