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Enhancing the development of microinsurance markets in Africa

Rationale

There is strong evidence that the development of inclusive insurance markets contributes to the economic and social development. Further evidence show that developing inclusive insurance requires attention to be given to multiple issues to overcome the wide-ranging constraints to expanding insurance access. One effective way of developing an inclusive insurance market is working closely with the private sector, regulators and other relevant industry stakeholders that share a common goal of developing vibrant and competitive insurance markets. To gradually develop insurance markets, it is necessary to improve product quality while expand the available supply. Once an insurance market reaches a competitive stage with quality products and significant scale, commercial insurers and reinsurers begin to make profits while providing better value to consumers. Therefore, the entry of insurers and reinsurers into microinsurance business can be seen as an investment aimed at developing the market and reaching scale.  

In recent years the African insurance market has experienced an extensive growth; between 2008 and 2011 it grew by 200%. Despite this, in most African countries the insurance market is still at a nascent stage as only 4.4% of Africans are covered by microinsurance. Furthermore, microinsurance coverage is highly concentrated, with more than 60% in South Africa; and it is undiversified, with life products composing 76% of the total microinsurance market (The Landscape of Microinsurance in Africa 2012). The potential to further develop inclusive insurance markets in Africa and reach scale is huge, but in many African countries this potential is not being reached due to lack of knowledge and capacity to implement viable and valuable microinsurance schemes. However, market facilitation initiatives in some African insurance market show that well structured market development approach that takes a holistic strategy in tackling problems of both demand and supply, policy and regulation be successful in developing a inclusive insurance market.

Purpose

This partnership between the ILO’s Impact Insurance Facility (the Facility) and African Reinsurance Corporation (Africa Re) aims to support and enhance the development of microinsurance markets in African countries. To achieve this, the project will:

  • support market facilitation activities that will develop and strengthen the capacity of insurance providers to offer valuable insurance products and stimulate demand for insurance among financially excluded population segments;
  • promote cross country collaboration and sharing of good practices among African countries to facilitate cross learning and hence;
  • develop the capacity of practitioners and multipliers to increase their knowledge through trainings that reach hundreds of professionals across the continent; and ultimately
  • strengthen Africa Re’s work on developing inclusive insurance markets.

 

Activities

The activities undertaken under this project will focus on improving understanding of the business case of inclusive insurance, stimulating demand among underserved or unserved population segments, and strengthening the supply and regulation, of inclusive insurance products in the countries of focus.  Specifically the project will:

  • support the training of insurance practitioners to improve knowledge and skills required for effective the development and distribution of high quality inclusive insurance products;
  • identify and work with country or regional multipliers to develop the sustainable flow of capacity building training programmes in the African insurance markets;
  • support and sustain a community of practice on market development facilitating peer exchange and cross learning on strategies for developing inclusive insurance markets; and
  • disseminate emerging lessons  and insights on market development to governments and other relevant stakeholders to influence their policies with regards how insurance can be used to achieve public policy objectives. 

Lessons

Emerging Insights

Other resources