New AIO President, Tope Smart, Unveils Ambitious Five-Point Agenda
Having been part of the sector for some decades, the new President of the African Insurance Organization (AIO), Tope Smart, has promised to increase the level of consumer trust, improve collaborations among markets, and also with governments and other regulators.
He also pledged to increase customer awareness;and also, the adoption of digitalization in the insurance market.
These are Smart’s five-point agenda that will drive his one year tenure as the president of practitioners in the sector that has lagged among its peers in Africa.
Smart, the 47th President of the AIO and the Group Managing Director of Nem Insurance Plc noted,
“The Insurance sector in Africa has underperformed when compared with other sectors such as banking and telecommunication.”
In 2019, Insurance penetration rate in Africa stood at 2.98 percent while global average penetration rate was 7.23 per cent. Africa’s GDP also increased from $2.368trillion in 2018 to $2.448trillion in 2019, but total direct premium written drop from $69.46billion to $68.2billion. Also in 2019, while global premium growth was 3 per cent, Africa recorded a negative growth of -3 per cent.
The trend is disheartening. Aside from a few markets such as South Africa, Morocco, Kenya, Egypt, Malawi, Zambia and Ghana, no other market in Africa has up to 1 per cent penetration rate.
He said the anomaly is an irony given the fact that Insurance is the bedrock of any economy as it ensures the stability and optimum performance of any organization.
Smart wants this trend must reversed by all stakeholders who have to work in close collaboration in order to achieve the goal. Though the sector has moved from where it was a few years ago, there is still a lot to be done if we must attain our rightful position in Africa.
“ It is on this basis that I hereby present my five-point agenda for the next one year, the achievement of which will ultimately lead to the increase in penetration rate in Africa which is the overall objective of this agenda.”
On increased consumer awareness, he said in the next one year, a lot of effort shall be dedicated towards increasing consumer awareness about the benefits of Insurance.
He said COVID-19 triggered awareness level as many became aware of the importance of Insurance during the period, promising that efforts shall be made not only to sustain this momentum, but also to increase same by collaborating with various markets to organize sensitization programmes that will ultimately lead to increase in consumer awareness.
Smart noted that “the strong economic growth of the past decades has helped to reduce poverty and increased the middle class in Africa. The effect of higher disposable income will translate into growth for Insurance business. Also to be noted is the changing cultural norms. The declining influence of the extended family as a form of informal insurance means that people should take care of themselves which will make people buy insurance.”
On adoption of digitalization, he said “The Insurance sector in Africa has been slow in embracing technology. The coming of COVID-19 and the subsequent lockdowns have made it imperative for the sector to upscale technology, digital technology in particular. COVID-19 has triggered the value of digitalization. While this is a positive development, the implementation has been slow with IT’s spending still going towards maintaining legacy systems. The benefits of digitalization cannot be over emphasized. Among other things, it helps in accessing new customer segments, launch new products and improve the appeal and affordability of Insurance products among other things. Efforts shall be made to appeal to all member companies to embrace full digitalization.”
On collaboration among markets, the new AIO President stated that “one hing that has been missing in markets across Africa is absence of collaboration among different markets. Collaboration among markets will lead to growth as this presents an opportunity to share experience among markets. We shall work with various markets to enable us achieve this goal . A strategic approach that takes into account the unique characteristics of each market, different growth prospects will be adopted and mechanism for collaboration will be worked out.”
Speaking on collaboration with governments and regulators, he said “One of the ways to increase penetration in Africa is to have Governments across Africa buy into the Insurance project. We shall work with various Governments across the region in order to gather support for Insurance. Government support by way of initiating policies as well as enforcement of compulsory insurances will go a long way in increasing penetration.
“One very strong enabler to deepen insurance penetration is regulatory reform. It is therefore important that the issue should be given prime consideration. A strategic approach to collaborate with regulators to drive reform and safeguard consumers could unlock significant value for the Industry players and the society at large.”
On increased level of consumer trust, Smart posited “One of the major barriers to the growth of Insurance in Africa is lack of consumer trust. A good number of consumers who are aware of the benefits of Insurance protection are yet to embrace Insurance due to lack of trust. Efforts shall be made through training and education to reverse this trend. Building consumer trust through meeting claims obligations timeously shall be encouraged and operators shall be advised to adopt this so as to increase the penetration rate.
From the foregoing, it is clear that Africa’s low insurance penetration is still its largest opportunity. Though the region’s Insurance sector has grown over the years, this growth is being driven primarily by economic growth rather than deepening market penetration. Steady economic growth in most countries combined with a largely underdeveloped Insurance sector have positioned the continent as the second fastest growing region for Insurance globally after Latin America. Prior to COVID-19, the Insurance market was expected to grow at compound annual growth rates of 7% per annum between 2020 and 2025. However, the market will struggle to attain the growth rate due to the pandemic as a lot of consumers are cutting back on discretionary expenditure (Insurance inclusive) due to dwindling income.”
He said the African Continental Free Trade Area (AFCFTA) is a good initiative, saying “it is supposed to be a game changer. Among other things, markets and economies across the region will be reshaped leading to the creation of new industries and the expansion of key sectors. Insurance markets across the region will benefit from this pact and this will consequently increase the penetration rate.”
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