Download PowerPoint-Präsentation - African Insurance Organisation

36th AIO Annual Conference
Dar Es Salaam, Tanzania
May 2009
Challenges of Access to
Insurance Services in Africa
Junior Ngulube
MRoA/MMRC
Munich Re Group
Challenges of Access to Insurance Services in Africa
Framing the Challenges

MRoA/MMRC
Munich Re Group
“……when you are a hammer, every problem is a nail…!”
2
Challenges of Access to Insurance Services in Africa
Framing the Challenges

MRoA/MMRC
Munich Re Group
Insurance Penetration in Africa is Relatively Low
3
Challenges of Access to Insurance Services in Africa
Framing the Challenges
Per-capita income (2006, US$)
MRoA/MMRC
Munich Re Group
Insurance market penetration (2006, in %)
0.0
40 000
1.0
2.0
3.0
4.0
5.0
6.0
World
North America
30 000
Western Europe
20 000
Japan/AUS/NZ
10 000
Emerging Asia
0
Penetration much
lower if South
Africa is excluded
(NL: 0.82, L: 0.33)
m
er
Latin America
tin
A
Af
ric
a
ic
a
pe
ur
o
E
La
rn
te
Ea
s
Em
er
gi
ng
As
ia
S/
N
Z
e
AU
op
pa
n/
Ja
rn
te
W
es
N
or
th
A
Eu
r
m
er
W
or
ld
ic
a
Eastern Europe
Africa
Non-life
Life
Low per-capita income and market penetration
4
Classification of insurance markets according to their
state of development (Life)
MRoA/MMRC
Munich Re Group
Criteria
1.
Life insurance penetration and density (premium per capita)
2.
Consumers: Wealth, savings rate, family structures, awareness
3.
Products: Range, complexity, flexibility, innovations, investment products
4.
Distribution: Types and market shares of sales channels, mix, quality of agents and
sales process
5.
Supervision: Insurance law, supervisory authority (independence, resources, quality of
data, models, instruments), practical effectivenesss and efficiency
6.
Capital markets: Development and use of stocks markets, degree of integration of
financial services, modern financial instruments
7.
Technology available in the market (either internal or external)
8.
Risk management:: Underwriting, claims management, experience studies or industry
surveys, asset liability management, etc.
9.
Companies‘ organisation: Legal forms, structure, management
10. Expertise and experience available in the market
5
Challenges of Access to Insurance Services in Africa
State of Development of Insurance Markets (Life)
Super mature
Source: Munich Re
Mature
Transitional
MRoA/MMRC
Munich Re Group
Emerging
6
Challenges of Access to Insurance Services in Africa
Framing the Challenges

MRoA/MMRC
Munich Re Group
Wealth Drives Insurance Penetration
7
Challenges of Access to Insurance Services
Relationship between wealth and insurance penetration
MRoA/MMRC
Munich Re Group
 There is a positive relationship between wealth (measured as gross national
income per capita in purchasing power parities) and a country’s insurance
penetration
 Higher wealth tends to result in a rising penetration in life as well as in non-life
insurance (i.e. the insurance market is growing faster than the overall economy)
 In general, the increase is stronger in emerging markets than in industrialized
countries
 Wealth alone does not explain the state of a country’s life insurance market.
Other causes are differences in life insurance market environments across
countries (e.g. degree of old-age pension systems being based on social
security).
 Based on the overall global trend, growth potential in life business in general
exists in emerging markets (catching up) as well as in industrialized countries
(reform of social security systems, ageing society)
8
Relationship between economic wealth and life
insurance penetration
MRoA/MMRC
Munich Re Group
Penetration in %
Data: year 2005
Global trend line
Gross national income per capita (in PPP-US$)
Life5.1.2 Life insurance markets and competitors research, Heike Wengert, 2007
29.04.2017
10
Relationship between economic wealth and
Non-life insurance penetration
MRoA/MMRC
Munich Re Group
Non-life penetration (premiums in % of GDP) and per-capita income 2004
United States
5
Global trend line
Penetration Non-life (%)
4
Germany
3
South Africa
Portugal
Korea
Spain
France
Czech Republic
Morocco
2
Kenya
Angola
Tunisia
Brazil
Ethiopia Zambia
1
Mauritius
Poland
Japan
Singapore
Turkey
Nigeria
Mozambique China
Tanzania
Sudan
0
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
GNI per capita in purchasing power parities (PPP-US$)
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Challenges of Access to Insurance Services in Africa
Framing the Challenges

MRoA/MMRC
Munich Re Group
Growth in Insurance Penetration
12
Some African countries fall in the category of
Emerging Markets with high growth potential
MRoA/MMRC
Munich Re Group
Non-Life: Expected average real growth 2004 - 2010 and penetration 2010
(G7 countries not included in global averages)
NL real growth until 2010 greater than
average (in std.dev.)
China
Angola
3
Sudan
2
India
Turkey
Tanzania Mozambique
1
Nigeria
(in std. dev.)
-2
Russia
Argentina
Penetration in 2010
Singapore
Penetration in 2010
lower than average
Chile
Ethiopia
Zambia Mexico
Cameroon
-1
0 Brazil
0
1
Kenya New Zealand
Japan
-1
higher than average
Korea
Taiwan
South Africa
Israel
Mauritius
(in std. dev.)
2
3
Australia
Norway
Italy
Canada
France
Germany
United States
United Kingdom
Switzerland
NL real growth until 2010 smaller
-2
than average (in std. dev.)
Note: Size of bubble relates to
insurance market size in 2010
13
Non-life premiums outgrow economic growth in line
with rising per capita income (= wealth)
MRoA/MMRC
Munich Re Group
Non-Life: average real growth 1994 - 2004 and current penetration
„Typical Emerging Markets" NL real growth 94-04 greater
„Advanced Growth Markets"
than average (in std. dev.)
2
Russia
China
Taiwan
Sudan
India
Current penetration
lower than average
Saudi Arabia
Nigeria
Mexico
(in std. dev.)
-2
Turkey
Greece
Insurance market
development path
1
Poland
Argentina
Malaysia
Hungary Morocco
Finland
0
Brazil
Mauritius
0
Hong Kong
Philippines
Kenya
United Arab Emirates
-1
IrelandKorea
Slovenia
South Africa
Luxembourg
Netherlands
Switzerland
United States
United Kingdom
Portugal
Italy
France
1
Austria
Germany
2
3
Current penetration higher
than average (in std. dev.)
Japan
-1
„Poor Fellows"
NL real growth 94-04 smaller than
„Advanced Losers"
average (in std. dev.)
-2
Note: Size of bubble relates to
insurance market size
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Challenges of Access to Insurance Services in Africa
Framing the Challenges

MRoA/MMRC
Munich Re Group
Is the Challenge Access to Insurance Services in Africa or Wealth?
16
Challenges of Access to Insurance Services in Africa
Framing the Challenges

MRoA/MMRC
Munich Re Group
Wealth in Africa
17
Wealth and Insurance Penetration in Africa
Top 10 Countries
County
MRoA/MMRC
Munich Re Group
GDP
Market Size Penetration
(USD Billion) (USD Billion)
%
Per Capita
Income
(USD)
Equatorial Guinea
10.30
0.002
0.04%
21041
Libya
66.20
0.17
0.31%
9022
Gabon
10.20
0.106
1.04%
6856
Botswana
11.90
0.372
3.905
6187
Mauritius
7.40
0.32
4.93%
5686
South Africa
282.00
24.678
8.75%
5372
Algeria
134.00
0.776
0.59%
3881
Tunisia
35.00
0.68
1.94%
3410
Cape Verde
1.60
0.022
1.38
2919
Namibia
6.60
0.454
7.96%
2842
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Wealth and Insurance Penetration in Africa
Bottom 5 Countries
MRoA/MMRC
Munich Re Group
County
GDP
(USD
Billion)
Market Size
(USD Billion)
Penetration
%
Per
Capita
Income
(USD)
Tanzania
14.3
0.123
0.86%
299
Niger
3.5
0.022
0.59%
247
Malawi
2.4
0.063
2.61%
166
Ethiopia
13.3
0.097
0.88%
149
Dem Rep of Congo
8.9
0.016
0.23%
124
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Challenges of Access to Insurance Services in Africa
Framing the Challenges

MRoA/MMRC
Munich Re Group
Access to Insurance for Low Income Groups
20
Challenges of Access to Insurance Services in Africa
Need for Insurance Among Low Income Groups
MRoA/MMRC
Munich Re Group

Asset protection and life insurance low in priority

Top priorities: food, shelter, clothing, medicine, provision for funerals,
education

Perception of risk centres on loss of a job, loss of an income provider,
disease or death

Least important perception of risk concerns things that can be replaced
e.g. assets

Asset ownership in this sector is low or assets low in value

Even when available, money is fungible leading to skipped premiums
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Challenges of Access to Insurance Services in Africa
Supply of Insurance to Low Income Groups
MRoA/MMRC
Munich Re Group

This market generally not targeted – insurance is sold not bought and
even when bought, it’s a grudge purchase

Existing insurance products designed for commercial and higher
income groups

Experience of the product may have been poor (repudiated claims,
complexity, policy language or just bad service)

High friction costs in the value chain: premium collection, claims
handling, large number of policyholders against low premium volumes

Lack of property rights and legal ownership of assets renders them
“dead capital” that cannot be traded and hence not insured

Intermediation replaced by “tick-the-box” intermediation with no
explanation of the product or terms and conditions
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Challenges of Access to Insurance Services in Africa
Competition to Insurance Solutions - Coping

Self-insurance

Extended family support especially in rural areas

Accrual of social capital as an investment

Borrowing from relatives, employers and even money lenders

Looking for alternative “livelihood” opportunities

Distress selling of assets like livestock and other property

Distress migration - to urban areas or even other countries
MRoA/MMRC
Munich Re Group
23
Challenges of Access to Insurance Services in Africa
The South African Example

MRoA/MMRC
Munich Re Group
Access to Insurance for Low Income People
24
Financial Sector Charter
MRoA/MMRC
Munich Re Group
Financial Sector Charter

Framework and principles upon which BEE will be implemented in the
Financial Sector
Charter Committed Financial Institutions to transform in :

Human Resources development

Procurement of goods and services

Access to financial services

Empowerment financing

Ownership and control

Corporate social investment
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Financial Sector Charter
3.
Access to Financial Services
MRoA/MMRC
Munich Re Group
Target
3.1 Transactions savings, products and services
LSM 1 – 5
3.2 Bank savings, products and services
LSM 1 – 5
3.3 Life assurance products and services
LSM 1 – 5
3.4 Collective investments products and services
LSM 1 – 5
3.5 Short-Term risk insurance products
LSM 1 – 5
3.6 Origination of :
Home Loans
Agricultural Loans
SME Loans
3.7 Consumer education
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Financial Sector Charter
Annual Review – The FSC 2007
MRoA/MMRC
Munich Re Group
27
Challenges of Access to Insurance Services in Africa
Conclusion
MRoA/MMRC
Munich Re Group

Wealth drives insurance penetration and eases access

Low income or poor communities have evolved COPING
mechanisms to address their exposure to risk

Where there is a FELT NEED, financial services will be consumed
even by low income groups

Replaceable assets rank lowly in priority regarding perception of
risk, made worse by their untradeable status

In the case of South Africa, banking and life insurance have had
better success than non-life insurance

A sustained and concerted effort is called for to achieve penetration
in low income groups even where there is a FELT NEED.
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Thank you for your attention
MRoA/MMRC
Munich Re Group
Munich Re Group
Diversified structure – Diversified risk
MRoA/MMRC
Munich Re Group
Munich Re Group
Reinsurance
Munich Health
Primary insurance
Salute
Asset management
The above is a selection of companies operating in the relevant field of business.
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Strong growth in life insurance worldwide
MRoA/MMRC
Munich Re Group
Gross life and non-life insurance premiums worldwide in US$ bn
Growth
`06
US$ bn
2,000
Life
Non-Life
1,500
1,000
CAGR*
`97-`06
Life 4.6%
4.3%
Non-3.2%
Life
3.0%
GDP 3.9%
3.1%
500
0
1970
1975
1980
1985
1990
1995
2000
2005
In last the last 25 years global life insurance has grown stronger
on the average than non-life insurance and the overall economy.
*CAGR = inflation-adjusted compound annual growth rate 1996 – 2005.
Source: MR Economic Research.
31
Rising importance of life insurance in the global
economy
5
MRoA/MMRC
Munich Re Group
Global life insurance penetration (GWP in % of GDP worldwide)
%
Global average of
■ 4.1% in 2006
4
3
Long-term trend
2
1
0
1970
1975
1980
1985
1990
1995
2000
2006
2005
From 1980 up to 2000 global penetration rose fast. Growing wealth leads to
higher saving rates and higher demand for risk protection (Maslow‘s hierarchy
of needs) + other favourite framework conditions.
Source: MR Economic Research.
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