December 4, 2018
The Emerging Opportunity in Africa
by Paul Carroll
Eighty years after Karen Blixen published her memoir, “Out of Africa,” it may be time for the local insurance industry to start writing a sequel: “Into Africa.”
That thought is prompted by a seminar that Africa Re hosted last week in Lagos, Nigeria, and that was put on by our chief innovation officer, Guy Fraker, and by our friend Grace Vandecruze, a veteran investment banker who is now the managing director of Grace Global Capital. Several dozen executives attended from the biggest insurers in Nigeria and Ghana, underscoring the interest in innovation among companies operating on a continent with almost unimaginable opportunity.
Grace said South Africa is the only country on the continent with any significant penetration by insurance products, and just 17% of households there own at least one insurance policy. In every other African country, she said, market penetration ranges from a fraction of a percent to a mere 4% of households. Meanwhile, the continent is home to more than 1.2 billion people and has six of the 10 fastest-growing economies in the world.
Virtually everyone on the continent has a cellphone, so, while companies in the U.S. and Europe complain about having to adapt legacy distribution and customer service networks to the demands of digital customers, insurers in Africa can develop optimized, fully digital systems from the get-go. African countries may also be able to leapfrog more-developed economies and build telecommunications systems based on the next generation of wireless technology, which is known as 5G and which promises Wi-Fi-like capabilities everywhere (though the jury is still out on the actual capabilities of 5G).
When I covered the computer industry for the Wall Street Journal in the ’80s and ’90s, a common geek joke was:
Q: “How did God manage to create the world in only six days?”
A: “He didn’t have an installed base.”
But the punchline applies here: Because Africa doesn’t have an installed based in insurance or in many of the underlying technologies that are being deployed by the industry in other parts of the world, insurers there have a chance to do things right the first time and leapfrog the rest of the globe.
I’m not suggesting that hundreds of business development types from outside the continent immediately book flights to Lagos and other African business centers. There is considerable expertise already there among the major insurers, sometimes facilitated by our new friends at Africa Re.
Insurance still needs to establish a trust factor among consumers in Africa, but the good news, Guy says, is that the low penetration of insurance means that companies have a unique opportunity to work together as a community for now, rather than as competitors. Basically, you have to have a pie before you start fighting over how to divvy it up.
So, let’s all do all we can to help bake that pie. As we all know, broadly available insurance will provide stability that the people in Africa and their economies can build on.
Have a great week.
Editor in Chief