African insurance regulators, CEOs and experts share views at high profile meeting in Dakar, Senegal
For years now, digital advances have been transforming a range of industries. The insurance industry especially in Africa has generally been slow to adopt new digital approaches, but times are now changing.
This shift is manifesting itself in major – and disruptive – trends in four areas: product design, pricing and underwriting, distribution and administration, and claims management, with leading insurers already playing a frontrunner role in driving their adoption.
But how can African-based insurance firms cope with the pace of technological advancement to remain relevant and still make money? That was the main issue discussed during the high profile Continental Reinsurance 4th CEO Summit held in Dakar, Senegal from April 5-7.
Femi Oyetunji, the chief executive officer of Continental Re told his guests that besides usual challenges that the insurance industry is grappling with such as under insurance, inappropriate pricing, and moral hazards, a new challenge has emerged.
“The pace of technological advancement is unbelievable. Our industry may become obsolete if we do not build a lasting legacy,” he said, “ We created this platform, Continental Re CEO Summit, to bring industry leaders together to deliberate on issues like this.”
To make the situation even worse, Oyetunji said a number of African countries have also been faced with currency devaluation due to low commodity prices on the international market rendering balance sheets of insurance companies on the continent easy preys for acquisitions.
The worst performing currency in 2015 worldwide, according to Bloomberg data was the Zambian kwacha, which lost around 40% of its value against the dollar as the country’s exports plunged. Zambia is heavily dependent on sales of copper, the price of which slumped by a quarter during the year.
Ghana’s cedi lost nearly 20% over the year, while in Mozambique; the metical lost 36%. In Nigeria, one of the continent’s largest economy, the Central Bank restricted access to dollars, in an attempt to slow the flight of hard currency out of the country, and to strengthen the local currency, the naira.
“For that, I appeal to our regulators, let it be Africa for Africans…Let us keep African premiums in Africa,” he said.
But this can’t be achieved if the insurance industry is fragmented, he said. For instance, Nigeria has 50 insurance companies, Ghana 46, Kenya 47, Mozambique 18 companies, and Liberia with a population of only four million has 20 insurance companies, and Uganda 29.
As such, he suggests the need for insurance firms to merge operations within country and across borders, so that they have large insurance and re-insurance companies with balance sheets that are better able to ensure lasting legacy and compete with the biggest and the best in the world. “Otherwise, the big globals will pick us up for cheap one by one until there’s no one standing. Guess who the losers will be. In this, I am also speaking to the brokers,” he said.
This comes at the time insurance premiums in Africa dropped from US$72bn in 2013 to US$69bn in 2014, according to the latest data from the Africa Insurance Organization’s survey dubbed Africa Insurance Barometer 2016.
Life insurance accounted for about two thirds of the 2014 total, with the remainder going to Non-Life insurance. South Africa dominated the African insurance market with 71% share of the total premiums.