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REACHING THE UNINSURED IN AFRICAEZEKIEL MACHARIA FIACHIEF ACTUARY & MANAGING DIRECTOR - KENBRIGHT
2ND ANNUAL AFRICAN INSURANCE FORUMJOHANNESBURG 3-4 MARCH 20153RD MARCH - 15:00
AGENDA
Where is insurance headingDisruptionFocus on the UninsuredConclusion
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IS INSURANCE EXPENSIVE?
3Source: Pew Research
Buy insurance or a smart phone?• A smart phone costs $100 or
more..• 15% of Africans have a smart phone
but less than 5% have insurance
Smart phones are winning
WHO NEEDS INSURANCE?
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Who needs insurance more?Social Safety Net features
Low Human Development Index – 0.5 (0.7 World)
Low life expectancy at birth rates - 56 Yrs years (annuities anybody?)
World
SCOPE FOR GROWTH
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Real GDP per Capita
$2,500
AfricaInsurance Stats
Premium per capita
$66
Willingness to Pay2.7% World
$13,000$640
4.9%
AFRICAN CONSUMER TRENDS
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• African consumers are quick to adopt to new technologies – African Insurers will be more susceptible to disruption
• Africans are ready to buy insurance if it is well packaged and adds value Uptake of mobile money
highest with Africans (50% of global share). The market is willing to test new things.
AFRICAN CONSUMER TRENDS
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Mobile money transactions as a share of GDP
In KenyaMobile Money - 55% vs Insurance – 3%
AGENDA
Where is insurance headingDisruptionFocus on the UninsuredConclusion
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INSURANCE ECOSYSTEM
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REACTION TO UBER IN KENYA
INSURANCE ECOSYSTEM
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DISRUPTIONIN POLITICS?
INSURANCE?
INSURANCE ECOSYSTEM
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DISRUPTION
Unexpected – It won’t happen soonUnconventional – Too poor to insure?
Resonates with the people12
OR.. CONFIRMATION BIASConfirmation Bias is tendency to search or interpret information in a way that confirms one's preconceptions leading to statistical errors
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MARKET DISRUPTION
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30b messages per day in 2016
SMS invented in 1992.
Disruption will be sudden
TOO BIG TO FAIL
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Nokia Revenue in 2008 - $70b
Africa Insurance Revenue (2013) $69b
Source: Wealth inequality in America (Politizane, 2012)
PEER TO PEER TECHNOLOGY
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•ZOPA is offering peer-to-peer banking – cutting out the bank. $1b lent out to date.
Taking this concept to insurance – will this be appealing to the uninsured?
PEER TO PEER INSURANCE MODEL
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Reinsurer
Insurer
Broker
Capital Market (ART)
Peer(Smart
Contracts)
Smart Phone
InsurTechBlockChai
nMobile MoneyAdmin
Peer(Smart
Contracts)
Customer
KEY INGREDIENTS FOR DISRUPTION
CapitalTechnologyChange in Behaviour
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WHERE IS THE CAPITAL?
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Top 1% now own 50% of the world’s wealth
Source: Wealth inequality in America (Politizane, 2012)
TECHNOLOGY
20PaaS – Platform as a Service – reduced cost for market entry & admin expenses
BEHAVIOUR CHANGE
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SSA has a median age of 18 years
Instagram generation?
AGENDA
Where is insurance headingDisruptionFocus on the UninsuredConclusion
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ELEPHANT IN THE ROOM
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40% of Africans are living in extreme poverty
<$2 a daySource: Institute of Security Studies. African Futures Paper 13
KEY FEATURES - TARGET MARKET
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The insured African population is less than 5% but Africans earning above $20 per day ($7,300 per year) represent 19% of the populationIncome above $20 per day
(19% of Africa population ~200m)
$10-$20 (11% of Africa population ~121m)
$4-$10 (10% of Africa population ~110m)
Below $4 per day (60% of Africa population ~600m)
Low Hanging Fruits(potential of 200m uninsured who can afford insurance)Premium - $30b
At 4%* of income paid towards insurance - $300 is available annually for insurance
(ILO Insurance Willingness to Pay Statistic)
POPULATION
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50% of Africa’s Population (One view)
Nigeria – 184mEAC Block – 150m
Ethiopia, DRC & S Sudan (Joining EAC?) – 180m
South Africa – 55mGhana – 28m
Total 600m lives
EAC to have monetary union by 2024
COPING MECHANISM
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Coping Strategies
(low income market)
Self Insurance(Retain Risk)
Salaries & wagesBorrow from family, friends or money lendersSell or pledge assets
Social Protection (Transfer Risk)
Public health servicesDisability compensation
Informal Groups(Share Risk)
Welfare associations Burial societies Church group loansFundraisersHiring of guardsMutuals
Risk Management for the uninsured
KEY REQUIREMENTS FOR INSURANCE
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Flexible Premium & readily available payment solutions – e.g. Mobile Money with SMS confirmation
Easy to understand & claim with limited exclusions. Bulk rating for all ages, genders.
Low ticket business – Catastrophic reinsurance would be appropriate to support this
Leverage current technologies:- Mobile phones – using voice recording to read policy document Electronic submission of claim documents Using ICT to curb fraud
RISKS IN DEMAND FOR UNINSURED
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Health – Illness RiskDeath RiskDisabilityDebt (Credit Risk)
AGENDA
Where is insurance headingDisruptionFocus on the UninsuredConclusion
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CONCLUSION
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Future is uncertain but disruption is certainYuuuge potential for uninsured African population. First 200m lives - $30b (40% growth)
The current insurance model may be disruptedAfricans already have coping mechanism – Innovative solutions will entice the target market
