Untapped micro-insurance market provides vast opportunities

South Africa has a huge untapped micro-insurance market, which provides insurance companies with vast opportunities to sell low-cost insurance products. It is estimated that less than 30% of low-income adults in South Africa have any form of insurance, while in the rest of Africa the untapped market for micro-insurance could be as much as 40% of the adult population.

African insurance markets (excluding South Africa) typically contribute no more than 2% of GDP and serve less than 5% of the population. Insurance companies in these markets tend to fight for market share in an already-served market, without looking outward to grow their market share. Experiments and experiences suggest that there is much value to be realised from the low-income market.

It is with this in mind that USB Executive Development (USB-ED), the public executive development and training company of the University of Stellenbosch Business School (USB), and the Centre for Financial Regulation and Inclusion (Cenfri) has joined forces to present a programme in Micro-insurance Business Strategies for African markets.

The programme, which will also have an international flavor with input from the International Labor Organization’s (ILO) Microinsurance Innovation Facility with regard to the micro-insurance market, is to be presented from 26 to 28 July in Cape Town.

Cenfri director, Anja Smith, said insurance companies in most African markets have traditionally targeted only the top 5% or in some cases, even fewer of the adult population. The need has now arisen for companies to adjust their overall business strategy to realise the financial potential in low-income markets.

“To do this, companies have to realise that insurance policies cannot simply be a low-value replica of what they provide for the higher-income market. They need to be able to address the needs of the low-income market in a unique way.

“A good understanding is needed of the economic circumstances of the low-income market, the way finances are managed and their overall financial needs.

“Serious consideration should also be given to the best way to communicate with the targeted market. Marketing and education should go hand in hand,” Smith said.

For companies to extend their reach in the micro-insurance market, the following will be required:

· The development of alternative distribution channels that reach beyond, the broker, agent and employment networks;

· The development of products that fit the profiles and needs of the low-income clients:

· Successful navigation of increasingly complex and uncertain regulatory environments; and

· A fundamental reinvention of the delivery of insurance.

The programme is aimed at banking and insurance professionals, mobile network operators, retailers and technology providers, policymakers, consultants, expert advisers and researchers in the areas of micro-insurance or low-income financial services.

Contact Charmaine Garcia at (021) 918 4488 or charmaine.garcia@usb-ed.com for more information.