Health insurance in Africa has experienced a boom in the last five years and consolidated into two distinct branches - insurers supporting comprehensive public schemes, on the one hand, and simple, complementary health products like hospital cash and health value-added services on the other, according to the "2018 Landscape of Microinsurance in Africa".
This latest study in the Microinsurance Network’s World Map of Microinsurance Programme shows that in particular, hospital cash products (simple insurance products that offer a cash pay-out per night spent in hospital) have proved remarkably successful.
The 2018 Africa Landscape Study is based on 100 insurers’ self-reported data on the performance of their microinsurance products as of 31 December 2017.
By 2017, health insurance products were responsible for the second largest proportion of reported lives covered in the region, at 4.3m lives covered. This corresponds to 28% of reported lives covered in that year, compared to just 14% of lives covered through health products in 2014. The 100 insurers, through their microinsurance activities, collectively covered a total of 15m lives — almost 2% of the estimated 700m in the low-income bracket in the continent.
Health insurance has joined life insurance as a product line capable of reaching significant scale. However, some other product types, particularly crop and livestock insurance, are still struggling to reach scale, with some important and encouraging exceptions.
The previous similar microinsurance study was carried out based on 2014 data. At that time, a new freemium model of distributing free insurance products and paid top-ups through mobile network operators (MNOs) reached its peak. Many schemes were signing up a million or more customers at a time, leading to a boom in the number of lives covered through microinsurance on the continent.
New business model
By 2017, the freemium model had largely collapsed and, with it, many large schemes covering millions of customers.
The 2018 report says that this sudden rise and fall in the number of lives covered likely disguises a slower and more durable growth through other models. Several MNO-linked schemes have abandoned the freemium model and proved successful by focusing on paid products. This is likely to continue as increased mobile money use facilitates premium payments.
In addition, new distribution opportunities are emerging through digital platforms, such as digital marketplaces, e-commerce and ride-hailing platforms. These are already being used by 12% of the insurers in this study. The industry may also be seeing a tentative shift towards combined sales models, in which insurers make direct sales to customers of partner institutions.
Claims ratios remain relatively low in most business lines apart from livestock and crop insurance. Nonetheless, the median claims ratio across all product lines of 45% represents a welcome return to previous levels, after the median claims ratio dropped to 25% in 2014.
Inefficient claims payments continue to be a problem in many countries and affect client experience. The median claims turnaround time for the region was 10 days. Nonetheless, turnaround times varied significantly from just one day to 90 days and there is a particular need to address slow turnaround times in property insurance, for which insurers in this study reported a median turnaround time of about two months.