COVID-19 will lead to an accelerated consolidation of Africa's insurance industry, eliminating companies with limited resources and fragile processes, according to findings from the latest edition of the African Insurance Pulse.
Such a shake-out would strengthen the continent’s insurance markets and benefit policyholders through higher security and a drive for more innovation.
The report, produced by Faber Consulting on behalf of the Africa Insurance Organisation, is based on market research and in-depth interviews with insurers, reinsurers and brokers operating in Africa. It highlighted the severe challenges faced by the continent’s insurers in the face of the COVID-19 pandemic, responses of the regulatory authorities, overall business sentiment and prospects for the sector.
Executives surveyed expect improved risk awareness among consumers, as a result of the pandemic, leading to higher demand for insurance products. However, there are concerns about the impact of COVID-19 on the income of African households. Survey respondents expect that policyholders will limit their spending and favour savings for fear of a reduction in income or job losses. This, in turn, will affect their insurance purchasing behaviour, ultimately leading to a decrease in premium income.
Faber Consulting partner Andreas Bollmann said, “Despite the impact from COVID-19, Africa’s insurers and reinsurers remain confident of the fundamental growth potential of their market. They believe that the effects of the pandemic will be offset by an accelerated digital transformation, supportive government and regulatory policies, and increased risk awareness by consumers.”
The future of the sector remains highly uncertain for the remainder of 2020 and going into 2021, according to Africa’s insurance executives. (Re)insurers have to maintain adequate solvency, ensure operational resilience and remain responsive to customer needs, said the report.
Insurers that have embarked on large-scale transformative strategies to redefine their core value proposition, optimise operations, update technology and build a workforce for the future will have to continue on this path to strengthen their competitiveness in 2021.