Insurtech in Africa: The Next Big Boom?
Insurance Market Growth in Kenya and Africa
Across Kenya and the broader African continent, insurance remains an underutilized financial product. Current penetration levels, measured as a percentage of GDP, are approximately half the global average. Furthermore, per capita premiums are eleven times lower than the worldwide average, as highlighted in a recent McKinsey & Co. report. Excluding South Africa’s substantial market share reveals an even wider gap.
Emerging Opportunities
However, the landscape is poised for significant change. Economic expansion coupled with the rapid proliferation of digital and mobile technologies are creating substantial growth potential. This presents a unique opportunity for new market entrants.
Safaricom, a leading Kenyan telecommunications company and the operator of the highly successful M-Pesa mobile payment platform, is developing a new insurance product, tentatively named Bima. This product will offer coverage against property damage, theft, and loss of life. Its launch, when finalized, will add to the increasing number of companies adopting innovative approaches to address the specific needs and constraints of regional consumers.
Fintech as a Precedent
The Kenyan insurance startup scene has experienced mixed results thus far, with current penetration rates below 3%. Nevertheless, this situation also fosters an environment conducive to innovation.
The success of the fintech sector provides a valuable precedent for insurtech development. Companies like Flutterwave, Wave, Kuda, and Thunes have secured significant investment rounds and achieved valuations comparable to those in more established markets, fueled by strong growth expectations.
Digital Solutions and Innovation
McKinsey’s recent report emphasizes that the increasing demand for digital solutions, driven by growing smartphone adoption and affordable internet access, is creating opportunities for insurtech companies to introduce innovative products.
The report further notes that competition is already driving innovation and disruption within the African insurance market, with insurers leveraging technology to target specific segments, offer tailored services, and reduce operational costs.
Customer-Centric Products
New insurance products across the continent are increasingly focused on customer convenience. These offerings often include micro-payments, flexible subscription options, and access to a wide range of services via mobile phones.
Kenya’s Griffin Insurance exemplifies this trend, providing full service access through a mobile app, installment payment plans for car coverage, and the ability to pause coverage during international travel. Griffin Insurance is affiliated with Lami Technologies, which secured $1.8 million in funding to expand its API insurance platform throughout Africa.
Expanding Service Offerings
Startups like Bima, sharing a name with Safaricom’s prospective product, are diversifying their services to include complementary offerings such as telemedicine. This mobile-first platform, providing life and health insurance alongside telemedicine support, raised $30 million last year to expand micro-insurance and healthcare services in emerging markets. While founded in Europe, Bima is actively operating in seven Asian countries, as well as Ghana, Tanzania, and Senegal.
The company focuses on individuals earning less than $10 per day, aiming to acquire at least 75% of its clients as first-time policyholders.
Mobile-Based Insurance
South Africa’s Pineapple is another growing insurtech company offering mobile-based services to streamline processes and reduce the need for traditional paperwork and office visits for sign-up and claims processing. The firm recently expanded its services to include car insurance and now provides comprehensive coverage underwritten by Old Mutual.
Agricultural Insurance
Opportunities within the agricultural sector are also emerging. Startups like Oko, operating in Mali and Uganda, provide automated insurance products based on satellite data and mobile payments. Having raised $1.2 million earlier this year, Oko mitigates risks for farmers affected by extreme weather events like droughts and floods.
Safaricom’s Early Moves
Safaricom has already initiated preliminary steps into the insurance space with a home insurance product covering electronics and furniture, offered in partnership with Jubilee Insurance, a Kenyan underwriter. Accessible through USSD technology, this service offers coverage up to $13 per month with a maximum payout of $10,000.
Safaricom’s forthcoming insurance service is anticipated to adopt a more direct approach to product delivery, potentially requiring additional regulatory approvals.
Challenges and Diversification
Despite the promising outlook, challenges remain for insurance providers and those considering entry into the market.
Safaricom, with its 39.9 million mobile subscribers in Kenya (as of March of this year) and the established success of M-Pesa, is poised to make a significant impact. However, the launch of its insurance service, initially approved in December 2020, is still pending, with a spokesperson declining to provide a specific timeline.
This insurance initiative underscores Safaricom’s ongoing efforts to diversify its revenue streams beyond traditional voice, data, and messaging services.
Expanding Ecosystem
The company recently unveiled plans for new services in its latest Sustainable Business Report, including Baze, a video-on-demand platform enabling content creators to monetize their work. Baze offers subscribers access to content for as little as $0.18 per day, providing a competitive alternative to more expensive streaming services like Netflix, Showmax, and Amazon Prime Video.
Safaricom is also exploring growth opportunities in agriculture, education, healthcare, next-generation financial services, regional expansion, and support for micro and small medium enterprises (MSMEs).
“Going forward we will endeavor to play a key role in driving healthcare and education inclusion as well as enabling smallholder farmers to become wealthier and commercially sustainable,” stated Safaricom CEO Peter Ndegwa.
DigiFarm and Regional Expansion
Safaricom currently operates DigiFarm, a platform providing farmers with access to discounted farm inputs, market linkages, loans, and educational resources. The platform currently has 14,000 active members.
Furthermore, a Safaricom-led consortium was granted a license to operate in Ethiopia by the Ethiopian Communications Authority in May of this year. The consortium, including Vodafone Group, Sumitomo Corporation, and CDC Group, plans to launch commercial services in Ethiopia next year, targeting a market of 4 million SMEs and a projected population of 130 million by 2030.
M-Pesa as a Foundation
Safaricom is renowned for M-Pesa, its mobile-money service that allows customers to send and receive money, pay bills, and effectively function as a bank account for millions of unbanked residents. M-Pesa recently surpassed voice revenue, generating $745 million in the financial year ending in March.
M-Pesa customers also have access to Fuliza, an overdraft service, and can obtain short-term loans through integrated third-party services. M-Pesa’s extensive customer base – 28.3 million active mobile money users in Kenya – positions it as a potential “super app” capable of marketing a wide range of new services, including insurance.