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 InsurTech and the Quest for Insurance Penetration in Africa

InsurTech and the Quest for Insurance Penetration in Africa

According to the 2017 Disrupt Africa FinTech report, the volume of investment into InsurTech companies globally was approximately $3.37 billion globally growing at a compounded annual growth rate of approximately 45%.

This presents an exciting opportunity for Africa to innovate in the insurance segment.

InsurTech is basically classified as an insurance company, intermediary or insurance value-chain segment specialist that utilizes technology to compete or provide value-added benefits to the insurance industry. According to FSD Africa, there are currently 292 insurtechs representing 481 initiatives identified in 85 countries globally. Interestingly, 202 of the 481 insurtech initiatives are located on the continent.

However, despite these impressive numbers and the relatively high penetration of mobile phones and mobile-based digital payments across the continent, insurance penetration rates remain strikingly low on the continent. Kenya (3.0%) Rwanda (1.74%) and Tanzania (0.68%) respectively.

This is mostly due to a unique set of challenges that exist in these markets. These include: –

Product Relevance
Consumers in Kenya for instance, especially small consumers feel that the general insurance products and services are not relevant and/or suited to their needs and requirements.

Trust and Integrity
Insurance companies in Kenya are not known to pay claims on time and this frustrates and
discourages consumers from taking up additional facilities. Th claims procedures are very lengthy and at times exceed months. Therefore, there exists a perception problem (real and imagined)
that has not been adequately addressed by the local insurance industry over the years.


Insurance products and services are not easy to understand and often use complex language that is not easily understood by most consumers. Furthermore, the application processes are time consuming and inefficient (filling in a lot of paper-based documentation).

Distribution models are expensive and complex and require many people across the insurance value-chain to serve customers effectively.

Customer retention is difficult as most products are bundled together in a manner that is not relevant to the consumer.

However, having noted these challenges, the World Economic Forum (WEF) has in the recent past identified three key growth drivers that will accelerate insurance penetration and uptake on the continent. These include, a young growing population across the continent, fast urbanization
rates and improvements in infrastructure and technology.
In light of these opportunities, what can Kenya do to increase its insurance penetration rates above 3%? How can the insurance sector enjoy a technology revolution like that witnessed in the banking sector in Kenya commonly known as the fintech revolution?

Let us look to South Africa for interesting illustrations and examples.

Pineapple Insurance South Africa
Pineapple is a peer-to-peer decentralized insurer based in South Africa that gives its members fully indemnified insurance coverage.
Here is how it works. One visits the website and downloads the pineapple application on their mobile phone. One takes a picture of the item to be insured. A quotation is generated.

Acceptance of the quotation is done once the first monthly payment is finalized and deposited into what is known as a pineapple wallet. The wallet acts as a pool and all claims are later paid from this pooled network of funds and users get un-used premiums refunded to their individual wallets at the end of every year. The pineapple wallet allows clients to see how their contributions are utilized to pay claims and any shortfalls that may occur are covered by a re-insurer who is fully indemnified.

Pineapple insurance is addressing the perception and conflict of interest problem that has characterized the traditional insurance sector across the continent who have been known to keep leftover premiums as profit for all insured items. The traditional insurance market works in such a way that clients pay premiums into a central pot which is latter used to settle claims from clients with no refunds for un-utilized claims.
In its first six months of operation, Pineapple had already attracted 13,000 users on its platform.
To address these gaps and increase penetration, digital platforms such as these that allow consumers to access insurance services in the comfort of their homes via mobile handsets. Such innovative solutions need to be introduced into the Kenyan market particularly if they are to attract the young urban population who form most users for pineapple in South Africa.

In summary, considerations should be made to increase capital investments leveraging insurance technology in sectors such as agriculture, healthcare and employment sectors (unemployment and job loss insurance) if insurance penetration and uptake is to increase in markets such as Kenya.


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© 2023 Brainhouse Capital Limited. All Rights Reserved.