$25bn African Microinsurance Market Mostly Untapped, Finds Report

May 2010
London, England, May, 13 2010 - Little over 2% of Africa's 700 million working poor are covered by insurance, representing a vast untapped opportunity for social and economic development, according to a new study by the Microinsurance Innovation Facility of the International Labour Office.

The study, "The Landscape of Microinsurance in Africa", shows that only 14.7 million low-income workers in Africa have access to microinsurance, a tiny fraction compared to the approximately 700 million people who can afford it.

"The findings of the study are very interesting and promising. They show that only 2.1% of the target population has access to some sort of microinsurance. The explanation is two-fold. On the one hand, potential clients do not understand very well what insurance is about and have difficulties paying premiums. On the supply side, there are deficiencies in terms of information technology, qualified personnel and high administrative costs", said Michal Matul, research officer from the ILO´s facility and one of the authors of the study.

"All this can change through the coordinated efforts of providers, donors and governments", he added. "We are already seeing signs of progress. Seventy per cent of the providers we talked to agreed that the number of microinsurance policies in their national market is expected to grow over 10% in the next year".

Though there is significant microinsurance activity in certain regions (especially in Southern and Eastern Africa where about 12 million poor people benefit from a policy), the majority of the African continent remains a vast and untapped market, the report found.

From a monetary perspective, assuming a potential for insurance expenditure levels of 5% of GDP, the value of the market for microinsurance in Africa is approximately $25bn. The survey found that received premiums in 2008 amounted to about $257m, only 1% of their potential value.

The ILO claims the most common type of microinsurance in Africa is life insurance, with credit life products covering close to 9.5% of the market and other life products around 3.2%. Health products - often cited as the most in need - only cover about 0.3% of the low-income population. Property and agriculture cover significantly fewer numbers, about 0.2% and 0.1% of their respective potential markets.

"It is possible to reach hundreds of millions of low-income people in Africa with microinsurance, but this requires a series of prerequisites, such as a diversity of providers, informed clients who understand the value of microinsurance, innovative distribution channels, and improved efficiency and human resource management. None of this can be achieved by the providers alone. Donors and governments must support these efforts by creating a coordinated movement that will help low-income Africans manage risks and lead safer, more stable lives", concluded Mr Matul.


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