Insurance has big role in African growth

Johannesburg - Now is the time for the insurance services sector, especially in South Africa, to take the leap and start growing Africa, according to Blum Khan, CEO of the International division of MMI Holdings.

"It is easy to see why Africa is an economic focal point for investors around the world. Even with falling commodity prices, growth in the world’s second largest continent is only projected to fall to 4% in 2015 – which is double Europe’s figure of 1.7%," Khan said on Monday.

The International Monetary Fund estimates that, in the next five years, Africa will have the world’s fast growing economy.

The latest figures from Swiss RE show that, while Africa’s insurance penetration rate stood at 3.5% in 2013, the market recorded a growth rate of 10.2% versus 2.5% worldwide.

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“Currently, insurance services amount to only 1% of Africa’s gross domestic product (GDP), compared to 12% to 14% of GDP in South Africa,” said Khan.

African population levels have maintained a steady growth in the last few decades. With this growth came an inevitable rise in living standards, consumer buying power and demand for financial wellness.

In Khan's view it makes good business sense for financial services companies – including those in investments and savings solutions, life insurance solutions, health solutions, and short-term insurance solutions – to maximise opportunities for collaboration, connectedness and growth.

“A growing African economy is only the starting point. If we want to grow in Africa, we need to help Africa grow in a socio-economical manner as well,” said Khan.

He warned that investing financially in emerging markets demands an emotional investment as well as a financial one.

He admitted that growth in Africa does not come without its challenges. Due to Africa’s diverse nature, Khan said the challenges of regulation, currencies, distribution capacity, human resource skills and low financial services penetration have to be tackled.

He stressed that realising there is no one-size-fits-all model is a big step in the right direction – the next step is to analyse individual markets, understand client needs and develop appropriate propositions to meet these needs.

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