A market of more than 100 million inhabitants, where only one-third of those over 25 have a bank or mobile finance account (compared to an average ... of 58.5% in sub-Saharan Africa and 79.5% in neighbouring Kenya). An economy where one public institution, Commercial Bank of Ethiopia (CBE), alone manages 55% of outstanding credit. A banking industry so inefficient that its costs absorb 56% of its revenues, but where the return on assets is four times higher than that of Moroccan banks…
“We are trying to replicate the partnerships” which allow Prudential’s products to be distributed in Ghana through the mobile-phone operators, Mokobi says at The Africa CEO Forum in Abidjan. He is “very optimistic that will happen” but nothing has yet been agreed.
Insurance penetration rates in most African countries remain stubbornly low. Mokobi is optimistic that a breakthrough can be achieved because of the rise of an educated and tech-savvy middle class. Prudential operates in eight African countries, Uganda, Zambia, Cameroon, Togo, Côte d’Ivoire, Nigeria and Kenya, as well as Ghana, and aims to extend its telecoms partnerships across those countries.
The aim is to distribute funeral insurance, income protection after job loss and hospital cash payout plans via mobile phones in those countries. Using mobile phones as sign-up tools reduces distribution costs and allow competitive policy pricing, Mokobi says. The partnerships in Ghana also make it possible to track applications which are begun but not completed. Call centres operated by the mobile operators contact those people and see if it is possible to get the application over the line.
Bank branches are another distribution method which Mokobi aims to extend the use of.
- Prudential’s banking partners include Standard Chartered, Fidelity, Calbank and Zenith in Ghana, Zanaco in Zambia, and Stanbic and Absa in Uganda. Mokobi wants to expand the scope of some of those agreements.
- New partnerships including with supermarkets, which Prudential does not yet have in Africa, may also have a role. “We are always seeking partners to develop new products and distribute them.”
Exposure to the concept of formal insurance in Africa comes via different channels to those in the West. In Western urban environments, the physical presence of insurers on the high street meant that generations of people became familiar with the names of major players well before they were old enough to buy insurance themselves.
In many parts of Africa, there has been no stable and established high street to provide that context. Mokobi sees lack of awareness and understanding of insurance as a major hurdle. Trust and confidence have to be earned, but some insurers in the past have failed to do that, he says. The industry has also tended to concentrate too much on the formal market, he adds, despite the fact that 80% of Africans work in the informal economy.
Lack of channels to distribute to the informal sector has been a fundamental problem.
- Covid-19 has increased the digital channels available to target informal workers, Mokobi says.
- Currently, accelerating inflation and higher food prices are obstacles to selling more policies. “Insurance thrives on disposable income,” Mokobi says. “Inflation hits us hard on the distribution and consumption sides.”
- Still, new business has “not slowed at all” and Prudential is “consistently meeting new business targets.”
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