Africa: Boost insurance growth through mobile phone partners

By David Whitehouse

Posted on Thursday, 12 November 2020 13:28
The logo of UK-listed insurer Prudential
The logo of UK-listed insurer Prudential REUTERS/Simon Dawson

Prudential is seeking new partnerships with mobile phone companies to extend its African insurance distribution network, Matt Lilley, CEO of Prudential Africa, tells The Africa Report.

The British life-insurance and financial services company is also considering extending the scope of existing partnerships with MTN, Orange and Tigo, says Lilley. Having mobile phone companies as partners is “very beneficial. There’s more that can be done.”

MTN offers insurance products from Sanlam, the continent’s largest insurer, on its mobile app. Distributing insurance products by mobile phone has a “unique ability” to reach lower-income customers with a product, and give them a method of payment, says Lilley. “There are lots of markets that we are looking at.”

READ MORE Sanlam seeks local partnerships in Tanzania

Lilley is open-minded on methods of new market entry. This can be done by acquisition, joint venture or building a business, he adds.

Prudential said in August that it will focus on Asia and Africa as it seeks to achieve “sustained double-digit growth” in embedded value per share. The planned divestment of Jackson National Life Insurance in the US will leave Prudential “purely targeting the structural opportunities of Asia and Africa.”

Proceeds from the sale of Jackson will be used to support investment in Asia and Africa.

Separating out Jackson gives investors the option of buying exposure to high-growth markets. But Africa has a long way to go to achieve a significant weight in a portfolio that is heavily skewed towards Asia.

  • Prudential’s Africa sales increased 59% to $54m in the first six months of the year, while Asian sales dropped 35% to $1.66bn.
  • Yet a low starting point means that Africa has the potential to achieve the fastest growth.
  • The COVID-19 pandemic, Lilley says, “doesn’t change our strategy at all.”
  • The economic impact of the crisis makes products less affordable in the short term, but longer-term awareness of insurance and savings has increased, he says.

Distribution channels

Prudential operates in Nigeria, Ghana, Kenya, Uganda and Zambia. In 2019, it bought a majority stake in the Beneficial, a life insurer operating in Cameroon, Côte d’Ivoire and Togo.

READ MORE Nigeria’s new fintech Sparkle plans to distribute general insurance products

The company is trying a wide range of channels to distribute insurance.

Bancassurance remains a central part of the strategy. In 2017, Prudential bought a majority stake in Zenith Life of Nigeria and formed bancassurance partnerships with Zenith Bank in Nigeria and Ghana.

  • In July this year, Prudential and Fidelity Bank Ghana extended their bancassurance agreement for 10 years.
  • In September, Prudential partnered with Ghanaian electronic payment platform Korba to provide regular customers with life insurance cover as a reward for loyalty.

Mobile distribution is intended to complement rather than displace insurance agents. In the first half, Prudential nearly doubled its number of active insurance agents in African from the same period last year.

The company is still investing “heavily” in new agents, Lilley says. “We are not calling time on the importance of the human being.”

As well as protecting individuals and their families, Lilley argues that life insurance has a wider role to play in economic development. People are more likely to take entrepreneurial risks once they have protection, he says. And capital invested in a life insurance contract can be used by governments to invest in infrastructure projects.

He gives South-east Asia as an example of a region where higher insurance penetration has contributed to economic growth. That can be replicated in Africa, he says.

Bottom line

There is no silver bullet on distributing insurance in Africa: Prudential’s strength gives it the scale to try all channels.

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