Can microinsurance close Africas insurance gap?
Africa has traditionally been the worlds most uninsured, and underinsured, continent. Thats rapidly changing, as the booming popularity of microinsurance gives millions of Africans access to life and hospital insurance for the first time. By Marius Botha, Group GEO of aYo Holdings  As its name suggests, microinsurance offers consumers financial protection against specific risks  like hospital cover for accidents, for example  for tiny premiums. The impact is transformative, as it shields people with lower incomes from the economic shocks that would otherwise keep them locked into an endless cycle of poverty. The rapid growth of microinsurance is turning traditional insurance models on their heads  and changing long-standing perceptions of insurance as complex and expensive. The traditional insurance industry has struggled to deliver relevant, affordable products to lower-income and rural audiences. The game-changer has been the ability to reach people through mobile handsets, which gives microinsurers the ability to deliver an insurance product using USSD codes on old-fashioned feature phones. South Africa has by far the highest insurance penetration rate on the continent, at 16.99%. Namibia, Lesotho, Mauritius and Zimbabwe have insurance penetration rates ranging between 4%-7%. More than half of the countries in sub-Saharan Africa have an insurance penetration rate of less than 1%. While ease of use is a major factor in the growth of microinsurance, affordability plays a key role too. If consumers cant afford the premium, they wont buy the product. Insurers like aYo allow customers to buy as much insurance as they can afford, without locking them into regular premiums. Its all about value. A seemingly insignificant premium can deliver great value for the amount of cover. But the real driver of microinsurances momentum across the continent is the changing perception of insurance. Many Africans see insurance as something thats reserved for the middle class, or not to be trusted. Now, a growing cohort of microinsurance customers is seeing that it works, and theyre spreading the word. A lot of our growth is being driven by word of mouth. The more people see that microinsurance is real, and the more they benefit, the more they talk about it in the community. This is helping break down a lot of the negative perceptions around insurance. As a result, microinsurance is starting to move up the value chain to close the insurance gap in markets that would previously have been the domain of the traditional insurance sector. aYo has already seen a growing trend of people with mid-range incomes buying down into the microinsurance space to cover their specific risks. There is always hesitant to use the word disrupt. Our experience is that the traditional approach of comprehensive insurance is not what is always needed, and theres a huge appetite for a model that says consumers can start their insurance small and build from there. Perhaps, once people have seen the value in microinsurance, they will see more value in bigger insurance for the future, where they can select what cover they need based on affordability. At the end of the day, microinsurance protects those who need it the most. People with a low-income need insurance even more than those with higher incomes, because they are more vulnerable and have a smaller cushion of resources to draw upon in times of need. Theyre one disaster away from falling below the breadline. By providing insurance to these audiences, were driving real financial inclusion on the continent.