✦ Expanding access to insurance in Africa

How can tech expand insurance coverage in Africa?
✦ Expanding access to insurance in Africa

Hi Quartz Africa members,

Despite having 17% of the world’s population, Africa is among the world’s most underinsured places with the penetration rate of all aggregated types of insurance standing below 3%. This lack of insurance leaves millions vulnerable, as they are often unable to bear the cost of medical emergencies, education, funerals, and property theft and damage, among other financial shocks.

Out-of-pocket health expenditures, in particular, devastate the livelihoods of many Africans with the World Bank estimating that these expenses push over 15 million people in Africa below the $1.90 poverty line every year.

Technology is poised to drive the increased uptake of insurance products in Africa. Before covid-19 hit economies hard in 2020, the African insurance market was projected to grow at 7% per year between 2020 and 2025⁠—over three times faster than Europe, just faster than Asia’s 6%, and almost twice as fast as North America.

One of the biggest challenges is that there simply aren’t enough insurance products tailored for low-income earners. Traditional models of selling insurance in Africa are largely driven by brokers and agents, who focus on the top-end of the market, incentivised by commissions. Yet 35.1% of the population in sub-Saharan Africa live on under $2.15 a day, according to World Bank data.

Other challenges include a lack of structural reforms to drive insurance uptake on the continent, regulatory gaps, and an absence of consumer trust.

The decline and loss of incomes as the pandemic ravaged economies slowed the industry’s momentum, with a decline from 2.78% in 2019 to 2.0% in 2020 in insurance penetration in Africa. But continuing economic recovery and the rise of “insurtech” is driving hopes of a new growth spurt in the sector.

Cheat Sheet

💡The opportunity: The vast majority of Africa’s population is uninsured, creating an opportunity for startups to drive uptake of technology-backed insurance products (insurtech).

🤔The challenge: There aren’t enough affordable insurance products targeting low-income earners, and regulatory gaps also exist in some markets.

🗺️The roadmap: Offering accessible, affordable insurtech products will help increase insurance penetration in Africa.

💰The stakeholders: Startups, regulators, underwriters, governments, financial service providers, and companies.

By The Digits

15 million: People in Africa pushed below the poverty line every year by out-of-pocket healthcare expenditures

2.78%: The insurance penetration rate in Africa in 2019

$68 billion: The estimated value of Africa’s insurance market, in terms of gross written premiums (GWP)

70%: South Africa’s share of total insurance premiums in Africa

91%: The share of the top 10 countries by total gross written premiums in Africa

35.1%: The proportion of sub-Saharan Africa living on under $2.15 a day

Case Study

Startup: Turaco

HQ: Kenya

Operating in: Kenya, Nigeria, and Uganda

Turaco is an insurtech startup currently operating in Kenya, Nigeria and Uganda. Founded in Nairobi in 2019, Turaco has set itself the lofty target of insuring a billion people within 25 years.

According to Turaco, it has so far covered more than 1.5 million people with its insurance products, and 90% of its customers had never bought insurance before. Turaco offers medical, life, asset, and vehicle insurance packages.

Turaco’s model hinges on partnerships with other companies, mostly tech-enabled ventures with large user bases, agent networks, or gig economy workers. For instance, Turaco reaches customers within the 500 million-strong pool of mobile subscribers in Africa by embedding insurance products in existing services offered by buy now pay later (BNPL) services, ride-hailing apps, fintechs, and social enterprises, among others. It has so far partnered with the likes of M-Kopa, Safeboda, SunKing, and One Acre Fund. Turaco also uses these companies’ existing payment systems to collect premiums.

The model lowers Turaco’s cost of offering insurance, compared to traditional agent and broker models, because no hefty commissions have to be factored in.

Turaco offers fully digitized claims processing, enabling claims to be filed via WhatsApp or a phone call, and it can pay out insurance in fewer than three days via mobile money.

“Everything that we do is through partnerships. We have no D2C (Direct-to-consumer) business,” Ted Pantone, the CEO and co-founder of Turaco, told Quartz.

Medical insurance is Turaco’s biggest product, representing the bulk of its business. Pantone says demand for health insurance is high as many people are aware of the often-devastating financial implications of unexpected medical emergencies. The company works with several underwriters including the likes of Sanlam, Prudential, APA, and ICEA Lion.

Turaco expanded into Nigeria in March 2022, through a partnership with underwriter AXA Mansard. The partnership enables Turaco to offer insurance products for as low as 500 Naira ($1.20) per month. Pantone said he expects Nigeria to be the startup’s biggest market in the next 12 months. Over 90% of Nigerians lack health insurance, and only 5% of Nigerians in the formal sector are covered by the National Health Insurance Scheme (NHIS).

In September, Turaco announced that it had closed a $10 million Series A equity round. It intends to use the funds to expand through more partnerships in the markets it already operates in and beyond as it looks to inch closer to its ambitious target of covering 1 billion people. The company aspires to spread its wings as far as South Asia.

In Conversation with

Ted Pantone - Turaco CEO and co-founder
Ted Pantone - Turaco CEO and co-founder
Photo: Turaco

🧨 On why insurtech is about to explode in Africa:

“The insurance industry in general on the continent is in a similar place to where the microfinance industry was 15 years ago, when the focus was on the top of the market. But if you look at it (the microfinance landscape) now, the mass market is the engine driving growth.”

🤕 On what’s broken in insurance in Africa:

“The traditional model of agents making commissions on every product they sell. It’s always going to be a part of the market, but it makes offering insurance expensive because of that incentive structure.”

💻 On how technology can be leveraged to increase insurance penetration:

“By using technology, we’re able to make product administration, onboarding, and claims processing much more efficient. It’s not a demand-side problem. People are ready to buy insurance, there’s just a lack of insurance products designed for them.”

Insurtech Deals to Watch

Insurtech startup Lami in August secured a $3.7 million seed extension. Based in Kenya, it is looking to expand into Uganda, Egypt, and Nigeria. Lami offers insurance products through its API platform, aiming to increase insurance penetration in Africa.

Nice Deer, an Egyptian health insurance startup, raised a $1 million pre-seed round in July 2022. Launched in 2022, Nice Deer works with health facilities and insurance companies to facilitate insurance uptake and payments of insurance claims.

MTek, an insurtech startup based in Kenya, raised $3 million in June 2022 as it looks to expand into six African countries within the next two years. It offers paperless insurance targeting the uninsured.

More from Quartz Africa

🔨 Who is building the tech infrastructure for African businesses?

🚜 A Kenyan insurtech startup for de-risking farmers is expanding to Asia

😷 The pandemic created Africa’s next investment opportunity

🌍 AfCFTA should be radical in prioritizing Africa’s health

🧠 There’s a mental health reckoning for Africa’s doctors

🛠️ Africa’s broken healthcare has an opportunity in covid

This member brief was prepared while listening to Kazoze, by Mastar VK, and Iano Ranking 🇰🇪. Have a fun, productive week!

Martin, Nairobi-based Quartz contributor

One 🌪️Thing

Africa accounts for less than 1% of insured catastrophe losses globally. In 2021, insured losses on the continent stood at $2.3 billion compared to $81.2 billion in North America, $22.1 billion in Europe, and $9.6 billion in Asia.