This article was originally published in the Africa Report on 23 November 2020
The COVID-19 pandemic has shone a light on the need for the African insurance sector to demonstrate its critical role in supporting people and businesses. The pandemic has been the most severe risk event in Africa in years, but many insurers have not delivered on their promise.
If the sector is to improve the narrative and rebuild trust, bold changes need to be made.
Over the past few months, we at FSD Africa have had discussions with over 80 insurers, reinsurers, regulatory authorities, associations and technical service providers across 27 countries in Africa to assess how the sector has been impacted by and is responding to the COVID-19 crisis. The broad consensus is that insurers have not fulfilled the role that the sector ought to play in responding to large systemic risk events.
Many businesses and households paid their premiums thinking they were covered for big risk events like the pandemic, but are now being forced to take general insurers to court to seek redress. In March, the Insurance Regulatory Authority in Kenya announced that all health-related COVID-19 claims would be honoured by insurers. Despite the initial agreement, as COVID-19 related health claims started trickling in, the industry began to backtrack on its commitmentJuly.
Some insurers are now turning away insured individuals who have medical bills worth thousands of shillings, saying that COVID-19 is a pandemic which is not covered by existing health policies. This is one of many examples where the insurance industry has struggled to deliver on its promises at time when it is needed most. As a result, trust is being eroded and many policyholders – whether it be businesses or individuals – are quickly becoming disillusioned with the sector.
However, there are some examples that do tell a more optimistic story. Companies like Prudential Life, which operates across eight African markets, added free new COVID-19 life insurance cover to existing and new clients and staff across their markets. Other companies including Hollard Mozambique and Naked Insurance in South Africa provided relief measures such as premium holidays and reductions to help take some of the financial burden off customers.
Rebuilding trust
In Africa, insurance is already anstry that individuals and businesses are wary of. Many often question its value: why pay money towards something that may not actually happen? Many are willing to take the gamble instead. Unfortunately, COVID-19 has, for the most part, exacerbated this perception, leaving the insurance industry at an all-time low.
With this low comes an opportunity for the insurance sector to step up and rebuild trust while adapting to new ways of doing business. Regulators have a key role to play. In instances where market consolidation is inevitable, regulators must act proactively to unwind weak insurers in an orderly fashion, ensuring that clients remain protected and their claims are honoured. If this transition is well-managed, there is potential to better facilitate market development and investment in products.
The insurance sector should prioritise innovation. The pandemic has highlighted the limited reach of insurance on the continent and the lack of products designed well enough to offer consums value and effectively address their risks and realities. Regulators should engage and support innovators as a key part of the recovery.
Meanwhile, insurers should encourage internal innovation and external collaboration with fintech to rethink and reimagine their approach to reaching new customers.
Now is the time for the insurance sector to reflect on how it can build trust in the sector by responding to customer realities and needs, and by meeting customers halfway. With largescale, systemic and society-wide risks like climate change continuing to gain prominence in the public conversation, insurers should use this time to enhance and accelerate efficiency.
The sector must consider resilience holistically and go beyond offering insurance products. Insurance alone will never be a sufficient mechanism to deal with major risks like pandemics or climate risks. We need to think about risk layering and public pools, consider options for risk prevention, management and mitigation by both pubic and private players. This applies at the macro and micro level. Micro and small businesses have been among the worst affected by the pandemic. They need tangible solutions that help them to understand, prevent and manage their risk – not just basic insurance policies that give poor cover for specific risks.
These are just recommendations. The choice to move forward is up to insurance companies. Do they continue with the old way of doing business or do they reinvent themselves to become more relevant to customer and business needs? What is clear is that insurers must adapt their business for the inevitable large-scale risks to come.
People’s Pension Trust (PPT) has received funding of up to GBP 500,000 from FSD Africa Investments to expand pension coverage and access to informal workers in Ghana. This will be done by developing innovative approaches specifically designed to foster inclusion in financial and social protection systems.
The funding will enable People’s Pension Trust to innovate through behavioural science, human-centred design, data analytics and artificial intelligence, ultimately developing groundbreaking pension products that meet the needs and aspirations of underserved constituents such as smallholder farmers, drivers, market women, head porters – among others.
This continued partnership with FSD Africa Investments provides the necessary runway for PPT to address old-age poverty especially among women that are most vulnerable. Through financial literacy programs and pension education coupled with incentive-led push for savings, PPT aims to impact economic growth by helping maintain the push for savings despite the covid-19 pandemic.
At FSD Africa Investments, we work to rece poverty by supporting innovative propositions touching on the financial sector that we believe will transform Africa’s financial markets. The PPT story is one such proposition that touches on micro-pension and by extension savings and we believe will have significant impact in the lives of Ghana’s informal workers and possibly go beyond the borders to the many who could use the same service across Africa.
Anne Marie-Chidzero, Chief Investment Officer, FSD Africa Investments
Our ambition is now to scale and to replicate our business model across the region, providing millions of informal sector workers with pension cover over the next few years. Securing this investment from FSD Africa Investments is therefore a significant step to making this possible. It certainly gives us a positive outlook for the coming years as we work to ensure that no one is left behind in the financial inclusion agenda.
Saqib Nazir, Chief Executive Officer of People’s Pension Trust
In addition, loyalty and reward programs will be rolled out to encourage uptake of digital savings options – like Auto Debit and Direct Debit, to ensure consistent savings-, and the PPT team will focus on regulatory engagements to drive policy change and the inclusion of global best practices and industry trends, accelerating real progress for our members.
 
We are pleased to have Jared Osoro join us as the Director for Credit Markets effective 1st September 2020.
Jared has two decades of experience as a practising economist in the financial sector. Prior to joining FSD Africa, he had the dual responsibility of being the Director of Research and Policy at the Kenya Bankers Association (KBA) and the Director of the KBA Centre for Research on Financial Markets and Policy®.
For nearly eight years in that role, he spearheaded analytical work on policy and market dynamics to support market deepening and policy engagement. The body of knowledge arising from the research work has supported financial sector players in Kenya and the broader East African region in their strategic endeavour to drive the development aspirations of the region.
Jared’s passion and intellectual interest in finance as an engine of development were nurtured at the East African Development Bank where he served as Bank Economist for more than ten years.
Jared holds a Master of Science Dee in Economics from the University of Zimbabwe and a bachelor’s degree in Economics from the University of Nairobi. Jared has published numerous journal essays for technical audiences as well as articles for a wider readership.
On his appointment, Jared said, “As I join FSD Africa, I have a good understanding of the various imperfections that characterize financial markets in Africa. While acknowledging the challenge of bridging the gap between the growth that the continent’s financial sector is experiencing and the ability of such growth to deliver development outcomes, I welcome the opportunity to be part of a diverse team that is dedicated to supporting the deepening of the financial system.”
“We are delighted to welcome Jared to FSD Africa. We will benefit greatly from his intellectual heft and unique insight into the regional financial system”.
“font-size: 21px; letter-spacing: 0.4px; color: #333333;”>Mark Napier, CEO
Jared lives in Nairobi with his wife and son. He is ideas-driven, hence his keen interest and obvious passion for reading. He is an avid golfer playing as often as he can get a chance, which he regrets is as rare as once a week.
Research set to inform the delivery of financial services for refugees
Kampala, March 17, 2020 – Working with local service providers (FSPs) in Uganda, we have collaborated with FSD Uganda and BFA Global to launch a landmark study with the aim of understanding the different sources of income for refugees, the uses of their finances and the financial products and services they use and supporting the development of financial products and services offered by Equity Bank Uganda Limited (EBUL), Vision Fund Uganda (VFU) and Rural Finance Initiative (RUFI) and evaluating the impact of those products and services on refugee livelihoods.,
Late last year, we joined FSD Uganda and BFA Global in Uganda where we are implementing the Financial Inclusion for Refugees Project (FI4R) in Nakivale, Bidi Bidi and Palorinya refugee camps and with urban refugees in Kampala. This project aims to drive the availability of financial services to refugees and host communities. We are also conducting research with the aim of understanding the different sources of income for refugees, the uses of their finances and the financial products and services they use and supporting the development of financial products and services offered by Equity Bank Uganda Limited (EBUL), Vision Fund Uganda (VFU) and Rural Finance Initiative (RUFI) and evaluating the impact of those products and services on refugee livelihoods.
The project kicked off with extensive focus group discussions and individual interviews. It is the first Financial Diaries project with refugees which will not only provide a detailed picture, over the course of a year, of the incomes, expenditures and financial flows of refugee households but also reflect on how financial service providers engage with these households and make a difference to their financial picture.
Here are some of the preliminary discoveries from the initial baseline study.,
Low-income earners, women, and youth who have traditionally been locked out of the financial system are no longer invisible. The advent of mobile money and uptake by this market segment has created data footprints that enable financial service providers (FSPs) to analyse their financial needs. In addition, external research carried out by governments and donors is free and publicly available. This research data is instrumental in enabling financial service providers to obtain a better understanding of clients that they have had no previous interactions with.
The Data Management and Analytics Capabilities (DMAC) project implemented in Sierra Leone, Tanzania and Zambia sought to demonstrate the case for the use of data in the product development cycle of banks, insurance companies, and fintechs. Learnings and lessons from the project implementation have been developed into a toolkit that acts as a guide for FSPs seeking to derive maximum value from their internal data, externally available research data and other third-party data, in order to improve their service offering to new and existing clients.
Read more on how to use data to transform financial services here.,
