Risk, Remittances and Integrity

R3Lab insurance regulation and innovation: Assessing eight African insurance markets to promote inclusive insurance market development ​

To support insurance regulatory authorities in sub-Saharan Africa, there is a need to strike a balance between innovation and the accompanying risks that arise. FSD Africa set up the R3Lab as a platform for capacity-building and peer exchange to assist regulators in delivering on their growing mandate.

FSD Africa’s R3Lab partnered with Cenfri to review and assess the state of innovation in eight African countries: Ethiopia, Ghana, Kenya, Malawi, Nigeria, Rwanda, Uganda and Zimbabwe.

The assessment focused on the current state of innovation in the market, the existing challenges and impediments in the enabling environment for innovation and identified specific and practical actions for regulators to take to further support innovation, while balancing the risks.

By exploring the underlying infrastructure, talent pipeline, market engagement enablers, access to finance, regulatory environment, and supervisory support, the project found that:

  • Low penetration rates persist
  • The market is dominated by non-life insurance and life insurance growing off a low base
  • Compulsory insurance remains a key driver of uptake
  • There is limited voluntary retail reach
  • Insurers largely innovate to improve efficiency and better serve their existing customer base
  • Insurtech sectors are still nascent and have a B2B focus

These country reports include a detailed assessment of the insurance market of each country as well as structural, market engagement, regulatory and supervisory recommendations to overcome the market’s key innovation constraints. The key actions to address the identified regulatory and supervisory constraints are to

  • Close remaining gaps regarding digital distribution and licence categories
  • Reconsider the sandbox design to ensure it is fit-for-purpose
  • Earmark capacity for innovation and coordinate across departments
  • Adapt and streamline the supervisory approval process
  • Broaden the monitoring framework for innovation
  • Invest in upgrading supervisory systems