The insurance industry in Africa, including Kenya, is undergoing significant changes, driven by evolving consumer needs, technological advancements, and shifting demographics.
Among the most influential demographic groups driving this change are Millennials, born between 1982 and 1994.
According to market research firm IMARC Group, the African insurance industry is expected to grow by 6.3 percent between 2024 and 2032, after reaching $87.4 billion (Sh11.6 trillion) in 2023.
“Millennials have a big role to play in Africa’s insurance growth as they begin to build families and acquire property,” says Mulenga Kashiwa, technical underwriting senior manager at Hollard International, in a statement.
“Millennials in Africa are now in their 30s to early 40s, a phase often associated with significant life changes such as starting families, buying property, and planning for the future. These milestones naturally lead to a heightened need for insurance products, including health, life, and property insurance.”
Low penetration
Low penetration of insurance in the Kenyan market, relative to more developed markets, is attributable to factors such as a general lack of a savings culture, low disposable incomes, and nearly 50 per cent of Kenyans living below the poverty line.
Despite these challenges, the insurance sector demonstrated resilience by registering a 14.8 percent growth in gross premiums to Sh101.5 billion in Q1 2023, up from Sh88.4 billion in Q1 2022. This growth outpaced the 11.3 percent increase in insurance claims, which rose to Sh42.9 billion in Q1 2023 from Sh38.5 billion in Q1 2022.
South Africa’s market surpasses its sub-Saharan counterparts in insurance purchases, with an expected gross written premium of $82.07 billion this year. This growth is mainly driven by life insurance, projected to reach a market volume of $52.59 billion, according to Statista. There is significant growth potential in other Sub-Saharan African countries.
Hollard International notes that affordability and a lack of tailored insurance products have led to a significant gap in insurance penetration among Millennials.
“Unlike previous generations, Millennials have a greater appreciation of the role of insurance in securing their financial future and protecting their assets. However, they demand more from insurers, including flexibility in product design and premiums aligned with their specific financial needs,” says Kashiwa.
To effectively meet Millennials’ needs and tap into the insurance industry’s growth potential in Africa, insurers need to evolve and leverage data and technology. By investing in data mining and analytics to better understand customer behavior and preferences, companies can tap into growth prospects presented by Millennials.
Sector assymetry
“Improving data quality and addressing the asymmetry between insurers and the public remains crucial. We have seen how industries such as ride-hailing services like Uber excel in understanding consumer patterns and preferences.
The insurance industry can learn from these examples to enhance its customer insights and product offerings,” Kashiwa says. “While we cannot use the same insurance product designs and models in Zambia as in South Africa, Namibia, Mozambique, or Kenya due to different levels of insurance penetration, we can optimize data to become more responsive to customer needs and expand insurance penetration across the continent,” argues Kashiwa.
The insurance sector has an important role to play in creating better futures. The industry needs to focus on creating innovative, flexible, and affordable products to bridge the existing gaps and protect economies, unlocking growth prospects across the continent.
