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The Future’s Bright, the Future’s Mobile

20 April 2017

Africa's infrastructure, dogged by poverty and war, has long suffered crippling under-development. From banking to broadband to bridges, the basic cornerstones that drive growth are missing, hampering economic development.

Part of the challenge is that development has been underpinned by insurance since Edward Lloyd began offering hospitality in 1688 and it remains an essential foundation for sustainable growth. Yet insurance penetration across Africa is alarmingly low apart from a handful of countries including South Africa (16.99%), and Namibia (6.69%). 

Enter insurance fintech. This emerging sector could overcome longstanding logistical obstacles to enable governments and businesses to reach the underserved, offering Africa a ladder where, all too often, it has been running into a wall. 

 Mobile Phones and  Blockchain Reduce Barriers to Service

Although once an expensive luxury, manufacturers offering basic smartphones valued at under USD 100 have won a 45% share of the 110-million unit African market.  Mobile phone subscription for sub-Saharan Africa now stands at over 75% whilst smartphone penetration sits around 25% in Kenya, Nigeria and Ghana, a figure that, along with data traffic, has doubled in two years. Whilst landlines may be scarce, mobile infrastructure is improving. Morocco now has better 4G coverage than the UK and paying for a taxi in Nairobi on a mobile is simpler than in New York, thanks to local fintech start-up M-PESA.

Mobiles are also reducing the cost of microinsurance by lowering administrative overhead. Premiums can now be paid using airtime credits. Other providers offer free cover in return for a minimum airtime purchase each month. Airtel in Malawi, for instance, offers Three for Free-Life, Disability and Hospital Cover if subscribers top-up USD 0.70 a month.

Tigo operates across Ghana, Tanzania and Senegal, specifically targeting bankless sub-Saharans with mobile microinsurance products and its most successful product, Insurance Hospital Support, boasts over a million registered customers in Ghana. The product provides USD 9 a day for up to 30 nights year in exchange for a top-up of around USD 0.08 a month. 

The mobile revolution has provided a model for increasing access to financial services in Africa. More recent technology, including smart contracts, blockchain and bitcoin could further reduce costs associated with claims administration, fraud losses and inefficiencies. Lemonade, in whom Allianz has recently become a stakeholder, recently claimed an unverified record of the fastest ever claims payment of 7 seconds from submission to money dispatch.

Bitcoin has demonstrated a practical application of blockchain It sidesteps the lack of banking infrastructure and problems afflicting e-commerce in Africa. With a bitcoin wallet, customer can operate without a bank account or address whilst for vendors the risk of fraud is vastly reduced. Moreover, with a smart contract consumers can depend upon receiving due payment, in bitcoins of course.

The combination of microinsurance, mobile payments, smart contracts and bitcoin could increase insurance penetration throughout the continent, laying a firm base for sustainable growth.