Professional services firm EY has said that one of the risks faced by SA insurers expanding to the rest of the continent was a lack of detailed knowledge about the insurance environment in various African countries.
A lack of knowledge may result in South African companies delivering smaller returns from investments made.
Trevor Rorbye, a director at EY advisory services said in an interview that insurers needed to spend time and effort in understanding African markets and then price for the risk properly.
Old Mutual has set aside R5bn over a three- to five-year period for expansion in Africa, Liberty wants to spend hundreds of millions of rand in West Africa on an acquisition and has deployed a senior executive to be stationed in Nigeria to bed down an acquisition. MMI has set aside R500m for African expansion. Sanlam has hundreds of millions of rand to build up scale in its businesses in Africa and has already spent billions of rand expanding to fast-growing Asia.
Rorbye said some SA insurers had ideas about exporting the insurance solutions offered in SA to countries such as Nigeria.
Markets are different
However, in Nigeria people did not, for example, put as much value on funeral products as people did in SA. Funerals are cheaper in some African countries than they are in SA. The other challenge was that clients paid insurance premiums to brokers and some of the brokers took time to deliver the cash to insurers.
"The challenges that we see is distribution. In Nigeria the brokers have so much power. You pay premiums to the broker and brokers can sit with premiums for up to a year."
This introduced a risk of the insurer rejecting the claim or making a delayed payment. A delay in paying claims risked tarnishing the brand of insurers.
Rorbye said SA insurers, save for Sanlam, had a bigger focus on Africa and yet the future growth was expected to come from Asia and South America.
"So while I do not think it is entirely wrong for the South African insurers to go after the rest of Africa, there is a very big market in Asia and South America that they could potentially go after as well," he said.
The middle class in the Asia Pacific is expected to top 1.7bn people by 2020, accounting for about 54% of the global middle class. Central and South America is expected to have a middle-class population of about 251m people, accounting for about 8% in 2020 and sub-Saharan Africa is forecast to have about 57m middle-class people, making up 2% of the global number.
Source: Business Day via I-Net Bridge
Read more at car-insurance.org.za
Trevor Rorbye, a director at EY advisory services said in an interview that insurers needed to spend time and effort in understanding African markets and then price for the risk properly.
Old Mutual has set aside R5bn over a three- to five-year period for expansion in Africa, Liberty wants to spend hundreds of millions of rand in West Africa on an acquisition and has deployed a senior executive to be stationed in Nigeria to bed down an acquisition. MMI has set aside R500m for African expansion. Sanlam has hundreds of millions of rand to build up scale in its businesses in Africa and has already spent billions of rand expanding to fast-growing Asia.
Rorbye said some SA insurers had ideas about exporting the insurance solutions offered in SA to countries such as Nigeria.
Markets are different
However, in Nigeria people did not, for example, put as much value on funeral products as people did in SA. Funerals are cheaper in some African countries than they are in SA. The other challenge was that clients paid insurance premiums to brokers and some of the brokers took time to deliver the cash to insurers.
"The challenges that we see is distribution. In Nigeria the brokers have so much power. You pay premiums to the broker and brokers can sit with premiums for up to a year."
This introduced a risk of the insurer rejecting the claim or making a delayed payment. A delay in paying claims risked tarnishing the brand of insurers.
Rorbye said SA insurers, save for Sanlam, had a bigger focus on Africa and yet the future growth was expected to come from Asia and South America.
"So while I do not think it is entirely wrong for the South African insurers to go after the rest of Africa, there is a very big market in Asia and South America that they could potentially go after as well," he said.
The middle class in the Asia Pacific is expected to top 1.7bn people by 2020, accounting for about 54% of the global middle class. Central and South America is expected to have a middle-class population of about 251m people, accounting for about 8% in 2020 and sub-Saharan Africa is forecast to have about 57m middle-class people, making up 2% of the global number.
Source: Business Day via I-Net Bridge
Read more at car-insurance.org.za
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