Big gap in South Africa’s insurance industry

Evolving consumer needs, technological advancements, and shifting demographics, driven mostly by Millennials, are creating a gap in the insurance industry.

This is according to Mulenga Kashiwa, technical underwriting senior manager at Hollard International, who explained that the insurance industry in Africa is undergoing a significant transformation. 

Millennials, born between 1982 and 1994, are one of the most influential drivers behind this change. 

According to market research firm IMARC Group, the African insurance industry is expected to grow by 6.3% between 2024 and 2032 after reaching $87.4 billion (R1.6 trillion) in 2023.

According to Statista, the South African insurance industry is expected to hit a gross written premium of $82.07 billion (R1.5 trillion) this year. 

This is mainly driven by life insurance, which is projected to reach a market volume of $52.59 billion (R962.8 billion) this year. 

“The Millennials have a big role to play in Africa’s insurance growth as they begin to build families and acquire property,” Kashiwa said. 

“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.”

He explained that, unlike previous generations, Millennials have a greater appreciation of the role of insurance in securing their financial future and protecting their assets. 

“However, the trend has been that they are demanding more from insurers, including flexibility in product design and premiums aligned with their specific financial needs,” he said.

However, insurers have not been able to keep up with their demands.

According to Hollard International, affordability and a lack of tailored insurance products that meet this generation’s unique needs have led to a significant gap in insurance penetration.

The Association for Savings and Investment South Africa (ASISA) 2022 Gap Study revealed that individuals aged between 30 and 39 are often underinsured by approximately R1.4 million. 

This trend is also true for those under 30. Despite 62% of young adults (18 years to 29 years) recognising the importance of financial security, only 17% have life insurance coverage, according to the 2024 Old Mutual Savings and Investment Monitor.

“We are increasingly finding that Millennials, with their diverse lifestyles and varied risk exposures, require more flexible and responsive insurance solutions,” Kashiwa said. 

“For instance, motor insurance products that once assumed consistent usage patterns now need to adapt to varied usage scenarios, such as weekend-only driving or reduced weekday commutes, especially given the realities of working from home and hybrid work models.”

“Pay-as-you-use models and other innovative solutions can better serve the new realities of this market segment.”

He explained that insurers need to adapt to effectively meet the needs of this generation and unlock the industry’s potential growth.

“Companies that will lead in insurance are those that are investing in data mining and analytics to better understand customer behaviour and preferences, and those are the companies that will tap into the growth prospects presented by Millennials,” he said.

Kashiwa believes that building robust data analytics capabilities will enable insurers to redesign products more aligned with their customers’ actual needs rather than pushing generic solutions.

“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 have excelled in understanding consumer patterns and preferences, and the insurance industry can learn from these examples to enhance its customer insights and product offerings for the industry’s varied market segments.”

He explained that the insurance industry needs to focus on developing innovative, flexible, and affordable products. 

By doing so, the industry can bridge gaps, protect the economy, unlock growth prospects, and contribute towards economic stability and sustainability, which will create better futures for millions of people who remain uninsured and underinsured.