Why is Africa’s insurance penetration low?


“It is Africans who are poor but not Africa,” – and I agree with Dr. Osagyefo Kwame Nkrumah on this statement. Africa is rich in natural resources ranging from arable land, water, oil, natural gas, minerals, forests and wildlife. The continent has 40% of the world’s gold and up to 90% of its chromium and platinum. The largest reserves of cobalt, diamond, platinum and uranium in the world are in Africa. It holds 65% of the world’s arable land and 10% of the planet’s internal renewable fresh-water source (UNEP). Africa’s population is equivalent to 17.4% of the total world population – around 1.37 billion people (statistics times, 2021).

According to the National Insurance Commission (NIC n.d), in developing countries like Luxembourg, with a GDP of more than US$70billion, insurance penetration as of 2017 was 38.8%. It is however surprising that compared with the peers of these countries in Africa, South Africa has the highest level of insurance penetration (16.99%) followed by Namibia (6.69%) and Lesotho (4.76%) with Ghana hovering at around just 1% as of 2018.

Ghana’s insurance industry is beset with a myriad of problems – including low insurance penetration, non-compliance with regulatory directives, slow adoption and under-utilisation of financial technologies by insurance companies, low actuarial expertise, weak market regimes/rules and undercapitalisation of some insurance firms, among others (NIC, 2020).

The downward trend of insurance coverage in Africa as compared to the rest of the developing world has been blamed on several issues by different researchers: including a lack of public confidence and trust in the insurance industry (UZOAMAKA 2019), lack of supportive insurance legal framework, inadequate research, uncompetitive pricing, inadequate distribution channels, low-income levels and hostile religious or cultural factors (Odenyo, 2018). Though all the findings of these researchers may have a significant impact on insurance penetration, regulation and technology may have a profound impact – displaying their relevance in the lives of modern corporations.

Insurance penetration is used as an indicator of insurance sector development within a country, and is calculated as the ratio of total insurance premiums to the gross domestic product in a given year. The services provided by insurance firms make them essential to the economic growth and development of every nation across the globe. Their role in economic development includes but is not limited to the offer of income, life and property protection to the insured and their kin, as well as income accumulation that can be used at retirement to help preserve desired lifestyles or living standards. (Apergis & Poufinas, 2020; Ćurak et al., 2009).

It is a fact that technology and regulation collectively play a central role in the growth and output of many industries – of which the insurance industry is no exception (Buchmueller & Liu, n.d.-a; Tiwari et al., 2019). However, despite the insurance industry’s immense contribution to economic growth and development, it is common knowledge that insurance penetration is still very low not only in Ghana but also many other economies in Africa.

NB: (Some selected African countries and their penetration and coverage rate)

Insurance penetration (% GDP)
10 lowest countries 10 highest countries
Guinea 0.036 Tunisia 1.525
Equatorial Guinea 0.038 Angola 1.963
Chad 0.196 Kenya 2.032
Congo, Dem. Rep 0.210 Eswatini 2.253
Central African Republic 0.257 Morocco 2.378
Mauritania 0.383 Botswana 2.628
Sierra Leone 0.396 Lesotho 4.290
Sudan 0.403 Mauritius 4.418
Libya 0.425 Namibia 6.868
Mali 0.463 South Africa 13.607

Source Authors’ calculation – Table is Insurance development in Africa (1996–2017) From Institutional determinants of insurance penetration in Africa

The Way Forward

  • A study by (Buchmueller & Liu, n.d.-b) points to insurance regulation as a key element that has led to deepening insurance penetration in the U.S.A. The study found evidence that regulatory reforms played a key role in the evolution of health insurance uptake in the U.S.A.
  • The study further highlights the need for insurance firms to adopt innovative approaches, reinforced by state-of-the-art technologies to deliver different products and services (claims) which meet the needs and affordability requirements of their clientele.
  • According to (Christine van Heerden & Moroney, 2016) the regulatory environment of a country is a key influence in the insurance market. According to the researchers, a competent regulator supported by sound legislation will create confidence in the insurance industry, which will increase the demand for insurance.
  • Regulators may also make some forms of insurance compulsory, which results in higher penetration for those insurance products. Restrictions may be imposed on insurance products and companies by the regulator. This may influence the insurance market in different ways depending on the regulation.
  • Technology has a similar effect on insurance penetration to regulation. Tiwari et al., 2019 – in their work on Information Communication Technology-Enabled Platforms and P&C insurance consumption in emerging and developing economies – found the adoption and utilisation of new financial technologies to be one essential instrument aiding insurance market growth, as it offers companies a competitive edge to penetrate new markets and thus widen their market share through bespoke and speedy client service in areas such as underwriting, product development, marketing and claims management.

Ghana has put a lot of measures in place – including a new Insurance Act that has increased the regulatory bite, and also made other insurances compulsory.

The introduction of technologies such as the Motor Insurance Database, Fire Insurance Database, Marine and Aviation Insurance Database, Insurance Agents Database and many others has increased the uptake of insurance.

The increase in minimum capital has brought confidence to the public and also increased the capacity of insurers to retain more insurance businesses.

The cap on motor third-party insurance and establishment of the claims guidelines are helping build confidence in the industry, and also helping insurers to meet claims.

Insurance coverage has increased based on some of these measures, but more could be done to build the insuring public’s confidence and trust to help increase insurance penetration and coverage.

Insurance claims payment is the insurance service’s end product. When a claim is paid, and on time, it increases the insuring public’s confidence and trust. There should be technology to capture, monitor and simplify the claims processes and procedures, since most victims have made complaints about the claims processes being cumbersome, tedious, rigid, demanding, unfriendly, time-consuming and financially demanding in acquiring certain claims documents. Could this still be accounting for the low insurance penetration and coverage in Africa?

The writer is a Chartered Insurance Practitioner



Ampaw, S., Nketiah-Amponsah, E., & Owoo, N. S. (2018). Gender perspective on life insurance demand in Ghana. International Journal of Social Economics, 45(12), 1631–1646. https://doi.org/10.1108/IJSE-03-2017-0120

Apergis, N., & Poufinas, T. (2020). The role of insurance growth in economic growth: Fresh evidence from a panel of OECD countries. North American Journal of Economics and Finance, 53. https://doi.org/10.1016/j.najef.2020.101217

Buchmueller, T. C., & Liu, S. (n.d.-a). Health Insurance Reform and HMO Penetration in the Small Group Market. In Inquiry (Vol. 42). Winter. www.inquiryjournal.org

Buchmueller, T. C., & Liu, S. (n.d.-b). Health Insurance Reform and HMO Penetration in the Small Group Market. In Inquiry (Vol. 42). Winter. www.inquiryjournal.org

Christine van Heerden, B., & Moroney, L. (2016). The application of demographic projections to predict changes in life and non-life insurance penetration rates. In ACTUARIAL SOCIETY.

Ćurak, M., Lončar, S., & Poposki, K. (2009). Insurance Sector Development and Economic Growth in Transition Countries. In International Research Journal of Finance and Economics. http://www.eurojournals.com/finance.htm

UZOAMAKA, E.( 2019). International Journal of Social Sciences and Management Review INSURANCE PENETRATION RATE AND ECONOMIC GROWTH IN NIGERIA. www.ijssmr.org


Oscar Akotey, J., & Abor, J. (2013). Risk management in the Ghanaian insurance industry. Qualitative Research in Financial Markets, 5(1), 26–42. https://doi.org/10.1108/17554171311308940

Owusu-Sekyere, F., & Kotey, R. A. (2019). Profitability of Insurance Brokerage Firms in Ghana. Academic Journal of Economic Studies, 5(2), 179–192.

Tiwari, A., Patro, A., & Shaikh, I. (2019). Information Communication Technology-Enabled Platforms and P&C Insurance Consumption: Evidence from Emerging & Developing Economies.



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