South African-owned short term and life insurer, Hollard Insurance Group, was established in 1980, and has since expanded its operations to other markets – including China, Australia, Zambia, Botswana, Namibia, Mozambique and Ghana.
The company has an annual turnover of more than R15bn (about $1bn), which it has grown with its model of selling insurance through third-party traders, such as retailers and banks. Its partners include some of South Africa’s biggest retailers – with Pep Stores, Edcon, Ackermans, Game, Spar and Truworths all on the list.
One of the major benefits of partnering with retailers is the use of their infrastructure, such as bricks and mortar branches. Furthermore, those retailers that offer credit have existing account bases from which premiums can be deducted. And potential clients can also easily be accessed through retailer magazines or email newsletters.
According to Frans Prinsloo, MD of Hollard International, who oversees the Africa and Asia side of the business, the insurer is following many of its retail partners as they expand into other African markets.
“A good example would certainly be the Edcon group [which owns Edgars]. It has operations in Botswana, Namibia, Zambia, and they have recently set up in Ghana as well. So in those markets, Hollard also underwrites products depending on what the requirements are for each store,” he told How we made it in Africa.
“For example from an Edgars environment, they offer credit sales in Botswana and Namibia, but not in Zambia. So then your offerings, and your way of collecting premiums and interacting with the client, is very different in those markets.”
Targeting emerging consumers
In addition to offering a cost-effective means to reach consumers and collect premiums, trusted third-party brands have a greater chance of selling insurance to first-time buyers, he noted. For example, a consumer who interacts with a mobile network every day might be more willing to pay for insurance via the network, than an unfamiliar broker.
“If you look at Africa and emerging consumers especially, often your insurance brands are not as strong as some of your retail, mobile or banking brands – so it helps to look for a trusted brand which customers interact with quite often.”
In Ghana, Hollard partnered with MTN to sell funeral insurance using MTN Mobile Money. “And that has worked pretty well in [getting] customers that didn’t have access to insurance in the past to utilise their mobile money account to purchase insurance. And then, because your method of reaching the client and collecting premiums is quite cost-effective, you can provide a superior price on a product,” he continued.
In Botswana a similar strategy has been adopted through a partnership with Botswana’s post office to access consumers in hard-to-reach areas, many of whom have never bought insurance before.
“It works through its post office branches. It has got really good distribution all across Botswana and you then utilise that post office network to provide access to insurance – either through putting an agent or brochure in the post office branch. You can also then utilise the post office infrastructure to collect premiums… and also claims back.”
Understanding different consumer cultures
“We are very bullish on the African insurance market and the opportunities that have been offered. Certainly the growth in the middle class and these economies is quite exciting. Some are growing faster than others – but there are definite trends from country to country.”
Prinsloo noted that while in South Africa life insurance is five to six times larger than the general or short-term insurance market, the reverse is true across the rest of the continent. This is in part due to the growth of the middle class which is accumulating more assets that need insurance. But he has found that cultural issues also come into play.
“So in a market like Nigeria funeral policies are not selling fantastically because of the cultural nature of the Nigerian market where a lot of people see it as a taboo to talk about death and ‘death insurance’.”
However, he noted this differs between countries. For example, Ghana is seeing a faster growth in funeral insurance than any other type.
“It depends on a lot of local factors and good market and consumer insights are vital in offering the right product in these markets,” he added.
Regulation can be limiting, but getting better
The regulatory environment can also be an inhibitor to growth of the insurance industry. For example, Prinsloo explained that while in South Africa Hollard can sell various products through banks, in Ghana it is only allowed to market personal products like funeral or vehicle coverage through banks. It does not allow for sale of business insurance.
“The bank is an ideal distribution channel to small businesses because they provide small business loans and funding. So to tag on the insurances and provide insurances in that space, it is much easier than a lot of other channels.”
Part of the problem is the low levels of insurance penetration in African countries outside of South Africa, he noted.
“There is obviously quite a lot we would like to see changed – but I think change is doable and the insurers have a very important role to play to influence regulators, and show them examples of how it can work.”
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