Ramping up financial literacy among underserved women will go a long way towards accelerating financial inclusion, which in turn will drive mass adoption of insurance solutions and unlock the immense economic potential of this marginalised market segment.
So says Eve Banda, Executive Head, People & Marketing at Hollard International. Who made the remarks against the backdrop of the commemoration of Women’s Month in South Africa. During August in SA, the spotlight is focused on barriers to women’s empowerment and development.
The International Monetary Fund (IMF) has found that women on the continent remain on the periphery of the financial system - in sub-Saharan Africa, only 37% of women have a bank account, compared with 48% of men, a gap that has widened over the years. In contrast, a study by Forbes found that women account for a staggering 85% of global consumer spending, translating into over $31 trillion annually.
Banda agrees and points out that there is a close relationship between economic development, the growth of the middle class and the adoption of insurance. “The growth of the insurance industry in Africa cannot be viewed in isolation; it is closely linked to economic growth, which has led to a rising middle class,” she says. “As many economies in Africa recover from the effects of Covid-19, we are seeing a corresponding growth of the insurance industry, which is stimulated by the rising middle class who have a better understanding of what insurance is, and who wish to protect their assets.”
The underserved market in Africa presents a massive opportunity for the insurance sector to drive financial literacy and demystify insurance through simple and relatable communication that is devoid of technical jargon.
“Financial literacy also entails dispelling the myth that insurance is a product for rich people,” Banda adds. “We need to make insurance easily accessible and internalise the importance of securing our future, and getting insurance is widely regarded as a basic need.
“It’s important to have conversations about how, for example, we can go to a produce market and explain to a woman selling tomatoes that they can invest a dollar and insure her product. If, as the insurance industry, we can do that, then we will be able to drive financial inclusion and level the playing field to enable women to unlock their economic potential.”
Affordable insurance products like micro-insurance, Banda points out, are low-hanging fruits that can be used to introduce women to insurance. “Once policyholders derive value from insurance offerings such as a $3 funeral cover, they will begin to aspire to a $10 product and then a $50 cover. But you have to start from somewhere, and that's where Hollard can make an impact,” Banda says.
She cautions that increasing financial literacy entails a paradigm shift because many long-held practices by women are rooted in patriarchal beliefs. “There's a lot of unlearning and relearning that needs to happen,” she says. “Unfortunately, financial literacy in some of the markets in Africa relates to values, and that becomes dicey because you may be inferring that women should challenge their value system and take independent financial decisions without the approval of their husbands. So financial literacy becomes important in that, first of all, you need to make women realise what they already know in order to learn something new. And that's where the paradigm shift lies in my mind.”
Banda points out that financial literacy has a spillover effect in career choices. For example, in markets such as South Africa, Zimbabwe and Kenya, young people understand what actuaries do because of the relatively high levels of insurance penetration. As a result, institutions of higher learning in these countries offer actuarial science as a course of study and a career choice.
“In many markets, actuary is not a career choice because of low insurance penetration, and universities are only introducing the course now. I believe that as we deepen financial literacy, there will be an increased appetite for actuarial studies and in people aspiring to a career in underwriting. The development of local actuarial capabilities is critical in deepening the adoption of insurance in various markets in Africa, as it will ensure that pricing of insurance solutions is nuanced by local dynamics and priced correctly,” says Banda.
She points out that market segmentation is a critical success factor in insurance uptake. The insurance requirements of middle-aged policyholders, for example, may be different from those of a younger generation. “There is no blanket solution,” she says. “There are varying generations in the market, so different product sets are required.”
One way to fast-track insurance adoption is to ensure that the signing-up process is seamless, easy and quick. Banda says in most African markets, one of the biggest challenges faced by the sector is getting a potential policyholder to sign up for an insurance product in just three or four clicks. “Consumers spend their time online, and when they are asked to fill in some document, they lose interest. We need to strike a balance, implementing a seamless and easy sign-up process without compromising our security in the back end.
“We need to make sure that there's a way at the back end to mitigate risks, while at the front end it’s still easy for people to make the decision to insure,” Banda concludes.
