Africa, land of loss adjusting

Loss Adjusting

Speaking of Africa, we rarely discuss the insurance issues of the territory, and yet it is an opportunity to be caught and shared. Here's an overview.

When it comes to Africa, there are few topics that deal with the insurance issues of the territory. Therefore, to rectify this, let’s take a look at some of the figures. Africa represents 15% of the world’s population for only 1.5% of the insurance market. On average, an African pays 70$ per year to insure himself against 2700$ for a European. The number of insurance companies present on the territory is disproportionately high: 600 against 5000 in Europe!

So, why focus attention on the African continent when we know that the penetration rate of the insurance sector is only 0.75% of the GDP (excluding South Africa) against 6.5% in the world? All the more reason to answer you.

An evolving continent, a context to be defined

Great disparities, both economic and social, strike the different regions of the African continent. From the Maghreb to Southern Africa, through Central Africa, from West to East, people do not live in the same way. The same applies to the insurance market. Let’s focus on West Africa and Central Africa (largely French-speaking) which represents 1.7 billion euros in terms of revenues in 2018! How can we define this ecosystem? Let’s take a look back.

The insurance industry of 14 countries in West and Central Africa decided in 1992 to join forces within the Inter-African Conference on Insurance Markets (CIMA). This was governed by an insurance code controlled by common authority, the Regional Insurance Control Commission (RICC). In 2016, the council of ministers of each country in charge of insurance calls on insurance companies to increase their share capital from 1 billion CFA francs to 5 billion CFA francs (or 7.6 million euros) with the first step to 3 billion CFA francs in 2019.

Another step is to come in 2021. Such a reform aims above all to deal with the weaknesses of the zone’s insurance sector with its excess of overly small players. Another objective of this policy reform is to limit pricing dumping, excessive reinsurance, low compensation, and the lack of innovation due to low profitability. We are therefore faced with an extremely heterogeneous sector in which small family-owned companies, weakened by limited equity capital, coexist with highly capitalized regional mastodons.

Consequently, players in the pan-African market are regrouping in order to gain strength and efficiency in the face of these constraints, which often lead to the closure of local insurers. With an estimated growth of 3.4% against 6.1% in Asia and 1.5% in Europe, Africa has a chance, indicators permitting, to make up for some deficits. Unfortunately, these are numerous. In some countries, the health situation is often dramatic. The infrastructure of basic necessities (railways, factories, motorways) are lacking. In statistical terms, this deficit is estimated at between 130 and 160 billion dollars. To overcome this logistical shortfall, many high-stakes projects have been launched in recent years. In 2018, more than 471 billion dollars will be invested, i.e. 50% growth compared to the previous year. In a fast-growing continent investing massively in structural works, expertise has a role to play in covering any resulting claims. A role that we share with our local partners.

Jointly developing and sharing loss adjusting

So how is the loss adjusting taking place in Africa? It depends on many parameters such as the nature of the claim, the location, the issue, and the insurance company. During many years, most of the technical claims that took place on African soil were handled by foreign appraisal companies. Why was this? Companies find it difficult to find a local expert to handle a high-stakes case from start to finish, regardless of whether the insured is a local company, insured by a local insurance company and necessarily reinsured by a foreign company, or whether the insured is an international company, insured by a foreign insurance company.

Purpose? Very few multi-specialty loss adjusting companies are based in the different African countries, with the exception of Morocco and South Africa. Loss adjusters are mostly organized in their own name, specialists in their field of expertise. They have neither the means necessary to make themselves known to foreign insurance or reinsurance companies operating in their country. Both insurers and reinsurers, therefore, work with multi-specialist international consulting firms that guarantee them respect for deadlines, expected report models, and negotiated rates. It is in this field that the exchange of knowledge can be mutually beneficial.

We can learn from them as they can learn from us. African loss adjusters have to deal with problems that are specific to the continent. On-site assessment varies according to the environment and the means available. In addition, like local insurance companies, these loss adjusters must be licensed in each of the countries where they operate. Until now, none of these insurance companies have had local subsidiaries or associated partners in different African countries. Instead, they had local representatives on a case-by-case basis. It is in this sense that we have chosen to differentiate ourselves in order to build our model: to build an international network of loss adjusters for Africa by combining with the best loss adjusters in their field and their country. A reciprocal contribution, to face a different disaster situation in a changing world.

Coronavirus time

Nowadays and across the continent, the figures show a slow spread of the virus.

How can this be explained? Some will say that logistical difficulties are masking the extent of the damage. Others will look at Africa’s past in terms of epidemics and demographics. Africa is a young population with an obesity rate well below the global average. By 2014, when the Ebola virus was rampant, many countries had already closed their borders to stem the flow of the virus. The same measures are at work today. Most countries have blocked their regional borders. In Morocco, the wearing of masks has been compulsory for several weeks. This commodity, which is so rare in France, can be found freely in the country’s supermarkets. So what are the risks for Africa while the world is suffering the full impact of the Covid-19 epidemic?

The economic impact is, predictably, the main one. In December 2019, in the early stages of the epidemic in China, World Bank estimates predicted growth in Africa of 3.9% in 2020 and 4.1% in 2021. In the meantime, half of humanity has been confined. An IMF report published on 15 April now considers that Africa will suffer a 1.6% decline in GDP in the current year. Only four countries (Côte d’Ivoire, Senegal, Uganda, Ethiopia) are expected to experience growth, mainly due to their agricultural sector. Partly dependent on European countries and China, the fears of Africans revolve around the lack of liquidity and the means to deal with the infrastructure deficit. Add to this a strong dependence on oil. All of which can darken the future, or how a growing continent can fall into recession.

Equally important is the impact on the world of insurance. Nevertheless, claims will not cease to exist. The same is true for expertise, whose local development will necessarily rely on new technologies. With Covid-19, many digital solutions are becoming tomorrow’s standards. These tools are becoming more and more efficient (e-learning, videoconferencing, tele-expertise…). What is certain is that tomorrow’s world will no longer be the same.

Working in Africa is an opportunity that must be seized and shared. On a daily basis, all our partners are co-creators. We offer them our small lead in the world of insurance. They offer us their knowledge and their specific know-how that should not be underestimated in order to improve and develop new modes of expertise. In the absence of sometimes essential services, we adapt to the different conditions to restore the pre-claim situation. We reinvent ourselves together.

In Africa more than anywhere else, we make the choice of agility!