How is Côte d'Ivoire reforming its insurance market?

As providers operating in Côte d’Ivoire’s insurance sector look for strategies to increase their market penetration, much focus is being directed to the role that product innovation could play in boosting demand. Product diversification is primarily led by the private sector; however, upcoming regulatory changes mean the segment is set to be advanced by the public sector.

Côte d’Ivoire’s insurance penetration rate of 2% of GDP in 2018 leaves considerable room for growth, yet tapping into this potential remains challenging. To a large degree, the low adoption of insurance products is linked to the current economic climate. Although the country’s 25m-strong population has seen repeated years of economic expansion since 2012, growth has not been sufficiently inclusive. To encourage further adoption, sector players will need to customise products to cater for lower-income policyholders, and while introducing a legal requirement for certain insurance products is a route to increased penetration, specific insurance regulations will need to be adjusted to the economic realities of target populations.

“It is mandatory to adapt insurance products to the purchasing power of ordinary people,” Romuald Kouassi, director-general at Génération Nouvelle d’Assurance Côte d’Ivoire, told OBG. “There is great potential in Côte d’Ivoire as the customer target base is huge.” Over the medium term, the health of the local market will likely depend on insurers’ ability to effectively implement innovative products, better distribution channels and price segmentation to serve the entire population.

Construction Insurance

In September 2019 the development of new regulations for mandatory insurance cover of all construction sites was under way. Although the specifics of the law remain unpublished as of April 2020, the move will likely provide a revenue boost to the insurance sector. According to the new law, construction sites will need to be insured as soon as work begins, and building sites will need to publicly post their insurance provider and make the necessary documentation available during inspections. As most big construction companies are already insured, the primary focus will be on ensuring that smaller construction sites abide by the regulation – especially in a country where a large degree of economic activity is informal.

A critical issue to be clarified is whether the insurance requirements will vary according to the construction value or project size and how tariffs will be determined. “The regulation could have a positive impact,” Daniel Diallo, secretary general of the Association of Insurance Companies of Côte d’Ivoire (Association des Sociétés d’Assurances de Côte d’Ivoire, ASA-CI), told OBG. “However, we need to have tariffs that are adapted to specific segments, because a large part of construction activity remains informal.” Additionally, in the residential segment, many homes are built over a period of several years, keeping pace with clients’ access to funds, which will make the new insurance requirements difficult to enforce in some cases.

Agriculture

At the same time, new agricultural insurance is set to have a considerable impact. The agriculture sector accounts for roughly one-fifth of GDP and produces several cash crops including cocoa, cashew and cotton (see Agriculture chapter). Protecting the livelihoods of Ivorian growers is therefore critical for long-term economic development.

Part of the drive to expand crop insurance was based on a 2017 feasibility study by the World Bank and its Global Index Insurance Facility. This led to the launch of a pilot project by the government in cooperation with local insurance companies in 2018. The programme focuses on using agricultural insurance to reduce the catastrophic effects of climate change and other natural events on grower income. As part of the programme, local firm Atlantique Assurances and French multinational AXA Insurance have worked to provide draught and flood coverage in the cotton and maize segments, respectively, while the government and other insurers are exploring expanding the programme to the coffee and cocoa industries, which constitute Côte d’Ivoire’s two most important agricultural exports.

Leveraging Technology

As smartphone use has increased among the population, insurers have been able to launch mobile insurance solutions to boost accessibility and cater to specific customer needs. These benefits have positively affected the auto insurance industry, which accounts for a significant share of sector business: in 2018 auto insurance accounted for 19.3%, or CFA69.6bn ($119.6m), of sector premium, according to ASA-CI. The segment is the second-largest non-life contributor after health, with a 16.3% expansion in premium from CFA59.8bn ($102.8m) in 2017.

However, technical results in the auto segment – namely, the difference between revenue (including premium) and expenses (including payouts) – were ranked the second lowest of all segments in the market in 2018, decreasing by around 28% from CFA15.4bn ($26.5m) in 2017 to CFA11.1bn ($19.1m). In this respect, incorporating technology into insurance offers could help to ameliorate this picture by offsetting losses over the long term. An example of this could be seen in late 2019, when Sunu Group launched a new auto insurance product that offers the installation of technology to improve security, navigation and driving efficiency in the first 12 months of a customer’s contract.

Yet whether or not mobile technology will facilitate insurance adoption remains to be seen. Although the mobile phone penetration rate stood at around 150% in the fourth quarter of 2019, according to the Telecommunications/ICT Regulation Authority of Côte d’Ivoire (Autorité de Régulation des Télécommunications/TIC de Côte d’Ivoire, ARTCI), the market dynamic in certain insurance categories continues to be conducive to face-to-face distribution. “The distribution of products via smartphones is better geared for life than for casualty insurance products,” ASA-CI’s Diallo told OBG. “Car insurance, for instance, requires filling out a form that will determine the proposed tariff, which needs to be settled by the policyholder and insurer. Ivorian customers often want to negotiate in person.”

Online Reach

Despite cultural norms, new insurance options are increasingly available through internet distribution channels. According to ARTCI figures, the number of mobile internet subscribers in the country reached 17m by end-2019. As such, Ivorian insurers partnered with sector authorities to launch the Easy Assur platform in June 2019. The online portal allows users to access home, travel, auto and personal accident insurance policies, handle claims processing and compare insurance options. Baloon Assurance, the country’s first online insurance broker, began offering auto insurance in 2017 before expanding to other countries in the region, and now offers travel and health insurance products as well. The platform allows customers to pay through mobile money and delivers necessary documents by post. While some gains have been made, changes to the insurance industry will ultimately depend on how new legislative changes are enforced and how product innovations are implemented.