Ivan Anoman – edited by PACT
What If We’ve Been Measuring Insurance Penetration the Wrong Way?
Insurance manages trillions in long-term capital and serves as a cornerstone of economic stability globally. Yet in Sub-Saharan Africa, where exposure to health, climate, and income shocks is highest, insurance penetration averages just 1–3% of GDP with exceptions like South Africa (11%) and Namibia (7%). This penetration rate is far below the global average of 6-8%. For decades, the industry has attributed this gap to a “lack of insurance culture” in Africa. But what if the problem isn’t the market itself rather than how we measure success?
The Measurement Gap: Why Insurance Is the Outlier
Every major financial service tracks penetration through people-based metrics:
- In Telecom: mobile penetration is the share of population owning a mobile phone
- In Banking: banking penetration is the share of adults with a bank account
- In Mobile Money: penetration is the share of population with a mobile money account
Insurance appears as an exception. Penetration is measured as Gross Written Premiums as a share of GDP, a macro-economic metric that reveals the industry’s contribution to economic output and the overall maturity of the sector, but tells us nothing about how many individuals are actually protected and benefit from any insurance policy.
This distinction is not semantic. It reflects insurance’s original design in Western markets: a tool to protect assets (shipping cargo, property from fire) and absorb systemic economic shocks. This was not designed to protect people’s livelihoods.
When you reframe the metric using population-based measurement, the picture becomes starkly different and and far more troubling; In Nigeria per example in 2025, the penetration rate is around 0.5% (% of premium collected of GDP), but according to the National Health insurance Authority (NHIA) around 10% of nigeria are covered by health insurance. This left 9 people out of 10 without any health insurance coverage and access to affordable healthcare.
This measurement bias has had concrete consequences particularly in African markets.
First, individual insurance remains structurally underdeveloped.
Most premiums come from mandatory lines (notably motor insurance) or corporate and collective schemes (group life and health). Voluntary, individual coverage, especially for informal workers and rural households is marginal.
Second, insurance is largely absent from financial inclusion frameworks.
An individual is considered “financially included” with a bank account or a mobile wallet, even if they have no protection against illness, climate shocks, or income loss. Life and health insurance, arguably the most impactful products for vulnerable households, remain invisible in inclusion metrics.
Third, innovation is optimized around the wrong objective.
When success is defined as maximizing GWP relative to GDP, insurers rationally prioritize:
- High-premium, low-volume corporate contracts
- Asset-heavy risks,
- Rather than low-premium, high-volume individual protection that would expand real coverage.
In reality, the low people-based penetration stems from failures on both the supply and demand sides:
| Dimension | Challenge | Impact |
| Distribution | Rural, informal populations are expensive to reach through traditional agent networks; digital infrastructure for insurance distribution remains underdeveloped | Customer acquisition costs for individuals far exceed those for corporate contracts |
| Product-market fit | Products designed for formal, salaried economies don’t match irregular cash flows of informal workers and smallholder farmers; population is mostly rural with predominantly informal economy and SMEs | Low perceived value drives low demand |
| Trust | Limited brand visibility in rural areas with weak claims experiences including delays and unpaid losses | Population prefers to manage risk privately, recurring to out-of pocket payments, debt or traditional risk-pooling mechanisms like tontines rather than “lose money” in insurance premiums |
All these issues fuel the false narrative that “Africans don’t have insurance culture” which is obviously wrong. Traditional risk-pooling mechanisms like tontines, which is the essence of insurance, have existed for generations across the continent. What Africa has lacked is an insurance industry designed around people-based access rather than asset-based protection.
Traditional channels like agents and brokers have failed to adress these problems simultaneously. Embedded insurance changes the economics and the psychology of insurance distribution.
At its core, Embedded insurance means integrating insurance directly into a non-insurance transaction at the moment of the purchase. Rather than requiring a customer to seek out an insurance company, embedded insurance meets them where they already are by leveraging digital technologies. It can be bundle into :
- A loan or BNPL product
- A mobile money wallet
- An agritech input purchase (seeds, fertilizer)
- A gig-work or logistics platform
- A solar home system contract
Embedded insurance model is build across two layers:
The Host Platform : Who embeds? (Non exhaustive list)
- Financial services: Mobile money providers (MTN, Vodafone), neobanks, lending platforms
- Commerce: E-commerce platforms, logistics networks, marketplace aggregators
- Utility/Transactional: Agricultural input suppliers (seeds, fertilizer), telecom subscriptions
- B2B Services: Payroll processors, merchant aggregators, supply chain platforms
Insurance Architecture Models or How it’s embedded? (Non exhaustive list)
- Parametric: Automatic payout on external trigger (drought, flood, price drop); eliminating claims process friction
- Bundled: Insurance premium absorbed into/subsidized by host platform economics
- Pay-per-use: Insurance triggered by specific transaction (flight booking → travel insurance)
This approach solves the distribution problem and addresses all three failure points simultaneously. It enables insurance companies to:
- Reduce acquisition costs : by leveraging existing platforms and infrastructure
- Build better trust : by referring to brands customers already know and trust
- Improves product fit :Coverage can be tailored to the underlying transaction and the consumer needs (e.g., crop insurance with seeds, device insurance with phone purchase)
Long before APIs and insurtech platforms, this logic was already proving effective through traditional channels.
In Côte d’Ivoire per example, several insurers have successfully embedded insurance by placing dedicated agents or desks directly inside major car dealerships. By aligning insurance distribution with the moment of vehicle purchase, insurers increased visibility and significantly improved motor insurance conversion. Insurance became a natural extension of the transaction, not a separate administrative burden.
A similar dynamic underpins bancassurance. By embedding life insurance into everyday banking interactions (loan origination, account opening) banks have become powerful insurance distribution engines. This model has materially accelerated life insurance adoption across multiple African markets, not because products changed, but because distribution aligned with customer behavior and trust.
Digital ecosystems now allow this logic to scale further. Pula is an example of a successful hybrid embedded insurance model.
Pula is a Kenyan agritech company which embeds parametric crop insurance directly into its agricultural advisory platform for smallholder farmers : a farmer purchasing improved seeds, fertilizer, or advisory services through Pula’s app receives automatic crop insurance tied to that purchase. The premium is bundled into the transaction cost (typically between $5–10), often subsidized by Pula’s business model or donor programs partnering with 100+ distribution partners, DFIs and cooperatives.
When drought or flooding is confirmed via satellite imagery and weather data, the farmer receives an automatic payout without filing a claim, parametric insurance eliminates claim friction entirely. Since inception in 2015, Pula has reached over 20 million smallholder farmers, paid more than USD 40 million in claims, and achieved renewal rates of ~80%, roughly double typical microinsurance benchmarks (40-50%).
The evidence is clear: when insurance is embedded in essential transactions, like agricultural inputs, mobile phones or credit, adoption rates transform. Pula’s 80% renewal rate and demonstrate demand exists and the model efficiency.
If insurance’s purpose is to protect people and not just assets, then the industry’s success should be measured by lives covered, not premiums collected. What remains is the institutional will to change how we measure insurance’s impact. The real insurance growth will happen when industry leaders will create an environment where protection is embedded into everyday economic life. Because ultimately, protecting economies starts with protecting people.