Although penetration of insurance services has typically been higher in Gabon than most surrounding markets, the country has shown that room for growth remains. Securing new insurance customers has sometimes been challenging for providers, due to low market awareness, particularly among low-income earners, and insufficiently developed distribution networks, especially across Gabon’s rural areas. However, government policy, a changing market and new distribution channels offered by insurance providers are gradually allowing operators to reach new customers and enhance the sector’s growth potential.
Although brokerage firms remain an essential actor for distribution purposes, the expanding role of bancassurance, as well as direct sales, is opening up market opportunities, as is a focus on products tailored towards the lower end of the income spectrum and those outside of the current formal financial system.
Microinsurance
Establishing specific insurance offers for customers with no access to banking services will certainly help galvanise insurance growth across the country, especially considering Gabon’s income disparity, which has traditionally kept low-income earners away from insurance schemes.
This disparity is highlighted by figures from the World Bank, with the country receiving Gini coefficient score of 0.674 for income in 2013, placing it 112th among the 187 countries measured. The authorities are therefore putting in place legislation to enable operators to start offering microinsurance products, a scheme that has achieved some success in other markets on the continent and could reach out to low-income earners.
A recent report by the Microinsurance Network, a Luxembourg-headquartered group which advocates for insurance products for low-income earners, found that as of 2011, there were already 39 African countries with microinsurance offers, covering different insurance product categories. Life microinsurance products, for example, cover approximately 33.9m people on the continent. However, the report also signals that market sophistication has an impact on the level of microinsurance penetration, as some 60% of the segment’s market was accounted for by South Africa alone, in 2011.
“This is an interesting part of the market that is set to develop, and insurance companies in the market are currently reflecting on how to establish microinsurance offers. These will be fundamental to increase penetration levels in a market like ours,” Renaud Allogho Akoue, general-secretary at Ogar, a local operator, told OBG.
Any market rules for the microinsurance segment in Gabon will be compatible with the regulation guidelines established by the Inter-African Conference on Insurance Markets (Conférence Interafricaine des Marchés d’Assurances, CIMA) over 2013-14. The guidelines limited maximum premiums for microinsurance protection to CFA3500 (€5) per month, or a yearly cap of CFA42,000 (€63). However, this might present some challenges for the Gabonese market, as the maximum values for the product segment are too close to the average premiums demanded by conventional insurance products.
The proposed national regulations are expected to allow for financial firms, as well as microfinance companies, to apply for a microinsurance licence, with minimum capital requirements of CFA1bn (€1.5m) and CFA500m (€750,000), respectively. This may be further amended however, following CIMA’s pending plans to double the minimum capital requirements for traditional insurance providers in the Central and West Africa region.
Service Provision
Stricter rules for insurance providers to comply with regulations might also help to establish a more insurance-oriented culture in the Gabonese market. In a 2014 meeting that included finance ministers from Central African Economic and Monetary Community member countries, one of the measures discussed to strengthen the insurance sector in the region’s markets was to impose fines on insurers that do not meet service provision within the legally required timeframe. The directive was focused specifically on the auto-insurance segment, and involved the payment of an additional 5% on top of the total damages amount per month of delay.
Although the measure targets a specific segment of the insurance sector, enforcing stricter rules through the payment of damages might prove an effective way to boost the confidence level of potential insurance customers.
This is especially relevant considering that automotive insurance, along with transport insurance, is one of the few mandatory insurance products in Gabon, as well as other regional markets, and commonly acts as a way for customers to enter other insurance categories.
Increasing Mandatory Coverage
A number of other regulatory changes are also likely to eventually impact the market and prompt greater awareness of insurance products in Gabon.
Over the medium term, the list of mandatory insurance products is expected to increase in line with the country’s economic growth and a greater formalisation of the economy. “Certain insurance types will need to become obligatory, such as insurance to cover construction sites, for example, or products that act as complementary retirement funds,” Andrew Gwodock, the general manager at Société Commerciale Gabonaise de Réassurance (SCG-RE), the country’s sole reinsurer, told OBG.
Multiple Risks
Despite the growing possibilities for insurers through the merging of public and private health schemes, the fastest-growing segment is multiple risk, or multirisques insurance. Although only accounting for a fraction of the market, at CFA6bn (€9m) in total premiums in 2014, the segment posted 25% growth in 2014.
General liability products, meanwhile, accounted for an additional CFA5.7bn (€8.6m) in 2014. Combined, these two types of products are set to expand steadily over the coming years, as regulatory pressure is expected to make a significantly larger number of insurance products mandatory. This has already been visible in terms of general liability insurance for construction projects.
Fire insurance in particular remains an important part of the sector, accounting for 12.08% of the total insurance market with CAF15.1bn (€22.7m), making it the fourth-largest segment for non-life insurance after product insurance.
Although the claims burden is typically higher in the damages segment compared to the rest of the insurance market, providers are hoping that a formalisation of regulations will help to reduce their exposure going forward.
“Insurers should be part of the negotiations for big public works projects, which are sometimes undertaken without a clear understanding of the local insurance and reinsurance obligations under the CIMA code,” Gwodock told OBG.
The insurance sector’s natural evolution, combined with market strategies and regulation, is helping to establish a more conducive environment for insurance services to reach a larger proportion of the Gabonese population.
With a considerable volume of the potential market still uncovered, market players are expected to continue adapting their offers and products to attract additional customers in the country. A significant part of this expansion drive will depend on establishing adequate microinsurance offers to reach out to low-income segments of the population in both urban and rural areas.
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