Future African insurance hinges on AI adoption, climate protection

LIVINGSTONE MARUFU IN VICTORIA FALLS

The future of African insurance hinges on the continent’s ability to adopt artificial intelligence, strengthen climate risk protection and develop inclusive insurance products to support sustainable economic growth, Business Times can report.

Speaking at the Southern Africa Insurance Indaba 2026 in Victoria Falls on Thursday, Hollard Life Solutions chief commercial officer Willem Smith said the future of the sector depended on the insurance industry’s ability to address emerging risks while maintaining its role of protecting businesses and economies against financial uncertainties.

Smith, who was the keynote speaker, said although the principles of insurance had remained largely unchanged for thousands of years, the risks confronting the industry and the technologies available to address them had evolved significantly.

“Artificial intelligence is one of the most significant opportunities for insurers, with applications across underwriting, claims processing, fraud detection and customer inclusion.

“AI could significantly reduce processing times, improve risk assessment and enable insurers to develop products for customers who lacked conventional credit histories,” Smith said.

He, however, cautioned that technological adoption needed to be supported by reliable data, skilled personnel and effective governance to ensure automated decisions remained fair, transparent and accountable.

Smith called for greater collaboration among insurers through initiatives such as shared industry data repositories, arguing that the quality of information available to the industry would determine how effectively AI could be deployed.

With the Super El Niño weather phenomenon raising concerns over extreme weather events, Smith highlighted the growing financial consequences of natural disasters across the continent.

He said natural catastrophe losses in Africa reached approximately US$3 billion in 2025, with less than US$500 million covered by insurance.

Smith said the significant proportion of uninsured losses demonstrated the urgent need for innovative products, including parametric insurance, which provides payouts when predetermined weather or environmental thresholds are reached.

He called for regional and sovereign risk pools, public-private partnerships and catastrophe bonds to strengthen the continent’s capacity to absorb major disaster-related losses.

Smith said insurers should move beyond simply compensating policyholders after disasters by using insurance pricing to encourage better building standards, flood protection and climate-smart agricultural practices.

On the life insurance and pensions front, Smith warned that increasing life expectancy would require the industry to rethink retirement planning, healthcare protection and long-term savings products.

With Africa’s population gradually ageing, Smith said insurers needed to develop affordable retirement and longevity products that also reached informal sector workers through mechanisms such as mobile money and micro-contributions.

The industry, he said, had an opportunity to build sustainable savings habits while Africa still had a predominantly young population.

He reiterated that the industry’s future would depend on maintaining public trust while embracing new ways of delivering insurance.

Smith identified climate change, cybercrime, artificial intelligence, economic pressures, changing demographics and limited insurance penetration as some of the major forces reshaping the African insurance landscape.

He said insurance was not merely a financial protection mechanism but an important catalyst for economic development because it enabled businesses to access credit, encouraged investment and supported the expansion of productive sectors.

Smith explained that when businesses insured their buildings, equipment, stock and other assets, lenders became more confident in extending credit because their collateral was protected against unforeseen losses.

“Every insured factory is a bankable factory,” Smith said, highlighting the relationship between insurance availability, access to finance and industrialisation.

He acknowledged that although Africa was experiencing relatively strong economic growth, the continent remained significantly underinsured, creating a major obstacle to financing development projects and expanding business activity.

Smith put Africa’s insurance penetration at approximately 2.7 percent of gross domestic product (GDP), against a global average of 7.4 percent, with South Africa remaining the only African market exceeding the global benchmark.