Algeria: the insurance market in the digital age

The insurance industry in Algeria has been impacted by the COVID-19 pandemic. The turnover declined by 6.1% at the end of 2020. Will the arrival of digital technology change the situation? Analysis. 

By Nadjoua KHELIL in Algiers 

Digital technology is now everywhere and its usefulness is increasing. This constantly-evolving revolution in the continent has altered the face of Africa. How is this transition taking place in Algeria’s insurance industry? 

“Changing slowly, but surely”

The situation in the Algerian market is still difficult, “especially for the personal insurance component, due to the suspension of commercial flights. This is a measure that we appreciate and abide by. However, it has severely impacted our business. It has brought about a loss of nearly 70% of the sector’s turnover, “said Mohamed Hakim Soufi, CEO of Macir Vie SPA. His company has “taken advantage” of this period of pandemic, “to strengthen our digital strategy, with new services for our customers. We will announce them very soon,” “says Soufi.

For any company, operational performance is the major challenge to achieve, by relying in the management, on digital tools. This is the case of Algerian insurance companies, which are in the process of “changing slowly, but surely”, towards “digital agency”, says Hassen Khelifati, vice president of the UAR and CEO of the private company, “Alliance Assurances”.

This transition is in its “infancy” in Algeria, the “optimal conditions are not met,” including those related to the quality of the infrastructure of the Internet network and broadband connection that are lacking, “said Khelifati. The other obstacle: “the current legislation that no longer meets the requirements of the moment, hence the need for its overhaul,” he said. “Though there are advances, there is still a long way to go.”

Innovation to conquer the continent

Today, insurers seem to be betting on the acceleration of the sector’s development and on digital technology, where innovation appears to be a way to capture new markets.

For Macir Vie, the main concern regarding personal insurance is “improving the offer for companies, through group insurance. For individuals, we aim to offer new guarantees that meet their expectations and simplify their daily lives. In this regard, the takeover of the travel business is one of our expectations. 

At the same time, the company is “constantly evolving, through innovative partnerships”. In this respect, an “alliance” has been sealed with “the world-class medical equipment manufacturer, GE Healthcare. This agreement allows, through our new guarantee “MyM Health +”, to take charge of a series of heavy pathologies, up to 5 million DZD, by directing our customers to facilities with advanced GE Healthcare equipment, “says Soufi. He added, it is particularly through “this type of partnership, by strengthening its local foundation and keeping abreast of digital innovation that we can consider expanding into the African market.

Khelifati, considers that it is “difficult” for insurers to capture the African market, “the business needs to be mastered internally, digitalization needs to be accelerated and the market stabilized through reforms.”

“No national company is prepared for this leap towards Africa, because of the dominance of the public sector at more than 75%. In the absence of financial means and in view of the rigidity of the exchange system in Algeria and in some African countries, such a decision is but an adventure,” said M’hamed Hamidouche, an expert with international financial institutions.

Freeing up initiatives

The insurance market is still “undersized compared to our country’s potential.” Therefore, the “modernization” of the financial sector “goes hand in hand with that of insurance, whether in terms of fundraising, for the expansion, or even the emergence of new players, and the secondary financial market for the placement of funds, which can contribute to the design of new insurance products,” says Sufi.  

In this wake, the emergence of innovative startups Assurtechs, are “tremendous growth drivers for insurance, both nationally and continentally. For their development, there are some “challenges and barriers to overcome. In this sense, the issue of the transformation of the financial market is of capital importance. Additionally, there may be, “regulatory barriers in terms of minimum capital, 3 billion DZD, for the creation of a new insurance entity,” notes Soufi. Startups with high potential “do exist”, “it is enough to free up the initiatives, to allow full benefit of them,” said Khelifati. 

Kenya, South Africa are “leaders” in this segment in Africa with “initiatives that have federated champions, notes Hamidouche. They have managed to attract capital, thanks to local skills in the field partnering with non-residents of several countries.

Can we succeed in the challenge of the digital shift in Algeria? According to Soufi, it is an “obligation! Insurers must succeed. The factors for success exist. Otherwise, they will be put in great difficulty. It is a question of survival, in the more or less long term.”

Africa, “an extraordinary growth potential »

Globally, the continent has used the technology and adapted it to its needs by innovating. Insurance represents “more than USD 67 billion, 69% of which is accounted for by South Africa alone,” according to Hamidouche.  

It is difficult to summarize the entire African market in one piece, so varied is it. That said, “we are seeing an abundance of ideas, new innovative companies in Fintech and Insurtech. An extraordinary growth potential, as the continent is underinsured. However, the need for “support” by public authorities and financial institutions, in terms of capital and regulation, “are the main challenges to unlock this potential”. This sector is also of “paramount importance from the point of view of the sovereignty of our great continent,” says Soufi.