Regulating for innovation in Africa

The report identifies that while insurance innovation exists across Ethiopia, Ghana, Kenya, Malawi, Nigeria, Rwanda, Uganda, and Zimbabwe, it is not yet leveraged to reach underserved segments like MSMEs and rural inhabitants at scale. Key constraints include high mobile data costs, low consumer trust, a significant STEM skills gap, and risk-averse corporate boards. Regulatory frameworks are generally not seen as major barriers, but gaps remain in digital onboarding clarity and license categories for insurtechs. The document recommends that regulators move beyond formal regulation to use proactive market engagement, streamlined supervisory processes, and upgraded digital monitoring systems to foster inclusive insurance growth.

• Insurance penetration remains low across the study countries, with most reporting rates below the Sub-Saharan African average of 2.78%, except for Zimbabwe at 3.6% as of 2020. The market is primarily dominated by non-life insurance and compulsory products, leaving voluntary retail markets for rural inhabitants, informal sector workers, and MSMEs underserved.
• Innovation in the insurance sector is unevenly distributed and often focused on efficiency for existing clients rather than inclusion. Incumbent insurers typically prioritise the digitalisation of processes to serve current customers, while the insurtech sector remains nascent and primarily focused on business-to-business (B2B) services, with Kenya being the only exception with a more developed sector.
• Three primary structural constraints hinder innovation across the sampled countries: the high cost of mobile data, which limits digital distribution; low consumer awareness and trust, often linked to poor claims payment records; and a significant gap in technical insurance and STEM skills, particularly in underwriting and actuarial science.
• Market-level constraints include a lack of corporate drive for innovation due to board-level risk aversion and a focus on short-term returns, as well as difficulties in establishing viable partnerships between traditional insurers and insurtechs due to legacy system incompatibilities.
• While regulatory frameworks are not viewed as major barriers, specific gaps persist, including uncertainty regarding remote onboarding and digital signatures, a lack of dedicated license categories for technical service providers (TSPs) and insurtechs (except in Ghana), and underutilised regulatory sandboxes and microinsurance frameworks.
• Supervisory systems are constrained by a lack of dedicated institutional capacity for innovation, communication efforts that do not reach prospective tech entrants, and monitoring systems that rely on broad indicators like penetration rates rather than granular innovation metrics.
• Regulators are urged to adopt a multi-pronged approach to support innovation, including using 'moral suasion' to encourage market research, issuing non-legally binding guidance to create certainty for non-traditional players, and investing in 'suptech' (supervisory technology) to improve risk and compliance monitoring.

APA

Hougaard, C., Gray, J., Allen, M., & Neugebauer, V. (n.d.). Regulating for innovation in Africa. FSD Africa. https://fsdafrica.org/wp-content/uploads/2025/05/22-10-25-R3Lab-Synthesis-Report.pdf

Chicago

Hougaard, Christine, Jeremy Gray, Michaella Allen, and Vera Neugebauer. Regulating for innovation in Africa. FSD Africa, n.d. https://fsdafrica.org/wp-content/uploads/2025/05/22-10-25-R3Lab-Synthesis-Report.pdf.

Wikipedia

{{cite report |last1=Hougaard |first1=Christine |last2=Gray |first2=Jeremy |last3=Allen |first3=Michaella |last4=Neugebauer |first4=Vera |title=Regulating for innovation in Africa |publisher=FSD Africa |url=https://fsdafrica.org/wp-content/uploads/2025/05/22-10-25-R3Lab-Synthesis-Report.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{hougaardndregulating, author = {Hougaard, Christine and Gray, Jeremy and Allen, Michaella and Neugebauer, Vera}, title = {{Regulating for innovation in Africa}}, institution = {FSD Africa}, url = {https://fsdafrica.org/wp-content/uploads/2025/05/22-10-25-R3Lab-Synthesis-Report.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }