In most African countries, insurance in a controversial and confusing subject for many. Much of the reason for this stems from the fact that the majority of Africans live on less than a dollar a day. Excluding South Africa and Egypt, the majority of Africans in other countries have never held any kind of insurance policy. Possibly the closest semblance of insurance policies for most are social arrangements where people come together and pool resources to go towards a common purpose. For example, in the event of death or illness.
As a result of this low penetration of insurance, it is understandable that most Africans do not fully grasp the ‘mechanics’ of insurance. Small business trainers employed by the many Non Governmental Organizations (NGO's) that are active on the continent have a particularly difficult task when they take on the topic of insurance; of course no small business course is complete without delving into some basics of insurance.
The most common misconception about insurance in Africa is that it is a preserve of the rich and upper middle class who work in the ‘big towns’. The average African associates insurance with motor vehicles. This is because in most countries, the law requires every vehicle to be insured and certificate displayed on the windshield as proof. Another common misconception is that insurance premiums are refundable so long as no claim is made during the year. Interestingly, amongst those who have undergone some training or are educated to college level, there is the feeling that this is an unfair practice.
Lastly, most Africans tend to think that you can benefit from an insurance contract by receiving more than is stipulated in the event of a claim. The principle of indemnity is not well understood in this case. For example most believe that it is automatic that should you insure your property for $100 then in the event of a total loss you receive your full $100 irrespective of wear and tear and issues such under or over insuring. Anyone contemplating a foray into the African insurance markets needs to thoroughly understand these issues in addition to other dynamics unique to Africa.