African countries are yet to catch up with social security and safety programs commonly used in the West, where the government provides health insurance and unemployment benefits to citizens. The general perception of insurance on the continent has been bland for years, and its penetration rate, except South Africa, is subpar. Only 1.9% of its adult population had one form of insurance policy in Nigeria as of 2018. Despite the dire situation, many startups are springing up to broaden insurance coverage across the country. Casava. The self-described “Nigeria’s first 100% digital insurance company” has raised a $4 million pre-seed round. It’s the largest pre-seed for an African insurtech company and second largest for a Nigerian startup after Nestcoin, whose round was announced.
There are further reasons why insurance has failed to scale in Africa’s largest technological market. First, traditional insurance companies in Nigeria have built their businesses on mandatory insurance for enterprise customers in oil and gas, energy, and property. Their unit economics is suited for large and not small transactions, which isn’t necessarily a bad thing, but this way, insurance products can’t get to the mass market. But there’s another reason for this low insurance adoption: the preference of instant gratification over long-term benefits. In essence, people prefer to invest in positive rather than adverse outcomes. The digital insurance platform currently provides cover for health and job loss. Unlike the former, insurance around job loss is relatively uncommon in Nigeria. There’s undeniably a market for it: 20% of workers in Nigeria lost their jobs because of the pandemic; however, the country’s staggering unemployment rate places so much risk on the insurer. Casava works with reinsurance partners who guarantee a refund when claims are paid as a licensed microinsurance underwriter. That’s how it makes revenue asides from profit off subscription fees. The company says it already has more than 66,000 customers, with $16 million in insurance coverage.