Role of Insurance in the development of the emerging African middle-class


 Insurance plays a major role in the development of the community. Traditionally, risk management has been practiced among African communities in different ways. Basically, risk managed has been done through risk retention, risk transfer and sharing of the risks at hand.

Risk retention has been done through self-insurance. Most individuals do this through their own salaries and wages. This has been effective but for most families but has been challenging at some point as diseases like cancer that require a lot funds have drained many families. The outbreak of the corona virus was also an eye opener as most individuals having lost their jobs could not afford basic needs that includes medical care. Self-insurance can also be done through borrowing from family, friends or money lenders. Kenya has seen a rise in mobile money lending. Over the years, we have seen self-insurance that has been done through sell or pledging of assets.

In some African countries, risk management is done through risk transfer. This normally happens through social protection services. For instance, public health services or disability compensation schemes would exist.

In extreme cases, risk management in a typical African society would be done by sharing the risk in the form of informal groups. This is very common in the society. Various groups you will find are welfare associations, burial societies, church group loans, fundraisers and mutual. Welfare associations in Kenya are referred to us Chamas and most have really excelled in terms of sharing risk.


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