MTN and Sanlam partner to build Africa-wide digital insurance business

SOUTH AFRICAMTN Group and Sanlam are joining forces to offer insurance products to the telecommunications operator’s huge subscriber base on the continent, where relatively few have cover, a deal whose goal is to “change the face of insurance” on the continent.

MTN, which is Africa’s largest mobile operator with 277 million voice subscribers, will leverage Sanlam’s license, geographical reach and expertise, while the insurer will be able to expand further outside its home market, South Africa, by selling its products to MTN’s vast customer base, they said in a joint statement.

The companies will sell insurance, investment and savings offerings.

“What we’re trying to do is really drive much deeper financial inclusion across our markets and meet as many financial needs of our customers,” MTN Group CEO Ralph Mupita said.

He said the partnership with Sanlam could boost its insurance offering from 6.2 million policyholders to 30 million by 2025.

Access to even basic traditional banking services across Africa is limited, with little infrastructure and a strong preference for cash.

Mobile money services like MTN’s, which enable people to access financial products from their phones, have had far greater success.

MTN has 48.9 million active users of its mobile money service every month.

Low penetration

While around 46% of the continent’s population has access to cell phone services, insurance penetration is less than 5% in most markets outside of South Africa, the companies said.

Sanlam, South Africa’s largest insurer, is looking to expand outside of the country, where a lackluster economy, high unemployment and stretched consumer finances have hampered growth and it has already partnered with MTN to offer insurance products in South Africa, also MTN’s home market

“The new business will provide people across the continent with easier access to these services, particularly those sectors of the population that have typically been unable to access traditional distribution channels for such products,” wrote the two companies in a joint statement.

A greater African reach

After the acquisition of Saham Finances in 2018, Sanlam was thrust into a leading position as far as any non-bank financial house’s African footprint is concerned, serving people across 32 African countries while MTN’s footprint expands across 21 countries, most of which are in Africa.

The alliance opens the door to new markets where Sanlam does not yet have a footprint in countries where MTN has a presence, and Sanlam does not, including Sudan, South Sudan, Congo-Brazzaville and Liberia.

But the alliance will potentially also give the insurer power to attack with two different brands in Africa’s biggest economy, Nigeria, given that MTN has successfully penetrated that. MTN Nigeria’s subscriber base stood at 76.5 million at the end of 2020.

“This strategic alliance has the potential to change the face of insurance in Africa by leveraging the brand and reach of MTN, together with Sanlam’s licensing, insurance expertise and extensive footprint”

MTN

The two companies reckon that this new business has the potential to pre-empt and adapt to digital disruption quicker in markets where both Sanlam and MTN operate.

Growing MTN’s mobile financial services business

MTN has been aggressively growing its fintech business lately and its fintech operations include mobile payments, lending, insurance, savings and m-commerce.

In its 2020 integrated report, MTN said that even though it has built a scale fintech business, its ambitions were to double its size over the next three to five years and broaden the mix of products it offers.  

MTN’s Ambition 2025 strategy has set a target that more than 20% of the group’s service revenue must come from the fintech business by the end of its 2025 financial year.

The Sanlam alliance is not MTN’s first attempt at partnering with a big insurer to boost its fintech offering. The company had a joint venture with Momentum Metropolitan Holdings (MMH), which gave birth to MTN’s subsidiary, aYo Holdings Limited.

The micro-insurance Insurtech startup, launched in 2017, was a 50/50 joint venture between the two companies. But MTN increased its stake to 75% last 2020 and eventually bought MMH out in June.

aYo now has more than 13.6 million registered policyholders and 6.3 million active policies. It is targeting over 30 million policyholders by 2025 with this new alliance. 

In the six months ended on 30 June 2021, aYo collected US$6.5 million in premium income and generated US$3.9 million in service revenue.

MTN said the aYo platform will form the base of the alliance with Sanlam.

“This strategic alliance has the potential to change the face of insurance in Africa by leveraging the brand and reach of MTN, together with Sanlam’s licensing, insurance expertise and extensive footprint,” said MTN.

In the initial period, the alliance will be chaired by MTN’s Group president and CEO Ralph Mupita and Sanlam’s CEO Paul Hanratty will be the deputy chair.

“We are excited by MTN’s development of modern mobile financial services for the benefit and empowerment of the African consumer. It gives us great pride to be able to partner with MTN to build the best possible range of solutions in the insurance and investment arena for consumers,” said Hanratty.

Sanlam is the ideal partner as the leading insurance and investment business across Africa, and with partnership key to its strategic and execution approach,” he said.

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