Life insurance will deliver development to East Africa

As a long-term investor in East Africa, Prudential has a vested interest in sustainable development.

Prudential was established in London in 1848, and the business was built by offering protection and savings opportunities to people in the UK who had never before had access to these kinds of services.

Our “penny policies” provided affordable life insurance and gave people a degree of financial security for the first time. The policies enabled people to plan for brighter futures for their families. We invested these savings in long-term projects that helped to fuel the dramatic growth of the UK, bringing more jobs and rising prosperity.

That cycle of protection, saving, investment and more protection is at the heart of life insurance. Our industry provides benefits to individuals, and their savings drive investment, which in turn provides more opportunities for savings. 

This view is supported by a study launched in Nairobi this week by Prudential and the Overseas Development Institute, the UK’s leading independent development think-tank. 

The study concludes that eight unskilled jobs are created for every one high-skilled position in the life insurance industry.

It found that most jobs in life insurance are also taken by women, a group who can have limited opportunities for well-paid work. Prudential has built up a force of more than 400,000 agents in Asia over the past 20 years. It has 200,000 agents in Indonesia alone and half of them are women.

In Kenya, Uganda and Ghana Prudential is on track to create thousands of high-quality jobs by 2020. This will support the development of the middle class and promote further growth.

Communities also benefit. Despite the past decade’s strong economic growth, over 200 million middle-class Africans remain vulnerable to economic shocks such as when their main earner passes away.

An education savings plan from a life insurance company can, for example, provide cash sums for university or school fees even when a family’s main earner dies and further payments cannot be made.

Life insurance helps communities to manage these shocks and alleviate some of the financial fallout from bereavements. Stronger welfare and security for individuals eases the burden on society as a whole.

The study also found that life insurance can raise high-quality funds to support economic growth. Prudential, for example, has invested $86.7 billion in infrastructure and property in the UK alone. 

While other foreign investors in East Africa — particularly private equity funds and venture capitalists — demand a return on their investment within five years, life insurance companies can look for projects with a lifespan of 40 years or more. We expect to invest more in both markets over the next five years. This investment will create jobs and attract foreign investment, which in turn will generate more employment.  

Long-term capital

Life insurance companies support sustainable development by mobilising long-term capital such as the money invested in savings products. A shortfall in infrastructure spending weakens Africa’s GDP growth by an estimated 2 per cent a year.

A strong life insurance industry can help bridge this gap by collecting the savings of local people and investing them in long-term, local assets such as infrastructure and government bonds.

All over the world, from Jakarta to London, from Hanoi to Chicago, you can see power stations, roads, bridges and cellphone masts that have been built using money from Prudential’s local customers.

These investments not only provide returns for our customers. They also help to build more productive and healthy economies.

Life insurance has a key role to play in delivering sustainable development for East Africa. The study report launched last week has shown what we have already seen across Asia and in the UK for decades.

Life insurance can raise funds for growth, create thousands of jobs and provide security for families. It can help to achieve the same in East Africa and unlock the region’s potential.

Matt Lilley is CEO of Prudential Africa