Policy Brief No.4 | April 2025
By: Sabine Klocke-Daffa
Formal social insurance is an expanding business on the African continent. With rising income and an emerging middle class, more people want a better standard of life and more security for themselves and those they have to care for. Due to prevailing cultural values, care obligations include the living and the dead. Funeral insurance and life cover (with a funeral cover usually being part of it) are therefore particularly favoured as they promise customers to be protected for any kind of life threat and at the same time meet all their social obligations. In the southern African countries of Namibia, South Africa and Botswana, life insurance is a bestseller with billions of US$ of annual turnover. Most contracts are taken out as pure risk insurance – to be paid out after the death of the policyholder. As much as formal insurance appears to be a reliable further pillar of national social security, the financial resources directed towards insurance companies and cooperating banks have been weakening other safeguarding mechanisms such as informal support networks. In times of polycrisis, the situation worsens if risk provisioning is inadequate. Drawing on data from Namibia , this policy brief shows that what was initially intended to increase social security for some inadvertently exacerbated insecurity for many. This led to a cascading failure of security assets, setting a domino effect in motion. It resulted in a severe economic decline and tremendous social hardship.
This policy brief discusses how the polycrisis affects formal insurance which could subsequently threaten security schemes and social protection on the national level. It identifies the factors that support the expansion of formal security products and their inherent hazard potential. Recommendations are directed to policymakers, insurers, employers, and the civil society.
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