The Challenges team in Zambia has undertaken a ground-breaking assessment of 80 small and medium enterprises across 18 sectors to understand their needs as part of an innovative partnership with global insurance giant Prudential and Zambian enterprise agency PEPZ. Their findings have helped Prudential shape a new range of financial product and services geared towards SMEs, while also deconstructing some of the negative myths around insurance.

Challenges is committed to supporting business and helping them grow, through implementing good operational and business practice, and encouraging the development of SME-centred products and services. We know that as businesses grow, everyone benefits through increased earnings and stable jobs leading to growth in the wider economy.

One of the issues sometimes overlooked by entrepreneurs and small business owners is life insurance, an area often clouded by myth and misinformation.

Aware of the potential to support Zambia’s SMEs and the need to generate greater awareness of its products, the global insurance giant Prudential partnered with the Challenges team in Zambia, tapping into their expert knowledge of the SME landscape and its extensive network of contacts and businesses. Zambian enterprise agency PEPZ also supported the project, which aimed to deliver a much-needed life insurance product to small business owners; people who were all too often excluded from traditional products and who, according to our findings, felt excluded from such offerings or felt they didn’t apply to them.

Insurance in Zambia

Market penetration for life insurance in Zambia is minuscule; for the past few years, it’s sat at less than 1% of a population of some 17 million people. But it’s not just life insurance; insurance products as a whole are only activated up by about 5% of the population.

Across many business owners, we found that there was a widespread belief that insurance was expensive, sometimes prohibitively so, while many people considered it an unnecessary cost, rather than an important asset to their business.

Aware of these issues, Prudential sought to design a product that catered to SMEs and entrepreneurs, leading to the PRU SMART Entrepreneur insurance, the first of its kind in Southern Africa.

The PRU SMART Entrepreneur is designed to provide Group Life Assurance Cover to small businesses, who, because of the unstructured nature of SME and entrepreneurs’ operations and lack of formal salaries, make them unattractive for conventional Group Life cover. The new Prudential product was designed specifically for the SME and entrepreneur, with the aim of increasing the financial inclusion of these businesses. The research undertaken by Challenges consultants was integral to the development of this innovative insurance product.

Prior to its launch, Prudential wanted to assess the product design and its planned distribution to SMEs and entrepreneurs, commissioning the Challenges team to undertake a far-reaching and in-depth market research project in Lusaka and in Zambia’s Copperbelt provinces. The research had two aims: to test Prudential’s own assumptions, and to ensure maximise the customer value that Prudential could deliver with the product, bringing greater benefit to the business people.

The Challenges researchers found that businesses are willing to pay more if they think the product gives them a truly special and significant value, and if the product is presented to them in just the right way.

The team also found that the majority of SMEs (62%) had set aside savings for when unexpected events that could affect their business, such as death, disability and critical illnesses.

Our analysis showed there was significant potential for the Prudential product, and following the research, we recommended a number of changes to the PRU SMART product. We also found that although there was clearly a market for this product, customer education and intelligent marketing would be invaluable to help the potential customers among Zambia’s SME community understand and appreciate the PRU SMART insurance. 

Key findings: 

• Majority of SME-owners prepared for unexpected events, relying on savings, family, etc
• Research spanned 79 SMEs across 18 sectors, ranging from renewables and health to tourism and transport.
• Almost half of SMEs had some form of motor insurance, while nearly one in three had fire/theft insurance.
• About one in six SMEs had no insurance whatsoever.

Two-thirds of SMEs agreed the PRU SMART product met their needs. Only 5% said it didn’t.