Insurance in Africa: Comparisons, Obligatory Requirements, and More

When expanding to Africa, taking into account all your responsibilities as an employer is of utmost importance. Beyond the more “obvious” considerations like salary payments and leave administration, lies the subject of obligatory insurance: who pays for them, and how?
Failure to consider and comply with the specific laws surrounding insurance in an African country can lead to disastrous consequences: from fines, legal sanctions, all the way to litigation and a damaged employer reputation.
In this article, we look into the different types of insurance, explore why some countries require obligatory insurance, the many types of obligatory insurance, and how an EOR can help mitigate the risks associated with insurance management.

Overview of Mandatory Insurance Types in Africa

There are several types of mandatory insurance across Africa, namely:

1. Health Insurance

In many countries like Nigeria and Cameroon, for example, there is some level of basic health protection that all citizens are entitled to. These basic schemes do not cover all incidents and occurrences. Often, more specialised healthcare needs are:

1. Covered by different, more advanced schemes
2. Covered by private insurance
3. Must be paid for out-of-pocket

Private v/s Public health insurance

Public Insurance

• Funded by government taxes or employer/employee contributions (for e.g., the NHS in the UK). Most Universal Health Care uses public insurance.
• Public insurance is managed by government agencies.
• Provides basic coverage to the entire population, with limited benefits.
• Costs are typically lower to individuals, being subsidised by the government.

Private Insurance:

• Funded by premiums paid directly to insurance companies.
• Managed by private companies with more flexibility and more specialised services.
• Offers a range of customisable coverage options and additional benefits, depending on the chosen plan.
• Typically higher costs, with premiums and out-of-pocket expenses varying based on coverage.
• Employers can enrol employees in private insurance schemes to offer more advanced health benefits, either covering the cost of the premium or offering to share the costs with the employee.

2. Life Insurance

In Africa currently, only 2 countries mandate obligatory life insurance coverage: Ghana and Nigeria. These west African strongholds both passed laws to cover their citizens upon the passing of their loved ones:

1. In Ghana, Group Life Insurance was made mandatory in 2021. Employees are given the assurance that in the case of death, disability or major illnesses, a multiple of their annual salary will be given to their beneficiaries to serve as replacement income.

2. In Nigeria, private and public organisations having 5 or more employees are required by law to have a Group Life Insurance Policy for their employees. The insurance plan must cover each employee for at least 3 times their total annual salary earnings. Naturally, non-compliance may lead to sanctions, including fines and a damaged employer reputation.

3. Workmen compensation

In some African countries, life and health insurance are not mandated. However, employees may be entitled to workmen’s compensation. Workmen’s compensation is insurance that covers employees who are injured or disabled in the course of their professional duties.

In Mali, for instance, workmen’s compensation is regulated by the social welfare code. It is employers who must fund this compensation, contributing between 1% to 4% of the employee’s gross salary.

Mandatory Insurance Requirements in African Countries

Why Some Countries Mandate Insurance

There are several reasons why countries like Benin, Cameroon, Ivory Coast, Mali, Nigeria, Niger, Rwanda, and Togo have chosen to mandate insurance, among which are:

The primary reason to mandate any kind of insurance for citizens is their welfare: whether that means ensuring that all citizens receive healthcare, or ensuring they don’t endure financial hardship.

That being said, there are other reasons that motivate countries to make such a move, including:

• • Equitable Cost Distribution
    Shares healthcare costs more evenly across the population.
  • Encouraging Formal Employment
    All across Africa, informal employment is a popular practice. This means that workers do not enter legally-recognised work agreements, and do not declare any income earned while working. This practice endangers everyone involved:

1. The employee who has no assurance that their rights will be respected, and who will not be able to make any complaints if they aren’t
2. The employer who will not be able to report or sanction a worker if they show poor behaviour
3. The state, which misses out on taxes from undeclared income and which is not able to protect unrecognised workers and organisations

Who pays for mandatory insurance?

There are multiple modes of financing for mandatory insurance, including but not limited to:

• Public/state/organised private sector schemes
• Non-contributory schemes (for low-income households)
• Supplementary private health insurance for costs not covered by mandatory health insurance and complementary insurance

In Togo, for example, both employers and employees must contribute towards the RAMO (Régime d'Assurance Maladie Obligatoire). In total, employees must contribute 10% of their monthly salary, at least 50% of which must be paid by the employer while the rest is paid by the worker.

Similarly, in Nigeria, both employers and employees contribute to employees’ medical insurance, at a rate of 10% and 5% of the employee’s monthly salary, respectively. Additionally, with the option for employers to cover employee contributions or make extra contributions for additional benefits. However, in Nigeria, different rulings apply for the mandatory life insurance. Employers are required to maintain a life insurance policy for all their employees and to pay at least 3 times the employees’ Gross Annual Total remuneration into the Group Life Insurance policy.

In Rwanda, the law mandates that 15% of an employee's basic salary should be contributed towards the universal healthcare scheme. This amount must be paid by both the employer and the employee at the rate of 7.5% each.

How an African EOR can help

Tackling the complexities of insurance requirements is far from being an easy task. Beyond understanding the initial regulations, you must also regularly comply with them. This means calculating and making the correct deductions/contributions at the right time – and also keeping up to date with these changing requirements.

Naturally, you will also need to find the right insurance scheme, which is often a draining task.

EORs like Africa HR Solutions simplify this task for you.

We take on the responsibility of finding you the right insurance scheme at competitive prices, and of making the right deductions/employer contributions on your behalf. Besides, we take full responsibility for always maintaining 100% compliance with local laws.

Beyond mandatory requirements, Africa HR Solutions can help you provide premium health and life insurance benefits to your employees across Africa – boosting employee satisfaction and retention.

Curious to know how our EOR solution can support your operations in Africa? Chat with one of our team members.