The intermediary trap: How misaligned incentives cost Africa's BoP billions in unrealised GDP

LAST week offered a striking juxtaposition.

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Entrepreneurial financial services innovator Prince Nwadeyi celebrated his academic paper's publication in the International Marketing Review. It’s research unpacking how insurance brokers in South Africa systematically maintain information asymmetries that keep base of the pyramid (BoP) consumers trapped in suboptimal products.

Meanwhile, SME investment asset class builder Joshua Bicknell's LinkedIn update suggested something between resignation and frustration about the capital his organisation, Balloon Ventures, has (and hasn't) managed to secure for backing East Africa's unglamorous SMEs.

Two founders. Two different immediate concerns. One uncomfortable parallel.

Intermediary issues

Nwadeyi's research, conducted with professor of International management and strategy at the University of Sussex, John Luiz, reveals how brokers leverage symbolic work - invoking dignity and cultural obligation around funerals - to reinforce consumer dependence on funeral cover whilst sidelining more comprehensive life insurance products. The kicker? Insurers themselves admitted they don't understand the BoP market and outsource that understanding to intermediaries who have vested interests in maintaining the status quo.

Commission structures incentivise pushing simple, high-turnover products. Complexity means effort. Effort means risk. Risk threatens income streams when policies lapse and commissions get clawed back. So intermediaries do what any rational actor would: they optimise for their own incentive structures, not the best consumer outcomes.