Experts see digitalisation speeding up growth for insurance industry
Though the global insurance industry is deriving a lot of pride in being the main recourse of people in difficult times especially for events caused by accidents or natural catastrophes, the poor reputation attached to the industry, especially in Africa and other developing countries still remains a big challenge.
One of the main reasons for this poor reputation is the consistent perception that insurers are not reliable and do not keep their promises. Certainly, that poor reputation has led to the low penetration rates of insurance – i.e. the share of premium income in the GDP of a country – especially in low and middle income countries. In the entire African continent the average insurance penetration is about 2.7 percent. Apart from South Africa (14.2 percent), Namibia (8.8 percent), Mauritius (8.4 percent), Morocco (3.48 percent) Kenya (2.8 percent) and Tunisia (1.9 percent), the remaining countries usually record less than 1 percent penetration rate.
With the skewed end-user perception, the challenge revolves around the best strategies to improve this low insurance penetration rate in this era of fast technological advancement. This can only be achieved by reconciling and resolving the issues of trust. Where do we start from? Which model should we adopt?
Technology has been a business-enabler as evident in different industries and the insurance industry is not an exception. There are numerous technology trends which will have significant impact on the insurance industry namely: Blockchain and Artificial Intelligence, Internet of Things & Telematics, Big Data & Analytics, Cloud Computing and Mobile Technology. These global technologies are beginning to find expression on the African continent as numerous initiatives are evolving and are at different stages of maturity.
In South Africa, we have Discovery Vitality, an evidence-based intervention to improve health outcomes using behavioural economics; Riovic, an on-demand insurance platform; Aerobotics, an aerial imagery technology which helps farmers improve yields and food production ratios; Hepstar, an advanced e-merchandising technology which helps aggregate the content of multiple insurers through a single integration, thus saving time and resources.
In the rest of Africa, we have also witnessed a couple of technology based initiatives such as the Index-Based Insurance supported by Africa Re and GIIF (Global Index Insurance Facility), an affiliate of the World Bank; the MPESA (Mobile Money Transfer Service) powered by SafariCom; the compareinsurance.com.ng and insurancequotes.ng in Nigeria for price aggregation; marocassur.com and biliga.ma for price aggregation in Morocco; the microensure.com and acreafrica.com initiative for micro insurance in Kenya; the atik.us for credit insurance in Rwanda; the Askniid.org supported by Africa Re for insurance validation and verification, amongst others.
The initiatives in Africa reveal the following consumer buying patterns which have assisted in recording the latest technological success in the industry with potential to significantly improve trust and awareness in insurance which will greatly improve its penetration:
Group Buying Power – better negotiating skills with respect to product pricing and prompt service delivery. This could be achieved through social media or leveraging on communal groups categorised along religious, ethnic or peer groups.
Add-Ons to Existing Products and Services – like most online product and service delivery channels, it could be added as a voluntary option. For example, while buying a phone online, adding insurance could be an option before check-out from the merchant.
Self Service Channels – convenience and comfort have always been a challenge. The industry has embraced the option of providing online channels for anyone to easily procure insurance either as a standalone or an aggregator platform.
Partnership with Data Aggregators for Insights – some data custodians have data on end-users that can help develop customized insurance products which will ultimately reduce the price. This is the trend explored by UBI (Usage Based Insurance) and other behavioural analytics models. We can also use this to drive insurance awareness campaigns through targeted ads. This has been the bedrock of behavioural economics.
But the journey is still long for the African insurance industry. The issue of trust needs to be addressed and this can only be achieved with a customer-focused strategy otherwise known as customer centricity. Customer centricity is not just about offering great customer service, it means offering a great experience from the awareness stage, through the purchasing process and finally through the post-purchase process. It’s a strategy that’s based on putting your customer first, and at the core of your business as the new insurer customer segments are more diverse, more demanding, more sophisticated and more hedonistic.
The insurance value chain is getting disrupted in areas such as Product Design, Pricing & Underwriting, Distribution and Administration & Claims Management as explained below:
Adopting technology in the insurance space has some challenges of its own for which all insurers need to be wary of. It however needs the active involvement especially of Executive Management or even the Board of Directors. Some of these challenges are based are coming from organizations while most of them are at the levels of governments and regulatory authorities. These issues include but are not limited to the following: Legacy technology overhaul cost; cultural constraints; regulatory environment; cyber security and consumer data protection; internet penetration and capacity and threats of non-traditional players.
It is also worthy of note that other non-traditional players like Google, Facebook, Apple, Amazon and Alibaba Group have been encroaching into the insurance space. Although this will create significant competition for the traditional players, it will definitely contribute to improving insurance penetration as a new market is open for a different category of insurance customers.