Transforming the African insurance sector through digital innovations

Innovation through technology has been a major driver of transformation in financial sectors across the world. In the last couple of decades, technology has been transforming the African insurance industry albeit at a slower pace compared to other industries such as banking and retail.

Within the insurance industry, the transformation has been prevalent mainly in internal process automation to drive efficiencies with significant bearing on customer experience.

Technology adoption rates by both insurers and consumers in the insurance industry are notably slow globally. Although many African insurance businesses have been riding on the transformational wave propelled by digitization, their participation has so far fallen short of meaningful business transaction processing.

Besides regulatory constraints that sometimes hamstrings industry players, several factors account for their challenges in adopting technology.

The industry has a notoriety for being conservative, often dragging its feet towards newer technologies. This is more of a cultural impediment as it varies from one insurer to another. Oftentimes it is difficult to get a clear sense of return on investment from the onset, when the business case is being developed.

This difficulty leads to weak executive support for investment and subsequently slows down technology adoption. Leading insurers exhibit a culture of audacity in technology investment.

They dare to invest to carry out experiments to learn and subsequently carry on investing to build game-changing solutions - they persevere until they realize appreciable benefits for the business and carry on building some more.

Legacy systems in the insurance industry can also be an impediment to the adoption of newer technologies.

For example, a legacy technology unable to integrate with third party systems via APIs (application programing interface) or one which consumes third party micro services, would impede the organization’s ability to bolt on other systems to address market needs speedily Many players in the African banking industry have adopted a carrot and stick approach to motivating customers to adopt digital solutions.

The insurance industry largely expects its consumers to automatically adopt its digital solutions just because they are made available and advertised a few times.

This coupled with the fact that the majority of insurance consumers are often outside the millennials bracket – an older generation not well known for their voluntary adoption of new technologies – means that end-user adoption of digital solutions in the industry is relatively low.

The gap that needs to be closed is leveraging digitization to meet customer expectations. Insurance business is predominantly an information processing business, which thrives on trust and commendable customer experience amongst others.

Today’s customers subliminally benchmark their service experience against what they encounter across industries. For example, customers expect the same kind of digital experience they enjoy in banking to be provided by insurers.

This is also affecting the insurance industry in very significant ways in that it is driving many providers to fight off conservatism to engage customers via digital platforms.

Insurers recognize that they must digitally transform in order to remain relevant to the current generation of customers who, more than ever before, have ready access to information to help them more easily choose between providers

Tailored products and services that can be distributed via digital channels present a considerable growth path. It is up to insurers on this continent, to take advantage of this opportunity. Traditionally, insurers turn to use physical presence and foot soldiers (sales agents) to distribute products.

The high cost associated with physical distribution has meant that many parts of the continent are left unattended despite their need for insurance (e.g. local economies driven by agribusiness, rural families with single bread winners etc.).

However, against this backdrop we see steady internet penetration especially via mobile handsets with more and more Africans engaged on social media platforms. We are also seeing rapid growth in digital payments solutions especially mobile money.

These present opportunities for insurers to deploy digital technologies to reach as much of the population as possible with products and services tailored to the needs and local realities of the continent.

Even more comforting is the fact that digital technologies provide less costly opportunities for up-close marketing communication channels by which insurers can reach segmented audiences with relevant education to drive understanding and appreciation of risk mitigation using insurance products.

Among the plethora of technologies available, insurers must place emphasis on use of emerging technologies such as advanced analytics, artificial intelligence, robotic process automation etc., if they are to realize the full benefit of digitization.