Opportunity for insurers to grow and innovate
By: Africa Unity
For forward-thinking insurers, Africa is up for grabs. Escalating
urbanisation, coupled with a rising middle class and a growing younger
population makes for an increased need for protection for both life and
assets.
While the effects of the global financial crisis are still being felt, the African Development Bank predicts a growth
in Africa?”s GDP to 4.0 percent in 2019 and 4.1 percent in 2020,
creating significant opportunities for insurers to enter this largely
untapped market.
According to Herman Lombard, Founder and Executive Director of African Unity,
Africa?”s insurance industry accounts for just 1.2% of insurance
premiums written globally, with South Africa accounting for about 75% of
that.
?SThe potential for doing business in Africa is enormous, and
companies are coming up with innovative and efficient ways to meet the
expectations of this market??, he said.
According to reports, only 8% of low-income earners have full life
insurance and most are not able to afford the premiums for their most
dominant risk ? loss of job or income.
Coupled with the fact that the informal economy in South Africa has a
spend of R280 billion, rivalling the formal economy?”s R300 billion,
Lombard believes that there are huge incentives for insurers to move
away from traditional models to products that are accessible and
affordable to the under- and uninsured.
Understanding the regulatory regime of a region is critical to
compliance and growth. In South Africa, new prudential and market
conduct regulations, as well as the introduction of the IFRS 17
Accounting Standard, have put financial and regulatory pressure on
insurers.
However, as Lombard points out: ?SThese new regulations are
progressive and allow for new entrants and innovation into the market??.
He adds that the new framework will foster financial inclusion and promote competition in the market.
A PWC report on the African insurance industry estimates that the
population on the continent will grow by 114.4% by 2050 to about two
billion people. Furthermore, because the population of Africa is the
youngest in the world with an average age of just 19.7 years in 2010,
there will be a large working-age population.
?SFor insurers, this is good news because a younger population is
linked to GDP growth which in turn makes for a wealthier population and
an increase in insurable lives and assets??, says Lombard.
Lombard stresses that a younger population also means a more
tech-savvy population who are connected 24/7 and have expectations of
customised solutions and an entirely virtual, paperless relationship
with their insurer.
?SThis will force many insurers into a paradigm shift away from their
legacy infrastructure and systems to adopting technology to suit the
needs of the customer and to offer competitive pricing??.
Innovative insurers who have taken on board emerging technologies are
now able to quickly analyse customer data, enabling them to understand
their customer?”s needs and rapidly develop new products.
In Africa, partnerships with insurtech companies are becoming
increasingly popular, enabling greater innovation and a faster response
to customer expectations.
?SUltimately, all insurers should be optimizing their digital capacity
to meet customer expectations and add value and efficiencies to the
business??, says Lombard.
Attracting and retaining talent remains a key risk for insurers in
the region and the industry will have to upscale its investment into
training, especially in the technology and actuarial fields if it is to
entice young talent.
Lombard believes that many organisations will have to rethink their
traditional, rigid approach to working hours and focus on outputs and
deliverables if they are to draw millennials into the business.
?SAlthough there are many regulatory and environmental challenges in
the region, globalisation and the emergence of the global citizen makes
for a conducive environment in which to innovate new customer-centric
products??, he concludes.
Culled from COVER https://www.cover.co.za/africas-changing-and-growing-insurance-customers/
