Demands for the digital savvy customer are changing the face of insurance with more firms turning to online platforms to deliver products.
This is calling for industry players to be relevant in a dynamic marketplace and adopt to a new breed of clients with expectations set on the most advanced digital retail providers.
Numerous studies undertaken by various organisations have highlighted technology adoption, awareness levels, cost of insurance, product sustainability, competition and undercutting, distribution mechanisms as some of the challenges the industry is grappling with.
New digital technologies and business approaches are starting to change the nature of insurance delivery, especially through micro insurance.
Micro insurance, is provision of cover to lower-income households.
Insurance industry experts are of the view that if micro insurance products are appropriately designed, they can play an important role in reducing vulnerability for the poor as well as presenting profitable markets for underwiters.
The new digital technologies, commonly known as InsurTech (Insurance Technology) start-ups, are promising to reach more low-income individuals cost-effectively, and in a way that delivers more customer value.
InsurTech firms are emerging as a game changer offering underwriters an opportunity to innovate, improve the relevance of their offerings and grow.
With Kenya leading in Africa in Internet penetration - with over 30 million people having access to the web - the insurance industry must come alive to digital transformation.
Winnie Badiah, chief executive of GrassRoots Bima, a local InsurTech start-up, in an interview with Smart Company said insurance is most threatened by disruptive change.
Ms Badiah said collaboration between underwriters and the start-ups will help them cope with the rapid technological advances.
Such partnerships are expected to promote competition and innovation among insurance companies.
She said collaboration should build relevant insurance products while cutting the operating cost and passing some of these savings on to the customer.
“This will be not just an opportunity to heighten profitability, but a real chance for insurers to build and retain trustworthy relationship with customers. Underwriters are aware of the disruptions and changes facing their industry, the transformational impact of which is now evident,” said Ms Badiah.
The Association of Kenya Insurers (AKI) in its 2016-2020 Strategic Plan aims to double the insurance penetration rate to six per cent, and at the same time, increase gross premiums to Sh500 billion within the five year period. Currently, insurance penetration stands at 2.9 per cent.
According to Insurance Regulatory Authority (IRA), InsurTech start-ups use technology to provide insurance companies with a platform to advertise and sell their products.
“It is, therefore, not an answer to micro insurance as the platform is used for all insurance product,” IRA said in a note to Smart Company.
A study conducted by PricewaterhouseCoopers (PwC) in 2016, highlighted the potential for start-ups to improve the industry.
Out of more than 1,300 start-ups from across the world focusing on the insurance industry, the study showed that a third (35 per cent) of these InsurTech start-ups are focusing on ways to improve customer relationships.
“Insurance companies are benefiting from an influx of new technology and are focusing on how new InsurTech products can redefine the way they interact with customers.”
“Seventy five per cent of incumbents established insurers believe the biggest impact to the industry will come from building new products in order to address the changing needs of the customer. Incumbents see these new products as an opportunity to redefine customer interaction,” the PwC study revealed.
The PwC report said the majority of new players do not seek to replace existing insurance companies, considering themselves enablers rather than disruptors.
The report said by focusing on what insurers consider to be the main challenge for the insurance industry of providing customers with the most suitable products, InsurTech start-ups can work alongside incumbents to effect swift changes.
A study released in March 2017 by Centre for Financial Regulation and Inclusion showed that lack of information on consumers, inadequate access to consumers, different and new consumer needs as some of the challenges facing micro insurance.