Technology has moved to the top of emerging issues ahead of regulation, and if insurers do not innovate, they risk falling behind, analysts say.
And with the rise of the new middle-class and digital natives, this is presenting opportunities for insurers, and using technology, they can better understand their customers and use customer data for more relevant product design and better pricing for risk.
Underwriters need to ensure that they can do so while navigating increasing regulatory compliance issues, overhauling legacy Information Technology systems, and investing in talent for the future.
Industry analysts say as regulations become more stringent, and the shift to client protection becomes more evident, business models will need to become more customer-focused.
A report by audit firm PricewaterhouseCoopers (PWC) on Africa insurance industry shows that the sector is facing more disruption than any other, posing challenges for some while opening up business opportunities for others.
The report says the pace of change in the industry has taken place more rapidly than originally anticipated and will accelerate further.
PWC Africa long-term insurance leader Victor Muguto said insurers, who are client-centric, innovative, technologically up-to-date, and who invest in a workforce of the future, will lead the change to increase insurance penetration levels in Africa.
In Kenya, PwC’s financial services leader Richard Njoroge, said insurers in the country and across Africa face exciting new opportunities for growth on the back of a rising middle-class and increased demand for new and innovative solutions.
“Most insurers know what to do, the winner will be those that are best at execution,” said Mr Njoroge.
Technology and data are now considered the most important global trend disrupting the industry, but they are also increasingly being used by the industry to accelerate growth.
Across all of Africa, the increased use of technology, on the back of the exponential growth of mobile phones, has significantly contributed to the large amount of new customers and more tailored products.
Technology is presenting insurers with powerful tools to better understand customer needs and expectations through data mining capabilities and artificial intelligence (AI).
However, it is expensive and not always easy for insurers to “go it alone”.
Thus, some insurers have formed partnerships with technology companies to improve operational efficiency and respond quickly to changing customer expectations.
Last week, African Reinsurance Corporation (Africa Re) group managing director and chief executive Corneille Karekezi said adoption of technology will benefit both insurers and clients.
“Technology must be embraced, it is the only way … because we have tried over the last 50 years to multiply the number of sales agents, branches and even staff, and we are yet to achieve our desired goals,” said Mr Karekezi.
“A software can explain better than a person and respond to all queries within a short time and effectively. Training people to respond to questions, identify the needs of clients and explain to them appropriately requires huge investments and currently this is not cost-effective to many insurers,” added Mr Karekezi.
Africa Re, the Pan-African reinsurance based in Lagos, Nigeria is pushing insurers to embrace technology to reach more people, and redeem their image, which has been shrouded in fraud and delayed claims settlement. Locally, penetration is still low due to high cost of premium, fraud, lack of trust and ignorance by members of the public.
Insurance Regulatory Authority data shows that last year the penetration rate declined to 2.68 per cent from 2.71 per cent in 2016.
Data from Swiss Re Sigma Report, shows South Africa has the highest penetration rate at 13.76 per cent, with Nigeria which has the highest economy in the sub-Saharan region recording a penetration rate of 0.25 per cent.
Lately, some insurers have made substantial investments in the development of the transmission of claims electronically, wider use of biometric identification cards and digital mobile apps and artificial intelligence.
Technology, specifically mobile phones, social media, and data analytics are seen as the top enablers to increase access to new customers, at reduced cost and to analyse behavioural data, in order to design new, more appropriate products.
Millennials are also reshaping the insurance industry both as employees and consumers due to their attitudes and preferences and this will definitely impact on how the industry operates in future.