Smart companies will respond to Africa's demand for innovative insurance solutions

A rising middle class and extensive mobile penetration make Africa a land of opportunity for insurers.

According to PwC South Africa, the African insurance industry remains one of the least penetrated in the world. But how can insurers (and related financial institutions) start benefiting from the opportunities that the continent offers?

Kelly Preston, data analytics manager at SilverBridge, believes having a digital mindset in this environment is a critical first step.

“Given the size of the unbanked population in Africa, insurers who can bridge the gap between formal structures and more innovative ways of collecting premiums (think mobile solutions), will be the ones that gain a foothold. Much has been written about how digital solutions can reduce costs and improve efficiencies. In Africa, their potential is so much more.”

Cynics might argue that economic and political uncertainty in many markets across Africa could negatively impact on people’s adoption of insurance solutions. However, Preston says that service providers on the continent are waking up to the need for customer-centric solutions and doing things differently to entice people to take out insurance.

“With research showing that 66 percent of people in sub-Saharan Africa do not have bank accounts, the primary goal of any insurer should be addressing this challenge. Mobile presents an effective and ubiquitous way of helping make the transition. Considering that Africa is viewed by many as a mobile-only continent, it is surprising that more providers have not capitalised on the potential that the likes of USSD and mobile apps present.”

However, this is likely to change in 2019.

“Leading insurers are already implementing strategies to focus on new customer behaviours and demographic shifts. The need to be agile in the face of a rapidly changing technological environment has never been more vital,” says Pieter Crafford, financial services advisory leader for PwC South Africa.

He cites four main themes that will change the African insurance industry in the months to come. Firstly, it will all be about maximising the use of technology and data. Secondly, insurers must be cognisant of a rapidly changing regulatory environment and must ensure that systems keep up with these refinements.

A third theme is how insurers and non-insurers alike are competing for customer data and the insights it can unlock. This ‘convergence’ as PwC terms it is resulting in multi-channel distribution strategies to reach as many potential customers as possible.

A final theme is addressing the dearth of skilled employees. Research shows that this is particularly evident in technology and actuarial skills. For Crafford, it is about training the workforce of the future and thinking about jobs that do not exist yet.

“Insurers 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 winners will be those that are best at execution.”