Opportunities for insurers as insurtech market experiences growth
Over the years, the insurance industry has revolutionised thanks to the influence of tech where traditional insurance is seen to be replaced by a new wave popularly known as insurtech. In Africa, insurtech is finding a footing on the heels of a fintech blast, which refers to any app, software, or technology enabling people and businesses to digitally access, manage, or gain insights into their finances or make financial transactions.
William Musyoka, a tech expert from Bizin Africa says that tech advancements have led to a massive transition in the insurance realm, including automating and predicting standard insurance-related tasks, from filing a claim to adjusting a policy’s coverage. “With the insurance industry embracing things, such as artificial intelligence (AI), machine learning, and other technologies, it is evident how the relationship between providers and clients is also transforming. As much as these processes and data analytics won’t necessarily remove the manpower, the advancements will increase precision, accessibility of information, and have the potential to greatly enhance carrier-customer relations,” he tells Eureka.
“We have observed big insurance firms tapping into tech platforms, with the likes of Old Mutual being among the strategic investors in insurtech platforms, such as CoverGo, a platform that lets firms build and launch insurance products and streamline policy administration and claims,” William adds as he defines insurtech as the use of technology innovations designed to make the current insurance model more efficient. He says insurtech is improving customer experience, simplifying policy management, and enhancing the efficiency of companies.
Customer first
Elias Omondi, a Senior Manager, Risk Regulations FSD Africa and a policy and regulatory expert, says that compared to the traditional insurance, the insurtech has immensely changed the industry as it has aided the insurance sector to keep the customer at the heart of everything. “Many insurers are implementing various initiatives at various levels, such as digitally connecting with customers via mobile applications and online processing of claims. Furthermore, insurance space is leveraging Insurtech to identify risks using remote imaging to assess damages and evaluate the risk of underwriting. Utilising the Internet of Things (IoT)-connected sensors and devices has aided the insurance sector to seamlessly carry out operations, such as assessing risk and evaluating premiums. This may expose the industry to cyber risks in future,” he starts.
Omondi, who holds a Master’s Degree in Actuarial Management from the University of London has been instrumental in training actuarial techniques and the development of capital models in Africa. As an innovator and technologist with strong passion in AI, blockchain, quantum computing and data science, he points out that these emerging technologies have posed a huge impact on the insurance industry with the main aspect being the inability to interact with customers directly, delays in payment of claims, time-consuming and expensive policy documentation, among other things. “Blockchain and AI will bring about significant efficiency gains, cost savings, transparency, faster claims payouts, and fraud mitigation while allowing for data to be shared in real-time between various parties in a trusted and traceable manner. These technologies will enable new insurance practices to build better products and markets,” he says.
Since the Covid-19 pandemic hit in 2020, African insurtech startups have actively overcome the historically low penetration rates of insurance products across the continent as reported by the research firm Research and Markets, that projects Africa’s insurance market to grow at a compounded annual growth rate of seven per cent to 2026.
Elias concurs as he confides that the onset of Covid-19 restrictions worldwide led to the diminishing of customer interaction and normal business operations were adversely affected for the insurance sector since Covid-19 was a key catalyst for insurers to shift to digital. The adoption of insurtech by the insurance industry became more of a norm than an exception.
Legal barriers
A McKinsey and Company report in 2022 showed that only three per cent of Africa is insured, marking the lowest coverage in the world. Elias is of the school of thought that the traditional players are yet to be disrupted within the insurance space, furthermore legal and regulatory barriers make it difficult for innovators to get into the market hence the market is predominantly led by incumbents that are slow to adopt technology. “The biggest obstacle for the insurance startups growth in Africa has been innovators in the industry struggling to grow their businesses due to lack of skills, failure to attract flexible, patient, and catalytic capital and lack of clarity to overcome regulatory, infrastructure, and other market barriers that impede impact and scale,” he mentions.
Omondi is optimistic that 2023 will be a prosperous year for the insurtech industry as he sees a year where insurtechs enabling firms will reach low-income households with solutions that will protect them against multi-hazard shocks, such as the Covid-19 pandemic and numerous climate events that have intensified than never before. He is optimistic that Kenya as a country is prepared for insurtech defining Africa as the future for digital disruption particularly in the insurance space. “We have created programmes, such as BimaLab to catalyse Africa’s insurtech ecosystem. BimaLab was set up to address challenges that insurtechs are facing, such as lack of technical capacity, access to funding, access to strategic partnerships, and regulatory barriers. The growth of insurtechs is also held back by a lack of knowledge on product development, consumer behaviour, and entrepreneurship skills. This programme will ensure that not only Africa is prepared for insurtech, but built to create and consume the technologies,” he explains.
With over 10 years experience in the Insurance field, Omondi still sees a gap that needs to be filled as he notes that Africa is still facing several challenges particularly in delivering relevant products to customers at the base of the economic pyramid. “Only three per cent of Africa’s Gross Domestic Product (GDP) is driven by insurance, which is less than half the world average of seven per cent. Yet, insurance provides a safety net from many external threats, such as natural disasters, health threats, and economic disruptions. If starting an insurance startup today, I would develop digital technologies that have the potential to enhance financial inclusion by providing access to unserved and underserved customers,” he explains.
In the next half a decade, Omondi and William share the same sentiment as they see a strong innovation ecosystem with active investors, strong capacity-building networks, and dynamic corporate institutions that will unlock capital, attract talent and share knowledge about insurance solutions tailored to meet communities’ and business needs in Africa.
