Historically, life insurance penetration rates in the African market have been very low. As the current markets approach maturity, loss ratios are on the rise. To increase margins, firms need to innovate and stay up to date with technological developments.
Most companies in Africa don’t trust the potential of digital transformation to make real change. However, properly executed, digital transformation will enable underwriters to tackle the rising claims ratios, increase profit margins and expand their target market - despite the instability of the market and perceived risks.
Why is digital transformation critical to African underwriters with limited resources?
Millennials are the future customers
In order to remain relevant, insurance companies need to capture the attention of the next generation of customers that will require life insurance. Right now, very few millennials in Africa choose to deal with insurance companies. For them, talking to an insurance agent for half an hour before getting a quotation or filling out a paper application and waiting for days for someone to get back to them is enough to deter them from purchasing the product.
Those issues are particularly problematic when trying to interest young consumers who have been born into the digital world, where transactions happen in real-time. Digitalization and CX expectations have made it so that millennials expect instant results. Underwriters who still take 30 days or more to make policy acceptance decisions need to evolve quickly and launch straight-through processing solutions to deliver on these heightened customer expectations.
Digital transformation increases product accessibility
Internet penetration in Africa remains a challenge. Concurrently, people are looking for the most convenient ways to purchase products and services, and underwriters need to transform in order to match those digital desires. Digitalization will open new markets for African underwriters. Through the development of digital platforms, underwriters can gain access to customers that they would not have otherwise been able to reach.
The best way to navigate this challenge is to take an API approach and build a sales interface in environments that promote higher traffic. As, for example, in South Africa, where people can buy insurance from grocery stores. Such embedded environments help alleviate internet access challenges in many parts of Africa.
Furthermore, digitalizing enables underwriters to use technology for distribution that doesn’t require an internet connection. Through this technology, customers can input their information offline when an internet connection is lacking. The system would then upload the information to the back office when an internet connection becomes available.
Digital transformation will increase access to customer data
“We claim data is the new oil. And if you’re not digitally enabled, how do you extract data from your customer? It is almost impossible”
- Opeoluwa Kumuyi, Head Of Digital West Africa, Old Mutual Limited
Customer insights are required in order to drive product enhancement. You also need those insights to cross-sell your products to existing customers.
The challenge for African underwriters is that customer data is not readily available due to the lack of digitalization in neighboring industries. Since the healthcare system is still not digitized in Africa, information is handwritten and not collected in a single database as it would be in other regions. Foundational projects to clean and migrate data, while making it machine-readable, are necessary before the African insurance industry can fully leverage the power of its data.
Words of advice:
Don’t underestimate the importance of your people
Digital transformation is not just about technology. Yes, the technology part is important, but it needs to work hand-in-hand with corporate governance in order to create a change management plan for digital transformation that will ensure the modernization project results in meaningful change.
Encouraging a data-driven culture within the organization and building collaboration across functional units is critical to ensuring a successful transformation. This means focusing on the corporate structures that support the new technology. In order to drive progress, companies need to think of how new processes impact culture and develop a change management plan to deal with the people part of things.
Focus on stakeholders ready to make a change
A culture of innovation is not deeply embedded in the African insurance industry. It’s not easy to convince an insurer to embark on an innovation journey. In part, this is because there’s a lot of overselling and overpromising going on, and a rap sheet of failed projects that make CIOs apprehensive.
In order to drive innovation, “focus on the stakeholders that are keen to make a change” advises Shingie Maramba, Director, Wealth & Insurance Solutions EMEA. Find sponsors who understand the importance of digital transformation to the future of the organization‒and work with them to source solutions and vendor partners with proven track records.
Start small, fail fast, repeat.
Start small, get it right, and then scale. This is especially true if you’re moving into unknown territory, whether it’s new technology that you’re just starting to explore or you’re the first innovator in your market.
“It’s better to innovate than to stay stationary. Executives have to get over their fear of innovation. Yes, some fears are credible. But it’s better to strategize well and move beat by beat than not to move at all.”
– Liberty Nobula, Founding Partner & Consultant, WHL Consultants
Start small by addressing the part of the value chain that’s simplest to innovate. Companies may choose to implement integrated CRM solutions to improve advisor and consumer experiences. APIs could be used to connect underwriter and distributor back-office systems. Or self-service portals could be layered on top of existing technology. Out with the agents for solutions, distribution or bank assurance, or simple things like leveraging APIs.
The most important thing is to start your digital transformation journey now. Those who continue to delay will see the digital divide between themselves and their customers increase. And with it the gap to their competitors becomes increasingly difficult to close.