Africa Thinking Digital To Revolutionise Her Reinsurance Sector
With the proliferation of mobile phones, users of social media in Africa, experts say that the reinsurance sector on the continent is still underutilising technology. Odimegwu Onwumere unearths that reinsurers in Africa are however thinking what the sector might be like in 30 years from now and not what they have in hand; they are thinking digital reinsurance for the future; they are thinking that the social media has impacted the ways of life of their potential target market so they must rise to bridge the digital divide between them and their potential target market in order to stay relevant; they are thinking of a continent where buying insurance will no longer be associated with questions but the big data will provide enthusiastic and accurate predictors of risk
It was a sadistic voice approaching from Kigali, Rwanda. The vicious voice was heard at the 42nd annual general meeting for the Federation of African National Insurance Companies (FANAF) held on February 12 2018. The ferocious voice harangued that re/insurers in Africa were not utilising the Information Communication Technology (ICT), upon that examination has it that approximately 80.8% of Africans own a mobile phone today. The 80.8% is contained in a 2016 data of the International Telecommunication Union (ITU), the United Nations agency for information and communication technologies. Those who know better said that this was 10% skip from 71% in 2014. Also, Kenyan Insurance Industry Strategy Report arranged by Transector International, September 2017, said that Kenyan mobile saturation was at 88%; Internet penetration was at 90%. Passages from the report buttressed that the country had towering rendezvous on social media of 6 million Facebook accounts; 2 million dynamic users on twitter; 10 million Whatsapp vigorous users; 3 million Instagram and 1.5 million on LinkedIn. When some analysts believed that there were 66 per cent population of Africans without bank accounts, no email address (causing difficulties for reinsurers to control their policyholders), there were over 32 million mobile money subscribers in Kenya. It was noted that the number was on the increase, not only in Kenya, but across Africa.
Allianz CEO Oliver Bäte far-left is seen here with collea gues in Africa (Photo Provided by Allianz
On the other hand, observers did not mince words in clamouring that Africa sways as the fastest-growing mobile phone market in the world and by 2020, this emerging continent in the reinsurance markets is expected to have 725 million smartphone users, as according to a 2016 report by a trade body representing the welfare of mobile operators worldwide: Global System for Mobile Communications Association (GSMA). According to the GSMA, mobile services gave in 6.7% of the continent’s GDP in 2015 and by 2022, 80% of Africans on the continent will be connected to 5G internet networks.
A 2014 World Bank Group account had opined that digitisation of economies donates to extensive economic growth, individual monetary authorisation, and financial enclosure. Nonetheless, the voice from Kigali was full of fears that apart from the proliferation of mobile phones, reinsurers in Africa were not utilising breakthrough technologies that aid easy services in the re/insurance business in the areas of measuring, controlling, and pricing risk, connecting with customers, trimming down cost, increasing competence, and swelling insurability. They were not utilising Cloud computing, the Internet of Things (IoT), advanced analytics, telematics, the global positioning system (GPS), mobile phones, digital platforms, drones, block chain, smart contracts, and artificial intelligence (AI). These technologies are believed to help in the creation of new products, services and business models.
Still In The Old Way
The supposed underutilisation of technologies on the continent’s reinsurance hurts stakeholders. For the manager life business department at Kenya Re, Peter O Angweny, at the event “The industry is still stuck in the old ways of doing business, which has slowed service delivery.”
The African Union chairman, President Paul Kagame of Rwanda grimaced that glaring obstructions in the sector on the continent reached $75 billion few years ago in the value of contracts, indicating a rough business.
But the Allianz SE CEO Oliver Bäte while at the 44thannual Insurance Conference in Sun City, South Africa, last year believed that in today’s fast changing world, “It’s critical to innovate quickly and to change course rapidly if necessary.
“The insurance industry, like other customer service industries, is transforming because of the all-encompassing impact of digitalisation on our lives.”
Femi Oyetunji is The managing director of Continental Reinsurance
In 2016, the continent was not shut down when Cameroon, Chad, the Democratic Republic of the Congo, Gabon, Gambia, the Republic of Congo and Uganda launched infertile entrée to social media for their citizens.
This was applicable in Ethiopia, Madagascar and Tanzania, where censorship legislation was fiercely introduced. While this happened, President Kagame feared that Africa had obstructions in the value of contracts to the tendency of $75 billion due to poor utilisation of technology.
But Bäte surmised in a different fora, saying, “While traditional markets, such as Europe, are struggling with their digital transformation process, Africa is digital by nature. Mobile is the fastest growing sector and innovation enabler on the continent with an expected (1.2 billion African subscribers by 2018?)”
Still, Kagame was counting loss in the insurance sector in Africa, whilst officials from German’s Reinsurance Company, Munich Re, expressed ecstasy that the global premium volume reached $5 trillion in 2016 and reinsurers scheme the attraction to resolve at $5.6 trillion in 2018.
This is being determined by recuperating economies in a number of proliferating emerging markets using technology.
A Drop In The Ocean
Conversely, investigations revealed that the worth of reinsurance industry in Africa is only $6.8 billion. To opinion leaders on the field, “It is just a drop in the ocean. How can this be turned around?”
Notwithstanding, lack of innovative solutions, limited financial capability and insurance wakefulness, proper products for different market segments, easy methods and under-pricing limit growth of profits are factors fingered to be hindering the reinsurance sector on the continent.
Hence, African reinsurers are summoned to hug digital technology. It is believed that this will drive growth in the industry.
Imperial Bank Head office in Nairobi soon after it was placed under the Kenya Deposit Insurance Corporation on October 13 2015
Changing From Analogue To Digital
Preparatory to the Organisation of Eastern and Southern Africa Insurers (OESAI) and Insurance Information Bureau (IIB), dubbed Africa Insurance Summit 2018, before the next Africa Insurance Summit in 2019 to be hosted in Accra, Ghana, issues on capacity and resources to instigate the flight towards a double-digit insurance penetration, how the African market will utilise technological modernism to considerably increase insurance penetration, are the key issues raising eyebrows.
Bäte sued for digitalisation in a different presentation, saying, “Digitalisation allows us to gain considerably better insights into our individual and institutional customers and thereby to better serve their needs.”
With this, those who know better are saying that the thinking of reinsurers and insurers who are mostly regarded as conservatives is drastically changing for progressiveness all over the world and the sector in Africa is not exempted.
Critical Success Or Failure
The Chairman, Board of Directors, Law Union and Rock Plc, Remi Babalola, a former Minister of State for Finance, while speaking on the theme “Millennials: Digital Transformation & The Nigerian Insurance Industry” at the 2017 Quarterly Breakfast Meeting of the Chartered Insurance Institute of Nigeria (CIIN), in Lagos, said the millennials have either negative or positive impact on the insurance industry.
Hear him, "The Millennials are either a critical success or failure factor for the insurance industry both locally and globally, depending on how proactive the sector is in harnessing its positive characteristics.
“Proactive adaptation of their lifestyle or behaviour to innovate products by insurers to match their lifestyle needs will significantly change the landscape of the insurance industry.”
The Big Data
Reinsurers in Africa are however thinking of a continent where buying insurance will no longer be associated with questions but the big data will provide enthusiastic and accurate predictors of risk. For example, an authority in the sector in America known as Aviva, where one Andrew Brem is the chief digital officer, the company prices its car insurance using data to find the numerical connection between the purchase of life insurance policies and safer driving, making life insurance policyholders obtain lower quotes unlike in the traditional way where a lot of questions are involved ranging from the type of the car, the location and the driving history.
According to Babalola, “If your brand doesn’t show up in online search, Millennials are not likely to take you seriously. Information available shows that the Millennials have the capacity, and are in fact influencing purchasing decisions as well as how companies conduct business. Insurers must therefore be ready to tailor their marketing strategies to align with the digital natives in order to achieve improved performance.
“We need to be where the customer is, and be part of the conversation where they interact, exchange opinions, and levy complaints. Insurance companies would need to allocate resources to study millennials’ habits and employ effective marketing strategies to sell multiple strands of insurance. Since they engage in a sharing economy, we may need to think of how to insure space and time.”
Reinsurance In Africa In 30 Years
On the continent, reinsurers are thinking what the sector might be like in 30 years from now and not what they have in hand. They are thinking digital reinsurance for the future.
For instance, some reinsurance companies in climes like Hoxton Square in east London are expending millions into innovation and research and building what they call “digital garage” and a company like the Continental Re in Africa is on top of its voice telling practitioners on the continent that retailing is where the re/insurance business is, not in corporate.
What this means is that Africa needs “insurtech” startups in order to challenge the big players in the Americas and Europe, where according to CB Insight, $1.7bn went into insurance startups in 2016, across 173 deals.
The President, CIIN, Funmi Babington-Ashaye, said, “The emerging generation of workforce and consumers are now tech-savvy, and require online real time information on products and their offerings.
“Put simply, the social media has impacted the ways of life of our potential target market, so we must therefore mount to bridge this digital divide between us and our potential target market in order to stay relevant.”
Picture Showing A Malawian teacher teaching students how to use a computer
Using Technology For Penetration
With a doctorate in statistics from the University of Manchester in the UK, a Master of Science degree in statistics from Imperial College, London, and a Bachelor of Science degree in statistics and operational research from the University of Manchester, the managing director of Continental Re, Femi Oyetunji was of the philosophy in January this year that while the global reinsurance companies are expected to be coming into the African market, there will be tremendous competition.
But for Bäte, “Insurance companies have much to offer to the African economy. Therefore, digitalisation allows us to gain considerably better insights into our individual and institutional customers and thereby to better serve their needs.
“We believe deeply in Africa’s huge long-term growth potential and we will leverage our global footprint and extensive expertise to strengthen our market position and to attract African talent.”
Oyetunji who is also a Fellow of the Institute of Actuaries, UK, and has attended several management development programmes locally and overseas, expressed dismay that the sector on the continent has not spent profoundly in “brick and mortar meaning we are best placed to leapfrog in technology.” Oyetunji showed apprehension that in the heralded competition that will challenge Africa, the continent can do more if it adopts technology to help the reinsurance on the continent drive penetration.
Why Reinsurers In Africa Need Technology
“For example, by using the mobile phone to sell insurance products we can reach more people,” Oyetunji said. “To some extent African players lack the technical capacity, which is a challenge companies must address. The shortage of skills can be addressed but we are not doing enough.
“In terms of financial capacity, it is hard to build a strong balance sheet when rating is used against us. This is why 60 to 70 per cent of premiums in Africa are expatriated abroad. It thus becomes hard to build a strong balance sheet when everything is going out.”
Perhaps, this was the reason the Continental Re has chosen to center on modification of technology for the 2018 annual CEOs Summit. “This year the focus is on technology because virtually everything these days is governed by technology. Insurance is about information and data and for the industry to fully optimise, it needs technology,” Oyetunji added.
“The challenge is how to turn this potential around. We are pushing for two things – first creating awareness through collaborations, and secondly getting the regulators to understand how the industry can be stimulated to grow. We must aim at doing at least 10 per cent of the global business in 10 years.”
The 42nd Annual General Assembly of the Federation of African National Insurance Companies (FANAF)
Besides, from Allianz and Munich Re in Europe to Manulife in Canada and XL Catlin in Bermuda, they are investing heavily into ICT and digital developments, therefore making their African counterparts to be developing hyper-thoughts.
Well, Allianz is aiming to transform into what it characterised by a truly customer-centric, ‘digital by default’ company, "the Group established a Single Digital Agenda which plans to spend over $800 million annually on revamping the 127-year-old business. Through the Single Digital Agenda, Allianz will conduct changes through initiatives built on five pillars."
In-any-case, the reinsurance markets in Africa will be growing over the years in the area of investing and applying technology in business to harness big data analytics in order to foster productivity. Already in the Americas, a mobile phone is used to signal or other sensors spot that someone is about to trade on a road path where many had been injured or died (for example, on a snow). When this is detected, the insurer warns the person on the dangerous path he or she is taking. In the event where the person does not listen, the insurer would advise the person to as a matter of urgency increase the premium.
Fear For Cybercrimes
Africa has nothing to fear about cybercrimes in the insurance sector no matter that a country like “Kenya lost $171 million – 0.28 per cent of GDP – to cybercrime in 2016, higher than the continent’s average of 0.07 of GDP,” as according to the 2017 Delloite Telecoms Media and Tech Trends report.
The source went further to highlight that upon the loss, “In April 2017, Kenya approved the Computer Cybercrime Bill, 2016, to handle 3,000 cybercrime cases reported every month. The Bill criminalises cyber offences such as illegal access to computerised systems, child pornography and computer related fraud, attracting fines of up to $200,000.”
This anti-cybercrimes policies are cutting across countries in Africa and insurance firms are not sleeping on their oars and allow their money stolen, but are mounting policies to guard companies from fatalities consequential from cyber assault. For example, insurance broker Aon Kenya initiated the Cyber Enterprise Solution – a property/casualty and internet of things insurance policy – to safeguard businesses from losses triggered by cybercrime.
In a nutshell, insurtech enthusiasts who would price risk accurately in the absence of harassing the buyer with obsolete questionnaires are advised in Africa. It is believed that technology would make the biggest difference in the reinsurance markets on the continent in say, 10 years to come. That time, what the continent’s reinsurers would choose to cover, how to cover it, would change. A case in study is that many people are being introduced to buying insurance online unlike few years back when they did that through a broker.
Odimegwu Onwumere is a Poet, Writer and Media Consultant based in Rivers State, Nigeria. Email: [email protected]