Technology AND Innovation IN THE Insurance Sector
Eben Mabunda
Innovation on the back of new technologies has proven to be a key driver of change in the provision of financial services, and this has resulted in unprecedented efficiencies despite the doubts associated with the shifts.
Rapid transformations brought about by Artificial intelligence, as evidenced by the the buzzword “Chat GPT” (an artificial intelligence chatbot developed by Open AI) casts a clear light on the major changes information technology is bringing to the history of Mankind.
When it reaches maturity, nothing after this AI sweep will be as it was before. The same is true of how other ‘technologies on steroids’ are set to transform the essence of Insurance.
Artificial Intelligence in the insurance market is estimated to reach a whopping USD 6.92 billion by 2028 and is expected to grow at a compound annual growth rate of 24.08% in the forecast till 2028.
This is just an estimation of one strand of technology from the web (pun intended!).
Emerging Technologies
Emerging technologies such as nanotechnology, biotechnology, robotics, 3D printing, Blockchains, artificial intelligence, big data, augmented reality, and virtual reality Progressive Web Apps (PWA), geofencing, and predictive analysis have a direct and indirect link to modern-day business and ultimately to the insurance sector.
Believe it or not, going into the future, drones, real-time data sets, and satellites will give Insurers insights into various risks and the processing of claims will likely be automated with speed. This beckons to players in the insurance sector in Africa and beyond to actively observe the trends and develop a clear strategy of how they can leverage the power of technology.
We will now explore a handful of key innovative technologies and how they affect the insurance landscape.
Insurtech
Insurtech refers to technological innovations that are created and implemented to
improve the efficiency of the insurance industry by encompassing digital and technological
driven products that cover individuals and enterprises against financial loss and health
insurance, life insurance, automobile insurance, and crop insurance for farmers.
These have proven a remedy for financial inclusion in the third world and are fast
gaining traction in Africa.
On the continent, Insurtech startups have been receiving venture capital funding in
recent years, posing a disruptive threat.
According to Briterbriges, “most insurtech startups in Africa are companies that focus on
the access to and distribution of insurance products, rather than offering insurance as
an underwriter per se.
They build products to help insurers, banks, or other businesses ramp up existing
insurance lines or create new ones that function as added revenue streams, increasing
product adoption for the main service.”
Predictive Analysis
Predictive analytics have been used in mobile app development and could be a game changer.
changer for Insurance players. An example is YouTube, which uses predictive analytics.
to suggest content to users based on their watching habits.
The same is true with Spotify. But in the coming years, we will see new applications of this technology, especially in insurance. Embracing predictive analysis can go a long way in improving the accuracy of insurers, especially those offering property and casualty coverage. It can also help identify outlier claims that suddenly become high-cost losses.
Using predictive analysis, insurers can thoroughly review claims raised previously for similar losses and identify potential complications early on.
Chatbot
An insurance chatbot is an AI-powered virtual assistant that can be programmed to help
ease the journey of insurance customers by catering to their requirements and
improving communication between the insurance company and its consumers. These
provide 24/7 customer service, Meaningful interactions, Faster resolutions, Thorough
processing, and other benefits.
Drones
Since 2017, when Hurricane Harvey hit the US, insurers have been employing drones.
to expedite the claims process.
Over the years, the popularity of drones in the insurance sector has soared, and
Predictably, more insurers are likely to embrace unmanned drones by 2023. According
to covergo.com; as clients expect a seamless digital insurance experience, insurers can
gain immensely by embracing state-of-the-art technology for their business.
Forms of technology exist, as indicated above, that can be employed to derive value from
the insurance sector, I just focused on a few.
Satellites
In 2022, Zimbabwe announced the launch of its first nano-satellite into space in a bid to help collect data to monitor disasters, boost agriculture, and enhance mineral mapping.
A rocket carrying the tiny satellite, dubbed ZIMSAT-1, successfully launched from Virginia in the United States alongside Uganda’s first satellite as part of the Japan Aerospace Exploration Agency (JAXA) multi-nation project.
The overall impact of this development could potentially aid Zimbabwean farmers and players in the Insurance sector if well harnessed. However, it remains to be seen the extent of the utilization of the satellite and the dissemination of the information gathered therefrom.
Elsewhere, satellites are being used to measure moisture levels and ground heat to work out the best conditions in which to grow various crops. This has been seen to reduce the area needed for livestock feed crops, which has in turn reduced deforestation.
Vital Stats
McKinsey research reveals that every second, 127 new devices are connected to the
internet, and there will be 43 billion devices by the close of 2023. With the world
becoming connected via the internet at a more rapid pace, the insurance business now
depends on the Internet of things. Based on a survey published by “Appientive”, 21% of
Insurance organizations report they are preparing their workforce for collaborative,
interactive and explainable AI-based systems. It is predicted that investment in AI
Insurance is high on decision-makers agendas.
Africa remains largely underinsured, with a penetration rate of less than 3%. According
According to the African Insurance Organization, Africa’s aggregate insurance penetration stood at
a meager 2.78% in 2019, a far cry from the global average of 7.23%. Meanwhile, global
Research firm McKinsey & Co. places Africa’s insurance penetration at just 3%.
McKinsey also found that 70.6% of gross written premiums (GWPs) in 2018 were in Africa.
were in South Africa at a total value of $48.3 billion.
This was followed by North Africa (totaling a combined 8.8%), East Africa (3.3%),
Francophone Africa (2.7%), Southern Africa (2.6%), and Anglophone West Africa
(1.9%). Currently, the insurance penetration ratio in Zimbabwe is at 3.6%, which is below
the matrix for South Africa, a mature market with a relatively high penetration and
density of insurance products, whose insurance penetration rate stands at 18 percent.
the highest rate in Sub-Saharan Africa.
However, Zimbabwe’s figure is higher than Botswana’s 2.8% penetration rate. A
A recent report by Deloitte on the African insurance adoption of technology noted thefollowing about Nigeria: “The Nigerian insurance industry is evolving from an analog to a digitally driven industry. Office processes are automated; manual registers and
Record keeping is being phased out, and out, and policy and clients’ information are spoiled, electronically, policy documents are generated and transmitted electronically, and the client onboarding process has been streamlined.
However, despite the progress made so far, the industry still struggles with challenges, including inadequate access to public data, which limits automation of insurance, substandard product knowledge, delayed adoption of technology, the absence of innovative products tailored to meet clients’ needs, data-related issues around premium payment, and poorly implemented CRM to personalize and address customer needs.” Technology, therefore, presents the opportunity for must African insurers must employ technology to close the insurance exclusion that grips the Continent.
The bottom line is this, now more than ever, Insurance companies must seriously consider investing in various forms of technology that are best suited to the form of insurance they offer and to the requirement of the clientele they service.
Eben Mabunda is an Independent Financial Analyst with nearly a decade of experience in regional markets. Eben is also a business anchor for ZTN PRIME #DSTV294.
