Staff Writer
THE business of insurance operates within a complex environment shaped by economic, digital, and geopolitical uncertainties.
According to Zimbabwe’s Finance Minister Mthuli Ncube, as the industry navigate through a rapidly changing global economic landscape, the importance of the insurance industry becomes even more pronounced.
The world is witnessing unprecedented technological advancements, shifts in regulatory frameworks, and evolving customer expectations.
“These changes pose both challenges and opportunities for insurers worldwide. I wish to underscore the need for you to focus more on the opportunities than challenges.”
He said this on behalf of the Government of Zimbabwe, at the 46th Annual Conference and Annual General Meeting of the Organisation of Eastern and Southern Africa Insurers (OESAI) in Victoria Falls, Zimbabwe.
Below is the full statement of the speech he delivered
Importance of the insurance industry
Ladies and gentlemen, the importance of the insurance industry in our economies cannot be overemphasised. Insurance provides individuals and businesses with the financial security and peace of mind needed to invest, innovate, and grow. Insurance helps mitigate risks, support economic stability, and foster resilience in the face of unforeseen challenges. In times of crisis, such as natural disasters, fire outbreaks, or economic downturns, the insurance industry has been a pillar of support, helping individuals and businesses rebuild and recover.
Operating Landscape
The business of insurance operates within a complex environment shaped by economic, digital, and geopolitical uncertainties as the conference theme refers. As you navigate through a rapidly changing global economic landscape, the importance of the insurance industry becomes even more pronounced. The world is witnessing unprecedented technological advancements, shifts in regulatory frameworks, and evolving customer expectations. These changes pose both challenges and opportunities for insurers worldwide. I wish to underscore the need for you to focus more on the opportunities than challenges.
As you may be aware, cyber-attacks are becoming a frequent occurrence targeting government institutions and private entities globally, making cybersecurity insurance a critical component of modern risk management strategies.
Ladies and gentlemen, I do appreciate that the insurance industry in Africa faces several unique risks that may significantly impact the operations and growth of the industry.
One of the key risks include inconsistent regulatory frameworks across different African countries. This poses challenges for insurance companies operating across borders. Regulatory changes or uncertainties in local laws affect market entry, product offerings, and operational strategies.
To this end, a robust and forward-thinking regulatory environment is essential for the sustainable growth of the insurance sector. On our part as policymakers, we are committed to creating a regulatory environment that promotes transparency, accountability, and consumer protection while encouraging innovation and competition. I urge the industry to engage in constructive dialogue with regulators and policymakers to ensure that the regulatory frameworks evolve in tandem with industry developments. Together, we can create an environment that fosters growth, protects consumers, and enhances the overall stability of the financial system.
The other challenges relate to political volatility, economic fluctuations, and currency risks. These uncertainties have an impact on product modelling and pricing, claims payouts, and overall business stability. Mitigating these risks require a proactive and adaptive approach. As insurers, you can enhance your resilience by diversifying operations, leveraging risk management tools, and engaging in strategic planning. Collaboration with regional and international partners, continuous monitoring of the external environment, and investment in innovation and education are also crucial for sustaining growth and stability in the face of these challenges.
Ladies and gentlemen, the low insurance penetration in Africa is a great concern to us as policymakers and regulators, averaging around 3% compared to global standards of 7%. While 3% may appear relatively reasonable, it is important to note that there are significant variations across different countries. For example, the insurance penetration rate in South Africa exceeds 14% while most Sub-Saharan Africa countries record rates below 1%. This limits the market size and potential for growth, as well as the ability of insurers to spread risk effectively. Ironically, Africa is one of the most vulnerable regions to a wide range of risks, including natural disasters, economic instability, health crises, and political volatility yet it is the least insured continent in the world.
Southern Africa is currently experiencing one of the worst droughts in recent years. The El Nino phenomenon has severely impacted farmers and is threatening food security and livelihoods in the Sub-Saharan Africa region. Without the support of organisations like Africa Risk Capacity, many countries would not be able to survive this climate catastrophe.
All of us here experienced the devastating effects of the COVID-19 pandemic from 2019 to 2021. This highlighted the vulnerability of insurers to health-related risks, leading to increased claims and disruption in business operations. Some companies have still not recovered from the effects of Covid-19. The upside of this is that it forced many of us to innovate and embrace technological advancement in our companies, to meet customer expectations.
Ladies and gentlemen, some of the key barriers to insurance uptake on the continent include low levels of insurance awareness, affordability, and accessibility of insurance products by the majority of the population including low and irregular-income earners such as Micro-Small and Medium-sized Enterprises and smallholder farmers. The silver lining is that the evolving landscape also poses significant potential for growth. By addressing challenges relating to low levels of insurance awareness, affordability, and accessibility of insurance products through innovative products, technology, and supportive regulatory environments, African insurance markets can expand significantly. The success of these efforts will not only enhance financial security for individuals and businesses but also contribute to broader economic stability and development across the continent.
Distinguished guests, ladies and gentlemen, technology such as artificial intelligence, has the potential to revolutionise the insurance market in Africa and the way we conduct business in general. It will enhance Page 7 of 10 efficiency, improve customer experience, and increase access to insurance products. For the insurance market to tap into these new opportunities, it requires agile and well-capacitated regulatory authorities. The need for insurance regulators to embrace artificial intelligence is becoming increasingly important as the technology continues to transform the insurance industry.
Artificial intelligence is not only key for underwriting claims processing, and customer service and fraud detection, it is equally important for regulators. By integrating AI into their operations, insurance regulators can enhance their oversight capabilities, improve efficiency, and ensure a more robust and fair insurance market. While there are challenges to overcome, strategic investments in artificial intelligence technology, infrastructure, and training, along with regulatory support, can unlock significant benefits for the insurance industry and contribute to economic development and financial inclusion across the continent.
The downside of technology is that fraudulent activities in insurance claims are increasing. Insurance fraud poses a significant challenge to the insurance industry in Africa, impacting financial stability, customer trust, and regulatory compliance. To effectively combat insurance fraud, insurers need to adopt advanced technologies, strengthen internal controls, enhance verification processes, and collaborate with external partners without unjustifiable repudiation or delayed settlement of claims. I am advised that the Insurance Council of Zimbabwe (ICZ) has taken the initiative in Zimbabwe to fight this scourge through the establishment of the Zimbabwe Insurance Crimes Bureau to detect fraudulent claims. I encourage other markets who have not yet adopted such tools to do so without further delay. By addressing these challenges and implementing comprehensive fraud prevention strategies, the insurance industry in Africa can improve its resilience, reduce financial losses, and foster a more trustworthy and efficient market.
Ladies and gentlemen, addressing the challenges bedevilling the insurance industry requires collaboration among insurers, regulators, governments, and other stakeholders to create resilient and sustainable insurance markets across Africa. Innovative approaches in product development, risk management, and distribution channels are essential to navigate these challenges and unlock the potential of the insurance industry in the region. On our part as the Government of Zimbabwe, we are committed to creating a conducive environment for the insurance industry in Zimbabwe to thrive but also respecting the rights and interests of policyholders.
Distinguished guests, ladies and gentlemen, the African insurance market must brace for the implementation of the African Continental Free Trade Area (AfCFTA) whose aim is to eliminate trade barriers and foster economic integration across the continent. One of its key objectives is to reduce protectionism, which has historically hindered the growth and competitiveness of various sectors, including the insurance market. By doing away with protectionism, AfCFTA can create a more open and competitive insurance market in Africa, leading to numerous benefits. Increased competition will result in quality services, affordable and competitive premiums. To this end, integration is the way to go and as governments on the continent, we are committed to see this through including in the insurance sector. This, therefore, calls for integrated regulatory systems that are seamless.
Since insurers are in the business of risk management, I wish to underscore the importance of effective risk management strategies, which are crucial for insurers to anticipate and mitigate economic, digital, and Page 9 of 10 geopolitical risks. This includes robust modelling, scenario analysis, and stress-testing. Insurers must remain agile to quickly respond to changing conditions. This may involve adjusting product offerings, enhancing digital capabilities, or diversifying geographical exposures.
Collaboration with technology partners, regulators, and industry peers can foster innovation and resilience. Embracing innovation in underwriting, claims processing, and customer engagement is essential for futureproofing the business. Maintaining a strong focus on customer needs and expectations helps insurers build trust and loyalty, even in uncertain times. This includes transparency in communication, fair pricing, and timely claims settlements.
While economic, digital, and geopolitical uncertainties present significant challenges for the insurance industry, they also create opportunities for innovation and growth. Insurers that effectively manage risks, embrace digital transformation, and adapt to geopolitical dynamics are well positioned to thrive in an increasingly complex global landscape.
Collaborations and Networking
I urge you to, therefore, take advantage of the networking opportunities during this conference, to engage in insightful discussions, learn from each other, and discover ground-breaking innovations that will shape the future of insurance going forward.
The conference agenda promises a deep dive into how these innovations are enhancing efficiency, improving customer experience, and mitigating risks.
Furthermore, this conference is about fostering collaboration and knowledge sharing as well as forging partnerships that will drive the insurance industry forward in the region, ensuring that it remains resilient and responsive to the evolving needs of our society.
May the conference be filled with fruitful exchanges, new connections, and valuable insights that will inspire you to innovate and lead in the world of insurance.
Conclusion
As I conclude, I wish you all a very successful and productive stay in Victoria Falls. I call upon all the delegates to take this opportunity to explore the beauty of our country’s tourism hospitality. Please do not forget to take a view of the Mighty Victoria Falls, the smoke that thunders, one of the seven wonders of the world, so that you become part of the witnesses that it is indeed one of the World’s natural wonders.
