The opportunities for growth in Africa’s insurance industry are huge despite recent economic and political uncertainty, according to PwC’s report – ‘Ready and Willing: African insurance industry poised for growth’
PwC said that despite the additional pressures of unrelenting regulatory and insurance accounting changes, and the huge costs associated with the changes, there are also some positive developments and opportunities for growth.
Victor Muguto, long-term insurance leader for PwC Africa, said, “The insurance industry across Africa continues to be one of the most disrupted, but at the same time the industry continues to innovate and adapt to take advantage of the many opportunities for growth that are also emerging.”
“In the years following the global financial crisis, economic and political uncertainty across the continent slowed down economic and insurance sector growth. Despite this, Africa’s insurance market remains one of the least penetrated in the world and the opportunities for growth are tremendous.”
“Leading insurers are already implementing key strategies to focus on new customer behaviours and demographic shifts. The need to be agile in the face of a rapidly changing technological environment has never been more vital,” noted Pieter Crafford, financial services advisory leader for PwC South Africa.
Four main themes that are transforming Africa’s insurance industry:
Technology and data ‘revolution’:
Technology and data are now considered the most important global trend disrupting the industry, but they are also increasingly being used by the industry to accelerate growth. Across all of Africa, the increased use of technology, on the back of the exponential growth of mobile phones, has significantly contributed to a large number of new customers and more tailored products. Technology presents insurers with powerful tools to better understand customer needs and expectations through data mining capabilities and artificial intelligence (AI).
Regulatory and accounting changes:
Behind technology, insurers also identified stringent risk-based prudential capital and market conduct regulations as the second most disruptive issue. By now, most insurers are used to regulations and this has become “business as usual”. Insurers across the African continent have embraced the regulatory changes, and are ready and willing to comply with new legislation and regulations. But, while most insurers have adopted new ways of compliance, the introduction of IFRS 17 is also expected to add new pressure.
Convergence, the new “Scramble” for Africa’s customers:
Changing demographics and social changes, in particular, the rise of a middle class, are driving insurers, bankers, and non-traditional players such as retailers and mobile operators to compete for the power of owning customers and customer information. We have started to see a convergence of insurers and bankers around customers. While most of the major banks have had insurance operations for years, there has been a renewed interest by other banks to also start insurance operations. Likewise, some insurers are setting up separate banking operations, and mobile phone operations and retailers are pushing in. All of this is with the aim of owning more customers and cross-selling various products to them.
Talent shortages – workforce of the future:
Insurers also highlighted talent shortages as a top issue in our survey. This is notable in the areas of technology and actuarial skills. In order to attract and retain talent, insurers need to invest more in training their “workforce of the future”. Alongside this, employee expectations are changing. Employees of the future expect better work-life balance. The majority of insurers surveyed are already prepared for change, with 83% of survey respondents indicating that they either had prepared or were moderately prepared to establish a more flexible working culture to support employee work-life balance.
While the African insurance industry is going through significant change and client expectations are changing the rise of the new middle class and digital natives offers new opportunities for insurers, using technology, to better understand their customers and use customer data for more relevant product design and better pricing for risk.
According to PwC, insurers need to ensure that they can do so while navigating increasing regulatory compliance issues, overhauling legacy IT systems, and investing in a workforce of the future. Operational procedures and business structures will also need to be updated to become more efficient.
