The rapid adoption of technology has disrupted traditional business models, with many institutions forced to digitise faster than anticipated. The Covid-19 pandemic also played a key role in accelerating the adoption of technology over face-to-face interaction.
By Jacques Erasmus, senior executive manager: individual life administration at Assupol Life
According to a report by PwC South Africa, the risks around the insurance industry’s technological modernisation continues to rank high. The focus of concern is on the ability for the industry to stay at the forefront of change, and on the operational risks in managing the transition to digitised services.
In addition, the report also indicated that the availability of human talent, is much needed as the industry undergoes its expected technological transformation in the face of strong competition from new entrants, that is also a rising concern.
Opportunities
While there are risks within the insurance industry in general, there are still fruitful opportunities ahead.
* Expanding the insurance market (access) – The next decade or two presents an opportunity to make long-term insurance accessible to more people. This means restructuring life insurance, helping people better understand their coverage. It also means avoiding unnecessary overspending in order to make sure people only pay for what they need. Changes in affordability by consumers in different target markets will affect both volumes and the mix of business sold between broad product lines and between specific products.
* Consumer education – The technological adoption presents consumers with learning about these policies from the comfort of their own homes. Financial education enhances consumer financial competence and contributes to demand for financial products, transparency and fair market conduct. Financial literacy is also a key factor in ensuring sustainable and effective financial inclusion.
* Enhanced customer experience – The influence of digital leaders in other industries has allowed the insurance industry to improve customer relations as well. Several areas offer opportunities for personalisation that can strengthen customer experience. McKinsey says by 2030, the number of people aged 60 and older will grow by more than 50%, from 900-million in 2015 to 1,4-illion. Further, noncommunicable diseases – those more closely linked to lifestyle and behaviour, such as diabetes, heart disease, and lung cancer – will account for 71% of all annual deaths globally and represent an increasing proportion of mortality risk. These factors may motivate life insurance and annuities providers to engage customers in the shared-value economics of healthy living to increase policyholder longevity. Technology will play an important part in this transition. The proliferation of data and connected devices, particularly wearables such as smart watches will also contribute to the way in which insurers deal with underwriting and risk management.
* Industry partnerships between legacy institutions and insurtech leaders – The life insurance industry (and the insurance industry as a whole) is starting to see new, digitised players partnering with well-established institutions to accommodate all the consumer needs. Most insurtech start-ups in Africa are companies that focus on the access to, and distribution of insurance products, rather than actually offering insurance as an underwriter per se. They build products to help insurers, banks or other businesses ramp up existing insurance distribution channels or create new ones that function as added revenue streams, increasing product adoption for the main service.
In conclusion, this is exciting time to be in this industry – Covid-19 has demonstrated the importance of life insurance, and technology is going to the driver to deliver it to all people.