In this digital era, the South African insurance industry is facing a series of challenges in its quest for sustainable competitive advantages. First and foremost, insurance companies need to effectively adapt and integrate new digital solutions. However, keeping pace with emerging technologies and strategically implementing them can be quite a struggle, especially for companies with limited resources or outdated legacy systems.
“As digitalisation transforms customer expectations, the demand for personalised and seamless experiences has skyrocketed,” says Marcia Le Roux, business development manager at insurance software provider, SSP. “To meet these expectations, insurance companies must invest in digital platforms and customer-centric solutions. The data generated by these investments provides tremendous opportunities for obtaining valuable insights and making data-driven decisions.”
However, striking the perfect balance between tailoring services to individual customer needs and safeguarding data privacy and security poses a complex challenge. In addition, effectively managing and analysing this wealth of information requires advanced data analytics capabilities and robust data governance practices.
Furthermore, our industry faces increased risks of cyber threats and data breaches.
“For insurance companies, protecting customer data and ensuring robust cybersecurity measures are in place is of utmost importance,” says Le Roux. “However, developing and maintaining strong cybersecurity defences, adhering to regulations, and addressing ever-evolving cyber threats can be a resource-intensive and challenging endeavour.”
In addition to these challenges, the insurance sector faces a talent and skills gap, with a shortage of experts proficient in areas like data analytics, artificial intelligence, and cybersecurity.
“Attracting and retaining top talent with the necessary expertise remains a significant challenge for companies striving for sustainable competitive advantages,” says Le Roux.
To address these challenges, Le Roux suggests a strategic approach that tackles all of these factors.
“Insurance companies that successfully navigate these hurdles will undoubtedly find themselves better positioned to achieve a sustainable competitive advantage in this dynamic digital era,” she says.
Initially, insurers prioritised digital transformation in the realm of general insurance, aimed at establishing their presence, selling insurance products, and providing services to clients through online platforms. The primary objective was to capture new business opportunities through a cost-effective channel and leverage the growing presence of aggregators, particularly in the motor insurance sector. But as the tech environment changes, so too should insurers’ priorities.
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In a report titled “The Many Aspects of Modernizing Insurance Systems,” Celent highlights that insurers primarily aim to enhance their digital presence when modernising their systems. While the interpretation and scope of “digitalisation” may vary among CIOs, it remains a significant goal for both general and life insurance companies.
Over a span of less than two decades, Celent has observed numerous manifestations of digitalisation within the insurance industry. Three key manifestations include:
- Enabling the sale of new insurance products online through a dedicated process for obtaining quotes and making purchases.
- Providing digital services to clients and supporting their distribution through portals and integration with aggregators, such as pricing comparison websites.
- Increasing visibility in the digital realm through online advertising efforts.
“Driven by a strong focus on immediate goals of boosting online sales, insurers frequently overlook the long-term implications of digitising their operations,” says Le Roux. “It now becomes more important to foresee the profound and transformative effects that digitisation would bring to the industry. Insurers across all sectors must now adapt and embrace the advantages brought by digitisation.”
Le Roux concludes: “In general, insurers are shifting towards a more data-centric approach rather than being solely focused on processes. We believe that the future industry leaders will be those who recognise that success depends on the relevance and timeliness of data, combined with the complete automation of business decision-making processes.”
