Innovation, Challenges, and Opportunities
Tony van Niekerk, COVER
The long-term insurance industry is at a transformative crossroads, driven by technological innovation, evolving consumer expectations, and the necessity for foundational modernisation.
My recent discussion with Paul Donnelly, Executive Vice President for FINEOS in EMEA, highlighted key themes shaping the sector and underscored the pressing need for collaboration between technology and human expertise.
A New era of business augmentation – As we move into 2025, the integration of artificial intelligence (AI) into long-term insurance promises not just efficiency but a deeper, more symbiotic collaboration between technology and human endeavour. According to Paul, the future of AI in insurance lies in its ability to augment business operations rather than serve as standalone research projects. AI is becoming an integral part of enhancing decision-making, streamlining processes, and improving customer experiences. This partnership between AI and humans creates opportunities for long-term insurers to innovate while maintaining the personalised touch critical to their offerings.
The Long shadow of legacy systems – One of the most significant challenges facing the long-term insurance industry is its reliance on legacy systems. These systems, often 20 or 30 years old, were built to last but have struggled to keep pace with rapid technological advancements. As Paul aptly described, the foundations of many insurers resemble castles built on sand, unable to support the innovative second stories needed to compete in today’s market.
This issue is not unique to South Africa but is a global phenomenon exacerbated by the industry’s long planning cycles. Unlike short-term insurers who can refresh systems over a couple of renewal cycles, long-term insurers face the daunting task of upgrading systems while managing policies that can span decades. The complexity increases further in cases of mergers and acquisitions, where legacy systems from multiple organizations are often run in parallel indefinitely.
The Healthcare-Insurance nexus – Paul emphasised the growing intersection between long-term insurance and healthcare. In South Africa, this convergence presents a unique opportunity. The country’s strength in healthcare innovation, coupled with its culture of insurance innovation, creates a perfect storm for the development of groundbreaking solutions. By leveraging advancements in healthcare technology, long-term insurers can design products that address both traditional insurance needs and emerging health-related risks.
This alignment is particularly important as insurers look to provide holistic solutions that integrate wellness, preventive care, and long-term risk management. The ability to innovate in this space not only enhances the value proposition for customers but also positions South Africa as a leader in the global insurance market.
The Case for foundational modernisation – While innovation is essential, it cannot succeed without robust foundational systems. As Paul noted, the industry must address the ever-growing deficit between technological advancements and the infrastructure required to support them. Modernising these core systems is a manageable yet critical challenge that requires a strategic approach.
Insurers must:
- Assess legacy systems: Conduct comprehensive audits to identify inefficiencies and prioritise areas for improvement.
- Invest in scalable solutions: Adopt technologies that are not only future-proof but also adaptable to evolving market needs.
- Foster a culture of change: Engage stakeholders across all levels to embrace modernisation and the opportunities it brings.
- Leverage external expertise: Partner with technology providers and consultants to bridge knowledge gaps and accelerate transformation.
Navigating the complexity of change – Long-term insurance’s unique challenges make transformation a slow and deliberate process. Unlike short-term insurance, where policies are renewed annually, long-term insurers deal with policies that often outlast the careers of the professionals managing them. This longevity necessitates a careful balance between innovation and continuity.
One of the most pervasive issues is the concept of “temporary solutions.” Paul highlighted how systems initially intended as stopgaps often become permanent fixtures, compounding inefficiencies over time. Breaking this cycle requires a clear vision, strong leadership, and the willingness to make difficult decisions.
The Path forward – Despite these challenges, the future of long-term insurance in South Africa looks promising. The combination of healthcare and insurance innovation positions the industry for sustained growth and global recognition. To capitalize on this momentum, insurers must:
- Integrate AI thoughtfully: Use AI to enhance, not replace, human capabilities.
- Strengthen core systems: Invest in modern, scalable infrastructure to support long-term goals.
- Promote collaboration: Foster partnerships across industries to drive holistic innovation.
- Adapt to consumer needs: Design products that reflect the evolving expectations of a digitally savvy customer base.
The long-term insurance industry is entering a new phase of transformation, where the interplay between innovation and foundational strength will determine its success. By addressing legacy challenges and embracing the opportunities presented by AI and healthcare integration, insurers can build a future that is both resilient and customer-focused.
As Paul Donnelly eloquently put it, the industry’s evolution requires a strong foundation to support the innovative structures of tomorrow. It is an achievable challenge that, if met with the right strategies and partnerships, will redefine the future of long-term insurance in South Africa and beyond.
FINEOS is a leading provider of core systems for life insurers globally with 7 of the 10 largest Life insurers in the U.S. and 70% of the Australian group insurance market using the FINEOS Platform. The FINEOS component-based Platform, including FINEOS Claims, is the only purpose-built, end-to-end SaaS solution for the Life & Employee Benefits market. It is now entering the South African market.