The COVID-19 pandemic has proven challenging for sectors across the South African economy, and insurance has been no exception.
Research by McKinsey & Company suggests that the market’s total gross written premium (GWP) pool is on track to decline by 15% over the next two years, with a return to pre-pandemic levels unlikely before 2024.
But with 70% of the African insurance market’s premiums, South African insurers start their recovery from a relatively strong foundation. And with substantial digital penetration in financial services – particularly in online and mobile banking, where McKinsey predicts that post-pandemic usage will be 37% higher than before COVID-19 – there’s ample reason for optimism that insurers can enjoy success by providing customers with accessible, intuitive, and seamless digital experiences.
What’s more, insurers can ride a wave of digital innovations that make it easier to quickly scale digital transformation and attractive new offerings that will power their performance throughout the 2020s and beyond.
Here’s a closer look at the challenges facing South African insurers and how they can seize the digital opportunities necessary to overcome them.
The Current Landscape
Like many of their counterparts across the globe, South African insurers have spent the past year in firefighting mode: grappling with a dramatic surge in claims, shifting to remote operations virtually overnight, and dealing with a host of customer relations issues stemming from the pandemic and its economic fallout.
On top of these unforeseen challenges, insurers have also been addressing new data privacy requirements under the Personal Protection of Information Act ahead of a July 1, 2021 compliance deadline.
With so many short-term issues to address, that’s hardly a climate conducive to long-term strategic thinking. This makes it harder for South African insurers to catch up with tech-forward organizations that have been leveraging digital channels and cutting-edge technologies like artificial intelligence to make insurance more efficient, personalized, and user-friendly.
To be sure, the South African market has given rise to an impressive crop of InsurTech startups, but these companies represent a small part of the wider ecosystem.
The good news is that a more innovative insurance ecosystem doesn’t require uprooting the entire industry or pursuing a wholesale transformation. In fact, there are even silver linings that come with being a digital laggard – as long as South African insurers seize this moment to get the future of insurance right.
Riding the Wave
Just as the entire insurance industry need not be uprooted, insurers don’t have to upend their entire operations simply to deliver better digital experiences and unlock the new revenue opportunities that come with them.
APIs make it possible for insurers to integrate new product and service offerings with quick time to market and at lower cost, as APIs can be added on to existing portals. Enterprise Service Buses (ESBs), for instance, facilitate seamless data-sharing among different systems. Insurance digital suites function similarly to ESBs and provide no-code or low-code development platforms, API and integration management tools, and support for partner ecosystems, including with third-party technology vendors.
Harnessing insurance digital suites provides insurers access to advanced customer analytics, insights, and efficient operational capabilities – driving the creation of new business offerings, enhancing personalized service, and boosting productivity, without needing to make hefty (and potentially unfeasible) investments in human resources and entirely new business models. This is a significant advantage at any time, but particularly in a turbulent period like the present, when innovation remains an imperative but insurers need to achieve it with minimal disruption to their business operations.
The InsurTech wave need not wipe out traditional players. As long as they have the right tools to ride it, they can reach new shores of high performance, personalized policies, and productive operations.