Following a challenging
2017, the South African insurance industry must adopt technology and
collaborate with local governments, if it is to effectively tap into new
markets to stimulate growth for the foreseeable future.
Many sectors have been
very quick in adopting new technology, like the financial services industry,
who have been at the forefront of technological innovation. It is time the
insurance sector does the same.
Luckily, we have seen
certain pockets in the insurance industry follow suit, such as Lemonade, who
launched an AI claims bot. It has the potential to investigate and approve a
personal lines claim in a record, yes wait for it, 3 seconds! This is a giant
leap for the insurance industry. Proper use of technology will vastly improve
customer experience. It will also allow insurers to properly assess a client’s
exposure, underwrite and price it appropriately.
To stay relevant,
insurers must adopt technology and redefine their market. According to the
Automobile Association (AA) between 65% and 70% of the 11,4 million vehicles on
the road are uninsured. Why is this? Simply put, a vast number of South
Africans can’t afford insurance. Our industry needs a concerted effort to
provide every single South African access to affordable insurance.
This won’t be easy. The
industry faces many challenges in 2018 which needs to be attended to. They are:
Changes
in regulation
There are many expected
changes to local regulation that will have significant effects on the insurance
industry. These include the Retail Distribution Review (RDR), Policy Protection
Rules (PPR), Protection of Personal Information (PoPI) and Treating Customers
Fairly (TCF).
Much has been said
about these changes, suffice to say Insurers need to properly understand the
impact of these changes and ensure they have systems and processes in place to
properly manage these changes.
The
effects of Climate Change
Insurers need to
prepare for more frequent and more severe weather incidents. This could be as
varied as more severe hailstorms in certain regions and more droughts in other.
Insurers need to properly understand the impact of these changes, for example, extended
droughts also mean that fixed firefighting systems may not work properly
anymore.
Staying
ahead of technological innovation
Technology is a key
enabler for insurers. Robotics could reduce time spend on mundane tasks and
artificial intelligence could enhance decision making, but at the same time,
cybercrime is on the rise. Insurers struggle to come to grips with technology
that is developing faster than they can cope; drones, cybercrime and driverless
cars are just a few developments insurers need to internalize and understand.
Attracting
millennials
There are indications
that millennials now outnumber other working generations. However, there are
very few insurance products that actually cater to their needs. The way
insurance is sold, is also not fully aligned with their needs.
The
retention of technical skills
The insurance industry
has been losing its technical skills at a rapid pace. Very few people leaving
school choose insurance as a career. The lack of skills has a negative impact
on customer experience and will result in increased premiums as risks are not
properly assessed and mitigated. The industry will have to introduce
accelerated learning programmes to ensure we build the skills the industry
needs.
Collaboration
for future success
Besides the many
challenges, the insurance industry is well positioned to better predict,
anticipate and adapt their approach to the dangers of climate change. Insurers
should partner with local government to firstly get an appreciation of the
level of accumulation and secondly to prepare an integrated and holistic
disaster management strategy.
By doing this, the
damage caused by localised flooding can be managed if the exposure is
understood and development of new property in flood zones and high-risk flood
areas is carefully managed or discouraged.
By
WP Pienaar, Chief Underwriting Officer: Commercial and Agri Assets at Old
Mutual Insure