Can Technology and Connectivity disrupt Insurance?
By Tenu Awoonor
On my way to the Pinet eInsurance conference hosted in Lagos recently, I asked myself a question. What does insurance have to do with telecom or technology for that matter? Plenty I concluded! According to a Business Day Nigeria article I recently read, the size of the insurance market in Nigeria is approximately $1.6 billion. With about 60 insurance companies in Nigeria, 6 of which control more than 60% market share. Meaning that that 50+ companies control only tiny fragments each thereby making it a fiercely competitive arena for anyone looking to grow. Interestingly also Nigeria is #1 in internet penetration in Africa and #8 in the world. So with no change in the business model in decades, the only way for the other 50 smaller players to grow is either consolidation or innovation using technology.
With the boom in internet penetration and adoption of new technologies, consumer habits and enterprises are ever evolving and disrupting traditional business models across industries from logistics to hospitality. The question is, are insurance companies keeping pace? I will give examples. Some of you may have heard of the sharing economy that is upon us, led by new age companies like AirBnB and Uber both of which are using connected technology to disrupt traditional businesses. AirBnB is only a few years old but yet already valued at over $10 billion. All one has to do is download the app onto your smartphone and you can easily manage and own your own hotel, without the expensive overheads that go with a traditional setup. One of the major challenges AirBnB encountered at the onset was that none of the established insurance companies were willing to underwrite any kind of insurance for it. A similar scenario played out for Uber that also struggled to get coverage for drivers and passengers when the car was being used for business vs. personal use. Practically all the insurance companies were unwilling to innovate and capture this new market opportunity made possible by technology.
These are now multi-billion dollar corporations that were forced to plug the gaps themselves or work with insurance startups to innovative their models and fill the gap. Technology it seems is rapidly transforming consumer habits and business models at a pace that many traditional businesses, including insurance are unable or unwilling to match. However, we must also be cognizant that change creates opportunity. Start-ups are embracing digitization and new technology to enhance their risk profiling of consumers, using new media to adapt their business models to reach and attract consumers from traditional establishments. Connectivity is making all this possible, therefore the establishment must either modify business models for the digital age or risk going the way of the neighborhood video-store.
Telecoms like Airtel understand the role technology plays in providing insurance coverage. They have developed a product called Airtel Insurance which essentially provides life insurance in the event of death and hospital insurance in case one is admitted into a hospital for a small monthly premium. Consumers, who subscribe to the service, must recharge a minimum of 1000 Naira every month, to receive the coverage benefit. The more you recharge, the higher the coverage limit you received. These are some of the types of innovations that enable the use of technology to touch new consumers, and we have 34 million of them for you to reach.
If you don’t disrupt, someone else is going to do it for you.
*Tenu Awoonor is an international business executive with experience in both the private and public sectors. He has proven himself to be a telecommunication and turn-around specialist, specifically in mobile and financial services arena. On twitter, his handle is @TAwoonor