Latest report of leading global development group, PwC has revealed that the opportunities for growth in Africa’s insurance industry are huge despite recent economic and political uncertainty. The new document averred that Africa’s insurance industry has done well to adapt to continuous disruption, with technological advances now considered the most important global trend disrupting the industry. Despite the additional pressures of unrelenting regulatory and insurance accounting changes, and the huge costs associated with the changes, there are also some positive developments and opportunities for growth.
Some of the key highlights from a report issued by PwC (www.PwC.com) Tuesday on Africa’s insurance industry.
PwC’s report – ‘Ready and Willing: African insurance industry poised for growth’ – comes at a time when economies on the African continent are starting to show signs of real growth on the back of recovering global commodity prices.
In his review of the report, Victor Muguto, Long-term Insurance Leader for PwC Africa observed that “The insurance industry across Africa continues to be one of the most disrupted, but at the same time the industry continues to innovate and adapt to take advantage of the many opportunities for growth that are also emerging”.
“In the years following the global financial crisis, economic and political uncertainty across the continent slowed down economic and insurance sector growth. Despite this, Africa’s insurance market remains one of the least penetrated in the world and the opportunities for growth are tremendous.”
Africa’s insurance industry is facing more disruption than any other industry, posing challenges for some while opening up business opportunities for others. The pace of change in the insurance industry has taken place more rapidly than originally anticipated and will accelerate further.
“Leading insurers are already implementing key strategies to focus on new customer behaviours and demographic shifts. The need to be agile in the face of a rapidly changing technological environment has never been more vital,” says Pieter Crafford, Financial Services Advisory Leader for PwC South Africa.
The survey identifies four main themes that are transforming the African insurance industry:
Technology and data ‘revolution’: Technology and data are now considered the most important global trend disrupting the industry, but they are also increasingly being used by the industry to accelerate growth. Across all of Africa, the increased use of technology, on the back of the exponential growth of mobile phones, has significantly contributed to the large amount of new customers and more tailored products. Technology presents insurers with powerful tools to better understand customer needs and expectations through data mining capabilities and artificial intelligence (AI).
However, it is expensive and not always easy for insurers to “go it alone”. Consequently, some insurers have formed partnerships with technology companies to improve operational efficiency and respond quickly to changing customer expectations. Technology, specifically mobile phones, social media, and data analytics are seen as the top enablers to increase access to new customers, at reduced cost and to analyse behavioural data, in order to design new, more appropriate products.
Regulatory and accounting changes: Behind technology, insurers also identified stringent risk based prudential capital and market conduct regulations as the second most disruptive issue. By now, most insurers are used to regulations and this has become “business as usual”.
Insurers across the African continent have embraced the regulatory changes, and are ready and willing to comply with new legislation and regulations. But, while most insurers have adopted new ways of compliance, the introduction of IFRS 17 is also expected to add new pressure.
