Unlocking new markets through digital innovation

African insurance providers who adopt a digital mindset can leverage innovative technologies to develop new business models and services that position them for growth. Kelly Preston, data analytics manager at SilverBridge, discusses the potential of the continent.

“According to Deloitte, South Africa accounts for more than 80 percent of Africa’s total gross insurance premiums. So, even though the country has one of the highest insurance penetration rates in the world, there are significant opportunities for service providers to reach previously untapped markets,” she says.

Given the size of the unbanked population in Africa, insurers who can bridge the gap between formal structures and more innovative ways of collecting premiums (think mobile solutions), will be the ones that gain a foothold. Much has been written about how digital solutions can reduce costs and improve efficiencies. In Africa, their potential is so much more.

“Just like any other continent in the world, Africa has woken up to the need for customer-centric solutions. While this talks to any industry sector, it is in insurance where companies can really drive more forward-thinking ways of catering for end-user demands. This innovation does not necessarily have to be too far ahead of its time (cryptocurrency and on-demand insurance are examples) but rather concentrate on getting people ‘connected’ from an insurance perspective.”

Mobile first

With research showing that 66 percent of people in Sub-Saharan Africa do not have bank accounts, the primary goal of any insurer should be on how to address this challenge. Mobile presents an effective and ubiquitous way of helping make the transition.

“Considering that Africa is viewed by many as a mobile-only continent, it is surprising that more service providers have not capitalised on the potential that the likes of USSD and mobile apps present. Granted, a small percentage of consumers use smartphones in Africa, but feature-phones are virtually everywhere. With Facebook and others using this as a platform to offer solutions geared for these entry-level devices, the time has come for insurers to wake up to the potential as well.”

Not only do SMS messages offer insurers more effective ways of communicating with customers than email and letters, but they also provide a more reliable way of capturing demographic information as well as what the specific needs of those customers are. Furthermore, mobile users are comfortable in buying airtime, data, and other basic services using their phones. So, why not make the transition and include insurance to the mix as well?

“Think about the potential that using airtime to purchase an insurance product could have for an expanding customer footprint. The focus here is on low value but consistently delivered insurance solutions where users take control of their cover in more direct ways than traditional banking solutions can offer.”

Even though insurtechs are putting the pressure on service providers to become more agile, if the incumbents focus on gaining momentum in the unbanked sector across the continent, then they will create more market opportunities for themselves.