Insurers in the African market are facing a number of challenges at a time when there are significant opportunities available. Not only do they have to comply with tighter regulatory and governance requirements, but they also need to respond to an emerging customer demand for doing business online.
From a legislative perspective, insurers across Africa are struggling with one or more of the following types of legislation that require a change in their administration systems:
- Legislation against composite insurers: companies that once sold life and short term insurance now cannot, which means the benefits of cross selling and economies of scale have been replaced with financial restructuring and a separation of capital requirements
- Legislation limiting shareholding: financial restructuring with the risk of the loss of a trading licence for non-compliance
- Legislation requiring a demonstration of financial health: without a robust IT system, proving validity of financial data from insurance administration can be a significant burden
- Legislation requiring director integrity
- Not legislated, but general move towards inclusivity: cost-effective distribution channels and microinsurance products
Amidst the pressure and cost of legislative compliance, Africa has entered the age of mobile. Mobile is driving a second internet revolution even more profound than the first, providing a huge opportunity for firms which embrace modern technology. This is especially true in the African insurance market, where consumers are by-passing desktop internet connections and going directly to hand-held devices.
Africa has the third fastest expanding economy, with more rapid growth than any other continent, resulting in the potential for greater discretionary spend. As a result, there were already more than 750 million subscribers to mobile services in Africa by the end of 2012, and penetration is expected to reach 84% by 2015.
With mobile use growing at such a rapid pace and the likes of M-Pesa and Fundamo already processing billions of dollars in transactions every year, insurers need to raise their game.
However, in both this scenario and in terms of compliance with legislative requirements, insurers are being held back by legacy systems that are costly to maintain and unable to respond fast enough to the demands of the connected world.
To deliver insurance products and services effectively on the ground, insurers and managing agents need a modern, flexible insurance solution. Obviously this is easier for start-ups, so firms with existing legacy systems need to ensure they replace these in the most effective way.
Traditional systems replacement has proved to be high risk and expensive, with a rigid path to ensure delivery and missed business opportunities. As a result, a more controlled move from legacy systems is required to provide technology that mirrors the needs of the business and enables it to move to the connected world.
Those who adopt such a tactical approach quickest will benefit from higher business value over time and reap the reward of significant premium growth.
About the Author
SSP is a global provider of technology systems and solutions across the entire insurance industry, using our expertise to enable our customers to transform their business and increase their profitability. SSP provides core technology solutions, distribution and trading capability, advanced analytics and solution delivery. We work with 8 of the top 10 UK insurers, 4 of the top 10 global insurers and over 40% of UK Brokers. Our unique position in the market, including the largest market share of UK e-trading, enables us to provide leading data insight and unrivalled distribution. Our knowledge, talent and technology capabilities deliver innovative results that make us the partner of choice for our customers.Follow on Twitter More content by SSP Worldwide