Good news in tough times
If you are expecting to read another newsletter about the challenges that the current global economic climate poses… I am the bearer of good news.
This is not another one of those newsletters. In fact, economies around the world are gaining momentum – albeit at a slow pace – and are showing some growth.
Breaking free of chains
We are all acutely aware that the growth of insurance is directly related to economic conditions. When times are tight, insurance gets pushed to the back of people’s minds. When times are good, insurance can start elbowing its way to the front.
Speaking at the 3rd annual African Insurance Forum, Gary Jack – Country President Chubb Insurance South Africa – pointed out that it is as if the world is starting to test the strength of the chains that the Global Financial Crisis had it bound in.
“Expectations are that the global economy will grow by an estimated 3.4% during 2017. This will largely be driven by growth from emerging markets which are showing significant resilience. Africa has some of the world’s fastest developing economies and China, as well as India, are showing immense growth despite their own structural problems,” said Jack.
Greenfield opportunities
The growth in the world economy offers many opportunities for new growth (whereby companies will not have to rely on upselling to existing clients).
This is good news for insurers. According to Jack, growth in global premiums during 2016 was 2,4%; this is expected to grow by a further 2,2% in 2017. Again, the majority of this growth will come from emerging markets in Africa and South America.
“If we look at insurance penetration in Africa, it currently sits at 3,6%. If we take South Africa out of the equation, it drops to 1%. This is way below the global average; and if companies keep their eye on Africa over the long term, their growth prospects will have a bright future,” said Jack.
The digital monster
He added that digital transformation is currently a big theme in the industry, particularly in the property and casualty sector which is apparently falling behind the curve.
“As an industry, we must be scared of technological transformation. It allows insurers with the opportunity to align themselves with client expectations; especially when it comes to the internet of things (IoT). Until recently, IoT was an unknown quantity in the market. But like telematics in motor vehicles, connected devises provides key insights into our clients browsing and online purchasing habits. And this will only grow; in the 1990s, there were 100 million connected devises in the world. By 2020, this is expected to increase to 50 billion devises,” said Jack.
Associated challenges
The digital revolution comes with its own challenges. It has provided companies who are not bound by corporate structures to become innovative and serve client needs in ways not known before. By using artificial intelligence, a client of US insurer Lemonade was able to process and approve a claim in 64 seconds. The payout of the claim alone took three seconds.
There is also a move towards pay-as-you-use insurance where clients can turn cover on and off as their risk increases or decreases.
This is all very well, but with expanded opportunities come expanded risks. With the move to have the majority of client history, and claims underwriting online, there is a risk of cyber crime. This has caused great concern within the industry as insurers don’t know how this risk will develop going forward. At the end of the day, insurers need to enhance their cyber offerings and capabilities without overstepping the realm of insurability.
“Insurers are worried about cyber, but they do not need to be. Almost any risk can be insured when we have the expertise to underwrite it and the information needed to understand and price it. It was the same with directors and officer liability when it first came out and now this is a common product,” Jack said in conclusion.
Editor’s Thoughts:
The key ingredient in this recipe is our appetite for risk; do we shy away from it as we would a undesirable meal or do we see it as a smorgasbord of opportunity? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts jonathan@fanews.co.za.
