Good insurers, brokers and advisers become market leaders because of their ability to recognise an industry challenge and work towards addressing it. As companies forge ahead in 2017, they hope to leave the challenges that 2016 brought behind them as a distant memory.
Most certainly, any company or individual operating in the financial services industry will not be effective unless they acknowledge the challenges they faced; there is no room for a head in the sand approach here.
A line from the Wizard of Oz comes to mind …we are not in Kansas anymore. The days of no challenges are behind us. This was the message presented at the recently held Insurance Institute of South Africa’s (IISA) market forum.
In an industry where there is little to no growth of new business, Africa poses an enticing option as the uninsured gap is significant. But are we really prepared for what expanding into Africa really means?
Delphine Maidou, IISA President and COO of Allianz Africa, pointed out that Africa is not really consolidated yet and is very much a continent made up of many independent states which have their own laws and challenges.
“One opportunity that Africa does present is that the continent has a young population. These young people are motivated to improve their lives and that of their families and are prepared to work hard to achieve this. It is no surprise then that five out of the world’s top ten fastest growing economies come from Africa. This is a major opportunity for insurers,” said Maidou.
South Africa has always been the powerhouse of Africa. Our position is based on the fact that we traditionally had the continent’s strongest economy and the most skilled workforce.
From an insurance perspective, this was entrenched even further by the fact that insurance penetration in South Africa has always been good.
South Africa’s position has weakened of late. Nigeria has overtaken South Africa as the continent’s biggest economy and has the biggest workforce on the continent. However, insurance penetration in the country is weak. So if an insurer has patience and a strong appetite for risk, this is a market that is worth expanding into as urbanisation gains momentum.
“There is a further trend which should be worrying to South Africa. A large portion of the revenue generated by some South African insurers is gained from African business. So there is a lot of money being spent outside of South Africa. This is a problem. Morocco is one of the biggest insurance markets on the continent and only 7% of their investment leaves the country,” said Maidou.
A digital world
One of the biggest trends impacting the financial services industry is technology. In a world of fast connectivity and the ability to gain key insights into your clients’ daily lives through the mining of Big Data, skills will become an important issue in the industry.
Wayne Abraham, MD of AIG Africa, said that while technology will bring positives into the industry, there will be some negatives.
“A recent survey done on a worldwide audience shows that while employees are willing to wear wearables, they want to opt into the process as opposed to opting out of the process. This will also be done if they are assured that data will be managed in a professional and careful manner by employers who must inform them what information they are collecting and what they will be using it for,” said Abrahams.
Interacting with a shared economy has major advantages. Companies do not have the guess work involved with building a product or service that will hopefully benefit some customers but probably not all. Clients are now able to tell them what they want and what they expect.
Tending to fires
This is also where the challenge comes in. How do insurers design products in this market? Uber is replacing cars, Airbnb is replacing hotels and Facebook is replacing media companies. There is a definite trend to insure the individual. But when that comes into play there needs to be an option to switch insurance on and off when liabilities or risk arise and go away.
In a world that is connected in the manner that ours is, it doesn’t take much to gain traction… be it good or bad. Clients expect professionalism and are very demanding when it comes to the levels thereof. If you make a difference in a client’s life they will most probably sing your praises from the roof top telling their friends about your service. But if you make, a mistake the world will hear about it.
Trust is set to become the new buzzword in the industry. Service will be defined as your ability to gain and then grow your client’s trust. Insurers, brokers and advisers need to focus on what the industry does to build trust, and then make a meaningful contribution.
None of the above is easy. Money leaves South Africa because we are not confident enough in our government and the local market to invest meaningfully in it. Further, there is no easy solution to the technology quandary because it is never static, it is always moving what are your thoughts?. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts firstname.lastname@example.org.