Keeping growth in check
Reinvention is not a new phenomenon. Many successful people had to reinvent themselves time and again before they achieved success. Most notably, Donald Trump went bankrupt four times before he became the real estate mogul that we know him to be today. Richard Branson has also had his fair share of failed business ventures prior to his Virgin Empire.
The global macro-economic environment is challenging; growth is slowing and there is a heightened sense of risk. Despite this, Africa is one of the fastest growing continents in the world, and we can’t allow this growth to stop.
Significant growth markets
Speaking at the 2016 African Insurance Conference, Gary Jack – ACE Insurance South Africa CEO – pointed out that 2016 promises to be a year of significant readjustment for many economies in Africa. He also added that Sub-Saharan Africa is still the fastest growing region in the world after the emerging economies in Asia.
This is particularly evident when we look at the global growth in short-term insurance premiums in 2015. Jack pointed out that while short-term premium growth in advanced economies grew by 1.7% in 2015, similar premium growth in emerging economies grew by 7.9%.
This points to the fact that the growing middle class in emerging markets are becoming more savvy with their money and that they see the value of the financial services sector.
Going heavy into Africa
It makes sense for companies to expand into markets where there is significant demand. However, Jack warned that expanding into Africa is not for the faint hearted. “Premium growth is often elastic and is heavily influenced by changes to Gross Domestic Product growth in emerging markets. Where insurance penetration and risk awareness is low, there is significant opportunity for growth,” said Jack.
He added that income is the main determinant of penetration. Insurance penetration will increase as economic growth, income per capita and insurable exposures increase. The region remains dependent on capital inflows to finance infrastructure and government spending.
“As insurable exposures continue to increase, and Africa becomes more integrated into what is increasingly a globalised, interconnected world, opportunities and challenges are bound to increase,” said Jack.
Technology concerns
Jack pointed out that technology is a major concern for businesses and risk managers believe it needs to be raised further up on the agenda. Cyber-attacks, data theft and hacking are among the most common red flags.
Areas where the insurance industry can improve include:
- The provision of broader solutions which cover the risks associated with technology risk such as reputational damage; and,
- The development of more tailored products and moving away from the tendency to package solutions into relatively inflexible off-the-shelf products.
“Four out of five risk managers surveyed in industry regard the insurance industry as essential for managing technology risk. However, 45% say that technology risk is an area where the industry most needs to develop,” said Jack.
The usual suspect
What would an article about growth challenges be without a word on regulation. It is a growing concern worldwide and it is set to make an impact in Africa in a big way.
“Growth and diversification on a global scale means that regulatory risk is becoming an increased source of concern. National authorities are becoming more proactive and at times more parochial when it comes to regulation. Regulatory regimes are increasingly becoming more fragmented and the issues are becoming more complex,” said Jack.
Editor’s Thoughts:
Technology can also present insurers with significant opportunities. Technologies such as mobility, social media and telematics will disrupt traditional models but can also kick start growth. It’s all about how you approach the issue. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts [email protected].
