A game-changer for South African insurers

Major advances in artificial intelligence, data analytics and the Internet of Things (IoT) have fuelled the growth of the global insurtech market, while offering new opportunities for legacy insurers to optimise their operations, improve customer service and better manage risk.

According to Gary Tessendorf, Regional Director at Sapiens South Africa, this is a dynamic that has insurers across the globe investing millions in digital transformation.

Insurers’ commitment to change

“Digital transformation entails much more than implementing technological tools and processes. It means a wholesale shift in organisational thinking, with digitisation driving every aspect of insurers’ operations – including smarter underwriting based on rich data analytics, personalised customer engagements, intelligent claims management and more,” said Tessendorf.

“While the South African industry has been somewhat hesitant to adopt total digital transformation, according to a recent PwC analysis, insurers are stepping up their investments in technological capabilities,” added Tessendorf.

“KPMG’s 2018 South African Insurance Industry Survey found that 80 percent of insurers are making either significant or moderate investments in advanced data and analytics, and in their organisations’ overall technology architecture. Insurers’ commitment to technological change will be essential to boosting the industry’s financial performance and better serving South African consumers, more than 80 percent of whom own smartphones,” continued Tessendorf.

How then, Tessendorf questions, can insurers achieve the paradigm shift necessary to realise the benefits of digital innovation?

The benefits of digital innovation

“Digitally enabled IT systems are crucial to the success of any transformation strategy, but 47 percent of insurers state that the difficulty of integrating legacy IT systems and new technologies is limiting the effectiveness of their investments in technology… achieving the necessary harmony is easier said than done. This makes it all the more important for insurers to clearly define the parameters of their digital transformation strategies and to utilise application program interfaces (APIs) that can integrate legacy systems with new innovations,” emphasised Tessendorf.

“Achieving this harmony will enable insurers to fully take advantage of the treasure trove of data being generated by customers, connected devices and third parties. Analysis of customer data can help insurers match customers to the right products, create personalised customer experiences and identify risk,” added Tessendorf.

“Consider the case of a flood insurer: due to the many IoT devices deployed throughout today’s smart homes, sensor-generated data can keep the insurer updated in real time on the status of the home’s pipes and other relevant infrastructure. This data can alert both the insurer and the consumer to heightened risks of a flood and can even lead to proactive repairs that prevent flooding and the need for a costly claim pay-out,” continued Tessendorf.

“Meanwhile, by implementing automated workflow and task management tools, insurers can mitigate human error, more efficiently process applications and claims, and quickly deploy new products and benefits tailored to fit the market’s needs. For example, an auto insurer’s AI-based fraud detection system can examine a wide range of data – vehicle telematics, accident-scene imagery, weather information, traffic data and much more. The system can efficiently process and decide on a claim; according to McKinsey, one European insurer saw an 18 percent improvement in fraud prevention due to its deployment of an AI-driven system,” said Tessendorf.

The future of insurance

While digitisation and automation will fundamentally reshape the future of insurance, Tessendorf said they won’t eliminate the need for human professionals.

“The integration of new technological tools and business processes requires a skilled workforce capable of implementing and managing the change. South African insurers should invest in research and development and employee upskilling to allow their workforces to work effectively alongside and with technology,” emphasised Tessendorf.

“For insurers to fully unlock the potential of digital transformation, they must see it not as a destination, but as a process. New innovations and tools will emerge over the coming years, and by adapting to new market and technological dynamics, insurers can stay competitive over the long term,” added Tessendorf.

“President Cyril Ramaphosa has hailed the digital revolution as ‘an opportunity to build an entrepreneurial state’. Insurance may seem an unlikely starting point for entrepreneurial innovation, but South African insurers have the chance to show what’s possible when organisations commit to true transformation,” concluded Tessendorf.

Writer’s Thoughts:
There is value in digitisation. At the rate it is developing only time will tell what the future will look like. The people who are going to survive are the people who adapt and adopt. And as Tessendorf mentioned, digitally enabled IT systems are crucial to the success of any transformation strategy making it more important for insurers to define the parameters of their digital transformation strategies and to utilise APIs that can integrate legacy systems with new innovations. Do you agree? Please comment below, interact with us on Twitter at @fanews online or email me your thoughts myra@fanews.co.za