South Africa’s insurance industry under threat

Craig Terblanche, regional director for Outsystems SA.

South Africa’s insurance industry will be seeing rapid change in the next five years, with incumbents losing market share to digital transformation, as young, dynamic entrants grab the opportunity.

Recent research findings show that of the 30 insurers in the local market only 12 have started moving into the mobile space. And, of those 12, less than 25% have useful mobile apps.

Customers abandoning ship

South African insurers are offering customers the mobile applications that they think customers want, but are not offering them what they need. Emergency assistance, personal safety and accident support with the click of a mobile app are bolt-ons outside of the existing customer journey that do not offer the consumer true value.

The truth is that digital transformation is not about one app.

The modern consumer expects mobile options that enhance existing services such as policy document retrieval, being able to manage their policy information online, updating the value of home contents and reviewing debit order or changing financial details.

While a quarter of the current market has considered some sort of digital platform, they seem to be mimicking the banking industry rather than addressing their customers needs directly.

Insurers need to use digital transformation to increase convenience and reduce customer churn.

Out with old – in with the digital

Insurance companies appear comfortable and lazy, leaving them exposed to young and dynamic business innovation.

This leaves the current insurers, who are using no claim bonuses and loyalty programmes to retain customers, open to new technology disruptors or insurance companies entering the industry that will provide a different model.

The insurer of the future, needs to be able to offer its customers new interactions that improve their experience, serve them better and make them want to go on a journey with them across the product portfolio. This experience and the efficient nature of digital will keep them price and service competitive.

The new generation insurers, some of which are already entering the industry, will become the front-runners, making the gap between first implementers and the rest almost impossible to close.

The new business model doesn’t only offer a mobile app, but an improved digital customer journey, one that reaches customers on their terms, across any channel from the “consideration” phase of the journey where a customer makes first contact or requests a quote all the way through to the retention phase where a customer can, for instance track their claim or manage all risk items and household contents on mobile. This increased understanding of the risk profile will allow insurers to be more creative in offering intermediate, on-demand products such as travel insurance.

Using the current customer data and digitising their core products will ensure a seamless and positive experience with the business by shaking hands with or touching the consumer as many times as possible, in a targeted manner.

This trend will also affect brokers, who are at risk of becoming obsolete, not because they don’t add any value, but rather because they are disintermediated by digital alternatives.

Why no change?

CIOs are hesitant to transform due to the inherent risk of change. In the past they have been burnt by six to 12 month software development projects that inevitably run over budget. They can now benefit from new technology that offers application development on a mature, low maintenance and secure platform within weeks, meeting the allocated budget.

This is where CIOs, who are still seen as a cost and not a profit centre, may be left merely keeping the lights on while the CMO, and the new CDO (Chief Digital Officer), who understand the value of digital transformation and being first to market, take the lead.

Europe is beginning to talk about a digital tipping point where the ability to quickly integrate core insurance products with customer, broker, supplier and 3rd party processes to deliver Minimum Valuable Products into the market happens in a matter of weeks.

The result? The enablement of integrated customer processes and an end-to-end journey that allows insurers to “hold their customers hand” throughout the relationship, and have the flexibility to adapt to their needs along the way. This requires an open standard software stack with rapid change capability.

While governance and compliance, in the heavily regulated financial services sector may be seen as a barrier to entering the digital world, it is possible to extract the complexity through micro-services and a digital delivery capability..

Modern technology platforms address governance and compliance as well as security concerns and supply the enterprise grade security that business needs.

This growing business pressure is amplified by poor local economic conditions, and now is the time to change digital capabilities or risk getting much of the same.

Slow, complex, poor customer engagement.