By WP Pienaar, Chief Underwriting Officer: Commercial and Agri Assets at Old Mutual Insure.
Following a challenging 2017, the South African insurance industry must adopt technology and collaborate with local governments, if it is to effectively tap into new markets to stimulate growth for the foreseeable future.
Many sectors have been very quick in adopting new technology, like the financial services industry, who have been at the forefront of technological innovation. It is time the insurance sector does the same.
Luckily, we have seen certain pockets in the insurance industry follow suit, such as Lemonade, who launched an AI claims bot. It has the potential to investigate and approve a personal lines claim in a record, yes wait for it, 3 seconds! This is a giant leap for the insurance industry. Proper use of technology will vastly improve customer experience. It will also allow insurers to properly assess a client’s exposure, underwrite and price it appropriately.
To stay relevant, insurers must adopt technology and redefine their market. According to the Automobile Association (AA) between 65% and 70% of the 11,4 million vehicles on the road are uninsured. Why is this? Simply put, a vast number of South Africans can’t afford insurance. Our industry needs a concerted effort to provide every single South African access to affordable insurance.
This won’t be easy. The industry faces many challenges in 2018 which needs to be attended to. They are:
Changes in regulation
There are many expected changes to local regulation that will have significant effects on the insurance industry. These include the Retail Distribution Review (RDR), Policy Protection Rules (PPR), Protection of Personal Information (PoPI) and Treating Customers Fairly (TCF).
Much has been said about these changes, suffice to say Insurers need to properly understand the impact of these changes and ensure they have systems and processes in place to properly manage these changes.
The effects of Climate Change
Insurers need to prepare for more frequent and more severe weather incidents. This could be as varied as more severe hailstorms in certain regions and more droughts in other. Insurers need to properly understand the impact of these changes, for example, extended droughts also mean that fixed firefighting systems may not work properly anymore.
Staying ahead of technological innovation
Technology is a key enabler for insurers. Robotics could reduce time spend on mundane tasks and artificial intelligence could enhance decision making, but at the same time, cybercrime is on the rise. Insurers struggle to come to grips with technology that is developing faster than they can cope; drones, cybercrime and driverless cars are just a few developments insurers need to internalise and understand.
There are indications that millennials now outnumber other working generations. However, there are very few insurance products that actually cater to their needs. The way insurance is sold, is also not fully aligned with their needs.
The retention of technical skills
The insurance industry has been losing its technical skills at a rapid pace. Very few people leaving school choose insurance as a career. The lack of skills has a negative impact on customer experience and will result in increased premiums as risks are not properly assessed and mitigated. The industry will have to introduce accelerated learning programmes to ensure we build the skills the industry needs.
Collaboration for future success
Besides the many challenges, the insurance industry is well positioned to better predict, anticipate and adapt their approach to the dangers of climate change. Insurers should partner with local government to firstly get an appreciation of the level of accumulation and secondly to prepare an integrated and holistic disaster management strategy.
By doing this, the damage caused by localised flooding can be managed if the exposure is understood and development of new property in flood zones and high-risk flood areas is carefully managed or discouraged.