Consolidation is taking place in the East African insurance market due
to rising capital requirements and mergers with international firms that
want to gain a foothold in the region. Ashok Shah, Group CEO of APA
Apollo examines the opportunities this brings.
“In addition to operating in such a dynamic business environment,
insurers in East Africa have access to a growing young population with
significant purchasing power. This is especially the case in Kenya which
EY ranked as one of the continent’s most mature insurance markets with
strong growth potential.”
Urbanisation and developing economies will likely spur increases in
annual insurance premium income in the region. However, the market still
needs to overcome challenges common to the sector in the emerging
world.
For example, insurers are struggling to expand coverage to the large
informal sector and income-sensitive population. For this sector of the
population, insurance remains a secondary or tertiary need.
“Having said that, millennials will provide new avenues for growth.
Selling to this segment via mobile is easier than ever but products must
be designed to have a limited life cycle to appease the instant
gratification culture of this generation. While a lack of trust and
fraud remain difficult to combat, insurers must embrace technologies
like artificial intelligence to counter it and be able to pay claims
faster. This is critical to capture the attention of this younger
customer segment.”
Reaching the uninsured
Given how mobile is becoming increasingly pervasive, it must be the
primary platform for growth. According to the Communications Authority
of Kenya, [mobile] penetration in the country stood at 88.1 percent as
at the end of September last year with 37.8 million subscribers.
“The growth in mobile phone ownership is the most dominating factor
compared to other technologies. It can reduce risks by controlling cost,
increasing productivity, and enhancing the customer experience.”
But even though other industries are adopting mobile because of its
convenience and reach, insurers in East Africa are still slow in the
uptake. Critically, mobile technology can have a huge impact on the
insurance industry by attracting new customers and retaining former
policyholders.
“Access to a mobile device is the first step towards broader financial
inclusion since it allows people to access affordable financial products
like insurance.”
Embracing innovation
Even though insurance in Kenya is mainly sourced through agents,
brokers, or directly by insurance companies, this is changing as
insurers are moving from a product-focused sales process to one
determined by the needs of the customer.
“Real‐time data at the point of sale and ability to drive needs‐based
selling is a growing priority of insurance in Africa not just Kenya or
the region. Additionally, evolving technology and changes to the
regulatory environment are driving significant shifts across the
insurance distribution landscape.”
Even though the need for insurance to be sold more directly and at a
lower cost is not new, the need to do it has changed into an
organisational priority. Similarly, the adoption of bank assurance in
Kenya have seen these financial institutions become intermediaries
themselves by forming an agency.
“They market insurance and receive a commission. For them, the
commission becomes an extra income while the risk remains with the
insurer. The opportunity to automate the business by using technology is
important for a quick execution. Here, two different systems need to be
integrated. However, it becomes an important market for an insurer as
it can increase the market share for the insurance industry as the
bank’s database can represent a significant client base.”
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