Africa’s insurance industry is facing more disruption than any other industry, posing challenges for some while opening up business opportunities for others.
According to a new analysis by PricewaterhouseCoopers (PwC), the second largest professional services firm in the world, opportunities for growth in Africa’s insurance industry are huge despite recent economic and political uncertainty.
PricewaterhouseCoopers is a multinational professional services network headquartered in London, United Kingdom. It is one of the Big Four auditors, along with Deloitte, EY and KPMG.
PwC has a presence in 34 Africa countries with an office footprint covering 66 offices. With a single Africa leadership team and more than 400 partners and 9,000 professionals across Africa, the company serves some of the continent’s largest businesses across all industries.
The group’s research revealed that Africa’s insurance industry has done well to adapt to continuous disruption, with technological advances now considered the most important global trend disrupting the industry.
“Despite the additional pressures of unrelenting regulatory and insurance accounting changes, and the huge costs associated with the changes, there are also some positive developments and opportunities for growth,” PwC said in a statement issued this week.
PwC’s report, titled ‘Ready and Willing: African insurance industry poised for growth’, comes at a time when economies on the African continent are starting to show signs of real growth on the back of recovering global commodity prices.
“The insurance industry across Africa continues to be one of the most disrupted, but at the same time the industry continues to innovate and adapt to take advantage of the many opportunities for growth that are also emerging,” explained Victor Muguto, Long-term Insurance Leader for PwC Africa.
“In the years following the global financial crisis, economic and political uncertainty across the continent slowed down economic and insurance sector growth. Despite this, Africa’s insurance market remains one of the least penetrated in the world and the opportunities for growth are tremendous,” he added.
PwC argues that the pace of change in the insurance industry has taken place more rapidly than originally anticipated and will accelerate further.
“Leading insurers are already implementing key strategies to focus on new customer behaviours and demographic shifts. The need to be agile in the face of a rapidly changing technological environment has never been more vital,” said Pieter Crafford, Financial Services Advisory Leader for PwC South Africa.
It has emerged that insurers are also adopting multichannel distribution strategies and taking more direct ownership of their customer data and relationships. According to PwC’s analysis, they are designing simpler products leaning towards technology-based direct mobile and online channels of distribution. While the more complex products will still require intermediation, the use of brokers may gradually reduce as insurers invest in their own in-house channels.
Insurers also highlighted talent shortages as a top issue in our survey. This is notable in the areas of technology and actuarial skills. In order to attract and retain talent, insurers need to invest more in training their “workforce of the future”.
PwC noted that while the African insurance industry is going through significant change and client expectations are changing, the rise of the new middle class and digital natives offers new opportunities for insurers, using technology and customer data for more relevant product design and better pricing for risk.
“Insurers across Africa face exciting new opportunities for growth on the back of a rising middle class and increased demand for new and innovative solutions. Most insurers know what to do – the winners will be those that are best at execution,” Crafford commented.
Muguto concluded that insurers who are client-centric, innovative, technologically up-to-date, and who invest in a workforce of the future, will lead the charge to increase insurance penetration levels in Africa.