Digital transformation has emerged as a vital strategic imperative for insurance companies, who are actively capitalising on the advantages of digital technology. As the evolution of technologies like cloud infrastructures and the much-discussed artificial intelligence (AI) continues, digital platforms play a crucial role in shaping the insurance industry’s future. These platforms are the foundation for digital transformation initiatives, presenting limitless growth opportunities, particularly within the African market. According to Research And Markets, Africa is projected to witness a remarkable compound annual growth rate (CAGR) of 7.19% between 2022 and 2028.

The African insurance market stood at US$ 81.6 Billion in 2022 and still provides massive growth opportunities as it is a market currently underserved. This is represented by an insurance penetration of 2.7% in 2021 which rose from 2.5% in 2020, according to the African Insurance Organisation, whose goal is to promote the integration of new technologies. The continent has shown that it is open to digital adoption as Statista reports that the number of internet users doubled to 570 million users in 2022 from what it was in 2015. By embracing digital platforms, insurers enable themselves to be innovative and expand their offerings to new markets that are ready to be tapped.

Digital platforms are the technological infrastructures that enable insurers to deliver digital services and streamline internal processes. These platforms effectively support various functions, including policy management, claims processing, customer engagement, data analytics, and other essential processes.

Just as FinTechs have disrupted various sectors within the financial industry, including banking and payments (see our article on Fintech trends here), their disruptive influence has extended to the insurance industry through Insurtechs. The rise of Insurtechs has been due to their potential to transform and improve the insurance industry by leveraging technology and data analytics and empowering customers through customer-centric approaches. Insurtechs also provide slick “one-click” apps that make the sign-on, payment, communication, and claim processes frictionless compared to clunky traditional solutions with numerous sub-brands and functions that are too sophisticated, ambiguous, and product-driven.

Traditional insurance firms are stuck with legacy systems which are difficult to integrate with the latest technologies and require manual processes which add inefficiencies to operations and drive-up costs. In contrast, Insurtechs use digital platforms to make insurance more accessible, cheaper, and efficient.

Insurers are partnering with or acquiring Insurtechs to adapt to the evolving digital landscape. For example, in 2020, Sanlam invested and partnered with JaSure, an Insurtech that offers on-demand insurance to clients. Later in 2022, Sanlam managed to acquire 100% ownership of the Insurtech. However, insurance companies are still increasingly investing in their digital platforms to drive innovation, improve operational efficiency, enhance customer experiences, and position themselves for long-term success.

By digitalising and automating workflows, insurers can improve their operational efficiency and have greater flexibility in allocating resources. This proves increasingly important in our current climate, where African consumers seek affordable and flexible insurance products.

By leveraging data analytics, AI, and machine learning algorithms, digital platforms enhance underwriting and risk assessment processes. Insurers can also deliver faster services and reduce costs by automating other workflows, such as claims management, policy administration, assessments, and settlement procedures.

Naked Insurance, an innovative Insurtech company based in South Africa, has successfully created a niche in the highly competitive local insurance market by adopting a digital-only approach. Naked has successfully used AI and automation to provide its customers with cheaper premiums.

Digital platforms allow insurers to understand customer preferences better, deliver targeted offerings, and provide seamless interactions. Through all the data collected and analysed, insurers can offer personalised and customised services to customers, where recommendations, communication and even pricing can be tailored to an individual customer.

Through self-service portals and online platforms, customers can access their policy information, make payments, file claims, and communicate with insurers at whichever time and place suits them. Furthermore, AI-powered chatbots and virtual assistants through APIs (Application Programming Interfaces) offer customers quick, around-the-clock responses and service. Although not free from errors, these tools help with handling customer queries and guiding customers through different processes.

Digital platforms allow customers to access and manage their insurance policies conveniently. In turn, these platforms provide insurers with great customer engagement, which leads to improved customer satisfaction and loyalty.

The technology evolution has brought about new technologies such as cloud computing, big data analytics, AI and the Internet of Things (IoT). Digital platforms can be leveraged to collect and analyse data from these technologies to gain insights, improve decision-making, and deliver better products or services. Data analytics is also used together with advanced algorithms to assess risks more accurately and determine premiums.

Data is at the root of digital transformation, and Banks have been at the forefront of leveraging data analytics to gain insights into customer behaviour, risk assessment, and fraud detection. Insurance companies are now catching up and realising the value of data analytics for their own digital transformation.

A key element in pursuing digital transformation for insurance companies is integrating systems with ecosystem partners to enhance the value created for customers. Developing digital platforms with collaborative tools to enable knowledge sharing among ecosystem partners and third parties is crucial for insurance companies.

APIs are essential in enabling seamless integration and collaboration between various systems that are used in the insurance industry. APIs can be connected to platforms with partners to facilitate data exchange between the different systems, unlocking opportunities for collaboration and creating new value propositions.

The strategic alliance between Sanlam and MTN to tackle the African insurance market is an example where collaboration and systems integration is necessary to achieve their goals of expanding market their reach in Africa and gaining new revenue streams.

By embracing digital transformation, insurers can adapt to evolving customer expectations, optimise processes, and drive innovation within their ecosystem. Digital platforms enable innovation to adapt to emerging trends and gain a competitive advantage, as seen through the rise of Insurtechs. Insurers must be ready for the continued emergence of AI, the Internet of Things (IoT), and blockchain (you can read more about how innovation is a key consideration when valuing non-life insurance businesses here).

Insurers are focused on building scalable and flexible infrastructures supporting growth and future innovations. Digital platforms allow insurers to tap into new markets and distribution networks from a central platform. Customers can be targeted efficiently and serviced digitally through data analytics and insights from the platform. As mentioned above, Africa currently possesses boundless opportunities for insurers to expand their operations due to the increased uptake in the adoption of digital services. Such markets can be reached and serviced through digital distribution channels.

In conclusion, digital platforms empower insurers to navigate the evolving insurance environment, seize growth opportunities, and deliver enhanced value to customers. As the digital revolution continues, embracing these platforms will be vital for insurers to thrive in an increasingly competitive industry and cater to the needs of an ever-changing customer base.

Navigating the complexities of digital transformation and determining the optimal strategic initiatives for growth can be difficult for organisations. However, at Step Advisory, we possess deep insight and expertise in assisting clients in making informed decisions regarding their strategic focus. Our team excels in helping companies identify and prioritise strategic initiatives that enhance their competitiveness in the market. Our comprehensive guidance and support enable organisations to adapt and capitalise on the potential of digital platforms, ensuring they stay ahead in this rapidly evolving digital landscape.