Customer-centricity key to success for developing insurance industry

Putting the customer first was among the key messages for delegates at the Organisation of Eastern and Southern Africa Insurers (OESAI) annual conference this year. Almost 300 delegates from 39 countries across Africa, Asia, Europe and North America attended the event in Swakopmund, Namibia to hear industry experts discuss the ‘Future of the Insurance Industry in Emerging African Markets’. Charles Nkosi, chairman of OESAI, reminded delegates of the absolute need to build a stronger and larger insurance market across Africa, particularly at a time when much of the continent is facing drought conditions, with the subsequent risks to millions of people. But there was a clear warning from the speakers that the insurance industry could not afford to stand still and keep offering the same products if it expected to survive in the new world order, let alone to build a sustainable business.hideQuestioning why it was even necessary to stand in front of a service industry audience and discuss putting customers first, Andrew Cartwright, an African ambassador for Total Solutions, said: “Customers should always have been put first. “If we go back to the beginning of insurance, it was about people finding a solution to a problem and pooling the risk of their ships not making it back home. It was not about products and asking people to fit into the product. “How far have we gone from the client to corporate goals aims and objectives?” he asks. Meeting the client demand is even more important, he said, for an industry where the product is actually a nebulous promise that is only called into question at the point at which it is all too late, as a claim comes in. “The client has to be at the centre of the process,” he argued. “I actually think the African insurance industry can be at the forefront of bringing the industry back to its roots and that is to servicing the client.” Referring to a message from Namibian finance minister, the Honourable Calle Schlettwein, Mr Cartwright reiterated the need to access the 97%-plus proportion of Africans who still have no access to insurance, but are among the most vulnerable and in greatest need of protection. “That has to be the focus for the industry,” he said “People who cannot afford to lose anything need insurance services far more than people who buy insurance to save part of what they have.” Another challenge for the industry is the lack of understanding among the wider population, but also among those who are buying some forms of insurance. “Quite sophisticated people will not understand the small print that comes with so many policies. Our responsibility is also about education, to make sure there is better understanding. “We have to design the experience so that it is one in which the customer will want to come back,” he suggests. As a first suggestion, he asks how many insurance companies incentivise their claims-handling teams, rather than the salesforce. Mr Cartwright believes delivering excellent service to the client ought to be rewarded in a bid to transform the sector from one that incentivises its salesforce for volumes of policies sold, ahead of service delivery. The message is even more crucial in an age where things are changing so fast and that the new normal could be utterly different to that of only a year or two ago. Thomas Kieck, of South Africa-based Tial Technologies, believes the speed of change and pace of connectivity will solve many challenges but will also create a new environment for insurers to operate within. He provided examples of traffic flows. In the near future (and in some cases already here) cameras will alert a centralised system to an accident blocking a junction, for example. It will allow on-road signage to divert other road users around the accident and also issue warnings to nearby traffic hotspots, such as schools that maybe about to send their children home, or to airports where passengers might be seriously delayed affecting flight movements. Blockchain too, offers new and exciting challenges for the insurance industry and could, believes Mr Kieck, go a long way to eradicating some forms of fraud. It will also help keep the insurer, insureds and broker in closer, but more secure, contact, allowing for greater transparency – which would in turn help develop greater trust in insurance as a financial tool. “Often the insurer is three or four degrees away from the information provider but this will change,” he said. Mr Kieck acknowledges the technology has some way to go in terms of development and it will have to satisfy the regulators across Africa before there will be widespread changes, but he is confident it will be the way forward. Cyber solutions While blockchain might help reduce the risk of fraud into the future, there is a very real need for cyber risk solutions right now. Risk managers, as well as insurers and brokers, all cite cyber risk as a growing or new threat to their businesses and they are looking for solutions. Japh Olende, senior consultant at Nairobi-based OBG, warned delegates that cyber risks are often underestimated and businesses often ignore crucial warning signs. He said: “Attacks against information infrastructure and internet services now have the potential to harm society in new and critical ways. Online fraud and hacking attacks are just some examples of computer-related crimes that are committed on a large scale every day and have become a major concern to many organisations. “Attacks and incidents are increasing, with costs climbing into multimillions. Risks related to data breaches cause most concern and particularly, the potential significant business interruption exposure. Major corporations, governments and public services have all been targeted by cyber criminals or hacktivists.” He pointed to the PwC 2016 Global Economic Crime Survey, which revealed that cybercrime was the second most reported crime, affecting 32% of organisations, and is said to cost the global economy is about $440bn annually. Mr Olende stressed the need for businesses to properly recognise and understand the risk, before they can start to put mitigation in place. “Businesses must put in place a robust risk management [strategy], with insurance as the second line of defence. It is important to appreciate that insurance cannot provide protection for all forms of cyber risk businesses are exposed to, hence the need for proactive risk management,” he said. Cyber risk, being one of the major risks business and individuals are exposed to, calls for robust risk mitigation measures to be put in place. “Given the fact that insurance is only the second line of defence, cyber security is therefore of utmost importance for any organisation,” he explained. “However, the low level of system security in Africa makes it difficult to address the fast-evolving cyber risk. Generally, there is very little investment in security infrastructure. Since very few businesses understand their exposure to cybercrime, very few take insurance.” Mr Olende added: “Boards and management do not understand cybercrime, hence limited investment in security and insurance. Organisations are generally not prepared for possible attacks and companies’ risk management strategies do not address cyber risk.” There are yet more challenges. For example, Mr Olende pointed to the lack of knowledge of cyber security, hence human error is a major source of cybercrime in Africa. “There is need for more education and training,” he suggested. “Businesses lack the ability to detect cybercrime therefore can take up to one year without knowing they have been attacked. Businesses also try to manage risks internally instead of transferring to insurance. There is also limited information about which companies offer cyber insurance,” he warned. Finally, he said: “Many businesses see cybercrime as a purely technical issue rather than a challenge to the board and the entire organisation. Compliance issues related to cybercrime are not adequately addressed. There is therefore a need for more education on the dynamics of cybercrime.” Mr Olende concluded: “Electronic data and information is one of the most important assets in an organisation. Despite its importance, PwC notes that most organisations in Africa are still not adequately prepared or do not understand the risk inherent in cybercrime, with very few organisations having a cybercrime response plan. “It is therefore imperative that organisations obtain specialised and comprehensive cyber insurance to protect them in the event of a cyber attack. Since cybercrime is a relatively new concept in the insurance industry, insurers will need to combine their knowledge of insurance and technology to ensure that they provide adequate cover to the big uninsured businesses.” Insurers have key role in steering through African headwinds Making the product fit the market is crucial for long-term success, according to Fabrice Jerlin, director, pan-African key account manager at Swiss Re, alongside a deep commitment to partners. Referring to the Swiss Re investment in Nigerian-based Leadway Insurance earlier this year, Mr Jerlin said such investments not only give the company greater capital but also a “fresh pair of eyes” in terms of product development, strategic planning and best practice for internal governance. They are able to take the best of existing products and make them work in local markets. “Very little is about reinventing the wheel,” he said, “but about making what you already do elsewhere fit other circumstances. “Part of our mission is to develop a resilient insurance market,” added Mr Jerlin, speaking at the Organisation of Eastern and Southern Africa Insurers annual conference in Swakopmund, Namibia. Take Nigeria, he said, where there is a real issue around consumer trust in insurance products. By building resilient companies, the local population can develop greater faith in insurance across the board. It also takes some new approaches though, for example, in terms of distribution. “Again using Nigeria as the example, it is no good opening offices and hoping that people will call in. We have to explore ways to reach people in the markets, on the streets where they are doing business,” he explained. It is also important to engage with local regulators to ensure products will resonate within the market. “It is about ensuring [you meet] your obligations. People are still not convinced about the value of insurance,” he said. To help boost awareness and trust in the system, Swiss Re is about to launch a pilot, together with the Kenyan regulator, to take the concept of insurance to people across Kenya through a public awareness campaign. “As we develop the idea, the concept is not to sell the benefits of insurance but to go back to basics and explain exactly what insurance is,” he said. Swiss Re is well aware of the headwinds blowing across Africa and the difficulties in many economies, particularly for the large infrastructure projects planned. “We have received enquiries from some foreign investors who want to do business in Africa but who have concerns,” he said. “They say they have development projects in Africa but they don’t have the right connections. So we are able to help them through partnering with them. It enables them to understand and meet local requirements with complete confidence. “If they issue a local policy, for example, they want that to be compliant and we can help achieve that and find the right local partners as and when required. “It allows the investment to go ahead because the investors are confident the risks have been securely transferred.” Mr Jerlin said there is still much to be done on the ground by African governments to help build greater investor confidence and provide greater certainty around the returns on investment, but he truly believes it is a case of not if but when.

Customer-centricity key to success for developing insurance industry

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