Understanding information is the first step in African insurers’ survival

Data could hold the key to the way in which the African insurance industry is shaped into the future, according to a group of insurers, reinsurers and brokers meeting in South Africa recently. The challenge of reaching Africa’s uninsured has long been appreciated, but has yet to be achieved. However, insurance markets across the continent also face challenges in writing any business for the currently uninsured. Much of that comes from a lack of information, resulting in an inability for underwriters to properly rate risks and often in insurers walking away from business rather than taking an unknown risk. As regulators tighten up on the rules, this issue is only likely to become greater, warn insurers, as they are forced to capitalise for these unknown risks. The answer can simply be not to bother – even though at the same time regulators are also urging the market to expand its reach into new communities. This was the conundrum under debate when a group of insurers, reinsurers and brokers met on the fringes of the recent African Insurance Organisation annual general assembly in South Africa recently. Lack of history In a roundtable event sponsored by Axco Information Services, insurers voiced concerns about the way a lack of adequate history still hinders market developments today. However, they also acknowledged that the picture is changing and it is not necessarily that the information is unavailable, it is just that they do not have access to it. Souvik Banerjea, managing director at Continental Re (Kenya), was among those stressing the importance of information but he said it was more than just having information, it is also about the ability to analyse and then properly use it. They all agreed however that the need to verify and cross-check information was critical and that having any one source of information was simply not enough. The group agreed some information is available from each insurance regulator’s office; however, by the very process of collection, that information is often two or three years out of date. As Alexander Frost, head of global risk and intelligence data at Axco, added: “It is also about getting information in a consistent manner so that it can be properly analysed.” He believes it is more important that any information can be trusted, than having volumes of untrustworthy data. In South Africa, the changing insurance law together with tighter regulations have created a greater emphasis on the need to make information publicly available, pointed out one South African insurer. Bringing the conversation to a practical level, Mary Driscoll, portfolio executive at reinsurer Emerald, said underwriting without sufficient detail remains a very real challenge that is not helped by industry players themselves. Too often, she said, calls for more information are ignored by brokers or primary insurers, as well as by the insureds themselves, leaving those further up the underwriting chain with an unpalatable choice of insuring the risk at an even greater risk or walking away. In today’s competitive marketplace, she said, many insurers were making the choice to accept the business – passing it up the chain to reinsurers as far as possible in the knowledge they were unsure of exactly what risk they had covered. She laid some of the blame for that at the brokers’ doors, saying they should be far more inquisitive. Ms Driscoll added that, by asking for more information at the outset, the risk of claim rejection would reduce too, in turn helping to enhance trust in the insurance sector as a whole. Redefining the narrative Chukwumu Kalu, head, business development and agribusiness insurance at Nigerian insurer Royal Exchange, believes the key is in redefining the insurance narrative. “You have to remember no one wants insurance and we have very different situations country to country. The picture in Nigeria is quite different to that in South Africa,” he said. He believes that helping subsistence farmers, for example, to scale up and become SMEs and then even corporate entities, can be achieved through insurance. However, one of the major stumbling blocks has been a lack of information. New initiatives do exist – for example, a recent investment by the InsuResilience Investment Fund in Agritask, an Agtech company providing data-driven decision support tools for end-to-end agronomic management of businesses throughout the agriculture ecosystem. Through its global activities, the company is expected to reach out to more than 25 million farmers by 2025, including millions in Africa. [ADD HYPERLINK: http://www.commercialriskonline.com/spreading-the-value-of-insurance] Another Nigerian initiative has been the development of insurance checks across the country. Yetunde Ilori, director general and CEO of the Nigerian Insurers Association (NIA), explained that the use of fake insurance documents had been widespread and often motorists were unaware they had bought a fake document. The NIA has developed a system that allows motorists to check their certificates via their mobile phones and get instant confirmation of whether it is a valid policy. That, she said, has helped drive the levels of fraud down. In Lagos state, the authorities have gone one step further and the police are now able to automatically check vehicle licence plates and see if there is valid insurance for that vehicle. Again, it has helped reduce fraud as people are keen to avoid being stopped by the police. The by-product for the industry has been that there is now a wealth of accurate information on the levels of motor insurance being sold across the country. While the information is one step better in Lagos state, it has given insurers a database from which to work nationwide. The Nigerian authorities are now working with the NIA to develop a similar system for cargo insurance – another problem area where thousands of fake insurance certificates are routinely sold to unsuspecting insureds. Nick Sorgo, of NS Risk Consultancy, also urged companies to look internally. “Often, people within companies are sitting on information that others don’t know they have. It is always worth asking internally, particularly within a large company, and you can be surprised at what you find.” State of the market However, one of the problems, he believes, is the state of the insurance market. “We have been in a soft market for so long – and continue to be so – which means underwriters will take on risks, without wanting to invest in research and analysis.” He too believes competition plays a part – insureds and brokers will simply choose another (less demanding) underwriter if someone asks too many awkward questions that require time and money to answer. “Sometimes, the reverse can happen and an insured will actually present the underwriter with more information than they have asked for,” he added. “We need to develop certain standards within the industry to cover both insurer and insured.” Mr Chukwumu also pointed to new forms of competition. Telcos and banks sit on a huge bank of information, he said, and they could prove extremely disruptive for insurers in the future if they are able to mine that data more efficiently than insurers. “We could become extinct unless we start building for the future,” he warned. “It is about putting the right structures in place to remain competitive and that includes our use of information.” He suggested reinsurers have the greatest role to play in this, since they are the ultimate risk carriers. The group agreed that the opportunities in African markets are huge, however they cautioned that insurers will not make the most of those unless they have a grip on data. Cassim Hansa, managing director (Botswana) for Continental Re, pointed to the lack of data as a major sustainability issue. “Look at Cyclone Ida and the havoc it caused in Mozambique, Malawi and Zimbabwe,” he said. “The same thing happened 20 years ago and it is unforgiveable that as an industry, we have done very little to change the narrative in the intervening years.” He added that the industry needs to wake up to its responsibilities, both to its own shareholders but also to its stakeholders, in terms of building a sustainable future. Using information intelligently, he said, is just a first step.

Understanding information is the first step in African insurers’ survival

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