It is clear that Africa is seeing a spike in Insurance usage but one thing is also clear – the challenge to build the future of insurance products and services.
Technology and InsurTech are attempting to foster and drive innovations that will ultimately lead to a better outcome for the consumers and providers – think patients and hospitals.
In the past, Insurance for many consumers – personal and commercial, has always been a “grudge purchase.”
Many hope they will not need to buy Insurance – plans and policies because they are pessimistic on how the “Insurance claims and support” process will work in the event of a loss.
Looking to Technology
To increase the consumption of Insurance products, it’s not only about the technology; it is more about the extent to which technology, like Curacel, can be leveraged in the advancement of Insurance product design and service is already having a far-reaching effect.
Arguably, technological growth is having a direct impact on the pricing and structure of new risk models that better mirror changing behaviours.
Insurance, Inclusion and Personalization
For instance, the adoption of recent technology has brought about the development of new business models that cater to a new kind of economy – gig/freelance/sharing, micro-insurance and flexible underwriting process.
The micro-insurance and flexible underwriting models have given birth to high-tech Usage-Based Insurance (UBI), On-Demand Insurance and Embedded Insurance.
This is made possible by sensors, devices, big data and immediate communication.
Social Disruption and Technological Innovation
Technology is driving product transformation and service/concierge provision for the modern Insurance consumer. And we can assess this transformation with a focus on social disruption and technological innovation, as listed below:
1. The gig/sharing economy/freelance
2. Usage-based insurance
3. Episodic/On-demand insurance
4. Embedded insurance
1. The Gig/Sharing Economy: This deals with independent contractors who perform commercial tasks, often using personal assets. Think of Fiverr, Upwork, AirBnB, Taxify and Uber.
COVID-19 has put a greater highlight on this growing sector of the economy. As businesses are looking to reinvent themselves for the modern age, a greater reliance on gig workers has emerged.
By 2023, it is estimated that the global gig economy will be worth some US$455.2 billion. This enormous economy needs, and is going to continue to need, insurance that reflects an increasingly changing work/life shuffle.
From the insurance marketplace, appropriate products and services for the gig economy are yet to be widely available or carved out.
As the insurance industry is becoming increasingly comfortable with the concept of gig work, so has its appreciation of the types of products that need to be unveiled to match consumer expectations.
2. Usage-based Insurance (UBI): This is a case where UBI products and services report back to an insurer and an insured how much of ‘something’ relating to a predefined risk has been done or used.
You can say for example, how many miles a car has been driven in a set period, related to the insured period.
The idea is to reward certain insureds whose behaviour performs better (or less) than the average demographic profile that might otherwise be pulled on that person.
It also allows insurers a better insight into how certain risks perform in real-time. This model of insurance has been made possible with the advent of affordable, readily commutable telematics and sensors.
The Auto/Motor space has had the greatest impact, where auto insurers might otherwise find it challenging to keep customers who drive very little unless they can embrace on-demand options these individuals find appealing.
The Insured essentially pay for actual miles driven rather than pay a fixed fee for a year based on credit score, age, postal address and so on.
This UBI model allows insurers to support products that reflect the behaviour of a driver and incentivize good, low-risk behaviour. The perceived benefits of the UBI model are clear; however, changes in underwriting regulations have made UBI and the telematics that are used to achieve it an even more pressing decision.
3. On-demand Insurance: A rise in the gig economy has led to a demand for insurance products that only come into play when they are needed; many InsurTech companies are increasingly offering products and services that are on-demand based.
Comparable to usage-based insurance, on-demand coverage speaks to the uniqueness of individual behaviour that performs economically more efficiently than fixed demographic pricing.
These models for insurance allow consumers to purchase products that are only put into use when certain behaviour or environments are encountered — that is, they do not provide blanket coverage for a year, but for an hour or per event.
Easy access gives customers the ability to turn their coverage on or off with ease – one click, tap or swipe — paying for coverage only when they need it.
For obvious reasons, it is very difficult to offer on-demand coverages for traditional property & casualty (P&C) liabilities such as flood, fire and theft, but there is a growing interest in episodic coverages for portable electronics that spend much of their lifetimes in the home but are occasionally taken on the road, for example, smartphones, laptops and musical instruments.
In general, if an individual owns a single expensive transportable product or engages in “risky” behaviour on an occasional basis, on-demand coverage makes a lot of financial sense to the insured.
4. Embedded Insurance: Embedded insurance means wrapping insurance functionality into technology to enable any third-party product or service provider or developer in any sector to seamlessly integrate that insurance solution into its customer propositions and experiences, as complementary add-ons to its core offerings or as new native components.
Embedded Insurance is as much about distribution as about product and service.
Insurers and InsurTechs are already designing future products with embedded insurance in mind.
Embedded insurance is about creating a series of products, solutions and services that are synergic to provide the end consumers with everything that they could need to wrap around the asset that they want to protect.
As part of an overall offering, the insurance product can be part of a broader service provision to a would-be insured.
In recent months, we have seen some car manufacturers turn their attention to partnering with digital insurers or at least providers of digital products, to offer point-of-sale modern auto products at the point of a car purchase.
For instance, in 2018, Jumia partnered with AXA to provide device, health and life products in Nigeria.
Embedded insurance offers an opportunity not only to InsurTechs and insurers but also to banks, financial institutions, manufacturers, retailers and mortgage providers.
Many InsurTechs are supporting the incumbent landscape by assisting with data capture, analytics, underwriting tools, product templates, service support, consumer engagement and claim handling.
While many more incumbents will undoubtedly look to areas like the gig economy, episodic and UBI insurance models to further expand their offering to a broadening market, the right partnership(s) with InsurTechs can be an excellent first, second and third stepping stone as they look to build out their own offering.