The digital transformation of insurance is well and truly underway in Africa. This is, in essence, one of the key messages of the latest McKinsey report on continental insurance. That favorable situation has been further accelerated by the COVID-19 pandemic and the rapid growth of InsurTech, these technological insurance companies that have sniffed out a booming market, valued today at around 68 billion dollars in terms of Gross Written Premiums (GWP).
In Kenya, for example - a country that launched a mass biometric registration drive to enroll citizens for a universal health insurance scheme last October - the start-up LCT Africa has set up a biometric data entry platform that facilitates the management of health insurance applications. Used by hospitals, the device authenticates patients using fingerprint biometrics, reducing administrative costs. But more importantly, it reduces the risk of fraud. "A paper document can easily be lost or misplaced, or end up in the hands of someone who is not supposed to have access to the private information it contains. That's the risk we're trying to avoid," explains the startup’s COO, Sylvia KANYORO. In total, more than 1,500 LCT biometric devices have been distributed to hospitals across the country; a deployment that has eased insurance claims for some 26,000 users, to the tune of about Sh100 million (about US$932,000).
“Leveraging the pandemic to strengthen the digital strategy, with new services for customers”
The same move to digital transformation is also taking place in Nigeria. The West African giant (population 210 million) recently acquired mobile biometric registration kits as part of a digital registration campaign for the National Health Insurance Scheme (NHIS), called e-NHIS. In the Maghreb, the major insurance players have also been pushing for more digital options. In Algeria, where the sector has been particularly impacted by the COVID-19 pandemic (turnover down by 70% in 2020), local players have resolutely turned to digital solutions. This is the case of insurer Macir Vie SPA, which has "leveraged this pandemic period to strengthen its digital strategy, with new services for customers," says the company’s CEO, Mohamed Hakim SOUFI. Hassen KHELIFATI, vice-president of the UAR and head of the company Alliance Assurances, shares the same view, stressing that the Algerian players in the insurance industry are in the process of "changing, slowly but surely", towards "the digital agency".
In any case, the ongoing digitalization of insurance services in Africa should help sustain the sector’s growth, according to authors of the aforementioned McKinsey report, for whom "Africa is expected to be among the insurance 'hot regions' and to grow at 8% per year [over the next five years (2020-2025)]. This would make it the second fastest growing region after Latin America."
“More traditional insurers are acquiring or partnering with startups to leverage their expertise”
The growing success of digital tools in the African insurance industry probably also owes much to the local context. Most African insurers agree that physical distribution (particularly the establishment of a network of agencies) has long been a major obstacle to the penetration of insurance on the continent, as the costs required for this endeavor are often considered prohibitively expensive, given the size of domestic markets. On this point, technology has made it possible to significantly reduce costs while integrating segments of the population that were previously inaccessible (rural, unbanked customers, etc.), thanks to new channels (mobile telephony, internet, etc.). Francois JURD de GIRANCOURT, a McKinsey partner who leads the firm's Financial Institutions Group for Africa from Casablanca, notes "an increase in the number of traditional insurance companies that are acquiring or partnering with start-ups to leverage [their] expertise. A trend that "is expected to accelerate, with African countries potentially outpacing more developed markets in some cases," the consultant predicts.
The ongoing deregulation of the market, increasingly favoring innovation, has also played in favor of the digitalization of insurance services, with several national regulators already formalizing the principle of electronic authentication or even new underwriting models based on artificial intelligence. That regulatory evolution which, although not generalized on the whole continent - in Algeria, Hassen KHELIFATI is sorry that "the legislation in force does not meet the requirements of the moment" - is nonetheless full of promises. The McKinsey study estimates that this move "will bolster consumer confidence and allow for the development of more resilient insurance sectors, while advising insurers "to work with governments and regulators to help shape their reform programs."
“Extraordinary growth potential, as the continent is underinsured”
So many developments and initiatives that, if carried out, could unleash "an extraordinary growth potential", conjectures Hassen KHELIFATI, "as the continent is underinsured. More cautious, Mohamed Hakim SOUFI calls, on his part, for a "significant increase in the support by public authorities and financial institutions, [...] the lack of such support [remains] the main obstacle to the sector’s takeoff". A word to the wise...