Thursday, June 13, 2024

Insurtech ÔÇô the threat that inspires

Elsewhere, startups are beginning to move in on the territory of insurance giants, who are themselves beginning to change their service models.

While in Botswana things are still moving slow, in the global space Insurtech has already started to force the insurance industry to step up its game in terms of customer service and offerings.

Tony Van Niekerk – Editor at Cover Publications (South Africa) says most established insurance players have decades and century old “memory” set in their thinking, which includes their execution processes.

Niekerk was speaking recently at the Insurance conference held in the capital Gaborone.

“I believe this is where the current weaknesses lie in taking innovations to market successfully. Ideas are a dime a dozen and even amazing innovations are worth nothing until they return results,” he noted.

Nevertheless he states that technology and data are now considered the most important global trend disrupting the industry and the biggest impact comes from mobile phones, social media and data analytics.

Niekerk says Insurtech is pushing to enter the customer’s ecosystem which includes loyalty systems, telematics and gamefication while the traditional insurance model tries to pull the customer into the insurance ecosystem.

Telematics and gamefication is a system where businesses can look at scanning of license plates of a car, scanning of driver’s license, punching on identity number, taking a photograph and having photo recognizing a selfie and giving all the necessary information about customers including geographical area.

“Imagine you as an Insurtech and you exploit that technology to find information about a person and it draws conclusions of that person and his movements, that is an important factor as you can get a risk management profile of that person just by using his/ her geographical area,” he noted.


Given the imminent changes by Insurtech, pundits maintain that incumbents in the insurance industry need to keep their eyes out for new entrants. Once fully adopted, it is expected that the size of the market share of the traditional players will be at stake.


Niekerk says although technology may help accelerate and facilitate distribution, claims handling and risk monitoring, it has to rely on the expertise of the industry and its ability to effectively pool and distribute risk.

“Eventually, it will still be the insurance company behind the digital solutions that has to inspire trust”.

A track of Insurtech start-ups across the globe shows that most African countries are still slow to adapt to the techno. In the southern African region, only South is ahead in terms of companies that uses the technology.

Botswana currently does not have Insurtech start-ups but most of its insurance companies are partially owned by South African groups of companies.

The local insurance industry comprises of life insurers, general insurers, reinsurers and medical insurance funds.

While Sunday Standard was unable to solicit comments from industry players relating to Insurtech, available data shows that the industry assets relative to GDP have declined over the years, from 20 percent in 2006 to about 12 percent in 2016. Bank of Botswana explains in its 2017 annual report that the decline in performance of the industry is a reflection of adverse conditions in the commodities markets, which affected the mining sector as well as households, resulting in a contraction in booking new policies and cancellations.

Moreover, the central bank notes that insurance penetration in Botswana has been stagnant around 3 percent over the past five years. Insurance penetration is essentially the contribution of the insurance market in the economy, it is measured as gross written premium as a share of GDP. However, insurance penetration, measured in terms of uptake by adult population in Botswana, is relatively high compared to other African countries, but lags behind Mauritius and South Africa and is low relative to the country’s per capita income.

Botswana Insurance Holdings Limited Group, the local financial services behemoth, which dominates the life insurance market through its subsidiary Botswana Life, has also spoken about the tough operating environment. In its 2017 annual report, the group said the environment is characterised by subdued economic growth, retrenchments, rising unemployment, stagnated incomes, intense competition and loss of key personnel.

“One of the major challenges experienced by our Group of companies is the contraction of disposable income for Batswana who therefore seek to reduce their monthly financial commitments,” said Batsho Dambe-Groth, BIHL group chairman. “Unfortunately, there is a widespread misconception that reducing or cancelling insurance cover ÔÇô both long-term and short-term ÔÇô is an easy way to ease pressure on household budgets.”

BIHL group’s chief executive officer, Catherine Lesetedi said increasing competition, especially aggressive pricing on employee benefit insurance covers and annuities, posed a challenge to attracting new business.


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