2021 Outlook: Trends defining the future of African insurance

  • By Evans Munene
  • January 20, 2021

Before COVID-19, the African insurance market was said to be the second-fastest growing region for insurance globally. The USD68 billion industry was expected to grow at a CAGRs of 7% per annum between 2020 and 2025.  This prediction was however dampened by the arrival of the pandemic with the expectation of a delay of about 3 years before growth can be experienced in the sector.

However, as unpredictable as the world we live in has become, there are some key trends that were said to be shaping the future of the Africa insurance market before the pandemic that are still pretty much prevalent today. In our on-the-ground interactions with many of the industry players we have seen 6 key trends that we feel will continue shaping the trajectory of the industry post-pandemic. I highlight them below:


  1. Modernizing Legacy Systems for Operational Efficiencies

Understandably, we have seen amongst our clients a massive shift towards a digital-first approach to every aspect of business. A digital-first mindset envisions as much of what is done and how it’s done as possible being used in digital form or powered by underlying digital platforms.

For our clients and the industry at large, digital means becoming more efficient, better resource management, tapping into an endless pool of internal and external data and profitability. Adapting the digital-first approach for them is to achieve agile, customer-centric and cost–effective operations and boost agent productivity. Having endured the deficiencies of legacy systems and processes, many now feel the urgency of modernizing or a complete overhaul.


  1. Changing Consumer Preferences and Expectations

As consumers become more accustomed to ordering packages from the comfort of their sofas, their expectations have changed dramatically. A high bar has been set when it comes to customer experience and insurers must innovate quickly to offer products and services that keep up with the pace of change.

Customers are no longer loyal to the brand but rather to the complete experience provided. As such, we see many of our clients seeking to acquire the tools and capabilities that will enable them to engage these modern consumers and deliver on their expectations and demand for seamless omni-channel experiences.


  1. Increasing acceptance of Cloud and SaaS

Even before the pandemic, cloud computing was said to be one of the fastest-growing segments in IT spend with Gartner predicting that by 2024, 45% of IT spend will shift from traditional solutions to cloud. This was accelerated even further in the aftermath of the COVID-19 crisis, as businesses were forced to reinvent themselves and find new ways of working to keep their businesses running.

Pre-pandemic, security and accessibility concerns were the main objections we got for cloud computing adoption. Many insurers have however been able to overcome their fears and are gradually growing in acceptance of cloud as they weigh the financial and operational benefits of cloud versus the security risks. Consequently, Deloitte reports that $34.bn was spent on cloud solutions in the 2nd quarter of 2020 alone. Insurers, concerned about the cost of core system upgrades, are also investigating the benefits of SaaS models to help mitigate these costs.


  1. Increasing Disruption by InsurTechs

The African insurance industry ecosystem is experiencing disruptions caused by the technology-savvy new entrants – InsurTechs. The most proficient of these are attacking different links in the insurance value chain – underwriting, claims, product development etc. These players are using new technologies like AI, ML, IoT, Drones and mobile Apps to bring innovation to the industry.

Depending on how they look at them, incumbent insurers can either see Insurtech a threat or an opportunity. Many have chosen to do the latter and are putting in place systems whose architecture will provide the flexibility and agility necessary to take advantage of emerging technologies and allow integration and effective partnerships with these new entrants.


  1. Leveraging Big Data And Analytics

Big data plays a key role in analyzing various financial data, actuarial data, claims data and risk data which helps insurance providers to make informed decisions. Big data implementations result in better access to insurance services, cost savings and higher fraud detection rates. “A 1% improvement in the loss ratio for a $1 billion insurer is worth more than $7 million on the bottom line.” – SAS

To remain competitive, insurers will have to harness the massive amount of data they hold and integrate that with external data sources in order to become more efficient and effective and continuously deliver superior customer experiences, reduce costs and drive profitability.


  1. Ecosystems & Platform Technologies

In the early 2000s there was a great move towards insurance platforms as insurers sought to streamline processes across various insurance lines of business and deliver seamless customer experiences. This has since evolved into an ecosystem play as insurers seek to either build their own ecosystems or integrate into existing ecosystems to transform their operations and stay competitive.  As the wave of disruption intensifies, insurers recognize the importance of being part of an ecosystem to not only capture value but become disruptors instead of being disrupted.

Turnkey Africa is not only on the forefront of digitizing the African insurance industry we also keep a keen eye on the industry trends to glean what could significantly unlock value for both our customers and our customers’ customers. We are constantly evolving and continuously improving our products adding new features or improving existing ones to meet the current and future needs of our target market.

I hope this article was insightful. I’d like to hear from you, what trends do you see shaping the insurance landscape in 2021? Feel free to share your feedback or comments below.

Evans Munene is the Lead Product Manager at Turnkey Africa Ltd.