A rapidly shifting economic environment and evolving customer expectations are compelling Ethiopian insurers to rethink their operating and business models towards more digitally-enabled and agile organizations. Ethiopia’s tremendous economic growth in GDP over the past decade has been an object of marvel to many. According to the World Bank, the once third-poorest country in the world (2000), was the third-fastest growing – in terms of GDP per capita – country of 10 billion or more people in the world between the period 2000 to 2018 after Myanmar and China.

Despite this, Ethiopia’s economic growth is yet to translate into insurance growth as its penetration rates remain low. The country’s insurance sector is largely underdeveloped with only 17 insurance companies to cater to a population of 112.1 million (2019) and an insurance penetration of less than 0.5%.

Studies show a strong correlation between economic and insurance growth, where as individuals and businesses utilize insurance to mitigate risks and protect against uncertainty and potential losses, they become more confident to invest, creating a lasting and positive impact on the economy.  This therefore behooves the Ethiopian government to pay closer attention to the insurance industry to build it up to support the economy for long-term resilience.

The reason why Ethiopia’s insurance industry has not kept up with its economic growth could be attributed to the various challenges plaguing the industry. These include lack of awareness, obscure and complex products, shortage of skilled manpower and lack of proper data for risk analysis. These challenges not only make the cost of doing business high but the products and services too expensive to be accessible to a majority of the population. This is further exacerbated by legacy systems and thinking patterns that many insurers are still holding on to.

Digitally-enabled and agile insurers leverage digital technology to help address some or all the challenges above and thus achieve their business goals. USAID, the international development agency recommends the use of digital tools in insurance to facilitate client uptake, reduce transaction costs and improve efficiency.

Becoming digitally-enabled involves the integration of digital technology into all areas of a business beginning with the core which impacts everything from how an insurer operates to how it delivers value to customers. Digital technologies provide a great opportunity for insurers to simplify the customer journey through omni-channel and personalized services. This would be hard to achieve for insurers still running legacy systems due to incompatibility issues that make it difficult for them to leverage new technologies for competitive advantage.

Starting at the core helps build a strong foundation for long-term sustainability and resilience and paves the way for the adoption of new technologies and tools like APIs, digital platforms, cloud computing and cyber security tools that have become so critical in this post-pandemic ‘new normal’ era.

Modern core platforms like TurnQuest Insurance Suite that support the critical core operational functions of an insurance business also form the foundation for new technology integration that enable deeper customer and market insights and faster speed-to-market for products. The TurnQuest platform supports the consolidation of insurance operations leading to immeasurable efficiency gains through lowered cost of doing business and subsequently affordable products thus increased insurance penetration.