Lessons for Nigeria as Kenya insurers redouble interest on insuretech to deepen penetration

Kenya insurers at the end of 2018 achieved a market penetration of 2.88 percent as against 2.77 percent in 2017, dwarfing Nigeria’s 0.4 percent penetration, and plans are underway for the East Africa industry to embrace insuretech to increase its penetration.

Insurance penetration is the measure of premium generated against the GDP of the country.

Nigerian operator’s frustration in embracing insuretech many operators and analysts have said was the difficulty in getting approvals from the regulator, National Insurance Commission (NAICOM) for products relating to application of technologies.

This they have said were part of the frustrations why partnerships with telecommunications companies that had hitherto opened the market for increased policy uptake was suspended.

Whatever the regulator can do to fast track embrace of insuretech, either directly or working with other regulators including Nigerian Communication’s Commission (NCC) and Central Bank of Nigeria (CBN) must be taken seriously for the growth of the Nigerian insurance industry, an operator who did not want to be mentioned pleaded.

Experts in finance and management, EY in its recent report said tomorrow’s insurance leaders must prepare for the adoption of blockchain and big data, the growing challenges of cybersecurity and more

They note that dramatic changes are reshaping the insurance industry and forward-looking insurers aren’t just watching it happen. They are taking action and making investments that will help them become more customer-centric, improve their pricing and create operational efficiencies.

Meanwhile, local underwriters in Kenya were said to have been tipped to adopt insurance-focused technology known as “insurtech” to double coverage of underserved populations from the current near three percent, according to local media in Kenya.

The industry it notes is under pressure to innovate and outpace existing traditional brick-and-mortar systems.

Insurers including about 60 insurance tech startups heard at a conference in Nairobi that players must utilise technology to make products relevant to customers and create new opportunities or their traditional business models will be extinct.

“East Africa’s mobile penetration gives great opportunities for disruptions in the insurance sector,” said market minds founder, Sebastian De Zulueta, one of the organisers of the recent conference.

Kenya’s mobile penetration hit 100 per cent for the first time as active customer subscription touched 46.6 million, last December, official data show.

But challenges including a lack of awareness among customers and high cost of premiums have locked many Kenyans from accessing insurance, according to several studies. Kenya’s penetration is estimated at 2.93 percent, the report said.

Globally, technology is redefining the way business is done and the insurance industry is not left out of this disruptive change especially with the growth of InsurTech companies leveraging on best-in-class technologies to simplify the product life cycle for consumers.

Africa Re, a leading reinsurer in Africa is driving the initiative in the continent with the launching of InsurTech Challenge, an initiative which aims at identifying, promoting and rewarding technology companies especially start-ups owned by Africans or built by individuals resident in Africa that are  solving some of the identified challenges in the insurance value chain.

At the global market, InsurTech start-up Lemonade recently signed  a $300 million Series D funding round led by SoftBank Group, with participation from Allianz, General Catalyst, GV, Our Crowd, and Thrive Capital.

Lemonade is one of the most high-profile companies to emerge from the insurance technology wave with aims to digitising the entire insurance process; the company claims to collect 100 times more data than traditional carriers.

Lemonade says it plans to use the funds to accelerate it’s US and European expansion in 2019, and explore new product lines.

According to Africa Re, InsurTech Challenge is a new category of its African Insurance Awards. It is targeted at non-insurers that are collaborating with insurers to improve their customer service delivery, product development and overall innovation all around Africa.

The grand finale of its award held at the annual conference of the African Insurance Organization (AIO) in Johannesburg – South Africa on 10 June 2019, shortlisted three companies with a platform to meet the insurance industry  where the winner got a cash prize of $20,000.

“In less than three years, Lemonade has expanded across the US, given back to dozens of charities chosen by our community, and fundamentally changed how a new generation of consumers interacts with insurance,” said Daniel Schreiber, chief executive officer and cofounder, Lemonade.

“Looking forward, we aspire to create the 21st century incarnation of the successful insurance company: a loved global brand that can endure for generations; an organization built on a digital substrate, enabling ever faster and more efficient operations, and ever more delighted consumers.”

This significant funding round comes off the back of an active year for InsurTech investment. Analysts at Deutsche Bank found recently that volumes had increased by more than 60 percent between 2017 and 2018.

Data also showed that InsurTech investments (across all stages) totaled $2.6 billion during the first three quarters of 2018, compared with $1.6 billion for the same period in the previous year.