Africa risk insurance needs to catch up to tech development

MORE than 90 chief executive officers and senior officials of the insurance sector representing over 20 African countries are meeting for the two days Continental Reinsurance’s fifth chief executive officers’ summit at Swakopmund.

Continental Reinsurance is a Nigeria-based insurance company with partners across the continent, including NamibRe in Namibia.

The theme is ‘Insurance and adaptations in the face of technological change in Africa’.

Speakers agreed that the insurance sector in Africa needs to design adequate responses and strategies to adapt to the changes, risks and opportunities of global technology developments, and so harness the new opportunities that come with it, or face costly disruptions if not adequately addressed.

For instance, they argued, the availability of new technology in the form of mobile phones and increased access to internet presents opportunities to the industry in the form of new distribution channels.

However, the same could pose a challenge in that the clients now have access to information and hence by the time the client asks for an insurance quote they already have more information on the product and company.

What this entails, they further said, for the industry is that there is a greater need to be able to not only respond quickly to the needs of the clients but to ensure that the insurance industry understands the needs of the client to advise on appropriate products.

Speakers further noted that insurance penetration rates in Africa remain deficient in comparison to the rates observed in global emerging markets.

This means that the majority of people are still excluded from accessing insurance and hence do not enjoy the protection offered by the industry. It is felt insurance companies have to offer more innovative products targeting all income groups, especially those in low-income sectors.

Furthermore, it was felt that it is imperative that growth of the sector should be accompanied by adequate regulation to control and facilitate the market’s expansion.

Regulating the industry is believed to be important because it is beneficial for the industry in that adequate regulations will promote fair competition in the industry and create trust between the clients and the industries.

Why technology could also advance the effectiveness of the industry to secure company and individual risk, it also poses a risk.

It is estimated that by 2021, cybercrime could cost the world more than N$72 trillion annually.

According to the Allianz Risk Barometer’s top 10 global risks for 2017 and Minter Ellison perspectives on Cyber risk 2017, cyber risk is fast becoming a key risk facing many organisations.

Cyber risk was ranked 15th in the top global risks in 2013 but climbed to third place currently.

The company’s managing director, Femi Oyetunji, said the insurance sector on the continent, worth billions of dollars, was slow at adapting to technological developments, and therefore it was hoped that a strategic plan could be established for the next five years to synchronise insurance with technology.

In a keynote address read on his behalf by Erongo governor Cleophas Mutjavikua, finance minister Calle Schlettwein said from an insurance perspective, cyber risk presents both an opportunity and a risk. It is an opportunity in that it presents a new business line to be written by insurers.

“The most important aspect to note is that the ongoing changes present both opportunities and challenges for the industry. The opportunities, however, will only be harnessed if the industry devises appropriate strategies,” Schlettwein said.

A survey by Fitch Ratings shows the global market for cyber coverage is estimated to have grown between N$25 billion and N$42 billion annually.

The growth is being driven by increasing risk and awareness of cyber attacks (such as the recent theft of an estimated 143 million individuals’ data from credit monitoring agency Equifax).

The growing awareness of the risk, coupled with intensified regulations, has contributed to the global demand for cyber coverage.

The insurance industry plays a key role in economic development, and in Namibia, the combined total assets under the management of the insurance services sector, both for short-term and long-term insurance, amount to about N$53,4 billion, which is about 35% of GDP.

Also, the financial and insurance sector in Namibia provided 15 525 jobs in 2016 and is doing its part in building the skills of these employees through various training programmes.

The insurance industry plays a key role in promoting business activity by offering protection against risk. Moreover, insurance contributes towards wealth creation and protection at both national and individual levels.