Insurers urged to embrace digitalisation

By Jonathan Marucha

The COVID-19 pandemic continues to have far-reaching implications on people’s lives, families and communities.
For Kenya’s insurance industry, the fallout from the pandemic has resulted in an increased number of health, travel and business interruption claims coupled with reduced sales volumes and fewer face-to-face interactions with customers.
At the same time, COVID-19 could also be a turning point for the insurance industry and enable insurers to demonstrate their purpose and value to society. So far, it is encouraging to see how well the industry has responded.
A global survey by Swiss Re revealed that COVID-19 has profoundly influenced individuals to rethink what is important to them. For many, the pandemic has been a time for reflection, self-awareness and putting life into perspective.
For a lot of people, the COVID-19 pandemic has reaffirmed the transience of life and the need to plan for any eventuality – the fundamental principle underpinning life insurance.
Another survey by PriceWaterhouseCoopers (PWC) showed that 15% of those interviewed were likely to purchase life insurance due to COVID-19 while 9% would consider the purchase of a critical illness cover. Some insurance companies have developed stand-alone COVID-19 insurance products that offer cash back benefit.
With the impact of the contagion now better understood, there is increased awareness on the need for insurance in providing financial security to households. The purpose of life insurance is to offer a financial cushion to a family after the loss of a bread-winner.
Insurance means that you are covered for certain risks in life and the potential financial loss that may arise. Life insurance guarantees payment of a death benefit in the term of an active policy. Life insurance essentially takes care of risks related to death or permanent disability. It is the money a family would need to maintain its standard of living should the breadwinner die and therefore offers some sort of social protection to households and families.
With COVID-19 causing disruption and uncertainty in numerous industries, discretionary spending has come into sharp focus amongst consumers. Short-term insurance is one area that is quickly gaining popularity in terms of household and business budgets, as consumers and business owners look to cut costs during these times.
Despite broad insurance coverage, such as motor, household and business assets remaining under pressure, specialized niche insurance products are seeing substantial growth. These include mechanical warranty, risk insurance and goods in transit cover, travel insurance, and cybercrime insurance.
With regards to travel insurance, for instance, the black swan COVID-19 crisis has demonstrated the impact of major catastrophes on international and business travel, with these types of events being perceived as having the possibility of recurring with increased frequency in the future.
The current crisis has also accelerated the trend toward automation and digitization, both of which were previously fueled by changing demographics, customer expectations and competitive pressures. Customers now expect their ‘best digital experience’ to be the norm, regardless of which industry is providing that experience.
That means that insurers are no longer competing against other insurers, but rather against the wide range of digital experiences customers now enjoy in their lives. With lots of digital competition now in the market, customers have become increasingly willing to reconsider their insurance options.
Having been forced to do all their other purchases online, customers have become increasingly comfortable with buying products (even complicated financial ones) virtually; new or more digitally savvy customers will naturally be drawn to those companies with the best digital offering.
We anticipate that remote working or a hybrid may remain the norm in many organizations for the foreseeable future. We realized early on that virtual interactions would open up new opportunities for servicing, selling and building customer relationships. We anticipate that conversations with customers that are supported by technology will lead to greater efficiency, more informed decisions, and better outcomes for both buyers and sellers.
There is little doubt that the insurance industry in Kenya is facing enormous challenges because of COVID-19. In my opinion, the cure lies in the development of new business strategies, rethinking what customer segments to target, and developing products, services and pricing strategies for prioritized segments. This will help drive revenue growth amid the tough economic times.
In this regard, progressive institutions are incrementally investing in digital capabilities, talent and other strategic resources needed for long-term success, as we believe this demand will guide the future of insurance. Offering services to our customers at the comfort of their phones is our strong focus as we adapt to a new contactless world order, which is fast becoming the new normal. Future marketing budgeting will be heavily guided by bigger investments in technology and digital transformation of organizations.
The Writer is the Executive Director, Laser Insurance Brokers (LIB) a subsidiary of the CPF Group.