The 2022 Annual Insurance Market Performance Report that was recently issued by the Tanzania Insurance Regulatory Authority indicated that the insurance sector maintained a relatively robust performance in 2022, as measured by all relevant indicators and metrics – gross written premiums, assets, penetration rates, number of policyholders and beneficiaries, number of insurance companies and intermediaries, new products, new initiatives, etc – supported by favourable economic performance both locally and globally in some way. The industry also has demonstrated its strength and adaptability in the face of global disruptions and challenges.
But the report also appreciated that there are some challenges, and these challenges run deep intertwining with global trends. Globally, insurance leaders are to contend with a raft of trends unleashed by COVID-19 and its post impact, as well as the ongoing Russia-Ukraine and Israel-Hamas wars, indirectly imported into our shores, with whatever levels of impacts and disruptions. Thus, for us 2022 was a unique moment. Looking into the future here at home, regionally and globally insurers face several fundamental strategic questions, such as: How can they create more value for their shareholders? How can they improve their customer experience? How can they regain momentum on the long-running quest to improve productivity? Also, what about talent? How can they reimagine the employee proposition to attract and retain the best? How can insurers, individually and collectively, reframe their role and the purpose of insurance in society’s social-economic demands? There must be answers to these questions. Leadership teams with insurance companies need to capitalize on some of the imperatives and value levers to maintain and retain sustainable value creation to all their relevant stakeholders, as described hereunder:
Regain relevance through product innovation and coverage of new risks: While the insurance industry has built financial resilience recently, some substantial risks have been left uninsured. A fast-changing world is creating many new and evolving risks. In general insurance such as property, causality, and commercial lines, for instance, data and cybersecurity risk and machine-learning liability are coming to the fore. New risks call for new products and a reallocation of priorities and represent significant opportunities for general and life insurers that are willing to innovate.
Enhance and personalize customer engagement and experience: New customer behaviours require a shift in distribution. Consumers are embracing digital channels and have become used to delightful experiences with leading tech companies. They expect the same when buying insurance both online and offline. They want to experience seamless, consistent, and multi-access channels.
Engage with ecosystems and insurance technologies (insurtechs): The ongoing drive toward digitalization has also put the insurance industry on the verge of a paradigm shift: as traditional industry borders fall away, in the near future, ecosystems will greatly influence the future of insurers, with insurtechs aiming to play a role in this re-composition of the value chain. Many insurance executives should be looking at ways to engage with emerging ecosystems in areas such as mobility, healthcare, and the connection to customers’ homes.
Develop new businesses for the digital age. Private investors, such as venture capital funds and private equity investors, have spotted the potential for improvement and the not-too-distant prospect of attractive returns in insurance. They are investing heavily in insurtechs, whose attractive talent pools can rapidly create and scale new businesses. In this context, incumbent intermediaries must reinvent their business models to fulfil the imperative to grow and, ultimately, to deliver stakeholder value.
Modernize core technology platforms: From 2012 to 2022, globally, technology’s average share of operating costs rose by almost 40 percent (for property and casualties) and 10 percent (for life). The key driver is increasing digitalization—at both the front end, where technology enhances the customer experience, and the back end, where digital drives productivity gains and operational performance. Digitalization is straining legacy systems, some of which are decades old, and many insurers are considering a replacement of core systems with tech platforms that support the requirements of the digital age. In a way the International Financial Reporting Standard – 17 (IFRS -17) which came into effect from 1st January 2023 has also been a catalyst for the increased investment in technology.
Reimagine culture, diversity, and ways of working to attract and retain talent: The recent McKenzie Report summed it up very well: “Once in a generation (if that), we have the opportunity to reimagine how we work. In the 1800s, the Industrial Revolution moved many in Europe and the United States from fields to factories. In the 1940s, World War II brought women into the workforce (if not the C-suite) at unprecedented rates. In the 1990s, the explosion of PCs and email drove a rapid increase in productivity and the speed of decision making, ushering in the digital age as we know it today. And in 2020, the COVID-19 pandemic drove employees out of offices to work from home…The return to the workplace is a chance to create a new, more effective operating model that works for companies and people navigating a world of increasing uncertainty.” I couldn’t say it better.
Make environmental, social, and governance (ESG) considerations a core feature of the business model: ESG issues increasingly affect how all companies do business. Consider climate risk, an area in which evidence is mounting that insurers will soon need to revisit their business models. However, while many insurers have begun to incorporate climate-risk considerations in their investment processes, new-product launches and underwriting processes are mostly unchanged.
Addressing some of these imperatives will help insurers and insurance intermediaries answer strategic questions about “how to play.” But the challenges and recent trends facing the industry will force some insurers to also think about “where to play” and rebalance their portfolios of businesses and review their capital allocation accordingly.
notesfrommoremi 