Nurturing digital innovation through industry collaboration could unlock African insurance markets

A version of this article by MNK Re Group Chief Executive Manoj Kumar, was first published in Insurance Day on 27 September as part of its feature on insurtech

At MNK Re we’ve always been clear that there are significant opportunities in the African market, it’s why last year we established MNK Re South Africa.?Africa is one of the most exciting emerging insurance markets in the world and could have the most to gain from what insurtech has to offer. But success is not guaranteed and there are particular issues that will need to be addressed to unlock its potential.

The gauntlet was thrown down at this year’s AIO conference in Lagos at the beginning of September.?The theme of the conference was the contribution the insurance industry can make in rebuilding Africa’s economy.?There is no doubt that our industry has a huge role to play. It was heartening to hear from government ministers, regulators and African companies that there is a real appetite to work more closely with the (re)insurance industry to support them in tackling the major risks that they face.?

There is much to be optimistic about, the opportunities are there but they need to be grasped.

An example has already been set: the rapid spread of mobile digital technology, has already revolutionised banking and payment services. There has been a nearly fifty-fold increase in internet usage over the last 20 years and, in the next 10 years, the continent is expected to achieve parity with the rest of the world with three-quarters of Africans projected to become internet users.?

The pandemic has of course slowed this trajectory, but it feels like this will be a temporary pause.?The insurance sector has traditionally been slower to adopt new technology, but it needs to harness this expanded access to digital services if it is going to take full advantage of growing markets. Indeed, the health crisis may well act as a further catalyst in the shift toward the use of digital technologies, bringing major new opportunities to brokers, insurers and our clients.

Industry collaboration is critical

A key challenge is that much of the African insurtech sector is currently scattered across the continent. Greater collaboration with established players could be the key to overcoming those barriers.?

Insurtechs typically focus on a specific function in the insurance value chain which they then aim to support through their digital solutions.?The overwhelming focus in Africa has been on the process to quote, bind and issue and we know from the experience within the London market, where PPL has revolutionized the quote and bind process in just eighteen months, that this can make a real difference to client/broker/insurer/reinsurer collaboration, no matter what the size of the risk.

The insurtechs that we work with are not simply there to provide ‘tech support’, but they are valued and strategic partners, helping us to deliver for our African clients as we work with them in developing new risk solutions.?

A unified Africa approach

We also need regulatory structures that help to nurture young businesses and provide markets into which they can grow.?Several African countries are strengthening and updating their regulatory frameworks to recognise the value of insurtechs and their growing importance.?Seven African countries also have some form of regulatory sandbox to help develop fintech solutions, which is clear evidence that work is being done to encourage new technology development and remove barriers to entry for fintech entrepreneurs.?

But what we ultimately need is a unified African approach. The game changer could be the African Continental Free Trade Agreement (AfCTA) which came into force in January this year, with ambitions to create a single African market and rightly has a big focus on opening up trade in services.

The AfCTA emphasis on regulatory harmonisation, uniform tariffs and the impetus it gives to the SME sector could make it easier for insurtech start-ups and tech entrepreneurs to do business across member states.?Importantly, facilitating cross-border trade would also support the reach and rapid expansion of new partnerships and be particularly fruitful at the foreign direct investment stage. At MNK Re we certainly believe that the Agreement should allow us to develop insurtech, parametric and other specialty products tailored to African markets.?

Our own experience in Africa has proved to us the value of specialist partnerships and local knowledge combined with global technological and insurance expertise.?Embracing disruptive technologies and embedding them in our business has not only enhanced our offer but also delivered real benefits to our clients.?For Africa it can only be a win-win situation.

It would be great to get your thoughts and perspectives of this issue, or if you would like to learn more about the services MNK Re offer, please feel free to leave comments or message us for more information.