Zimbabwe insurance industry urged to embrace technology
ZIMBABWE’S troubled insurance sector has been urged to embrace digital transformation and use data insights to reduce fraud and increase penetration rate.
The country’s insurance industry is still reeling from hyperinflation, which happened a decade ago and wiped out people’s savings resulting in a low penetration rate. In the past few years, the industry has also struggled with increasing cases of fraud that include fictitious car accident or death claims, exaggerated claims and backdating of insurance claims.
Blessmore Kazengura, the acting Commissioner of Insurance, Pension and Provident Funds, said technology such as blockchain could help to instill confidence in the troubled sector, which has remained trapped in the past.
“The truth is that we cannot ignore the wave of technological change and assume that the local insurance industry will remain a virtual island in a sea of technological change. Insurance is an international business that transcends boundaries, hence the need to be on the watch-out regarding developments in the international markets,” he told delegates attending a breakfast meeting last Friday.
With the youths making more than 60 percent of the world’s population there has been a major shift in client demographics, behaviors and expectations.
Kazengura said agile insurance players have observed the shift in population demographics and consumer tastes and have leveraged technology to create new insurance products, services and business models that are tailored to the demanding needs of growing digital customers.
“Technology is changing business models in both positive and disruptive manner. It is, therefore, imperative that we stay as relevant as possible for our continued existence and development of the sector. In fact, we should be first followers of those insurance markets that have become first movers in terms of technological innovation in insurance delivery,” he said.
The IPEC boss said his organization was supportive of innovation among its players since it is good for competition and insurance inclusion.
“As you may be aware, the local insurance penetration, which is around 4,7 percent is on the low side given the potential impact of digitisation in increasing insurance penetration. One interesting fact to note is that Bitcoin has overtaken insurance penetration in many African markets.
“For instance, in Nigeria, the penetration of Bitcoin is at 3percent against insurance’s 1percent. This is despite the fact that there are no brokers and agents for cryptocurrency and consumer protection laws in place. Therefore, the uptake of bitcoin demystifies the perception that there is no market for insurance in Africa and Zimbabwe in particular. Thus, the low penetration of insurance can thus be tackled through digitization,” he added.
New Finance minister Mthuli Ncube concurred with Kazengura and said it was important for regulators to embrace and encourage technology and innovation.
“I think the attitude for Zimbabwe should be to invest in understanding innovations and often central banks are too slow in investing in these technologies. But there are other countries which are moving faster. If you look at the Swiss central bank they are investing in and understanding Bitcoin. One can pay for travel using Bitcoin in Switzerland. So if these countries can see value in this and where it’s headed, we should also pay attention.
“We have innovative youngsters so the idea shouldn’t be to stop it and say don’t do this but rather the regulators should invest in catching up with them and find ways to understand it, then you regulate it because you now understand it. I would actually encourage the central bank to create a unit to try and understand cryptocurrency,” he said.
This was after the central bank recently banned Golix, Zimbabwe’s only exchange for cryptocurrencies, arguing that fiat currencies could fuel moneylaundering as they are not regulated.
Lynn Mukonoweshuro, chairman of IPEC, said blockchain technology was a silver bullet to challenges of low penetration bedeviling the insurance industry.
“We believe that financial inclusion cannot be wholly attained with the current methods of insurance delivery, which rely solely only on the use of brokers and agents. It is time that we harness technology to develop products that are tailored to the needs of the digital customer which is where our demographic patterns are pointing to.
“In this regard, I wish to challenge the market to pioneer in adopting blockchain technology to attain universal access to insurance and pensions through harnessing the power of technology,” she said.
This comes as a number of breakthrough technologies such as cloud computing, the Internet of Things, advanced analytics, telematics, the global positioning system, mobile phones, digital platforms, drones, blockchain, smart contracts and artificial intelligence, have transformed the insurance industry in other markets.
The new technologies have redefined insurance distribution models through cutting distribution costs, increasing accessibility of the customer and developing products that are tailored to the needs of the digital customer.
Mukonoweshuro noted that the establishment of online insurance companies in countries such as China and Spain through collaboration between technology platforms and traditional insurers has seen insurance technology forms (insurtechs) offering clients more tailored products.
“For instance, motor insurance that charges by the mile driven or dependent on other driving habits and other social behavior,” she said.
The United States insurance market has also seen an increase in insurtechs. Research has shown that more than 1 500 insurance technology start-ups and venture capital companies invested an estimated $2,65 billion in 2015 to support insurance technology.
Cynthia Ndlovu, a risk analyst with a local financial institution said insurance firms have numerous sources from where they can collect data and help create important and personalized products for clients hence helping them in the management of risk.
She indicated that insurance companies stand to benefit a great deal by tapping into blockchain technology, artificial intelligence and cloud computing technologies.
“By 2020, it is estimated that there will be more than 20 billion devices connected to the internet. Insurance companies that will strategically position themselves for this transformation will reap big in the home, health and car insurance sectors,” she said.