Adapt or die, and the changing nature of insurance industry

Significant events and shifts in geopolitics, global health, technology and climate change are transforming behaviours in the financial markets at an unprecedented pace. Investor confidence is challenged every day, and market trends are changing just as quickly. In true “adapt or die” philosophy, businesses continue to come up with strategies to respond to most of these trends, to mitigate against new and emergent risks, and to make their mark in an ever-evolving socio-economic climate.

Technology transformation is at the forefront of these market trends. Technological advances are accelerating not just how we live, but how we work, how we deliver products and solutions to market, and how our economy functions. Governments are also adapting their approaches to regulation and support, as we all strive towards the most conducive ecosystems possible. The insurance sector is no different, equally within the mix of balancing need and anticipatory desire to progress with agility and innovation approaches including but not limited to digital transformation, customer loyalty and people management strategies.

 For context, we need to appreciate the reality that the Botswana insurance market is dominated by the life insurance sector. This sector is larger than the non-life insurance sector, with each accounting for 75% (life insurance) and 25% (non-life insurance) of the market, in 2018. Overall, written insurance premiums in Botswana remained relatively steady at P5,4 billion for two consecutive years in 2018 and 2019 falling short of projected growth of 7,7%.

While the life insurance sector contracted for the second consecutive year in 2020, premium growth in the life sector is still expected to average 4,8% per annum between 2021 and 2024. The life insurance market in Botswana is therefore set to grow faster than non-life business and this will represent 82% of total gross written premiums by 2022.  This is with consideration of rising non-communicable diseases, COVID-19 and other associated changes that have drastically shaped our industry. On the other hand, the non-life insurance segment in Botswana is considerably smaller than its life counterpart and is expected to account for merely 23,0% of total written insurance premiums by 2024. This will be driven by falling policy prices in the motor vehicle segment and low single-digit growth in the property segment, both of which are the largest non-life subsegments; together accounting for 63,6% of total non-life premiums in 2024. 

 The COVID-19 crisis shows no signs of disappearing any time soon, and will continue to affect the population’s disposable household income. This is therefore expected to weigh on demand for life and non-life insurance products in the short term. The non-life sector is more heavily exposed than the life sector as motor and property insurance sectors are heavily procyclical. Unforeseen slumps in the price of key exports and GDP growth may affect this segment growth.

 Growth opportunities in varied aspects such as being innovative in distribution strategies, potential growth in financial inclusion and continued education of non-insurance takers will need to be considered. A lack of insurable corporate or institutional risks and potential of widespread poverty may reduce demand for a range of insurance and investment products. What does this mean for us all?

The financial services industry is increasingly defined by an aggressive focus on digitally-based business models to unlock new value. New technologies are being adopted and incorporated into the fabric of business to boost operational efficiencies, enhance client experience and minimise human error.  Technological advancements have created new opportunities for corporate partnerships to build out their digital experience. The rise of such partnerships has accelerated data-driven growth as artificial intelligence and data analytics are employed to inform decisions related to product development, distribution channel development and cost reduction. The order of the day is digitalisation for progress, all the while striving to ensure the necessary digital literacy investment and inclusion efforts to make sure that nobody is left behind.

 The increasing competition and macroeconomic conditions can potentially result in consumers restructuring or cancelling some of the products on offer within the financial services industry. This has required companies to consider clients as more than customers but rather partners with shared objectives which create opportunities for mutually beneficial value exchanges. This is the value of the modern financial services provider: banks ought to be not just a place to put your money, insurance providers not simply those who receive and pay out claims, etc. etc. 

 As such, all client interactions may require companies to take active
and intentional steps to create relationships that will foster client delight and therefore loyalty. The development of robust partnerships allows not only for client retention but also eases the cost of acquisition by creating opportunities for up- and cross-selling. 

The use of surveys has demonstrated that only 28% of financial services respondents expect to stay with their current employer for the next five years, with only 4% of millennials expressing a desire to work in the insurance sector. Attracting and retaining talent will be of great significance in the years to come, with millennials placing a premium on flexibility and positive working. There is increasing pressure on the financial services industry to regularly review policies to align with workers’ changing needs. 

 Within the BIHL Group, innovation and agility have not only become core values in the business and indeed across our Subsidiaries but are actively lived and demonstrated on a daily basis, be it through large scale project investments or smaller in-house process and mindset shifts. Our culture is shaped and continues to be shaped around the need to always be better, do better, and create more meaningful and sustainable value not only for clients and customers, but for colleagues, communities and the nation at large. It is about leveraging our strength in numbers and all that we have and all that we can, and to transform this into truly engineering more positive futures for all, and stronger legacies for and with each other.

We have entered the digital revolution, but with it comes an equally important need for human insight and consideration, empathy and the importance of creating shared value. Trends can teach us a great deal, and certainly continue to shape the future of the industry in many ways, but how businesses adapt and onboard new innovations and demonstrate the relevant agility planning and execution is what remains core towards ensuring actual change and true progress in the most sustainable way possible.

In the “adapt or die story,” those that do not move with the times and set or shape the trends rather than simply following them, and likely to find themselves as a cautionary tale on the latter part of the phrase.

By Teko Moumakwa

BIHL Group Programmes Manager