Physical isolation during COVID-19 accelerated a trend towards increased digitisation across industries.

In the insurance sector, it seems COVID-19 has been the catalyst insurers so dearly needed to fast-track digitisation of their operations and the creation of next-generation operating models.

According to KPMG 2020 CEO Outlook report on the insurance sector’s digital acceleration, 78% of CEOs in the industry consented that Covid-19 has turbo charged progress on the creation of a seamless digital customer experience and almost a similar number of CEOs (79%) said Covid-19 orchestrated new urgency to the creation of new business models and revenue streams.

The report established that CEOs are updating their digital roadmaps, strategically designing and aligning to ensure that key processes and activities are being connected across the front, middle and back-office.

Considering today’s rapidly changing technology environment, industry players are moving their technology architecture to a platform-based approach.

The managing director of Kenbright Uganda, Ernest Barusya Magezi, said insurers need a technology architecture that can quickly adapt and evolve as this allows companies to reduce their risk by essentially taking modular decisions that move towards an end goal while building a more agile environment in which to thrive as an organisation.

“In view of the above, more than ever, leading sector players are making partnering a core capability and working with a wide range of technology providers — from Insurtech start-ups and data providers through to established technology and cloud storage providers — to tap into new ideas, tools and approaches and this is commendable”, Magezi says.

Magezi said as new technologies emerge into the marketplace and new use cases are applied, insurance CEOs will need to ensure that they are continuously reviewing the technology landscape to identify opportunities.

“COVID-19 has made us uncomfortable, anxious and it is also fair to say that it has changed us and our habits. My colleagues have addressed the pandemic from several angles already,” he said, adding: “We are seeing a growing number of Insurtech start-ups and technology providers proving their solutions at scale. They are considering how they can use new technologies.”

“Throughout human history, every challenge we have faced has made us more resilient. This pandemic is just another example. So, it is, especially crucial that we understand how the insurance industry can adapt to the changing market needs,” Insurance Regulatory Authority (IRA)’s chief executive officer, Kaddunabbi Ibrahim Lubega, said.

Risk cautiousness has increased

According to Lubega, the pandemic has transformed consumers’ views on insurance products and the way they purchase insurance.

“It is not surprising to see that consumers’ interest in Life and Health insurance increased since the COVID-19 outbreak, especially when insurance companies pro-actively contacted their customers,” he said.

“Interestingly, the sector has within a short period upgraded its operational models and we have continued to deliver on promises even within the existing constraints. A case in point was when the industry players unanimously agreed to support government efforts in preventing the spread of COVID-19 by making exemptions to the standard policy terms and conditions for medical insurance,” Lubega said.

He added: “We provided regulatory guidance to all medical insurance providers to allow and admit valid claims for medical expenses and or provide testing and treatment of insured patients infected with COVID-19. This action was proof that insurance is relevant and beneficial in such circumstances.”

This impact, Lubega said, has also enabled players to greatly improve in their technological capabilities to achieve the desired targets.

“This pandemic has improved risk awareness among the people because it has demonstrated how devastating unplanned risks can be,” he said.

Insurance Brokers Association of Uganda (IBAU) chairperson Solomon Rubondo reasons that with emerging risks, it is high time Ugandans started appreciating insurance.

He said it has become more imperative than ever for the public to buy insurance and treat it as a necessity.

According to Magezi, COVID-19 has prompted consumers to review their own personal protection gap and to reconsider the merits of stable, longer term protection.

He added: “As we expect stronger customer demand for health and life insurance products, it is time for us to rethink what values we can add for our customers and how we should speed up and plan ahead for the imminent wave of digitisation.”

Magezi said COVID-19 and lockdowns altered attitude towards daily life via smartphone, tablet and laptops, whether forced or by choice, whether we were buying, selling, ordering, delivering or working, it’staking place online.

The COVID-19 unprecedented environment highlighted the importance and opportunities for insurers to elevate their digitisation plans.

Rubondo noted that the industry would continue investing in building innovative products that meet people’s ever-changing needs.

“We have found that consumers express a strong desire to buy new policies and submit claims through digital channels,” he said.

Sector performance amid COVID-19, lockdowns

Despite the adverse macroeconomic fundamentals, the insurance sector posted a positive growth of 9.34% growth over the reporting year, albeit lower than the 13.22% in 2019.

The positive growth amidst the COVID-19 challenges, according to IRA’s Lubega, continued to emerge from among others; enhanced distribution — premiums collected through bancassurance channels that raised from sh53.6b in 2019 to sh83.3b in 2020, representing a 55.4% growth (accounting for 7.83% contribution to the total GWP compared to 5.5% in 2019).

Additionally, the growth was triggered by sustained growth in uptake of medical insurance class of business, mainly by corporate institutions, growing from sh219b in 2019 to sh243.79b in 2020 (accounting for 22.9% of the total GWP) and increased uptake of individual life insurance (which accounts for 55% of total life premiums) emerging from increased awareness and a growing middle class.

Lubega also holds that there was continued improvement in risk cautiousness among the people resulting from, among other things, increased public sensitisation campaigns by the various insurance sector players.

“COVID-19 has been a wake-up call to businesses and individuals alike that insurance is not a mere option, but a necessity,” he said.

Digitisation of insurance distribution channels, such as MTP payment platform for the period July-December 2020 alone, generated sh11b in GWPs.

This means players had to find hybrid models to use in order to retain policyholders in the wake of COVID-19.

However, most importantly, it further illustrated how insurers with stronger digital capabilities will be in a better position to meet consumers’ expectations in future.

Experts across all markets indicate that looking more closely at coverage details will be the biggest influence of the COVID-19 outbreak on their purchasing decisions.

This underlines the need for expert, trusted advice and highlights the ongoing importance of intermediaries in customer engagement, especially when customers are unfamiliar with their specific protection needs.

The opportunity

According to Magezi, the COVID-19 era represents an excellent opportunity to introduce behavioural economic and human-centered design principles into the insurance customer journey.

The insurance industry must digitise distribution channels in tandem with hybrid models and assisted sales to ensure that consumers are provided with the right information and different options when purchasing insurance.

“If we benchmark on the performance of the sector in 2019, we would be right to say sector performance was not any better than it was in 2020, Yet, someone would think otherwise because March 2020 had interim lockdowns and so expected that the sector gets a hiccup,” he said.

“So, although the industry grew in 2020, there was better sector performance in 2019, compared to 2020,” he added

Future of sector

The Government, according to Maurice Amogola, Minet’s Managing Director, is stimulating growth in the economy through investments in the oil and gas sector.

Such developments in the infrastructure, according to Amogola, are speeding up the economy, while enabling investors to do business incentivised by policies, like tax holidays.

Amogola said the 2020-2021 Budget is robust and specific on areas of investment that will stimulate general economic growth and the insurance sector in particular.

When the Government sub [1] contracts private companies to implement infrastructural developments, be it in oil and gas, roads, digitisation, the private companies will need capital from banks and banks will require that the companies take up insurance.

This way, Amogola said insurance premiums will grow. If the Parish Development Model can be well linked to the oil and gas sector and other substantial sectors, like agriculture, then we shall have micro-insurance spring up from the 15 billion oil and gas sector, which will require huge supplies of foodstuffs thus agriculture.