A false sense of stability prevails in the current MENA insurance market, in that insurers are well aware of the vast changes taking place in the industry worldwide but lack the motivation to adapt to the changes on a scale required to stay competitive, says Mr Frederik Bisbjerg, an international business (digital) transformation specialist.
In a paper titled “The MENA insurance industry -- headed for a fall?”, he notes that incumbent insurers are approaching changes in the industry in different ways, with the large majority taking a ‘wait and see’ approach, closely monitoring more active insurers to learn from their endeavours.
The more active insurers are ‘doing something’, digitizing existing processes and products, enabling customer service and sales, and offering API connectivity to partners and third parties.
Very few— if any — insurers have gone ‘all in’ in the MENA markets, redefining products, services and processes from the core, in effect recreating the company on a digital platform with a comprehensive customer focus permeating the entire organisation.
Mr Bisbjerg says that following the current strategic trajectory will not be a viable option in the long run.
He said that given the lack of motivation to make changes, the insurance markets in the region are not expected to see significant changes in products, services or processes over the next few years. While there will be more digitised solutions, all are based on what’s already there in terms of products and services.
The pace of the markets is bound to change and the barriers to market entry are slowly diminishing – a perfect storm is brewing centring on tech savvy customers in a digitally underserved market, Mr Bisbjerg warns.
He said, “It is important to note that this change will not be ‘more of the same, just digital’, but a whole new range of products, services and distribution models, all of which require extreme adoption – even transformation – from the incumbent insurers, if they are to keep a significant market share in the future.”
What’s in store for the region
Mr Bisbjerg reiterates that market development in the region over the next few years is expected to evolve at a slow pace, focusing on perfecting and digitising what’s already there in terms of products, services and distribution channels. Operations will be digitised to reduce operating expenses and there will be an increasing number of incumbents digitising customer journeys, from quote to claim. However, it will not be significantly redesigned processes being digitised.
Chatbots have already been implemented amongst few insurers but still as support bots (based on menus or decision trees) with no real interaction between the user and the bot – no conversational interface based on contextual AI.
He says that when the Big Tech players (FAANG; Facebook, Amazon, Apple, Netflix, Google) decide to leverage their massive and very granular data on corporates and individuals, the insurance industry in the region will face a new challenge altogether. Not only will the industry face distributors capable of reaching customers even before the customer realises the need for insurance (based on searches, online behaviour and purchase history), but distributors will have much more knowledge of the customer than the insurer, allowing for much more precise underwriting.
Following this, and further building on the expectations from new consumers, Insurance-as-a-Service (IaaS) will be introduced, offering cover only when required and only to the exact limit needed. IaaS is enabled by wider use of Internet of Things (IoT), allowing digital insurers to automatically register events that activate or deactivate IaaS products.
Examples could be home insurance being activated when sensors register there are no one at home or a travel insurance that is activated when a person leaves the country (registered via geolocation services).
Claims will be connected to IoT as well, and as AI develops, the majority of claims will be settled instantly and over time through smart contracts in the blockchain – the role of the insurer will be hosting the intelligent systems with a very limited number of people for personal claims support or surveying.
Mr Bisbjerg says that the good news is that markets in the region are still growing and with one of the world’s lowest insurance penetrations, the right player with the right offerings will have a significant potential for cornering the market and create a resilient insurer for the future.