By Benjamin Obegi
Insurance firms face a bleak future due to continued reliance on old traditional business products and services and business models, a recent survey has shown.
The survey by international consultancy KPMG further details failure to adopt new technological advancements and a slow pace to master the needs of highly sophisticated insurance consumers is putting the firms on stunted growth.
The survey paints a grim picture for the sector which is struggling, especially in developing countries like Kenya where penetration remains at its lowest and plagued by low customer confidence.
According to the author, Gary Reader, the Global Head of Insurance at KPMG, the old business models are no longer generating revenue for insurance firms and also fitting the industry expectations largely driven by consumer needs.
He said, “we have reached a point where the old models and processes are no longer fit for purpose,’’. He noted that it is going to take big steps-possibly an entirely new out-look -to drive growth in the future.
In order to shepherd the industry into a profitable and consumer-responsive future, the survey argues, CEOs will urgently need to pursue product innovation and transformation in order to fall in line with the fast-emerging business realities.
Further, CEOs will need to lay specific emphasis on creative front and customer service and market-responsive products and services.
The report is a wake-up call for developing countries where the uptake of insurance products and services is still low despite intensified efforts to create public awareness.
According to data by the Association of Kenya Insurers (AKI), Kenya, the leading economy in East Africa, recorded a penetration of 2.75 per cent in 2016.
This is a climb down from 2015 where the industry had a penetration of 2.79 per cent. This drop is despite a policy and legislative regulations aimed at addressing confidence crisis amongst consumers.
Some of the regulation interventions are meant to bridge administrative and other past failures which led to the collapse of some firms. They include reduced timelines for receiving and processing customer claims and declaring the financial status of insurance firms. Failure to declare the status has in the past been fingered for the sudden collapse of some firms putting customer premiums at risk.
The KPMG survey which sampled 100 CEOs in leading markets continues to place the onus on the top managers.
“Insurance CEOs may be confident in their market position but they also recognise that they face an uncertain future where new innovations, technologies and operation risks will upset the status quo and catalyse further disruptions’’, it reads.
In order to gain market relevance, there is need to invest in new technologies, products and customer diversification.