The biggest frustration I have with local insurance companies is lack of differentiation. Whether we are talking about short term insurance, life assurance, medical cover or funeral cover there is not much differentiation. This is best demonstrated by how much people move from one insurance company to the next and then the next term to term for their vehicle cover. Why? The only difference currently is where you buy the service so people will go to the insurance ‘shop’ closest to them at that time.
This is terrible for the insurance companies themselves. To use telecommunications terminology: there is too much churn in the Zimbabwean insurance market. Despite the costs associated with having to recruit that same customer every once in a while, this current state of affairs leaves the local companies quite vulnerable. All it takes for an innovative company from South Africa or wherever else to swoop in and take the spoils is to bring just a little variation to what’s on offer.
Innovation is not easy particularly when you are in an industry that has been around for centuries and thriving too (maybe not in Zim right now). Worldwide this sector owns everything from real estate to most of the publicly traded shares in any stock exchange. Success can be dangerous, it can make you lazy. Why break what’s working right? No! In the internet age success is transient.
In a broadband economy (this current one) things work fine until they just don’t. The great thing though is that the broadband economy itself gives businesses from all sectors including the insurance sector almost infinite opportunities for growth, efficiency and differentiation. Let’s look at a few opportunities that are not too difficult for Zimbabwe’s conservative insurance companies to imagine:
Car tracking and other tracking
This is a no brainer. There are a lot of tracking solutions out there. Most are selling directly to consumers. Insurance companies could be ideal wholesale buyers. They can then offer customers who have tracking activated lower premiums. This applies to other valuable items like mobile phones (of course no one would insure kambudzi).
Monitoring how customers are driving
There is a growing industry of telematics in other markets which can be adapted for Zimbabwe. Telematics is just a fancy word for programmes that monitor how people drive. This system monitors how many red lights you cross, how speedy or not you are etc. The insurance company then rewards better drivers with lower premiums. This may reduce the number of claims and at the same time it may increase customer retention. Obviously this demands a rethink of business models.
Promoting healthy lifestyles
A senior executive at a life insurance company said this to me, “We are in the business of life.” This is so true even for wholly dedicated funeral cover businesses. Contrary to popular belief companies like Nyaradzo want you to live to be a million. When the premium payer dies not only does Nyaradzo lose revenue, they need to pay out according to the policy agreed on. Even if it’s not the policy holder who dies but their dependent Nyaradzo still has to pay out through services.
How does technology help? The life assurance company or funeral cover company can provide health monitoring devices to help customers stick to healthy eating habits, exercise etc. Wearable devices may be a bit far for Zimbabwe but a mobile app can do just as good. Again this may be used to reward customers with healthy habits with lower premiums to improve uptake of these services as well as retention of customers.
Digital door bells
We have all seen the ads right? Someone walks up to a door and the owners of the house are not there. However, the owners are monitoring the door through their smart phones which are connected to a camera in the doorway via the internet. If I had an insurance company I would wow the Zim market by partnering an internet service provider or mobile operator to roll out this technology for free in exchange for insurance cover for household goods for a specified time frame.
Data, data, data…
The most powerful thing about all the above plus much more possibilities that I have not explored or that I can’t even imagine myself is the amount of data that these innovations collect. This data will help make insurance products more refined and relevant. The calculation of premiums is part science and part guesswork at times but with increasing amounts of data in the hands of actuary scientists they can make premiums more accurate and personalised.
The lack of differentiation within the insurance market is not just at the level of one insurance company to the next but at customer level within the same company. Right now vehicle insurance is just being calculated taking just the value of the car as the only variable or at least it seems so. With the collection of data each customer’s behavioral patterns can inform how much premium to pay. Most customers will be happy to have data collected for such purposes. In the US 78% consumers said they don’t mind data collected to fix premiums. At the end of the day why should I pay the same premium as that road maniac just because we drive the same model car?
Where to from here for Zimbabwe’s insurance companies?
Easy, the Broadband Economy Conference on the 20th of July. This is an event for top executives to share ideas and strategies on how connectivity can become a real tool for business growth in Zimbabwe. Technology must be a boardroom issue, we keep repeating this. It is not just for the IT manager or the CTO, just like finance is not delegated to just the FD. The programme will make tech less intimidating (not intimidating at all actually) for directors from diverse industries and most of the directors will not be CTO’s.
There will be a panel discussion that will talk about insurance specifically. The panel will have leaders from insurance, banking and telecoms. It’s gonna be exciting #BroadbandEconomy