Digital transformation must take precedence in the insurance industry

CIC General Insurance Managing Director Fred Ruoro. [Wilberforce Okwiri, Standard]

In Kenya, as in many parts of the world, the insurance sector is fundamentally revered as a provider of financial security and stability to individuals and businesses alike.

However, despite its importance, the industry has often been perceived as a slow adopter of new technologies in favour of its traditional modus operandi. 

To truly expand and thrive in the post-pandemic era, the Kenyan insurance industry must embrace digital transformation and innovation in line with evolving consumer patterns. 

According to the 2023 Economic Survey by Kenya National Bureau of Statistics, Kenya’s insurance penetration rate is at 2.3 per cent.

This differs in comparison to regional leaders like South Africa at 10 per cent and is below the global average of seven per cent, highlighting an urgent need for a paradigm shift in favour of the deployment of new technologies. 

The 2024 Insurance Outlook report by Deloitte further underscores this seismic shift with artificial intelligence (AI) and cloud technology identified as key drivers in amplifying operational efficiencies and catalysing innovation in product development. 

One of the primary benefits of embracing digitisation is the potential to reach previously underserved or untapped markets. 

By harnessing technology, insurance companies can extend their reach to everyone in urban to remote areas and offer microinsurance products tailored to people in the low-income bracket. 

Mobile phone penetration stands at 62.96 million as of last year, translating into a device penetration rate of 124.5 per cent where smartphones account for  58.3 per cent and feature phones (better known as Kabambes) being  66.2 per cent can play a big role in enhancing the new mode of insurance products consumption. 

Digital transformation can also significantly improve operational efficiency within the insurance industry.  

Introducing automated systems, reducing administrative costs and improving the speed and accuracy of policy issuance, claims processing, and customer service could significantly improve service delivery and hence increase the uptake. 

This not only benefits insurance companies potentially increasing their profitability but also enhances the overall customer experience, leading to greater satisfaction and retention.