Using InsurTech to overcome barriers to non-life insurance
In a region ripe with opportunity, African insurers are uniquely placed to grow their non-life insurance business. But as Jeremy Leach reports, infrastructure and operational challenges are getting in the way.
Non-life business lines account for between 0.5% and 2% of insurance penetration in most African countries, but many insurers are prevented from harnessing the potential for growth because of existing infrastructure and operational challenges. Cumbersome manual processes resulting in costly claims processing and fraudulent activity across the process flow are largely to blame.
Claims falling into non-life categories – such as automotive – still rely heavily on in-field assessors, resulting in longer cycle times and loss of transparency across the claims process. Research shows customer trust is at its lowest point during the claims process and this is reflected in countries such as Kenya, where insurers have been ordered by the Insurance Regulation Authority (IRA) to reduce claims settlement time from three months to 30 days to combat increasing levels of consumer dissatisfaction.[2,3]
InsurTech presents a logical and relevant fit for the traditional claims process, as evidenced by the growth in claims automation tools available on the market today. Indeed, we are seeing technology increasingly used to achieve what has become known as a ‘Touchless Claim’, which requires no human intervention. While many African insurers are a long way from completely touchless claims handling, some digital claims solutions could really help solve the primary challenges of greater efficiencies, improved customer satisfaction and increased transparency.
Virtual claims processing
A recent US study revealed that insurers using virtual claims handling experienced 80% faster cycle times than their peers using traditional claims handling methods.
Covea Insurance in the UK is one example where a digital solution is being applied to create claim efficiencies. Covea partnered with Audatex, a solution provider that helps to streamline motor claims by applying first notification of loss (FNOL) and rapid allocation manager (RAM) to help claimants arrive at a clear, unambiguous description of the damage to their car without requiring any technical expertise. The insurer integrates into Audatex’s back-end systems to enable end-to-end claim processing, including allocating repair work between the insurer and its body-shop network.
Another example is Snapsheet in the US, which has recently raised US$12 million in Series C funding (a third injection of investment capital from outside sources). The company’s cloudbased software is used by insurance providers to guide users through a photo and information gathering process at the scene of an accident. It is white-labelled as a mobile application for insurance providers and in the backend, Snapsheet helps insurers to process claims virtually without needing an adjuster to inspect the vehicle. Snapsheet intends to use the funds raised to further integrate crowdsourced photos, telematics and machine learning into its platform.
Telematics has also already started delivering on its promise of enabling greater accuracy for underwriters. Additionally, integration with cloud applications to trigger FNOL and detailed imagery of accidents is reducing claim processing times for providers such as Discovery Insure in South Africa, which has been applying telematics to its insurance processes since 2013.
Redesigning the claims process in Africa
In regions such as Africa, more accessible technologies including cloud systems and mobile phones are being applied to iron out claim processing issues associated with data capture, storage and fraud. An insights study published in 2017 by Britam Microinsurance identified two key bottlenecks in their medical claim processing time.
Firstly, the time taken for hospitals to send claim documents to Britam, and secondly the time spent on data entry from physical documents to the IT system. Taken together, these steps in the process flow accounted for 62% of the entire claims processing time. Ghanaian Insurtech provider Claimsync designed a solution to deal with the specific challenges experienced by Britam. Their cloud platform enables insurers to process all completed medical claims via an online dashboard, which allows the insurer to vet and reject items or claims.
Back in Kenya, where non-life insurance penetration is just 1.8%, fraud has emerged as a major concern for insurers over the past few years. In 2015, Kenyan private and personal motor insurance class single-handedly contributed 76% (KES3.2 billion or US$32 million) towards underwriting loss for Kenyan insurers, making it the largest loss-making insurance class nationally. According to the IRA and the Insurance Fraud Investigation Unit (IFIU), the high growth in incurred claims and losses points to significant fraudulent activity in the market, resulting in premiums rising by as much as 25%.
Responding to this challenge, a joint venture between Inclusivity Solutions and Cocoon Network has been working on an innovative pilot called MALCOLM (Mobile Application Linked to Claims Operations and Learning for Microinsurance). MALCOLM aims to reduce opportunities for fraud, whilst simultaneously creating greater efficiencies in the claim assessment process by combining a cloud-based platform with a mobile application. It enables insurers to log assessments online, allowing assessors immediate access to information regarding the job. Through a mobile application, the assessor is then able to capture the customer data and the assessment itself, and submit them in real time to the insurance company using a smart phone. The insurance company can then access the assessment via a web interface and generate reports in multiple formats.
Figure 1 outlines how a typical motor insurance claim can be improved by applying MALCOLM technology. During the product proof of concept, insurers specifically highlighted several areas where the product demonstrated most promise. These included efficiency and cost, transparency, fraud management and digitisation. Insurers see significant opportunity to increase efficiency and cut costs. MALCOLM allows a broker or agent to allocate an assessor, to speed up the process and reduce the cost of assessments by reducing the number of steps and iterations involved in allocating assessments. Brokers also confirmed the technology could ease their concerns about transparency, because currently they are the main point of contact for the customer, yet have no visibility on the status of the claim.
MALCOLM can manage fraud in two ways. Firstly, the app includes Global Positioning System (GPS) location functionality on photos so insurers can identify whether assessors are taking too long between photos or are taking photos of different locations. Secondly, assessor automation functionality reduces the risk of claims administrators receiving kick-backs or financial incentives from assessor firms.
Lastly, by digitising the claims process, insurers can use data analytics to improve pricing as well as to tackle fraud. Currently the process is mainly paper-based and in some cases finding one file in an archive can take an administrator an entire day.
Mapping MALCOLM’s process flow was critical for ensuring lines of accountability and determining the appropriate evaluation criteria for the project. Results from the pilot are still coming in, and will be evaluated against the following indicators: improved claims process; timeliness; reduced cost of claim (currently at KES 7,600 or US$75); increased number of claims processed per day (currently the insurer is registering between 15 and 20 claims per day, using seven claims managers); claims logged per assessor per day; fraud detection.
However, it is worth noting that, as with most digitisation projects, the greatest challenge is often around change management and getting traditional companies to embrace new technology.
The move to new digital channels that can facilitate and improve traditional insurance processes in emerging markets is still some way off. For example, KPMG estimates that as many as 40% of organisations in East Africa have not yet embraced mobile technology as part of their operational model.9 Insurers in emerging markets have a real opportunity to achieve growth in their domestic markets, but only if they are prepared to embrace change through innovations that deliver customer value and create efficiencies.
 2017 African Insurance Barometer. Available at https:// pulse.schanz-alms.com/africa-insurance-barometer/2017.html, accessed on 6 September 2018.
 KPMG, The Next Generation Customer: KPMG Kenya Insurance Survey Report. Available at https://www.the-digital-insurer.com/the-next-generation-customer-kpmg-kenya-insurance-survey-report, accessed on 6 September 2018.
 The Star, January 2017.
 LexisNexis, Future of Claims Study 2017 (LexisNexis, 2017). Available at https://risk.lexisnexis.com/insights-resources/research/2017-future-of-claims-study, accessed on 6 September 2018.
 International Labour Organization (ILO) Impact Insurance, Getting to the bottom of claims turnaround time. Available at http://www.impactinsurance.org/emerging-insights/ei131, accessed on 6 September 2018.
 Association of Kenyan Insurers, Insurance Industry Annual Report 2015. Available at https://ira.go.ke/images/docs/Annual%20Report%202015.pdf, accessed on 6 September 2018.
 Insurance Regulatory Authority, Quarter 4 report.
 Daily Nation, May 2015.
 KPMG East Africa Insurance, The Next Generation Customer: KPMG Kenya Insurance Survey Report (KPMG East Africa Insurance, 2016). Available at http://www.akinsure.com/ images/pdf/KPMG%20Insurance%20-%20the%20next%20 generation%20customer%20-%20Kenya.pdf, accessed on 6 September 2018.