South Africa’s funeral insurance market is booming. It is the most prevalent type of insurance in the country, with the Centre for Financial Regulation and Inclusion (Cenfri) reporting that just under 90% of cover falls into this sector.
In a digitally-driven world, service providers in this space no longer necessarily look the same. In fact, many traditional insurers are now looking to combine forces with technology (fintech) and insurance technology (insurtech) companies, which can often quickly draw large client numbers through innovative and nimble offerings.
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Research by PwC shows that nine out of 10 insurance companies fear losing business to fintech startups, but that the majority recognise that co-operation between innovators and backers with capital and an established network have the power to revolutionise the industry.
Consumers are open to purchasing insurance cover from non-insurers, according to Accenture. This underscores the potential for non-traditional service providers to work with entrepreneurs to drive the evolution of the insurtech landscape.
In recognition of the power of partnerships in creating this foundation of tech solutions that work across sectors, Rise, Barclays Africa’s innovation hub in Cape Town, partnered with Byte Money through its 13-week Barclays Accelerator programme earlier this year.
Byte Money is a niche startup offering payment receipting and allocation services in the funeral insurance market.
Rise connects startups, investors and experts to help create mutually beneficial ecosystems able to grow the next generation of technology solutions across industries.
Moving towards the tipping point in insurtech
Byte Money CEO Marlon Shaw says a massive opportunity exists in the micro-insurance space to design and offer other types of insurance because with more data available, and with technology enabling thorough compliance from service providers, existing channels can be leveraged to cross-sell short-term products and other financial services. Using technology to decrease risk also means that insurers can start offering competitive pricing, he says.
As such, insurance and technology will increasingly be seen as one and the same, rather than companion industries, according to Shaw. Several tech companies are already carrying out the functions of insurance companies – just without offering the cover, he says.
With that change will come the tipping point for insurtech, according to Shaw.
“There is a tidal wave coming and industry players will either ride the wave or will be consumed by it. Tech-driven insurance solutions enable far greater efficiencies, more astute risk assessments and have a powerful ability to rapidly build economies of scale,” he says.
To fully unlock these benefits, it will become inevitable for players large and small and across industries to join forces, says Shaw.
Since the rise of the introduction of insurance-specific software in the last seven or eight years, large companies and insurers have typically responded to technological disruption slowly and by looking to large tech companies to provide the software they need to offer solutions.
That is no longer going to be enough to satisfy savvy customers, according to Shaw. He believes that, by their very nature, these companies often lack the agility to create new ideas and keep up with rapidly evolving tech advancements.
Now, some of the forward-thinking, larger industry players are looking “outside the box” for more flexible solutions that cost less and which perform more specialised tasks, says Shaw.
As the boundaries of insurtech continue to shift and grow, previously unimaginable solutions are becoming possible as large companies partner with agile innovators.
Ultimately, consumers will benefit.
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