In Africa’s insurance sector, a delicate balance must be struck between long-standing traditions of personal relationships and the urgent need for digital efficiency. While technology offers a path to growth, a staggering 80% of insurance groups still depend on person-led sales. This highlights a major challenge: how to modernize operations to lower costs and improve speed without losing the essential human touch that customers trust and value.
The Human Element in African Insurance
Insurance has always been a business built on trust. This is especially true across the African continent, where personal connections are not just a part of business, but the very foundation of it. When a customer buys a policy, they are often buying into a relationship with their representative.
This cultural context explains why the vast majority of insurance sales and services are conducted face-to-face. Customers want assurance that their unique needs are understood by a real person, not just an algorithm. This preference is deeply ingrained and represents a significant consideration for any company looking to introduce new technology.
The reliance on this model means that purely digital solutions often fail to gain traction because they cannot replicate the nuanced, trust-based interactions that drive the market.
Why Digital Transformation is Stalling
Despite the clear potential of digital tools, the African insurance industry faces a major problem with distribution. The current person-led model, while trusted, is not efficient enough for the modern era.
The primary issues are cost and speed. The cost to serve each customer remains excessively high, eating into profits and making it difficult to offer competitive pricing. At the same time, the speed to serve is too low, with manual processes slowing down everything from issuing policies to handling claims.
This inefficiency creates a difficult situation for insurers. They need to scale their operations to reach more customers and grow their business, but their current methods make scaling expensive and slow. This is the core reason why digital transformation is no longer a luxury but a necessity for survival and growth.
Key Digital Roadblocks in South Africa
In South Africa, the path to digitization is complicated by a unique set of challenges. According to Carl Blake from ServiceNow, these barriers are both technological and demographic, creating a complex problem for insurers to solve.
Integrating new digital systems with traditional sales methods has proven to be a difficult and expensive task. Insurers are struggling to build a seamless system that serves both their agents and their customers effectively.
The main hurdles include:
- High Data Costs: For many potential customers, accessing digital insurance services is a financial burden due to the high cost of mobile data. This limits the reach of online platforms.
- Demographic Factors: A significant portion of the target audience is not yet comfortable with digital-only interactions. They prefer the familiarity and trust of speaking with a person, especially for sensitive products.
- Legacy System Integration: Old, outdated software systems are a major obstacle to introducing modern digital solutions, as they are often incompatible with new technology.
The Hidden Hurdle of Legacy Systems
Perhaps the most significant barrier to modernization is one that customers never see: legacy systems. Jack Govender, a solutions expert at ServiceNow, points out that some insurers are running on software developed in the 1990s or even earlier. These systems are the digital equivalent of ancient relics.
These outdated systems cannot be easily replaced because they are deeply embedded in the business, servicing long-term policies that have been active for decades. Replacing them would be a massive, risky, and expensive undertaking.
This is particularly true for culturally sensitive products like funeral plans. As Blake notes, “Selecting a funeral policy is a culturally sensitive and personal process for many South Africans.” This requires a human touch that old, inflexible systems struggle to support with modern, user-friendly interfaces.
| Legacy System Issue | Impact on Business |
| Complex and Custom Tools | Slows down or prevents integration with new apps and digital platforms. |
| High Maintenance Costs | Diverts budget away from innovation and towards simply keeping old systems running. |
| Limited Flexibility | Restricts the ability to quickly launch new products or adapt to market changes. |
Bridging the Gap with a Unified Digital Ecosystem
To move forward, insurers need to stop trying to rip and replace old systems. Instead, the solution lies in building a unified digital ecosystem that can work with what is already there. This involves creating a modern service platform that acts as a bridge between legacy systems, new applications, and people.
This approach creates a “single digital thread” that connects everything. It allows different systems to communicate and automates processes across them. According to Muhammed Omar, ServiceNow’s Country Manager for Africa, such a platform “digitises the processes across these applications in a simple way.”
This integration simplifies the entire distribution chain. It ensures that customers, brokers, and back-office staff all have a consistent and efficient experience, regardless of the underlying technology.
The Tangible Benefits of a Modern Service Platform
Adopting a unified platform is not just about new technology; it is about achieving real business results. By connecting digital innovation with their valuable human capital, insurers can unlock significant advantages and improve their bottom line.
Companies that successfully integrate their systems in this way have been shown to be 1.5 to 2.8 times more profitable due to reduced operational costs and increased efficiency. The benefits extend across the entire organization.
- Consistent Customer Engagement: Customers receive a seamless and professional experience whether they are interacting online, on the phone, or in person.
- Increased Efficiency: Automating routine tasks frees up employees to focus on high-value activities like building customer relationships and providing expert advice.
- Enhanced Profitability: Lower administrative costs and faster processes lead directly to a healthier bottom line and a stronger competitive position.
Ultimately, these platforms help insurers offer better products and relevant information to customers, all while ensuring they meet strict regulatory requirements.
Frequently Asked Questions
Why is person-led sales so common in African insurance?
Person-led sales are dominant because trust and personal relationships are culturally vital in many African markets. Customers often feel more secure buying complex products like insurance from a person they know and trust.
What are the main challenges for digital insurance in South Africa?
The primary challenges are the high cost of mobile data, which limits accessibility for many customers, and demographic preferences for personal interaction. Additionally, outdated legacy systems make it difficult to integrate new digital technologies.
What is a legacy system in insurance?
A legacy system is old software, sometimes decades old, that an insurance company still uses. These systems are hard to replace because they often manage thousands of long-term policies and are deeply integrated into the company’s core operations.
How can a unified digital platform help insurers?
A unified platform connects an insurer’s various systems, both old and new, into a single ecosystem. This integration automates processes, streamlines workflows, and provides a consistent experience for customers, brokers, and employees, leading to greater efficiency and profitability.
Can digital insurance completely replace the personal touch in Africa?
It is highly unlikely. The most effective strategy is not to replace human agents but to empower them with digital tools. The goal is to create a hybrid model where technology handles routine tasks, freeing up agents to focus on building relationships and providing personalized advice.
