Allianz eyes lower premiums as Jubilee deal takes effect

Nizar Juma and Coenraad Vrolijk.

Allianz Africa Regional CEO Coenraad Vrolijk on September 29, 2020 in Nairobi. PHOTO | NMG

Global general insurer Allianz SE on May 4, 2021 completed the acquisition of majority stake in Jubilee General Insurance #ticker:JUB.

Regional CEO for Allianz in Africa Coenraad Vrolijk spoke with the Business Daily on why the German insurer chose Kenya and how the deal with Jubilee will impact products and customer service going.

Allianz has had a greenfield licence in Kenya since 2014 and the business was growing. Why did you opt for a partnership with Jubilee Insurance?

We are a large multinational and it is quite difficult to do greenfield given the so many rules and constraints that are designed for large businesses and not start-ups.

We applied for the greenfield licence in 2014 but it was granted towards the end of 2016 and commenced operations as Allianz Kenya in 2017.

Our experience around the world is that it works much faster and better when we work with a great local partner who has been there for a long time and understands the market than doing everything from scratch.

You exited some markets inWest Africa and then the jubilee deal happened. Why Kenya?

Allianz Africa has aspiration to be one of the leading insurers on the continent over a reasonable period of time and Kenya is a really important part of this.

It is difficult to say you are a pan-African insurance company if you are not in Kenya and East Africa.

The talks with Jubilee started in 2016 and its conclusion and launch of Jubilee Allianz General coincided with Covid-19 disruption. How has this impacted the take-off?

We are not a private equity company. We are not doing this with a three- to five-year period then get out.

We are doing this because we believe this is a business we want to be part of indefinitely. If you have an indefinite time horizon, there is no wrong time to enter.

Today is always almost better than tomorrow.

We want to build a business. We are not here to strip the business apart, lay off people and exit.

Globally, Allianz is big on general insurance. What key things do you intend to do differently having assessed the market via Allianz Kenya?

Globally, we try to simplify everything so that the service is identical everywhere. We have done this across all our west African markets and we want to do the same in Kenya, Uganda and Tanzania.

Over time, we can bring lower cost base to the Kenyan market. And a lower cost base always translates into lower prices for consumers.

If we can remove more of fraud and more of costs, we should be looking at cost reduction of about 25 percent in a period of 10 years.

Costs in many African insurers are extremely high by global standards. Everything we can do to lower the cost for customers is at the top of what we want to do.

Kenyan market is heavily dependent on use of agents to sell insurance but Allianz is heavy on robotics and artificial intelligence. How do you see this playing out?

Our experience is that every distribution channel has a role to play. Even in the most sophisticated market you will find agents and brokers.

Agents will still be an important channel but our job is to digitise the process so that customers can complete the buying of insurance produces directly on digital devices.

Costs are lower when there is no person involved in the middle. So, the more customers can start buying insurance products directly, the faster we can realise lower prices.

The young population want a retouch on the traditional insurance products. How prepared are you to handle this segment?

We are usually open to testing and rolling out new products. There is a twist in how young people want to buy insurance.

There is a shift to shorter duration insurance and periodic payments. But the underlying nature of risks does not change.

The young population wants to have slightly more in small packaging which can be achieved through automation of processes.

There is room to explore areas such as weekly or monthly insurance and also to insurer on usage such as insuring somebody only when they drive the car; not when it is parked.

Is there a need for fresh capital to start off this deal given Allianz is on top of the world and Jubilee on top of East and Central Africa?

Both Jubilee and Allianz have more than sufficient capital to individually operate general insurance so there is no immediate need for fresh capital.

The partnership is about bringing together knowledge so that one plus one becomes more than two.

Price undercutting is on the lips of many insurers in Kenya. Any way out of this?

Price undercutting is a reflection that the costs of insurance are so high that people are complaining about prices going down. So, addressing costs will address pricing.

As Kenyan continues to undergo the path of competition, there will be a competition on prices based on different risk judgments.

Both Allianz and Jubilee are still on geographical expansion mission. How do you intend to avoid turning into competitors?

We are quite committed as partners to do our best efforts. There will be markets such as Ethiopia that we will consider entering jointly.

We have a very open channel of communication with Jubilee team and if we see opportunities where we are all interested we will figure out how to do it together.

You sold stakes in places such as Benin, Burkina Faso and Mali. Does this talk to a challenging business environment in West Africa?

We exited these businesses for regulatory reasons. The Conférence Interafricaine des Marchés d’Assurances (CIMA) zone quintupled capital requirements from 1 billion CFS franc.

(CIMA is an insurance oversight body for 15 countries in Francophone Africa).

In some markets, we realised we were to have more capital than the entire market size. The return on equity was not going to be sensible.

Kenya is relatively far ahead on regulations than most African countries on regulations. We have good respect for the market.