The business of insurance is about the management of risk, reducing it to levels that allow for sustainable provision of a product while contributing positively to the providers' bottom-line.
In the Kenyan market, however, and for the motor insurance segment, in particular, it has been a case of diminishing returns for underwriters and increasingly poor service experiences for those covered, with unprecedented fraud starting the downward spiral and price-undercutting delivering an additional crippling blow.
Telematics has been touted as the silver bullet, having been deployed with varying success the world over. The proposition that many providers have led with, has been the reduction of premiums payable for the seemingly innocuous action of allowing their mobility data to be collected and analysed, a touchy affair in current public discourse where privacy conversations have taken centre stage. When world-renown psychologist and behavioural scientist Dan Ariely was in town, I posed a question concerning big data, machine learning and the quest for personalised risk profiling and the maxim that insurance is sold never bought.
“What would drive behaviour change to tip the scales in the adoption of and profitability of our ailing insurance sectors?” I asked.
“The upside”, he said.
Triggering more thought than providing a decisive answer, transforming motor insurance and adjacent verticals through the use of the internet or the network of things will call for underwriters and service providers to package the upside much better than the consumer can visualise any downside.
This means dealing transparently with privacy, data ownership and data residency concerns, making the business models work on the basis of self-selection, providing a compelling value buffet that offers a defensible exchange quotient for users’ data at a low cost of acquisition and building a trusted platform where vetted partners can fill any needs that may arise on the long tail of consumer demand.
Investments must also be secured in the development of the full solution stack that covers hardware, software and the infrastructure on which it all comes together. We are yet to hit any sort of enviable KPI on the manufacturing of complex electronics in-county, not with all the hoops that one still needs to jump through.
Regardless, industry players must hire for the critical roles of design and build across disciplines to maintain an edge that can only be acquired through agile iterations on identified opportunities.
Motor insurance would just be the beginning.