The Ethiopian insurance industry has remained too tame to adapt to the digital age and enhanced competition for market share. New models of doing business need to arise where technology solutions are integrated, and existing advantages are better leveraged, writes Asseged G. Medhin (firstname.lastname@example.org), deputy CEO of operations at the National Insurance Company of Ethiopia (NICE).
In the face of macroeconomic crisis, regulatory burdens, and increased competition for market share, insurance companies of Ethiopia can be seen struggling to maintain their balance.
The time does not allow for insurance companies to navigate the economy traditionally, with shrinking gross written premiums and flat expenses that continue to eat at profits.
The competitive landscape exists though and will favour those in the insurance industry who take advantage of the market by positioning themselves for long-term gains. But capitalising on the current challenge and turning it into a real opportunity will require new strategies that leverage human capital and increase productivity.
The manual process, customer retention, underwriting effectiveness and customer service response are all areas that need to be streamlined to realise dynamism. We should keep in mind that the Ethiopian insurance sector has always been a highly regulated industry. New regulations and legislation are proposed and adopted on regular bases, or when the sector faces emerging risks, and these are bad practices.
The regulatory body's measures may be proactive and show the responsiveness of the regulator towards risks. But we also have directives that aggravate operational inefficiency as well as service delivery.
Insurance companies that understand the compelling need of this transformation have taken the first step towards increasing operational efficiency and improving critical insurance processes.
Adapting business process re-engineering (BPR) and business process management (BPM) technologies, including adaptive management solutions and business architecture tools, is the next step forward. It can help insurance companies apply new strategies to reduce operational cost, eliminate significant stream of paperwork from their processes, improve customer's experience and grow their business.
Whether or not a company faces a financial crisis, the pressure in the business environment should give insurers the imperative to be flexible. Directives of no-premium-no-cover, minimum capital requirement, and vehicle insurance against a third party are all forward-looking. But insurance companies found them difficult to implement, given that they could not adapt effectively.
Hardship in meeting the targets of the minimum capital requirement; the time, energy and cost they incur to retain their credit clients; and the challenge they faced to accept minimum premiums for third-party vehicle insurance betrays a significant problem. It shows that they are not proactive with regard to mitigating risks arising out of the impacts of directives.
Thus, waiting to react to the directives is not sustainable. It is better to proactively devise strategies and turn them into opportunities for business development. Insurance companies must always find a way to break traditions that perpetuate a limited view of customers and accounting books.
New models of doing business and enterprise architecture need to arise where new technology solutions are integrated and improvements that leverage the capabilities of existing personnel and applications can be the norm.
Insurance companies ought to identify and strengthen their core processes and simplify complex workflows. Automation can help here, where massive sets of data can be utilised to help make optimum decisions, and ease the effect of the inefficient business process. Too many of the insurance companies introduce automation but fail to make good use of it or even their staff to help improve services.
Such reforms will help retain profitable customers, attract new ones, deliver innovative products, and provide high-quality customer service.
Insurance company executives who dare to change their company to streamline the process and deliver improved performance to support profitable growth strategies must work on key strategies.
They ought to change their core business process to enhance operational efficiency and control expense across service value chains. Changing the overall mind set up of employees and management staff to enhance adaptability is another important strategy. The need for automation should go without saying.
Where practices such as BPR and BPM apply, and the role of traditionalists is reduced, a typical insurance company's claim leakage can be managed, fundamental market growth through word of mouth can be achieved, customer service will be optimised, and cost of archiving and staff overload can be cut. Report capabilities to proactively managed works and directives will be expanded, compliance monitoring and management will be enhanced, and customer request response time will be reduced.
If insurance companies want to navigate, fulfil and reach their visions of high profitability, they should cease to be resistant and embrace change. The authorities must likewise consider opening the sector for foreign investors as well as deregulating the sector to enhance the competitive spirit that does not exist in today's Ethiopia.