A sure-fire measure of how a market emerges and matures goes beyond traditional metrics like insurance penetration and premium density.
It also means the adoption of standards such as corporate governance and risk management. In Africa, risk management plays a significant role in shaping the future of the insurance sector.
New opportunities, new challenges
Claims programme management can cover complex exposures across regions, countries and classes. They can be of high value and low volume or low value and high volume with several stakeholders working together to manage the process. In addition, programme structure often varies across Africa based on the size of the insured, complexity of the exposures and reinsurance arrangements. The role of the broker and intermediaries becomes pivotal in placing the programme with the right insurer and monitoring how the programme is performing against variables such as incurred losses, quantum, recoveries, litigation and fraud.
It is no longer enough to simply transfer risk to the insurer and rely on them and their partners to manage the programmes. COVID-19 has taught us to revisit programme management, reset best practices, develop deeper partnerships, and accelerate data and tech innovations. In the context of this uncertain landscape, let’s consider two diverse pain points that will likely impact the management of African claims programmes in 2022 and beyond:
Part of Africa’s unique claims story is that there has been significant investment from traditional sources and increasingly from China. Projects range from the Trans-Maghreb Highway and new railways to powerplants in Nigeria, the Walvis Bay Container Terminal in Namibia, and the Caculo Cabaca hydropower plant in Angola.
These infrastructure projects will undoubtedly transform day-to-day lives by improving socio-economic mobility. Risk transfer/insurance are an important part of these initiatives — offering assurance and an ability to secure funding. From inception to completion/post completion and as risk profile changes, they will need robust claims programmes management that covers losses from workers’ compensation to public liability and cyber. To be effective, there must be significant collaboration between the insured, insurer, brokers, loss adjusters, lawyers, etc. This ensures the risk appetite and claims philosophy are understood; the level of oversight, reporting and technology is clear; the exposure is protected; and an operating model exists to service the losses.
Impacts of climate change
From building structures to building resilience, the World Economic Forum Global Risk Report for 2022 cited the top three risks as climate action failure, extreme weather and biodiversity loss. On the topic of weather, this is a driver of insurance exposures as Africa continues to experience extreme weather events. In Northern Kenya and Ethiopia there are ongoing droughts. A single catastrophe — drought, flood, earthquake, wildfire, tsunami or cyclone — can wreck lives, destroy businesses and create large claims bills that can easily spiral through lack of oversight into the billions of USD.
Extreme weather-related events are becoming more common, fierce and uncertain — making insurance vital. For example, post-loss insurers and partners must deliver on their promise through management of technical skills, crisis response, rapid action and stakeholder management. They do so all to reduce the cost — insurance or otherwise — of an event. Alongside cost containment, they must show soft skills like empathy and trust. This requires experience and expertise, including technology knowledge about drones, satellites, parametric solutions and remote loss assessment.
Whilst claims can never be fully automated or completely avoided, a lot of the focus in Africa has shifted to risk prevention and mitigation. There is a recognized need to drive from within a healthy, resilient and sustainable sector as seen in the 2021 Nairobi Declaration on Sustainable Insurance a statement of commitment by African insurance leaders to pursue sustainable development goals across risk management, insurance, investments, policy and regulation. This collective action and championing environmental, social governance (ESG)s and the UN principles will support stronger claims management in 2022 and beyond.