African insurers are constantly evolving best practices to ensure they further adopt international insurance principles, stay compliant with changing regulations and leverage opportunities to grow — whether that be through International Finance Reporting Standards (IFRS) or International Association of Insurance Supervisors (IAIS) standards.
The acceleration within large, emerging markets like Africa is a key reason for their continued access, premium growth and innovation in new products, distribution, and service. It also means they support the next generation of insurance customers through sustainability, resilience and solvency. A key tool to achieve effective management is their corporate governance framework.
A few years ago — much like risk management, compliance and fraud — corporate governance was an under-developed concept across Africa, with either a lack of appetite or real understanding around its value. Today, it has evolved from a buzz word in the boardroom to a tangible point of difference in the business. Corporate governance is best viewed as the overarching glue that hold things together. It is not just a system of rules, processes and best practices by which an insurance company is directed. Rather, it is the board setting out the strategic vision, creating leadership to execute goals, and giving stewardship on the navigation to success. In other words, it gives a platform for people, process, performance and purpose. And it’s playing an increasing role in claims management.
Corporate governance will inevitably extend into the critical area of claims management and deliver a better claims journey to the customer as expectations, access and appetite for insurance products builds. A higher claims maturity is a sure sign of a strong insurance market which has enabling regulation and customer confidence. The key shift that Africa is moving towards is a mentality that insurance is value adding because in a worst-case scenario, your claim is more likely to be paid than not. The purpose is not for insurers to take the premium and hide, but to indemnify the customer through this risk transfer.
A game changer across Africa has been the silent, evolving separation of audit, compliance and risk functions which sit as the second line of defence in risk management frameworks to allow the first line of defence (e.g. claims, underwriting) the ability to function strongly. Historically, they started as one team but now, segregation is becoming more standard — allowing independence, autonomy and empowerment to focus on specific functions. There isn’t a more critical function that requires corporate governance than claims.
Any insurer should have that clear overall strategy and vision, while understanding their risk and claims profile. This is increasingly augmented by data insights and supported by a well-documented claims philosophy and strategy which sets out key aspects of claims. Key aspects include the level of customer care and communication, conduct, processes to report a claim, reserving guidelines, procurement, selection and use of service providers (and their behaviours) recoveries, and tolerance around fraud and litigation.
Claims is ultimately a complex journey from notification to outcome — bound by contractual terms and conditions, but instinctively driven by the spirit of how rules are applied. This is where claims corporate governance becomes a lever to ensure the right decisions are made on each claim, give clarity and consistency, and ensure outcomes are always equitable, fast and proportionate. It is therefore part of the very culture of the insurer; and in this age of social media and next generation customers, it is vital to foster a strong reputation as an insurer who meets expectations in claims management. This creates a strong overall brand and growing platform. Insurers ultimately will live and die by the claim’s performance and perception.
Africa is a large, vast and emerging market. As such, it should not seek to simply copy mature market standards but apply them authentically. This will involve the right partners and steps that fit their customer base and target operating model while aligning to their strategy and risk appetite.
A more mature claims management approach anchored by strong corporate governance will achieve:
- Positive behaviours and culture — ensuring the claims process is as seamless as possible
- Reduced costs due to decreased leakage and less of a chance for things to go wrong
- Improved decision making and confidence on a claim
- Assurance to stakeholders and internal audit teams and the board that robust internal controls exist and deliver a reduction of risk exposure in claims portfolio
- Innovation as the focus on positive action
- More talent as there is a deep pool of African insurance human capital and the race to attract it will be shaped by brand and reputation