INSURANCE PENETRATION IN A DIGITIZED ENVIRONMENT: AN INDEPTH REVIEW HIGHLIGHTING THE STATUS QUO IN DEVELOPING COUNTRIES
Abstract
Purpose of the Study: The purpose of this study was to examine the link between digital technology within the insurance industry and insurance penetration.
Problem Statement: There are factors lowering the speed of adoption which includes: disruption to existing insurance business models, data management, data ownership, regulation, data security and fraud, resistance to change, and cyber security. The linkage between the penetration of these digital channels in the insurance industry and the penetration of insurance at the macro level in different countries show the existence of a global increase in number of patents applied in the years between 2011 and 2016, but despite accelerated adoption, developing countries are seen to record low insurance penetration and digital adoption index (DAI). The emerging and developed countries show both high DAI rating and insurance penetration. Studies also reveal that developed countries like Japan and Israel record very high DAI but moderately low insurance penetration while South Africa has very high insurance penetration but slightly above average DAI. Therefore, the emerging and developed countries show very minimal linkages between digital adoption and insurance penetration.
Study Methodology: The study used literature review methodology. A robust technological wind is blowing the insurance industry away from the conventional insurance model. The wind is stirring nearly every aspect of the insurance business from the analog to a predominantly digital model. Various technological innovations like the mobile connectivity, machine learning, Artificial Intelligence (AI), Internet of Things (IoT) and the Social Media – have crushed traditional barriers to entry and expansion, and accelerated the speed of change within the insurance market. Insurance business must therefore evolve to capture new possibilities and challenges from competitors. The role of technology in insurance penetration has been enjoying growing interest.
Results: The study found insurance penetration in developing countries to be significantly lower than that of the developed countries, but insurance growth in developing countries exceeds that observed in the developed countries. Modern business focus is shifting towards improving e-commerce capabilities, deepening customer relationships, and operating a leaner and smarter supply chain.
Conclusion: The study concluded that, digital technology is improving the business operating environment. The main areas of interest include the adoption of digital marketing, digital distribution, digital IT architecture and digital attackers with digital technologies such as telematics, automation, and machine learning. Drivers of the technology adoption were found to include advancement in technology, emerging innovative practices such as peer-to-peer insurance models, block chain technology (BT) and the emergence of a technologically gifted generation of millennials.
Key words: Innovation; digital technology; insurance penetration; technology adoption
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