The Outlook reflects on the past year and shares perspectives on trends that will shape the industry in the coming year
Customer centricity has been highlighted as one of the crucial aspects for African insurers to evolve as customers demand increased digitisation, accessibility, flexibility, and individualisation. This is according to Deloitte’s Africa Insurance Outlook 2022 publication released today.
“The publication offers insights on topics that are relevant to African insurers and was produced against the backdrop of an industry that, in the past two years, has proven its resilience in facing higher than normal levels of claims due to the Covid 19 outbreak while investment markets have been skittish. The pace of digital distribution has increased, with insurers having to understand their clients now more than ever before”, this is according to Andrew Warren, Insurance sector Leader at Deloitte.
Key customer demands on the insurance industry
“While there are clear leaders in the industry, there is still time to invest in beyond-the-obvious customer initiatives and partnerships to enable all insurers to move from a product-push mentality to individualised customer offerings in a streamlined and deliberate fashion” said Amilah Costandius, non-banking financial services lead consultant at Deloitte Africa.
Digitisation, with data at its centre, can play a key role in meeting customer expectations on automation of processes, from application to claims stage, flexibility of product offerings and tailor-made risk profiling and therefore pricing
IFRS 17 key considerations for tax
The publication also highlights the impact of the introduction of International Financial Reporting Standard (IFRS) 17 on the tax base of long-term insurers in South Africa. IFRS 17 will replace IFRS 4 as the financial reporting standard for insurance companies and will be implemented for reporting periods starting on or after 1 January 2023. Any legislative changes impacting tax would need to be finalised prior to that date.
Deloitte anticipates that, for some, the transition to IFRS 17 will give rise to significant additional day one IFRS profits. These increased profits will result in increased tax payable on transition which may place certain insurers under severe liquidity strain.
Insurers are modelling the expected day one as well as Business as Usual impact of transitioning to IFRS 17, and the industry is working with the legislature to ensure that there is an appropriate phase-in period of the expected day one impact, and how to apply the tax basis under IFRS 17.
It is recommended that insurers assess the system, model and data requirements that will be required to support income tax return submissions in the years ahead and how these will interact with expected changes to accommodate IFRS 17.
The Financial Action Task Force Report: what insurers need to know
Additional key aspects of the 2022 Insurance Outlook focuses on the 2021 South African Financial Action Task Force (FATF)’s Mutual Evaluation Report for South Africa which shows clearly that South Africa needs to significantly improve its practices and processes regarding countering money laundering and terrorist financing.
FATF has also made it clear that it believes the large banks have established better practices and processes than the rest of the Accountable Institutions (which include insurance companies), and accordingly there is a need for the insurance sector to reassess and refresh their responses to financial crime.
While the South African government understands that there are aspects it needs to correct, it will also require stronger cooperation between Accountable Institutions and law enforcement.
The FATF report also provides some clear indications of where the areas of weakness are and there is no doubt that the Regulator will be far more active at monitoring Accountable institutions’ responses. The combination of these two is that the responsibility for reducing financial crime has increased for Accountable Institutions and Insurers will need to respond accordingly.
“While regulatory pressures continue to drive some change in insurers, they can’t let this make them lose sight of the customer”, said Andrew Warren.