Visiting South Africa recently, I was struck by the insurers’ frustration of the lack of vendor commitment to the country. My conversations were with large insurers – and I mean seriously large companies tipping billions in premium — and it appears even these companies are unable to attract vendors to make the serious investment. Those vendors that have, appear to have local operations that are not able to deliver to the standards of their international parents.
This is a story that is repeated across Africa, and the Middle East. These are small but growing markets but in terms of potential, merely amount to rounding errors in global premium when compared to markets such as India or China. It’s understandable that suppliers choose to chase the big markets (but not why local operations offer poor service). So where does this leave the CIO of an insurer in Africa or the Middle East?
I’ll stick my neck out here and propose something for consideration – offshoring. Labour arbitrage and cost savings are typically the headline benefit of an outsourcing deal and admittedly, there is little labour cost saving to be had between Africa and India. But there is a lesser talked about benefit – one of a vast pool of skills.
Celent has been researching outsourcing recently and I am impressed at the level of commitment from providers to the insurance domain. You know the figures of the number of IT graduates in India and China each year and that many of them are choosing the outsourcing world. The large outsourcers offer tremendous career opportunities and a certain cache on the resume.
I’d challenge insurers in poorly served countries to think laterally to solve this problem. Outsourcers have offered staff augmentation for many years. Now add to that a deep understanding of insurance and of the vendor solutions on the market, and a maturity of the delivery model and the proposition looks all the more appealing. Outsourcers in India and China also understand about poor communications infrastructure and will be in a position to offer innovative solutions.
I’d challenge outsourcers to look at Africa and the Middle East as interesting expansion opportunities. South Africa has always been interested in looking outside of the country for innovation, best practice and skills and I imagine other parts of Africa and Middle East are similar. Revenue from these regions will not offset the 2009 slowdown in contracts in Europe and North America. However, a revenue stream from these regions is likely will to be a little immune to the global insurance cycle and provide a small buffer in future down cycles.