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Digital Is Crucial To Bridging The Insurance Gap Between Rural And Urban Citizens

In South Africa, the divide between rural and urban citizens is significant. According to research from the Treasury Department, rural areas have much lower GDP per capita levels and higher rates of unemployment. They also have less access to healthcare and other critical services that urban citizens might take for granted. Insurance is no exception. Putting aside the millions of subsistence dwellers and casual workers who are likely uninsured, some estimates show that as many as 70% of South African farmers are under-insured. 

There are a variety of reasons for this divide, both among the rural poor and farmers, with cost and connectivity, and general insurance literacy playing major roles. That said, bridging the gap between rural and urban citizens represents a major opportunity for insurers. Key to doing so is embracing digital products and services, which cater to the needs of people in rural areas.    

Rolling out these services not only exposes insurers to new markets, but also gives them a chance to contribute to rural GDPs. 

Smarter farming products 

Within the broader context that farmers in South Africa face, it’s easy to see why so many of them are uninsured or underinsured. While 2020 may have been a bumper year for agriculture, this isn’t always the case. Over the past few years, South African farmers in every province have faced drought, alongside other natural and man-made disasters — such as floods and runaway fires. In such an uncertain economic atmosphere, many are forced to cut costs wherever they can. 

As a grudge purchase, insurance is often a victim of these cost-cutting measures. But this needn’t be the case. With levels of rural connectivity improving in some regions, insurers can take a smart approach to agricultural insurance. 

Just as car insurers use real-time monitoring and data to incentivise safe driving, so agri-insurers can provide discounts to farmers who use connected sensors to monitor crop and livestock health and who can demonstrate that they have risk mitigation plans in place. 

They can also use any data and insights available to communicate with farmers and demonstrate savings to them. 

Connecting the rural poor

Of course, not all farmers can afford this level of sensor-driven connectivity, never mind low-income rural dwellers. That does not, however, mean that these people should be ignored. After all, more than a third of South Africans live in rural areas. 

Using simplified back-end architecture and a digital experience platform (DXP) insurers can unlock the possibilities of enterprise-exclusive content management capabilities and UI/UX options designed specifically for people in rural areas. 

When one Indian company, Sahaj, a rural partner network focused on bringing financial and digital inclusion to rural India, took the second route, it was able to significantly expand its rural visibility, increase customer retention, get updates and news out more quickly, and accelerate the amount of time it takes to get new features to market. During the COVID-19 pandemic, for example, it was able to make a low-cost insurance option available to communities who otherwise wouldn’t have had access. 

In South Africa, insurers could offer products such as lebola insurance, or products that allow people to insure the surplus products from their smallholdings as it travels to a market to be sold. If these offerings can be turned on and off with a few taps of a phone, so much the better.  

Even in markets with as high a mobile penetration as South Africa, the levels of digital literacy may not be high enough for people to fully embrace these products. Here, insurers can blend the digital with the analogue by training entrepreneurs who can help rural citizens access insurance products digitally, even if their own digital skill-sets are lacking. 

These entrepreneurs can, in turn, become customers when it comes to insuring their own businesses. 

Meeting needs and embracing opportunity 

It’s clear that there is both a need for insurance tailored to the full spectrum of South Africa’s rural citizens and a significant opportunity for companies who can cater to those needs. It’s also clear, however, that digital is crucial to embracing that opportunity and bridging the rural-urban insurance gap.

By Greg Gatherer, Account Manager, Liferay