Speakers Marvellous Rukundu, Head of Profitability, Molebatsi Langa, Head of Strategic Accounts and Tamara Naidoo, Head of New Business Development at Old Mutual Insure, spoke about some of the trends that impact the industry and the ways in which we can future proof our businesses.
Key trends that impact the industry
Langa started the presentation by quoting Garth Napier, MD Old Mutual Insure, saying “the South African short-term insurance industry is a vital socio-economic sector that provides a critical safety net to society. And while the industry has had to contend with the effects of the COVID-19 pandemic, surprisingly, life in what we call the “post Covid era” has presented both challenges and opportunities for the industry.”
Langa then went on to highlight some of the trends that impact the industry such as: the increase in cybercrime; embracing insurtech; consolidation of the market; enhancing and personalising customer engagement and experience; and the value shift toward intermediaries.
Here are some key takeaways from the presentation.
Increase in cybercrime
According to Langa, cybercrime in on the increase. “Ransomware attacks have increased by 148% and multimillion-dollar ransom payments are no longer uncommon, according to the FIA Insight magazine, Quarter 4, 2021.”
In South Africa, Langa said we have had numerous incidents of cyber-attacks, “to name just a few examples, we have had data breaches related to two major credit bureaus in the last 24 months, with the latest one having affected 5 million consumers and a total of 600 000 organisation who were potentially affected by this incident. On 22 July 2021, Transnet became a victim of a ransomware attack. The attack caused Transnet to declare force majeure at several key container terminals, including Port of Durban, Ngqura, Port Elizabeth and Cape Town. This added to the supply chain disruption we were/are already are experiencing all over the world.”
So, what are some of the measures that we can implement to protect ourselves and our businesses?
Langa said we can implement multifactor authentication for remote access, email filtering and web security. “Companies can also run awareness training with staff and phishing testing (to test the effectiveness of these training sessions). Other mechanisms include Privileged Access Management (PAM), which is an information security (infosec) mechanism that safeguards identities with special access or capabilities beyond regular users. Lastly, have secured, encrypted and tested backups; run weekly or multiple times a month, these backups should be secured and encrypted, and not easily accessible.”
Embracing insurtech
The industry, according to Langa, needs to embrace insurtech partnerships, because insurtech is a technological innovation that is created and implemented to improve the efficiency of the insurance industry. “Insurtech powers the creation, distribution and administration of the insurance business, so the industry must embrace insurtechs.”
Rukundu said there is optimism in the market when it comes to insurtechs. “If you look at surveys and the responses from organisations there is evidence on the need to embrace insurtechs and partnerships, with the collaborative effort to transform the industry.”
Here is an example of a recent partnership that has developed between an insurer and insurtech. “Old Mutual Insure and SwiftVee joined forces to launch an industry first digital solution for the South African livestock buyer and auction market – VeeSure, the solution designed to support the ever-changing needs of the South African livestock buyer and production auction market. How it works is that farmers can buy animals online via a livestreaming virtual auction, connect with the livestock agent and the auctioneer, and have access to the VeeSure online insurance solution to protect their new proud investment,” said Langa.
When asked if intermediaries are taking advantage of the insurtech space, Rukundu said “we have not quite embraced technology to the full extent. There is more to be done.”
Consolidation of the market
“A study that was conducted by EY on the Belgian Insurance Market showed that between 2010 and 2021, the number of registered brokers decreased by about one-third. During the first eight months of 2021, 485 insurance brokers ceased their activity and only 142 new registrations were recorded. This suggests that the trend was accelerated by the COVID-19 pandemic,” said Langa.
In South Africa, Naidoo said bigger brokers are acquiring smaller brokers, we are also seeing many administrators and insurers acquiring brokers.
Brokers remain the preferred distribution channel, but market forces are driving consolidation. What drives broker consolidation?
“According to the study, consumers’ digital expectations are increasing, leading brokers to adapt their operations. New technologies are evolving the way brokers do business in various ways. Digitalisation (the digitalisation process can be costly, leading smaller players to search for partners with more financial means), tighter regulatory requirements and professionalisation (regulations on distribution, financial requirements and more frequent controls push brokers to professionalise further, grow or stop their activity), and an ageing broker force (many brokers are approaching retirement age and looking to hand over their businesses. In this context, the need to consolidate with another broker arises due to the difficulty to attract new generations into the field) are also driving consolidation of the broker landscape,” said Langa.
The smaller intermediaries are at a disadvantage, according to Naidoo.
Enhancing and personalising customer engagement and experience
Langa said any insurer and intermediary that wants to stay relevant needs to continuously think about these factors: price, choice, speed and convenience, trust and belonging. So, how do we balance the need to stay relevant, profitable and ensure we are pricing right and making our clients happy?
Rukundu says “for us, as insurers and intermediaries, it is about keeping customers at the center of what we do. The challenge is that the factors mentioned above have a different weighing for each client. It then boils down to the insurer and intermediary to determine what areas they are playing in and segmenting.”
“Choice, speed and convenience… there’s so many new trends in the short-term environment such as, for example, microinsurance. Insurers should focus on microinsurance because it is a cheaper format to do business, which will lead to better choice, speed and price for customers,” said Naidoo.
How important is trust? Rukundu said its hard to rank the elements in terms of which is more important. For some, trust is dupped by being consistent and how insurers have delivered a service. For others, it’s about products.
Advice is also key, said Naidoo. It drives trust.
The value shift toward intermediaries
The intermediary is key to relationships. In statistics of a survey by Ask Afrika, aimed at understanding the intermediary market and its challenges, the respondents believe that providing advice to ensure clients make informed decisions and supplying overall better service than the product suppliers was important.
With the technological advances and the perceived threats of third-party entrants and changing customer behaviors, it is interesting that intermediaries still view providing advice as an important aspect of what they do on a daily basis.
Rukundu said the role that intermediaries play is important, in terms of humanising insurance. “The risk environment is becoming more complex on the one hand and on the other, insurers are trying to simplify and standardise products. That’s where intermediaries are going to find more ground to play, in terms of adding value, beyond just advising a client.”
In her concluding remarks Langa said, “It’s very clear that the role of intermediaries and the role of advice is very crucial and will continue to be important in our lives going forward. It is important for all of us, in this insurance value chain, to keep up with these trends, improve and harness the best of what these challenges present.
