Capitec moves into insurance market
Meanwhile, international short-selling outfit Viceroy Research sends a new list of questions for Capitec’s audit committee
Capitec, the lender that indelibly disrupted SA’s banking sector, entered the insurance market with the launch of Capitec Insure on Monday.
It will dip its toes in the water with a funeral plan underwritten by Sanlam-owned Centriq Life Insurance Company.
"We know what our banking clients are paying to other providers and we are coming in well below the competition with more cover," Francois Viviers, executive of marketing and communications at Capitec, told Business Day on Monday.
The vast majority of the bank’s clients had funeral policies with other providers. It would target these customers initially before launching marketing campaigns, Viviers said.
Capitec, which obtained its banking licence in 2001, now boasts nearly 10-million customers. About 46% of these are primary banking clients, who not only have loans with the bank but make regular deposits into their Capitec accounts, mainly salaries.
It now has 289,000 active credit cards in issue, launching that product at the beginning of 2017 to target wealthier customers. Its credit card product had a book value of R2bn at the end of February — about 4.2% of Capitec’s total loan book.
The funeral insurance market in SA is reportedly worth more than $500m in annual premiums. The Financial Services Conduct Authority could not confirm this figure at the time of publication.
Funeral insurance was a "good opportunity" for Capitec, as it had been very lucrative for large life insurers such as MMI and Sanlam, said Renier de Bruyn, investment analyst at Sanlam Private Wealth.
"Margins are high, which means Capitec can charge less and still be profitable," he said.
There were 15-million funeral insurance policies in circulation covering 19-million adults, Viviers said.
"Based on our research, we estimate the average policy in the market to cover a main life, spouse, two children and one extended family member costs between R175 and R295.
"Capitec provides the equivalent cover at approximately R140 in branch and R124 on our banking app," he said.
Policies start from R25 a month, through the Capitec app and R40 a month when applying in branch.
Funeral cover ranges from R10,000 to R100,000.
The product would be accessible via the Capitec banking app, where customers could change their cover amounts depending on monthly affordability, Viviers said.
The funeral plan featured cover for up to 21 dependants, including the policyholder.
Other features include a doubling of the funeral payout if a life assured died in an accident and a six-month premium waiver if the policyholder died for the remaining life assureds.
In addition, there was a voluntary policy pause for up to six months, with no premiums payable and no cover.
Capitec hoped to launch other insurance products in the long term, Viviers said.
Also on Monday, international short-selling outfit Viceroy Research published a letter containing questions for Capitec’s audit committee.
These relate to alleged changes in Capitec’s provisioning policy and the nature of internal consolidation.
A scathing Viceroy report in February torpedoed the share price and prompted a back-and-forth debate between Capitec and Viceroy.
Capitec CEO Gerrie Fourie said at the time that the Viceroy report was "riddled with inaccuracies".
The share price did not react to the Viceroy letter on Monday.