Picture: 123RF/ALEXEY ROMANENKO
Picture: 123RF/ALEXEY ROMANENKO

Even before the Covid-19 pandemic hit, SA’s traditional insurers had been contending for relevance and market share in an increasingly competitive and digitally transforming consumer landscape.

What we saw happening from about 2016 is verified by various pieces of research by the big consulting firms and local universities, highlighting the rapid evolution and maturation of consumers, putting pressure on traditional insurers and their push-product-at-consumer value propositions. As the needs of consumers and clients evolve and mature, insurers face a continuing challenge to maintain relevance with policyholders.

The partnership between Fedgroup Life and SmartWill (owned by CliqTech, a fidtech start-up), which we announced this week as our entrance into the insure-tech sector, has been one of the outcomes of our mutual reading of the future of the local insurance industry. We’re glad that we prioritised smart partnerships for the future when we did and are not only starting now that the Covid-19 storm is here.

We see insurers taking their offerings online using very expensive models, but they’re still built on the old business models. To become insurance providers of choice into the future companies need to harness the power of digital technologies to rethink and reshape their business models and the way they interact with customers. Financial services doesn’t have to be a threatening engagement, but one that is straightforward and seamless.

SA's insurance market seems to invest large amounts of capital in digital offerings that don’t always achieve their intended outcomes. There are threats from new entrants that don’t come from the insurance sectors — they’re tech entrepreneurs, telecoms and retail giants and other nontraditional players. They aren’t just throwing money at the problem, but using their deeply nuanced understandings of consumer behaviour and their finger on the pulse of mass distribution to give clients what they want, rather than pushing products onto clients.

Ours is an advanced economy in insurance terms and we’re number 19 in the world when you consider our US insurance premium amounts, but with a shrinking middle class and lacklustre economic performance exacerbated by Covid-19, it’s a tough market for growth as insurers in SA. Smart partnerships, rather than ownership-based models, will be an important part of the future landscape as we plan for growth in a post-Covid-19 reality.

Unless traditional insurers start engaging with consumers at their preferred front-end with products that speak to the needs they want to meet (not the ones we think they should be meeting), we’re not going to see any growth. This was highlighted in Accenture’s 2016 Be digital report that stated, “For insurers to retain and grow market share, it will be important to understand these needs and present customers with tailored solutions via preferred channels.” That means in-house technology platforms may become more of a dinosaur than a silver bullet.

There are clearly opportunities for growth when innovation is prioritised. China has used its access to specific data to get a 360-degree view of their consumers, meaning they understand what their customers financial needs are before the consumer even knows. They know which products their consumers need to buy for their particular life phase and how to sell those solutions to their consumers. This is why by 2029 Asia-Pacific will account for 42% of global insurance premiums, with China on course to become the largest insurance market by mid-2030s, according to SwissRe.

In our view, the Chinese model is leading in the insure-tech sector globally. We are approaching the sector in a similar way.

Two thirds of consumers say they will share their personalised data for improved products and premiums if service providers offer solutions to their problems without having to provide inputs to solving those problems. But with access to that data comes greater responsibility. We need to provide clients with the assurance that they are safe with us from a technological, financial and fiduciary perspective. It’s important for the future to see clients as partners, which means their trust is imperative to how we do things.

Another way in which we can build on the trust that clients give us as insurers — and it’s currently a gap in the sector — is financial education and equipping clients to understand their financial needs. If we want to see growth as insurers, we need to offer digital solutions that not only increase accessibility but simultaneously educate clients and open up the financial services sector to those who have been underserved and excluded.

In a post-Covid-19 world with consumers and clients as partners and smart business partnerships, we will see cost-efficiency and skill sets being leveraged across the pillars of technology, distribution and an insurance balance sheet. This requires forward-thinking on collaboration, an appetite for risk and an entrepreneurial more than ownership mindset. This is the future for insurance as we see it.

• Van der Merwe is Fedgroup Life CEO and Hechter is CEO of CliqTech.

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