Marthinus Visser: People should also consider issues such as efficiency at paying claims. Picture: Freddy Mavunda
Marthinus Visser: People should also consider issues such as efficiency at paying claims. Picture: Freddy Mavunda

It is part of the business cycle that the disruptor becomes the disruptee. It might have been innovative to advertise cut-price insurance on TV 20 years ago, but Outsurance’s old media-focused campaigns now look dated.

Its endless "We can save you R300" ads make the Clientèle Life infomercials look like Citizen Kane.

The backbone of Outsurance is still its call centre, which would fill an aircraft carrier.

It will no doubt need to reduce this as functions are taken over by artificial intelligence devices. There are signs of Outsurance running out of road, at least in SA.

In its last financial year (to June 2018) its short-term premiums in SA were up just 5%.

CEO Marthinus Visser says that was entirely made up of unit growth as there was no premium inflation.

"But claims experience is also getting better as more people use Uber for nights out and the technology of vehicles improves — automatically braking before rear-ending, for example."

Outsurance is one of the unlisted companies that many fund managers would like to get their hands on. The best way is through Rand Merchant Investment Holdings (RMI), as Outsurance makes up 60% of its total earnings.

RMI owns 88.6% of Outsurance and the business is a rare example of an investment holding company that does not trade at a discount to the sum of its parts.

Even if Outsurance SA goes ex-growth it will be a massive cash generator and a favourite for dividend-focused fund managers.

"We have never seen a need to list Outsurance," says RMI CEO Herman Bosman. "Short-term insurance generates cash much more quickly than life insurance, and we decided to lend the group R800m to start its Australian business Youi, which is now the main growth engine."

Youi’s earnings were up 39% to R803m last year.

Outsurance’s associate company in the UK, Hastings, has a similar business model, but Bosman says it relies mainly on price comparison websites for leads, as does the rest of the UK market.

Visser says he does not participate in SA’s only credible insurance comparator, Hippo.co.za, as he believes that clients should consider issues such as complaints to the ombud and efficiency at paying claims as well as price. Quite rich, considering how much Outsurance bangs on about price in its ads.

But Bosman says Outsurance does not want to be a prisoner of Hippo and its ilk, as they take a larger and larger share of the margin as their power grows. "These websites are not dominant in Australia either, as the two largest insurers have refused to be included."

René Otto, head of MiWay, Santam’s direct business, says clients involved in an accident might not mind paying R20 or R30 more for knowing that their insurer runs software that can spot their location at least 95% of the time. MiWay’s marketing approach focuses on service more than price, and it is growing its revenue faster.

Sumarie Greybe, co-founder of Naked, probably the best of the new breed of insurtech motor insurers, also doesn’t list on Hippo.

"They work on the old system of indicative quotes, which are then negotiated. We can give hard quotes through our app."

Naked has a fully flexible facility to allow clients to stop and start cover when they aren’t using their cars. Greybe says that a significant number of clients use the facility over December and are able to save money on cars left at home: as much as half of their premium in some cases.

Naked will start to cover building and home contents by midyear, but it will also see increased competition from other insurtech players such as Granadilla and Pineapple.

The two fruits now offer only gadget insurance for items such as cameras and laptops, but aim to soon move into motor, which still accounts for the majority of personal-lines premiums.

But it is not just the exotics that will erode the market share of the big three, Outsurance, Telesure and MiWay. Dushen Naidoo, head of Absa Insurance, promises an end-to-end digital business allowing customers to buy, administer and claim via app or website.

It bought Instant Life, the first internet-only life business, which will be given more prominence in the branches and electronic channels.

Direct life has grown much more slowly than direct short-term.

Outsurance was a latecomer, having been beaten to the punch by Telesure’s 1Life.

Otto says direct life has not been as successful as direct short-term. Outsurance is the largest personal-lines insurer after the Santam group, but Outsurance Life, for example, in spite of the brand, still trails the profit of the listed life offices, including Clientèle.

Direct life still has to produce a surprise success such as King Price, which, without a corporate backer such as RMI or Santam, has still grown into a R1bn annual-premium business.

In its last financial year Outsurance Life increased its gross written premiums by 7% to R469m, but earnings fell 53% to R53m with higher-than-expected lapses and volatile bond yields.

Philip Tomlinson, CEO of Different Life, one of the early digital businesses, says volumes have been lower than expected and the business will change its focus towards providing a technology platform for other brands, locally and internationally, that are looking to offer end-to-end digital distribution.

Different Life’s major selling point has been that on request it pays one premium a year to a selection of charities and NGOs.

Tomlinson says clients who take up the option are only about half as likely to let policies lapse as those who don’t.

Anthony Miller, MD of Simply, says a truly online business needs to be able to process an application in a few minutes — more complex underwritten products need 15 minutes, which is beyond the attention span of many digital clients.

Simply has a strong focus on the domestic worker and small-business markets, which have little time for complexity.

"With the information available to us we can prompt people at a critical point, such as when they have a new baby and are more receptive to cover."

He adds that keeping policies on the books is getting tougher; economic conditions mean that many clients are rethinking the R500 a month or so that they are paying in life policies.