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South Africa’s life insurance market is performing well by global standards, with healthy premium growth, new business and return on equity in recent years. But our environment is changing as digital technologies transform the landscape, as new regulations come into effect and as customers begin to seek more value from their life insurers.
Here are a few of the trends that will shape life insurance in South Africa this year:
1. New technology enables more customer-centricity
Thanks to big data and the power of the cloud, life insurers are today able to gain a more complete view of their customers and use a wealth of data to personalise products and interactions for the people whose lives they cover.
As a result, we’re seeing the industry shift from product-centricity to client-centricity. Products are becoming more personalised, yet simpler at the same time. We are also seeing insurers focus more on the customer experience, interacting with their customers more often, and providing new digital and direct touchpoints for sales and service.
2. The move to direct channels
Digital technologies, coupled with a changing regulatory landscape, are shifting more interaction between customers and life insurers onto digital channels such as the Web and smartphones. One reason for this is that lean, flexible insurance platforms allow insurers to automate most of the process of underwriting and issuing a new policy. Instant Life’s underwriting engine, for example, allows us to underwrite 99% of policies electronically within minutes.
The result is that consumers can buy life cover online in under 20 minutes and save up to 30% on their premiums. They can also manage their policies themselves via an online portal. It’s cost-effective and delivers the sort of customer experience today’s digitally savvy customer expects. At the higher-end of the market, financial advisors are also using similar digital channels to service their customers because it saves them time and allows them to focus on giving advice rather than doing admin.
3. Regulatory change continues
There’s a regulatory drive in South Africa to bring more transparency into the financial services market and to ensure that financial products become more accessible to consumers of all income groups. The South African Financial Services Board (FSB)’s Retail Distribution Review, for example, proposes wide-ranging changes to how personal financial products are sold in South Africa. Similar regulatory reviews in Australia and the UK have had dramatic effects on the market.
One proposal is that advisors will need to be clear about whether they are independent or ‘tied’ to product providers. Another might see brokers forced to earn money by providing advice and receive less commission from insurers for product sales. Such changes could help prompt more self-service and self-advice in the insurance market.
4. The rise of wearables
Wearable devices, and the big data they give insurers, could be a game-changer for how insurance products are sold and priced. Similar to how car insurers reward customers with lower premiums if they allow them to track their driving behaviour via vehicle telematics, health and life insurers are increasingly offering customers who wear a fitness wearable premium discounts in exchange for their health data and for following a healthier lifestyle.
To date, the market for such technology has been niche, but it will grow rapidly as people become more comfortable with sharing their data and begin to understand the benefits of doing so. People are already starting to recognise that having access to their data can help them make better lifestyle decisions, so adoption is growing.
5. Addressing the missing middle
South Africa’s higher-end life insurance market is covered reasonably well by life insurers and their brokers; we’ve also seen innovations in non-underwritten insurance and funeral policies for the poorer market. Instant Life is focussing on the missing middle – the low to mid-range of middle-income families who have been neglected by traditional insurance brokers or financial advisors.
According to the Association for Savings and Investment SA (Asisa), South Africans are on average underinsured by 62% for death and 60% for disability. The simplicity and lower costs of DIY insurance will make life cover more accessible for this market, something which could also help bring more financial stability into the country.