OPINION: Advice and technology will redefine insurance sector
Short-term insurer Santam believes that a combination of advice and technology will redefine the general insurance sector as one that prevents loss rather than simply paying claims when loss events occur.
The inaugural publication of its Short-term Insurance Barometer urged industry stakeholders to affirm the value of insurance to the broader economy and to acknowledge the role of intermediaries in risk mitigation.
Changes in consumer buying behaviour could be hampering the industry’s call for a loss-prevention focus. “There has been a shift away from advice and intermediated distribution to direct and self-insurance solutions despite the growing complexity of the risk environment,” says Andrew Coutts, the head of intermediated business at Santam.
The barometer found that only 17% of consumers who buy personal lines cover were assisted by intermediaries versus the 62% who placed their cover with direct insurers, unadvised.
The recent trend of direct insurers offering tailored business solutions has also seen a shift in insurance buying behaviour among small commercial customers, where only 38% still use intermediaries. More than two-thirds of customers in the mid- to large- commercial and corporate markets favour advice.
Consumers who shun the advice offered by short-term insurance brokers stand to miss out on the expertise and knowledge offered through the intermediated distribution channel.
Your insurance broker can secure the most appropriate balance of cover and premium from multiple quotes and is also better placed to identify your risk exposures, match products to your needs and assist at claims stage.
“There is space for both direct and intermediated distribution, but we maintain that intermediaries are well-positioned to become an indispensable component in the modern insurance environment,” says Coutts. “A deployed force that is active in helping customers to prevent losses from occurring will become the fundamental differentiator going forward.”
Technological innovations are being prioritised as tools to manage risk proactively, with connectivity and the Internet of Things singled out as major disruptors in this space. Examples include leak detection systems for geysers, driver telematics and app-enabled home security devices. These innovations can help to eliminate consequential losses as well as reduce both the frequency and severity of claims.
“We are leveraging technology through tracking devices and the impact of telematics on driver behaviour to control and mitigate risk,” says Coutts. “The future of insurance is about removing the need to claim through better risk management.”
Most participants in this year’s barometer cite “peace of mind” as the primary driver behind their short-term insurance purchasing decision. But concerns about affordability are forcing many to be selective about which assets they place on cover. The solution is simple.
“We must broaden the insurance base and place greater emphasis on preventing claims,” says Coutts.
He adds that a tighter focus on loss prevention will increase the demand for intermediated distribution, since intermediaries are best placed to recommend appropriate risk-mitigation strategies for their clients.