SA insurance industry set for digital disruptions
Although technology continues to take the lead in relation to changes in the life insurance space, the industry will continue to see major disruptions as a result of the current economic activity, customer demands and behaviour, new competitors, as well as governance and regulatory changes.
To ensure that the industry continues to grow, below are some key considerations that I believe need to be implemented:
It has become apparent that customers do not particularly have a good understanding of their insurance products. Many customers also struggle to understand the terms and conditions of their policies, particularly key stipulations such as inclusions and exclusions in the policy document.
Data has become a key focus area across industries, more so among insurance companies. With so much data available from the Department of Home Affairs, organisations have the ability not only to simplify claims for customers but also to proactively look for deaths that haven’t been claimed for and initiate claims on behalf of the beneficiaries.
In 2018, FNB Life started using death data proactively to pay out claims to benefactors. We have now paid out more than R50million in proactive claims and as our process improves, we think within the next few months 20% of all our claims will be initiated by us and not our customers. If this data is readily available, why aren’t more companies doing this?
For most families, life insurance is their last hope against dire financial circumstances after losing a breadwinner. Insurance companies have a duty to sell products that not only offer customers value, but pay out beneficiaries in their time of need.
The insurance industry must consciously start creating an environment where barriers to switching are eliminated. These barriers create angst and inconvenience for customers to shop and purchase the appropriate policy for their needs. In addition, customers also need to understand what the benefits are of switching and why one would need to switch their policy.
The insurance industry needs less aggressive escalations and more transparency around the necessity of escalations in accordance to customer policy types. There are four models for premium escalation:
1. No changes - your cover and premium stay the same.
2. Your cover and premium increase at the same rate.
3. Your premium increases at a fixed percentage above what your cover increases by (say, premium at 7% and cover at 5%).
4. Your premium increases according to your mortality risk - as you get older, your risk increases, and your premium tracks this.
The industry should further empower customers to ask key questions about their premium escalations. Questions that are centred on creating value for the client, such as whether or not escalations should be made mandatory for certain types of policies, and whether the industry should possibly consider moving to an opt-in model for escalations.
Independent advisers will often sell policies based on the commission percentage they receive instead of customer needs. The industry should move to remunerating advisers based on customers attaining the right outcomes as opposed to paying whatever the maximum in regulations.
In the midst of all these changes, many forward-looking insurers are striving for a faster and more flexible, data-led approach, similar to what many telecoms and technology companies use. The pace of change will only accelerate in the coming years as innovations become mainstream.
From the impact of analytics, digitisation, increasing customer expectations, the disruptive effect of regulation and rising economic growth in the African insurance industry has no choice but to look very different in 2020.
The result of this shift is likely to be fundamental to the way that life insurance is perceived and valued by consumers. Instead of a complicated and expensive grudge purchase, the appeal of tailored and flexible life cover as a cornerstone of personal financial security could be greatly enhanced, and the barriers to entry often faced by large segments of the population will effectively be removed.
Lee Bromfield is the chief executive of FNB Life Insurance.