Insurers finding new ways to attract customers
But while drones, bots, blockchain and telematics are leading innovation, insurers are increasingly focusing on risk management and more refined underwriting. The challenge is to convince clients that insurance should not be a grudge purchase.
Wynand van Vuuren, the head of legal at King Price, says the traditional broker-client model has become obsolete, and direct insurance offers more individualised underwriting to give clients more affordable premiums based on their risk profile.
“If you want to be an insurer, you’ll have to change your model and adapt to the market needs because the risk of the insurable market will change from month to month,” Van Vuuren says.
“For example, we’re seeing more road users opting to use Uber. In Europe, the risk landscape is rapidly changing with self-driving cars. Autobrake systems make roads safer, which raises questions about the old models of risk assessment.”
The so-called “cash back” model, which offers to refund a portion of clients’ premiums, has started to lose traction: the claim-free proviso means customers lose any benefit should they claim within a specified time frame.
For Solvency, a fintech start-up underwritten by Genric Insurance Company, it’s about rewarding customers - tangibly - through their digital platform by linking insurance premiums to an interest-bearing savings account.
Launched this month, Solvency says nine out of 10 insured customers claim far less than they pay in premiums, so the majority is subsidising multi-claimers who don’t manage their risk.
Co-founder Mutoda Mahamba believes the industry needs upending by rewarding customers for their business.
“As a client, you decide what percentage of your monthly motor or household insurance premium goes to risk and what percentage (up to a maximum of 25%) goes to savings based on what excess you are prepared and able to pay, should you ever need to claim. This provides a savings solution for you to use to partially or wholly fund any excess should you need to claim. If you don’t claim, you can choose to draw off up to 50% of your savings in a 12-month period in cash for your own use. Or better still, leave the money invested to grow and earn interest,” Mahamba says.
Jenny Ingram, the head of product development for Momentum Retail Life Insurance, says it remains firmly focused on human interaction. When it comes to financial affairs, it’s vital to get the mix of personal and artificial intelligence right.
“We believe the ability to attract new clients is not going to become easier - insurers will have to fight for clients and retain them. They will have to become more efficient and streamline operations.
“For us, preventing claims is part of that process. Our focus is on better disclosures and risk classification, upfront.”
Ingram says large insurers have the benefit of scale and software capabilities - but can be bogged down by legacy systems, which is why they strike strategic partnerships with fintech companies to help them solve problems.
“That means we drive innovations - we have a lot to offer those start-ups,” she says, adding that MMI has a division investigating start-ups and whether to get involved.
For Christelle Colman, the managing director of Elite Risk (a division of Old Mutual), there’s a place for new entrants focusing on digital innovation and specific market segments. Elite Risk caters for new risks, such as electric vehicles, drones and even bitcoin theft.
“Cover needs to be relevant. Last year, Elite launched a product specifically for high-net-worth individuals. Our premium income in one year far outstrips what the smaller insuretech start-ups are able to achieve, exceeding R100 million.”
She says everyone’s focusing on innovation but in the traditional sector, there’s great need too.
“If you’re continuously looking at providing insurance cover for what people want, you’ll remain relevant in the market and thrive. Things are changing, in many different ways.”
It’s not only about products, Van Vuuren adds: it’s a business primarily about people. “Do we know our clients? I don’t believe so. Everyone’s on the bandwagon of processing data, there’s a big demand for personalisation, and the guys on that will be the leaders. To do that you need to collect and process data properly.”