The big disruptor in the future of insurance is technology. In PwC’s 19th annual global CEO survey, insurance CEOs saw technology as the trend most likely to transform stakeholder expectations over the next five years.
Nigel Wilson, CEO of Legal and General in the UK observed: ‘There will be tremendous technological disruption in the next 10 years. We lived in the analogue era for 500 years. We’re only 10 years into the digital era.’
According to PwC’s short-term insurance leader for Africa Chantel van den Heever, short-term insurers can move ahead of the competition by making the most of technological advances, such as telematics sensors, digital channels and wearables. She adds that short-term insurers are starting to move into the space of prevention rather than reactive claims. This could be a win-win for both companies and customers.
Some of the other moves include insurers sending text messages to customers with warning of impending hailstorms. ‘We see a future where more insurers are working with meteorological offices to understand weather patterns, or with local municipalities to support investment in infrastructure to reduce the risk of future claims,’ says Van den Heever.
Santam commercial and personal executive head Edward Gibbens echoes the importance of technology, saying that data mapping, predictive analytics, big data and the application of smarter technologies across social media platforms are reshaping the industry.
For the consumer, technology is also helping to sharpen their choices. Gibbens adds that customers are using interactive technology to request multiple quotes, update their details and change insurance requirements.
Van den Heever notes that social media is now being used far more to engage with Generation X, Millennial and sometimes older customers. PwC research indicates that more than 50% of patients would be happy to have a Skype-style video conference with their doctor. Customers also expect a quicker turnaround time from their insurance companies. PwC says 84% of patients expect their insurance provider to respond within 24 hours to a query logged via social media.
Using incentives to draw customers has become the hallmark of companies such as Discovery. CEO of Discovery Insure Anton Ossip says the company has grown its vehicle insurance industry by introducing the Vitality drive programme. Discovery’s telematics service is able to monitor driver behaviour, in turn enabling them to better incentivise, giving motorists immediate feedback and rewards for driving well.
Ossip believes they have been able to scoop some of the market share by rewarding its good-driver members with up to 50% of their fuel spend each month. Thus far it’s given back ZAR191 million in fuel rewards to clients. Discovery has also introduced other apps such as a vehicle panic button with immediate response and a tracking service.
To remain robust, firms are trying to crack into the uninsured market and retain existing customers through increased use of social media and communication, and by introducing technology and applications that make it easier to settle claims.
Discovery Insure has mobile phone apps, whereby clients can log claims. Meanwhile last year, Santam launched an online app for policyholders to register claims, and upload claim forms and accident data.
On the life insurance side, Discovery Life is using its science-based programme, Vitality, to link life insurance policies to health and wellness management, and entices new customers by offering paybacks and discounts linked to living a healthy lifestyle.
‘There is an old adage that reads “life insurance is sold and not bought,”’ says Gareth Friedlander, head of research and development at Discovery Life. He adds that Discovery Life is trying to reach new goals through innovation and integration.
Friedlander believes that customers are increasingly linking life insurance with a package of ancillary benefits such as disability, severe illness cover and income protection. Clients don’t only receive the benefits when they pass away, are disabled or ill, but can qualify for discounts when they demonstrate healthy living. According to Friedlander, this ‘takes the grudge out of the purchase’, and has broadened the appeal for life insurance.
Companies are trying to crack into the uninsured market and retain existing customers through increased use of social media and communication
Medical aid schemes have been squeezed in recent years. Van den Heever explains that competition has been extremely tight in the health-insurance sector, with a reduction in medical aid schemes and administrators. ‘This is in line with the expectation that the number of schemes will reduce significantly over the next few years due to mergers.’ She adds that there has been an increasing need in South Africa for medical schemes to differentiate themselves.
‘The challenge for insurers will be to convince the uninsured population and those not covered by workplace insurance programmes to purchase what is traditionally seen as a basic right and a grudge purchase.’
Discovery Health CEO Jonathan Broomberg says South Africa is not alone in feeling the pinch. ‘South Africa, in common with public and private healthcare systems the world over, is fighting an increasingly intense and complex battle to maintain the fragile balance between quality access and the rising cost of healthcare.’
Private healthcare costs are rising well above the inflation rate, at 3% to 4% above CPI. In the opinion of Broomberg, this puts pressure on contributions, which have to rise at the same rate. Members of medical schemes, whose salaries generally increase at CPI, have had to take the pain.
‘Advances in medicine have been a boon, but have also led to members of medical schemes using more healthcare services each year than the year before,’ says Broomberg.
An ageing insured population, together with a rapidly increasing chronic disease burden (including lifestyle diseases and cancer) has put pressure on medical schemes. ‘While an explosion of powerful new medicines and technologies are a real fillip for health, they are coming to the market at dramatically higher prices than the technologies they are replacing,’ he says.
Discovery Health suggests ways to make the healthcare system more efficient, including focusing on quality and outcomes when it comes to fees for medical practitioners, instead of simply on quantity. It’s also increasing the option for members to choose more cost-effective generic medicines.
‘While the South African market, in terms of medical schemes, recorded only a 0.4% growth over the past year, growth in gap cover products and top-up insurance has become more popular and has seen a greater rate of growth,’ says Van den Heever.
She believes there’s scope for better marketing in the industry to target young and healthy low-risk patients. ‘Very few insurances have actually customised their communication strategy to segment their membership base and communicate with appropriate messages as well as specific targeted campaigns to grow the market share.’ However, she adds, doctors and healthcare providers are making themselves more visible and accessible as they increasingly move into spaces such as shopping malls and transport hubs.
Discovery Health Medical Scheme has also expanded its reach to low-income households, typically earning between ZAR5 000 and ZAR10 000 per month with its KeyCare plans, which offer access to quality healthcare to more than 411 000 members – half of whom were uninsured before joining. In time, the company plans to expand into Africa.
‘Our intention is that at the right time and with the right partners, we can export our business model to the rest of the continent,’ says Broomberg.
The short-term insurance industry has also been battling the tough economic curve. Gibbens notes that real annual GDP has slowed to 1.3% for 2015.
The rand’s fall by 25% against the US dollar during 2015 has also hit the industry. This, says Gibbens, has had a knock-on effect on Santam’s insurance results, as it directly affects claims costs, mainly due to imported motor parts.
Companies are also aware that consumers, under pressure of rising costs, are looking for ways to spend less. ‘We know that the temptation to cut out or cut down on insurance costs becomes a real one as consumers come under pressure from rising interest rates, higher inflation and the general increase in the cost of living,’ he says.
However, the companies that find creative ways to relate to a new market are the ones that will survive – and prosper
