By: Kobus Wentzel, Executive Head of Direct Sales & Distribution at 1Life
It’s no secret that the South African economy is struggling.
Even though the remedies promised in the 2020/21 budget speech to prevent the country from falling into junk status are highly anticipated – consumers, especially at the lower end of the market, are certainly celebrating the personal income tax relief that was announced by the finance minister. It is yet to be seen however, if this will have a meaningful impact on consumers – given that the increased fuel levy is known to affect the price of everything. While many sectors will undoubtedly suffer a hard hit, what do the outcomes of the budget address specifically mean for the long-term insurance industry – and how can insurers and brokers position themselves to thrive in uncertainty?
We know that consumers will still feel the strain on their pockets and will be pressured to cut costs, or be faced with what may feel like a hand-to-mouth financial constraint. Moreover, in the insurance space, recessionary influences often affect long-term insurance products, such as life insurance and disability cover.
When people struggle to make ends meet, they start to look for ways to cut costs. And insurance is usually high on the considerations list – a halt on any new policies or cancelling polices they can no longer afford – or even, quite frankly, letting polices lapse. This need not spell disaster for the long-term insurance sector as there are still ways to overcome these hard times, drive sales, and retain clients – by being innovative, driving solid customer service and making insurance ‘easy’ for the market.
Over the next decade, we will see a dynamic change in the way life, dread and disability products are structured and sold. Consumers are far more insurance savvy and their purchasing decisions are more informed. This evolution requires insurers to innovate if they are to stand any chance of tapping into this ‘new consumer’, one that is spoilt for choice. This means developing products that can be accurately tailored to clients’ needs, life stages and their pockets. What will become significantly important, especially within the broker segment, is the need for quicker processing, less red tape and new pricing models – all of which will contribute to quicker acquisition and retention and – for the client – result in insurance options that are tailored to their immediate needs, lifestyles and financial changes.
The insurance sector is up against some tough competition and innovation is going to be critical for success. This means devising new ways of doing business, ones which place the customer at the centre – while still offering more flexible actuarial models, to manage this shift.
As clients begin to dictate the type of cover they want, and the benefits that are most relevant to them – across product structure and value-added options – industry players now need to re-examine their platforms, customer experience journeys as well as the tools they use to ensure an attractive, interactive and valuable offering. While we have already seen some market disruption in this space, we expect to see more market partnerships between financial services and other sectors to ensure packaged offerings, which aids consumers on a day-to-day basis, are offered.
Almost every consumer segment is offering consumers value-added services, mostly in the form of rewards, as a retention strategy – and this is no different in financial services.
This makes long-term strategic partnerships valuable, with technology playing the most disruptive role. It means that life insurers, and the long-term insurance sector in general, will need to understand how ‘bonuses’ and ‘rewards’ are integrated to attract and retain customers. And, very importantly, how technology is used to really create value-add for consumers – real value on their financial profile and not simply quick rewards.
The undeniable impact of what may still very likely be constrained consumer spend, and decreased investment, as a result of continued financial pressures, will have a direct impact on the insurance space as a whole.
Therefore, industry players who want to navigate and survive financially frustrated clients are those who are poised to respond to consumer challenges and position themselves for innovation.