By: Karen Rimmer, Head of Distribution at PSG Insure
The rapid acceleration of technological development is one of the driving forces behind some of the major shifts in the insurance industry. Technology is bringing a new level of innovation to traditional methods of gathering data, underwriting policies and crafting new insurance products to meet the needs of an evolving consumer base. Understanding how these innovations will impact the insurance landscape should be a top priority for insurers and their clients.
Technology can be a powerful enabler of change. On the one hand, these innovations can help insurers make sense of what ‘risk’ looks like in the digital age, and on the other ensuring assets are covered appropriately given rapid technological innovation will present a challenge.
Drones provide a new perspective
There has been an increasing deployment of aerial drones for data capturing purposes. Where before certain geographical locations were out of reach for insurers, drones have broadened accessibility to outlying or disaster-prone areas. Drones are fast becoming the ‘eyes and ears’ of insurers, making the data collection process more accurate and efficient.
Drones can gather invaluable data that underwriters can use to gain a better understanding of their clients’ risk exposures. Drones have also proven to be highly effective tools for assessing the extent of loss or damage when evaluating the validity of claims in the case of a natural disaster.
The potential this technology has to reduce fraudulent insurance claims, predict emerging risks to specific sectors and save insurers time and resources, can amount to millions of rands annually.
While nothing can replace human ingenuity, technological tools such as drones can serve as aids for stakeholders at every level of the insurance industry, from advisers and their clients to underwriters and product developers. As insurers, the more tech-driven solutions we incorporate into our service offering, the more we will be able to empower and equip clients with futureproof risk management tools.
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Electric cars and the new breed of motor vehicle policies
There is also a wider adoption of electric/hybrid vehicles as a factor that will transform the way insurers structure and underwrite motor vehicle policies in the future.
Although the market in South Africa, for these vehicles of this kind, is still in its infancy, experts see the year-on-year increase in demand for electric vehicles as a sign of things to come. This technology is set to become a game-changer in an area that has remained relatively unchanged for a number of decades, especially now with sustainability being at the forefront of many industry operations.
Electric vehicle systems differ substantially from combustion engine vehicles and are therefore exposed to a different level of risk. For example, electric vehicles could suffer significant damage caused by a power surge or the improper use of charging ports. Furthermore, in the case of complete electrical failure, the reinstatement of the required software programs can be a costly exercise.
Arguably the biggest risk facing owners of electric or hybrid vehicles, involves the cost of replacing the car’s lithium-ion battery, which can cost in excess of R100 000, depending on the model.
Therefore, insurance policies for these cars are more bespoke than their fuel-powered counterparts, with underwriters needing to account for increased risk exposures.
These factors, coupled with the fact that electric vehicles typically cost more than conventional cars, mean that premiums are usually higher. Policies also come with a new set of conditions, exclusions and extensions that may fall within the scope of specialist insurers.
With the increasing adoption of this kind of technology by South African consumers, insurance advisers will play a pivotal role in helping clients to understand their changing risk profile and how to best protect their new valuable assets.
This will become particularly important in cases where policies do not cover the replacement of expensive car components such as lithium-ion batteries. In these instances, advisers may advise their clients to implement alternative means by which to safeguard their vehicles, such as an allocated savings pool or self-insurance.
While the uptake of electric and hybrid vehicles in South Africa is relatively low compared to other countries, it is definitely a market to keep a watchful eye on. While socioeconomic pressures may yet serve to curb higher purchasing volumes, the onset of climate change and the call for a more stable supply of energy will undoubtedly increase adoption in the not-too-distant future. These and other technological advancements will continue to challenge insurers to become more proactive and prioritise agility in their product and service offering.
