KEEP UP TO DATE WITH ALL THE IMPORTANT COVID-19 INFORMATIONCOVID-19 RESOURCE PORTAL
FANews
FANews
RELATED CATEGORIES
SUB CATEGORIES Short term |  Life |  Legal |  Employee Benefits |  General |  Technology |  Investments / Economy |  Healthcare | 

Covid-19 changes considerations around life insurance

02 November 2020 Felix Kagura, Head: Life Insurance Propositions at Standard Bank Group

The Covid-19 pandemic has brought challenges and uncertainty to the world in 2020. The consequences of a low-probability event such as the one we are living through was not a top consideration for many prior to the outbreak. Now, hundreds of millions of people are struggling to survive losses in income and an uncertain future. And like many challenges that are uncertain, this has highlighted the urgent need for life insurance.

There are many other examples that have surfaced, but the provision of loss of income and retrenchment cover for those who have credit life solutions in place has become crucial. These benefits have helped those who had the foresight to include this protection in their portfolios ahead of time. Of course, Covid-19 has amplified morbidity, and this has heightened awareness around the value of life insurance.

In South Africa, there has been a considerable increase in demand for this type of cover – especially via digital channels. Even before the pandemic hit, insurers were incorporating digital offerings while InsurTech start-ups have emerged in accordance with customers’ increasing preference for digital over traditional channels. This trend has been amplified by some practical challenges for face-to-face channels because of Covid-19. For instance, in traditional financial services, Covid-19 has resulted in the closure of branches, which impacts the ability to distribute life policies.

Pre Covid-19, significant shifts in consumer behaviour had already started to take shape. The growing need for a seamless online experience when it comes to life insurance has now been accelerated by the pandemic as customers increase their take-up of digital channels during a time of physical distancing. While it may be too early to be prescriptive, we would certainly expect a strong shift to online-based sales models.

This aligns with a broader shift among consumers towards digital platforms. Online and mobile platforms provide consumers the convenience of being able to choose where, when and how they choose to interact with a service or product.

In addition to accelerated digital adoption within the insurance industry, it is expected that there will be some imminent product changes as insurers seek to assist customers into the future under the new normal. The need for cover for non-death events will increase, like retrenchment, disability, and critical illness cover, among others, and this will compel the market to respond appropriately. This requires insurers – both new players and larger incumbents – to take on an agile approach so that they can adapt to new demands.

The disease is also likely to challenge, and change, some long-standing life insurance practices like medical underwriting. There is increased aversion to medical tests and the processes have also been impacted by the need to avail medical facilities to Covid-19 testing ahead of other discretionary requests. Insurers are more likely to employ data-based methods to create personalised offerings that incorporate predictive underwriting and other non-invasive, but more accurate methods.

In the current environment, risk assessments must shift toward more remote and data-driven models while distribution must shift from face-to-face or call centre interactions to more online interactions. This means that in order to stay relevant, insurers need to accelerate their digital transformation journeys.

The outbreak of the pandemic and measures implemented to contain the spread are accelerating many of the trends that were already apparent before. First and foremost is the area of automation and digitisation. As consumer needs change and consumer buying behaviour changes, we need to meet them where they are.

Quick Polls

QUESTION

How to give affordable and appropriate financial advice to the low income market segment. There is little room on a R50 pm policy for advisers to be remunerated for the time it would it would take to educate & fulfil admin function. What is the solution?

ANSWER

[a] Eliminate non-advice sales / telesales
[b] Implement industry standards for non-advice information
[c] Introduce an insurer-funded pro-bono advice network to low income earners
[d] Reinforce the Policyholder Protection Rules
fanews magazine
FAnews November 2020 Get the latest issue of FAnews

This month's headlines

Customer experience in the ‘now’ generation
Is our industry a tainted industry?
How to keep brokers out of the firing line
Getting to grips with contractual versus delictual liability
International trusts and tax consequences
The COVID-19 pandemic and medical schemes
Subscribe now