2020 set to bring its own set of challenges and opportunities
The year 2020 marks the start of a new decade, bringing with it its own set of challenges and opportunities. With this, FAnews spoke to a few industry experts to share their views on what 2020 and the new decade will bring to the short and long term industry.
The life insurance industry
“The rise in cancer-related claims will continue to impact significantly on life, disability and critical illness insurance,” said Rudi Van Rooyen, Head of Specialized Pricing in Group Insurance at Momentum Corporate.
“Genetic-driven insights into future health prospects will enable individuals to purchase insurance accordingly. In addition, the legislative and regulatory framework addressing the use of genetic test results will continuously change as genetic testing improves and becomes more widely used. If personalised medicine improves, it could have a marked impact on morbidity and mortality. This would in turn impact the premium rates for life, disability and critical illness benefits. Insurers will therefore have to innovate around their underwriting processes and requirements, products and policy wording,” concluded Van Rooyen.
Brad Toerien, Chief Executive Officer at FMI mentioned that the number of customers with income protection is set to grow over the coming decade, as more and more advisers realise the unique advantages that income benefits offer should a client get sick, injured or pass away. There are two main drivers, according to Toerien, influencing how income protection will evolve over the coming decade:
- Advances in assessing risk. With the growing ‘gig-economy’, and careers that did not exist just a few short years ago, insurers need to evolve their risk protection products, and explore alternative ways of assessing risk to ensure they are able to continue offering cover to a changing market. Income protection is a core need to all income earners; regardless of whether a client is salaried, a freelancer, or earning an income from multiple occupations.
- Product innovation across categories. The concept of income protection will evolve as insurers start to innovate across products for different risk insurance needs. For example, FMI’s first-to-market Critical Illness Income benefit pays clients 130% of their income for up to 12 months should they get a listed critical illness. This has meant that the risks of minor injuries and illnesses, as well as more severe illnesses, have no impact on a client’s earning ability. Another instance is FMI’s Life Income benefit, which pays an ongoing income to dependants as opposed to a large once-off lump sum. Advisers can now offer a secure estate liquidity solution, education cover, or cover day-to-day living expenses for a specified term whilst the deceased’ estate is being wound up, or to pay the beneficiary for the rest of their life. The latter scenario means that they may not need lump sum cover at all, and this may save the client significantly on premiums.
“Whatever changes income protection sees over the years ahead, the biggest industry changes will come from insurers and advisers working together, to create the best solutions possible for clients,” concluded Toerien.
Retirement and investments
“In the future, products will cater more towards employee needs. Instead of just a retirement savings product, they would instead invest in a bundle of products that maximises the benefit to them, including getting the best out of all their possible benefits, such as tax-free savings and other investment options. We will also continue to see development in the trend of people retiring later and later,” said Grant Field, Chief Executive Officer at Fedgroup.
“In terms of investments, less and less, people are trying to time the market to make returns. We have seen an emerging trend where people are still concerned with earning a good return but are increasing their focus on what their investments are actually achieving for the world around them. Many people are also looking for offshore opportunities. Many companies are now listed on secondary exchanges and cryptocurrency is also playing its part. This abundance of choice means that there will be increased pressure on the pricing offered by financial services providers,” added Field.
“There is also a concern that the latest technological advances are going to reduce the need for workers and even put entire companies out of business. However, businesses exist to sell things to consumers. Therefore, to continue to operate, businesses will always need a consumer base. It is therefore in their best interest to keep people employed (employee benefits), otherwise there will be no demand for the supply created,” concluded Field.
The short term industry
“The majority of personal lines business is still on traditional products. Even though certain innovators are testing the market with new types of products, it is going to take one of the major players to pursue these types of products to enact any real change in the market,” said Ben du Preez, Group Chief Information Officer at Genasys Technologies.
“Smart IoT devices in cars, homes, along with wearables, are driving innovation and adding to the dataset, which can be used for actuarial analysis or improving the claims process. B2B digital integration is also improving efficiencies, which can drive down costs as well improve the turnaround times on claims,” added du Preez.
“Insurance will become a value-added function rather than a grudge purchase. Insurers will provide simpler products that the consumer can understand, and these products will be easy to buy at the point of contact,” said Steve Symes, Chief Executive Officer at Genasys Technologies.
“New types of commercial products are starting to emerge, which are smarter and more geared towards specific types of business,” said du Preez.
“Mergers and acquisitions pose additional commercial risks, and we are seeing an uptake in M&A insurance. Recent director behaviours highlight the need for legal covers. The gig economy and SME markets are growing, and insurers should consider options in these potential markets. Legislation will bring additional risk to running a business. Unions, the Commision for Conciliation Mediation and Arbitrarion (CCMA) and Workers Compensation will increase the risk for employers. The Protection of Personal Information (POPI) Act and the General Data Protection Regulation (GDPR), with massive fines and legal fees, will either force insurance or a significant change in behaviour,” concluded Symes.
Writer’s Thoughts:
While challenges exist, these challenges bring opportunities which, if leveraged appropriately, can drive sustainability and success. One thing is for sure though, as mentioned above, insurers will have to innovate and work together with advisers/brokers to create the best solutions possible for clients. Do you agree? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts myra@fanews.co.za.
