Bespoke distribution
Growth in the insurance industry has been one of the most talked about topics over the past five years. The challenge that is presented is designing products and distributing them in an effective way that will be profitable for insurers to truly work towards financial inclusion.
effective way that will be profitable for insurers to truly work towards financial inclusion.
This is a significant problem and needs urgent attention as the lower income earning market can no longer exist on the fringes of the financial services industry. Bespoke distribution channels are needed and are achievable if product providers follow specific steps.
FAnews recently attended the Insurance Distribution Conference to find out more about this.
Understand the market
Insurers have been doing customer and market segmentation since the birth of the industry. But are the models that we are using outdated or are we out of touch with who has the spending power in South Africa?
Like China, South Africa has a growing middle class; this class exists in the mass market, so it makes sense to focus on this sector of society. When looking at this, Michael Gondo, MD of Emerging Markets at Liberty, points out that this is an important model to follow in emerging markets.
As with many people in society, the power of the mass market can be harnessed at the source of where the money is spent. Traditionally, selling low level, easily consumable products such as funeral policies has been successful in this space. Gondo adds that if this has been a success, there is no reason that more products cannot be sold in a similar way.
“The mass market consumes products that they trust. If your product can build trust through brand association and partnerships with brands that are easily consumed by the mass market, you are taking a step in the right direction.”
Make sure it is profitable
Premium collection is also a general concern in the market. How does a company design a product, price it correctly and facilitate revenue collection?
Again, Gondo pointed out that one has to follow the pattern of the spending habits of the mass market. If they are buying goods at stores, how are they paying for these goods? The majority of the payments are being made through stop orders, so companies need to follow the yellow brick road in order to facilitate this.
This does not mean that brokers do not have a role to play in the value chain. Once clients become more aware and more educated on the products they are consuming, the broker starts to play an increased role.
Going forward, this will be even more pronounced than before. Gondo points out that clients are demanding financial inclusion, they have increased knowledge about the products they are consuming, they are demanding proper engagement with insurers and they want to be treated with respect. This can only be effectively achieved through broker interaction.
Refining the pillars
Defining the channel of distribution and the way in which you engage with clients are the cornerstones of your pillars of success. But the insurance industry is becoming a dynamic ever changing industry, so the strategies that put you in good stead twenty years ago are becoming increasingly irrelevant.
Herman Moloi, Head of New Markets at Mutual & Federal, pointed out that it is important in everything we do to look at new strategies and to refine them.
The first element of this is data. Data is collected in a number of ways in the industry, and it is important to interpret this data to ensure success. The next element is the distribution model. Insurers need to provide their target market with better access to products that suit their needs and are bespoke to the challenges they face.
Possibly the most important factor is the level of dedication an insurer shows towards looking after the needs of their clients. In business, customer centricity is everything and insurers need to go out of their way (whether it be through brokers, tied agents or direct engagement with clients) to ensure that a relationship is developed with the client beyond the initial sale of the product.
Customer retention
How does one turn a once off client into a repeat client? How does one sell effectively to clients? One method is to go back to the initial record of advice and information gathering step and work from there.
Unfortunately, the literacy level in the mass market is a problem. This complicates matters when it comes to the record of advice. It becomes difficult to track down clients and to assess whether the product that they bought is still relevant in their lives.
“This is a perpetual problem in society and is unfortunately a problem when dealing with the mass market. Liberty has found that there needs to be a number of managers involved in the process. These managers engage directly with the clients in order to find out if there as any problem in the sales process. Managers also need to go out into the greater community to check whether there is compliance with principles set out by the regulator,” said Gondo.
Editor’s Thoughts:
Both Moloi and Gondo pointed out that clients want to be treated as business partners rather than a source of income. If insurers can improve client engagement, distribution models can be tailor made to suit their needs. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts [email protected].
