Claims insights to reshape the broker-client conversation
The latest Standard Bank Insurance Claims Insight Report opens with some sober reflections on the risk landscape in which brokers and insurers are initiating general insurance covers. In his report introduction, the bank’s Chief Risk Officer, Thabani Ndwandwe, described a “converging risk landscape” where extreme weather, infrastructure shortcomings and societal pressures were amplifying insurers’ loss exposures.
An enabler of economic stability
Chief Executive, Johan van Greuning, labelled insurance as a critical enabler of economic stability. He commented that Africa was significantly underinsured, leaving businesses, households and governments exposed to severe loss events. Up to 80% of Africa’s USD1.3 billion in economic losses in 2022 were uninsured. South Africa, meanwhile, has suffered over USD9 billion in disaster-related losses since 1952, including the recent mega losses due to the pandemic, civil commotion (July 2021) and flooding in KwaZulu-Natal (KZN) in April 2022.
“These protection gaps underscore the urgency of rethinking how short-term insurance is delivered, who it serves and how it integrates into the broader resilience ecosystem,” Van Greuning wrote, labelling insurance a proactive enabler of resilience. FAnews readers might not be aware of this, but Standard Bank Insurance is among the top 10 underwriters in the domestic market, measured by Gross Written Premium (GWP). Over the past five years, the insurer has processed more than 100,000 claims and paid out around R1.8 billion annually.
FAnews spoke to Dr Hardy Ncube, Head: Personal Products at Standard Bank Insurance, to delve into some of the themes flagged in the report. Our discussion kicked off with a quick overview of the insurer’s share of business between personal lines and commercial, and its preferred distribution methodology. In somewhat of a surprise, we learned that commercial cover accounted for just 6% of the business versus 94% for households.
No ordinary personal lines broker
The commercial business is placed 100% via brokers, as is the bulk of personal lines premium, but with somewhat of a twist. “Around 97% of our personal lines business is also through intermediaries,” Ncube explained. He singled out the insurer’s internal broker, Standard Bank Insurance Brokers (SBIB), as the conduit through which the bancassurance business model is enabled. The insurer is in the process of expanding its distribution channel through other intermediary partners.
The rising frequency and severity of extreme weather events featured prominently in the report. In fact, storms and catastrophic weather events (CATs) now account for the highest volume of both home and commercial insurance claims, with 2022 standing out as the peak year. Claims from that year made up 27% of the five-year total, underscoring how a single season of severe losses can shift the claims landscape. The following two years reflect a decline due to improved risk mitigations by insureds and tougher underwriting decisions by insurers.
Standard Bank, like most of its large general insurance peers, is banking on comprehensive data to give a better picture of risk exposures across its property book. Ncube singled out geo-tagging as one example of how information can enhance discussions between broker, client and insurer, whether at renewal or when onboarding a new policy. “Having access to data around the risks affecting a property fosters more meaningful conversations,” he said.
Those wondering why insurers are so obsessed about risk rating should take a closer look at the April 2022 KZN floods. In addition to claiming 461 lives, these floods cost the country an estimated R62.3 billion in economic losses, of which R32 billion was recovered from insurers and reinsurers. Khumbelo Nevhorwa, an analyst at Melville Douglas, Standard Bank Group, wrote that droughts, floods, hailstorms and wildfires had caused substantial financial losses over the years. “Without adequate coverage, such losses can lead to business closures, job cuts, GDP decline and increased pressure on government resources,” he wrote.
Underwriting for the next catastrophe
FAnews asked Ncube how insurers would survive future catastrophes of this magnitude. “While the industry can look at pricing, it also has to consider additional levers from a pooled or portfolio underwriting perspective,” he said. He offered efficient claim management and sustainable underwriting as two important ways to limit exposures, before commenting on the impact of reinsurance on pricing. “After KZN, reinsurers were pushing us on deductibles and pricing; we had to manage our portfolio in light of the increasing reinsurance costs,” he said.
Is it possible to expand Sasria SOC Limited’s mandate to include future climate-related extreme weather losses? “An expanded arrangement with Sasria could potentially have an impact provided it is structured innovatively,” Ncube said. He suggested the local insurance industry stand in up to a deductible of, say, R100 million, whereafter the losses could be paid from a climate pool to help shield insurers from reinsurance capacity constraints and price increases. The state-owned special risks insurer came in for praise for its distribution model.
Commenting more broadly, the interviewee lamented the multiplier effect of losses due to failing or poorly maintained infrastructure. He also suggested greater collaboration between the private and public sectors in the recovery stages following large loss events. Insurers have proven their supply chain management prowess time and again, and it makes sense for them to be available to assist government in disaster response and, perhaps in some future world, in areas like municipal infrastructure maintenance and even service delivery.
Commercial fire: low frequency, insane severity
Your writer could not resist asking whether the insurer had been ‘burned’ by the huge commercial fire claim it reported in its five-year claims experience data. “The R183 million claim paid was a shock,” conceded Ncube. “It triggered a pivot in terms of our commercial strategy around risk acceptance criteria, and spoke to exposure management in terms of how far we can write specific risks,” he said. The insurer is paying closer attention to its total exposure to fire losses as well as placing more emphasis on the risk management framework from both broker and client perspectives.
The report makes some interesting findings around generational differences in client-insurer interactions. Policyholders in the 55-plus age group show strong retention traits versus those in the 18-35 band who exhibit lower retention, possibly due to lifestyle changes, mobility or affordability. Digital platforms stood out as a major enabler of these behaviours. “The younger generation is more likely to transact digitally,” Ncube said. Anecdotally, younger people are also less loyal to brand, content to hop from one insurer to another based on accessibility and price.
Digitisation and digital engagement across all customer journeys are non-negotiable for insurers keen to service this part of the personal lines market. “We will have to use digital technology and AI to make things easier, whether this is from a sales perspective, from a claims perspective, or from any advisory perspective,” Ncube said. On the underwriting front, managing climate exposures is a key challenge. “This calls for a more innovative way of underwriting and structuring solutions for different areas,” he concluded.
Twin leavers for resilience
The report points to innovation and collaboration as the twin levers for building resilience in the insurance sector. Returning to the CEO’s brief opening remarks, we learn that geospatial risk mapping, modular product design and behaviour-based pricing are already reshaping underwriting and claims. Intermediaries still have an edge in the distribution realm, but they have to fight for business against a growing number of insurtech start-ups offering direct, self-advised solutions.
Intermediaries can take some solace from the fact that insurance is no longer a passive safety net. Sustainable underwriting requires that clients, preferably advised, do more to identify and mitigate risks as part of their insurance purchase. As Van Greuning concludes: “Short-term insurance is no longer just about paying for what is lost; it is about making sure people and businesses can keep going, no matter what comes next.”
Writer’s thoughts:
Standard Bank Insurance’s five-year claims data confirms how quickly the risk landscape is shifting, from the frequency and severity of CAT losses to changing client behaviour. Are brokers adapting quickly enough to hold their place in the insurance value chain? Please comment below, interact with us on X at @fanews_online or email us your thoughts [email protected].
