Deliberately adding value
Innovation is the deliberate change or manipulation of a product or service in response to changing dynamics within the industry or changing client demands.
The South African financial services industry is currently experiencing a lot of changes. Is it innovative enough to work through these changes and remain relevant in the eyes of their clients?
FAnews spoke to Gareth Friedlander, Head of Research and Development for Discovery Life to find out more about the industry’s current efforts when it comes to innovation as well as what can be done in the future.
A changing landscape
The life insurance industry has changed substantially over the past decade. Advances in technology such as more powerful computing and great leaps in medical advancements have substantially changed the nature of the risks the industry faces and hence, the way companies design their products.
Furthermore, the nature and behaviour of the end consumer has evolved – consumers are more health conscious, have access to more information and choice, and tend to be more present biased with a greater need for instant gratification.
“Auditing giant Deloitte & Touche recently released a report on the insurance industry outlook in which they noted that traditional insurance business models may be in jeopardy. The study highlighted, among other things, that the monopoly that insurers held on pricing and assessing risk has been eroded by third party data-analytics companies with the capabilities to build non-traditional risk profiles on individuals,” said Friedlander.
Responding to change
Similarly, the 2015 Pricewaterhouse Coopers (PWC) Insurance Industry Report highlighted the disruptive influence of tech companies on the insurance industry as a major trend. PWC estimated that as much as 22% of new insurance business could be lost to FinTech companies by 2020.
“In response to these changes, Discovery launched Medicals-on-demand in September 2016. Medicals-on-demand is an Uber style underwriting service that allows advisers to call a nurse on demand or pre-book a nurse by simply scanning the QR code on the quote and using the Discovery app,” says Friedlander.
Discovery also launched Discovery Underwriting in September 2016. “Through Vitality Underwriting we are able to segment risks more accurately. We feel that this allows us to price more efficiently and reduce the extent of cross-subsidies inherent in traditional pricing models. It allows us to deliver a lower premium for healthy clients and identify and create a clinical pathway to improve the health of clients with elevated risks and chronic conditions,” said Friedlander.
There are a number of other health insurers in the industry that have been at the forefront of innovation. Brightrock offers a product which changes to a client’s lifestyle as their situation changes. We cannot sit back and say that South African life insurers are becoming complacent when it comes to innovation.
Revolutionising thinking
This is an indication of the current global trend towards dry underwriting that a number of large insurers are undertaking. In essence, this means that for clients to truly take steps to improve their health and wellness, an upfront awareness of their current health status is critical.
By undertaking dry underwriting, clients see the benefits of a healthy lifestyle and manage their health with their insurers. This way, doctors and hospital staff know what they are dealing with when treating clients. This model recognises the need for tailored pathways for high-risk clients, enabling a personalised journey to better health.
Big Data driver
This real-time, actionable data is not only beneficial from a product design and pricing perspective but has also become an important business and service enabler for clients and financial advisers. For clients, activity tracking wearables and real-time data (for both the policyholder and insurer) has significantly increased the connectedness between Discovery Life and our policyholders.
“For advisers, the changing nature of the adviser landscape – with the ever increasing importance of Treating Customer’s Fairly (TCF) and the looming Retail Distribution Review (RDR) – necessitates absolute certainty in the quality of advice and product offered. Having a better understanding of the risks a client faces from a holistic point of view enables the adviser to give better, more accurate, real-time advice that moves away from the traditional static approach to take account of the client’s individual behaviour and needs,” said Friedlander.
Editor’s Thoughts:
Like value, innovation means different things to different companies. However, it is worthwhile to note that clients are attracted to innovation. This is a value differentiator that cannot be ignored. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts jonathan@fanews.co.za.
