How to edge out competitors when competing for new business
Terence Williams, CEO of AON South Africa
Sharon Paterson, CEO of Infiniti Insurance
Famous Formula One driver Ayrton Senna once said that being second is to be the first of the ones who lose. This quote epitomises the nature of the South African insurance industry where companies and brokers are increasingly competing against each other for a small pool of business.
This is the legacy of the South African market. Even though the South African insurance industry is close to two centuries old in the country, the industry has always been dominated by a number of major companies who tried to capture the balk of the market.
The current economic situation is bringing certain dynamics to the fore which are changing the way competition is viewed in the market. Or are these dynamics intensifying it? These were the issues explored at the Standard & Poor’s Rating Services third annual Spotlight on South African Insurance Seminar.
A need for change
One of the defining characteristics of the South African insurance market is that it has a very well defined broker model. This has been moulded over the years to make South Africa one of the countries in the world where insurance penetration is at its highest.
While this has served the country well in the past, it has to change. Angela Mhlanga, Head of Bancassurance at Standard Bank, felt that the broker needs to be more open with insurers. “Brokers are at the coalface when it comes to collecting information. However, not all of this information is shared with insurers; this needs to change.”
In a world that is being defined by data analysis, one can see value in Mhlanga’s comments. The very nature of customer behaviour is changing and clients are expecting companies to offer them tailor made products; how can this be achieved if information is not handed over to them?
At the end of the day, Maltese author and consultant Edward de Bono was right in saying that companies who solely focus on competition will ultimately die; but companies who focus on value creation will thrive.
Legacy issues
This is not to say that brokers are not giving any information to insurers. The problem is, do insurers know what to do with data once they have it. There is a dichotomy of being data rich but analysis poor that exists in the market.
Terence Williams, CEO of AON South Africa, points out that because we operate in a small market (in terms of population size), this problem is exacerbated.
“Companies need to be nimble and agile. We need to move away from the traditional model of serving our clients. We need to be educated on the data we have. In an effort to not be data rich and analysis poor, we are possibly going to see some fintech mergers in the future,” said Williams.
Part of the furniture
If we had to define the insurance industry in one word, it would be tradition. The market has been dominated by traditional industry heavyweights, and because of the late adoption of direct insurers, the broker model is part of the furniture in the market.
That does not mean that someone won’t come along to challenge these traditions; and we have seen some recent examples of this. However, Sharon Paterson, CEO of Infiniti Insurance, said that the broker model is here to stay.
“The broker model will continue to exist in the South African market, but it needs to embrace technology and change. There are legacy issues in the market where insurers are struggling to run their books. Well then pass this information onto the broker who knows the client better than anyone. Let them run the book,” said Paterson.
She added that there is also nothing wrong with going back to basics and working with products that you are comfortable with. “Times are tough and there is no spending power in the market. In times like these, clients go back to basics and they frown down upon add-on products.
Innovate
But Williams is adamant that product innovation needs to happen, “A big challenge in the market is the quest to solve the following question: are we selling products to a market that we want to attract, or are we selling products to a market we want to hold onto?” Even insurers are reluctant to change because they are familiar with the products and how to manage them.
Andy Rayner, Chief Risk Officer at Discovery, says that the industry has been on a product push for a long time, but have we taken client’s needs into consideration? “We need to be competitive and take business opportunities. If you cannot innovate products, then innovate services around products,” he said.
Editor’s Thoughts:
Adaptation to change is what ensures longevity in a market. There are avenues for change in the insurance market and it will make you more competitive when edging out other brokers in a tight market. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts [email protected].
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