It is time to actively promote the value of advice
South Africa’s direct short-term insurers spend multiples more on their ‘above the line’ advertising than the three largest traditional insurers. Unfortunately their lust for market share has tarnished the reputation of hardworking short-term insurance br
Mutual & Federal is leading the industry charge to win back consumer respect for short-term insurance brokers. Their latest ‘above the line’ advertising campaign is directed at promoting the broker as an effective, efficient and caring representative of the insurance company. FAnews attended the first screening of the group’s current television advertisement and can confirm that the applause of those in attendance at the FIA function was as rapturous as when the commercial first screened. Santam’s latest television advertising campaign ties in with the “value of advice / broker” theme – and the FIA’s recently unveiled slogan – Your best insurance is an FIA Advisor – does so too.
Brokers must focus on the value proposition
Brokers also have a part to play. “The broker must focus on their core value proposition,” said Da Silva, “And insurers must offer better administration to make the broker look good at all times.” It is essential that both broker and insurer work together to uphold the image of the short-term insurance industry. In order to better understand the role of the broker in a changing industry we must first consider the myriad challenges they face. According to Da Silva the main trends playing out in the short-term insurance industry at present are abundant regulation, direct insurer growth and heightened consumerism. Each of these themes has been trotted out repeatedly at industry “talk shops” over the past year or two...
Beginning with regulation… The volume of insurance-specific and general financial services regulation that has been introduced recently – or is in planning – is overwhelming. Industry stakeholders have had to get to grips with Solvency Assessment and Management (SAM), FAIS regulations on Conflict of Interest (COI) and the pending Treating Customers Fairly (TCF) legislation to name a few. Instead of getting annoyed with the apparent legislative onslaught the industry should consider its intent. Da Silva observed that the regulators had a simple and consistent agenda – they want to eliminate conflicts of interest, create greater transparency around financial services products, ensure enforceability and create financial security at provider level.
We addressed some of the concerns around direct insurers in the opening paragraphs of today’s newsletter. Suffice to say these insurers are making significant progress in terms of market share among the “easier” personal lines covers. And they are moving into the life space too! “The growth of the direct insurers has been a wake-up call for traditional insurers,” said Da Silva. On the plus side their arrival has driven insurance costs down and been a catalyst for innovation… It could certainly be argued that their massive marketing budgets – R1.14 billion on ‘above the line’ marketing last year – have also increased insurance coverage locally.
On the minus side they have tarnished the value of advice and convinced consumers that financial intermediaries are an unnecessary excess. To make matters worse the direct insurers’ obsession with price has led to the commoditisation of the industry. If you ever get in a tussle with a consumer who loves direct insurers, you might use this line – offered up by Da Silva: “Price is the default position when you do not consider value!”
Consumer power is growing by the minute
Each and every stakeholder in the domestic insurance space – be it long or short-term – intermediated or direct – is slave to the trend of heightened consumerism. Things have changed a great deal since then US-President John F Kennedy observed in 1962: “Consumers are the only important group in the economy who are not effectively organised, whose views are often not heard.” Nowadays the consumer is king!
Technology has placed more power in the hands of consumers than ever before and it is possible that social media will outweigh the impact of regulation. “You would do well to view the consumer as a super-regulator,” said Da Silva. Average Joe is connected and has myriad platforms to raise his voice. Disgruntled consumers can raise their concerns via multiple social media platforms – in real time – globally. Within minutes one complaint can undo what an insurer’s marketing department has spent months working on. The TCF regulation is an obvious answer to the power of the consumer. “It is an indictment on the industry that we need consumer regulation,” said Da Silva, before adding that TCF would have a significant impact, particularly on product offerings.
The three trends mentioned today will impact brokers and insurers over the next few years. As these trends unfold insurers will find it difficult to attract talent while the cost of doing business soars. For brokers, income streams are likely to reduce, but the ongoing complexity in financial services product will create a greater need for advice than ever before.
Editor’s thoughts: All stakeholders in the insurance industry should uphold the value of advice and the role of the insurance broker. This requires being vigilant and taking action when abuses occur. Mutual & Federal had success recently when they tackled a major direct insurer for unscrupulous premium claims in its advertising – the advert was subsequently amended. Is it possible for insurance brokers to undo the damage caused by the so-called ‘middle man’ advertising campaigns? Add your comment below, or send it to gareth@fanews.co.za
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