The value of adviser relationships has never been higher
In an era marked by economic turbulence and shifting consumer behaviours, the South African life insurance landscape stands at a pivotal juncture.
FAnews recently caught up with Barry Shrosbree, Senior Manager at 1Life Insurance Distribution and Mark Neil, Chief Distribution Officer at Bidvest Life, to delve into the key drivers of change shaping this dynamic sector.
The current economic challenges
“Between economic headwinds and FMCG inflation – it is no surprise that the financial service sector is facing unprecedented challenges. This means that we have to adapt our business models, improve risk management practices, and innovate in product offerings and customer engagement. Furthermore, the unrelenting pace and scale of technology-led innovation and disruption continue to force businesses to reinvent how they operate and engage with customers while meeting evolving compliance and regulatory requirements,” said Shrosbree.
While research suggests that the impact of higher inflation and interest rates is likely to recede in 2024, the average South African will remain in the uncomfortable position of having to balance reduced disposable income with a sustained cost of living crisis, Neil stated. “This, in turn, is prompting more individuals to seek out financial advice directly from a financial adviser, whereas previously they may have looked to online information and resources to fulfil this need. So, from a life insurance provider’s point of view, the value of investing into relationships with advisers has never been higher.”
Financial advisers, according to Neil, are under pressure to expand their expertise and focus on risk solutions that not only address their clients’ current budget constraints but also to provide greater financial understanding and long-term stability. “Flexible product solutions customised to each client’s specific needs are driving a better customer experience. Clients are also learning that they can invest more into their life insurance portfolios as the financial pressure in other areas eases, and this is creating a sense of trust and peace of mind.”
Customer sentiment and behaviour
“Today, there is a ‘new consumer’ that not only wants digital enablement but has changing product and pricing demands – all while requiring we communicate with them in a way that meets their needs,” said Shrosbree.
“In this time of heightened financial insecurity, the life insurance industry is being compelled to evolve. As the ‘safety net’ of the financial services industry, life insurers are adapting to meet shifts in workforce demands, technological advances, societal expectations, and affordability requirements. Trust and integrity continue to be prized currencies, with trust being an active cultural attribute guiding customer sentiment and behaviour as consumers interact with the sector and make choices about brands and benefits. Quite simply, an insurance industry or provider that isn’t perceived as being trustworthy will struggle to build strong customer relationships and retain their customers over the long-term,” said Neil.
Again, Neil emphasised this is where insurers’ enhanced focus on adviser relationships is paying off. “The more personalised information an adviser can impart, the greater the trust that’s built, and the more secure the client-adviser relationship. As life insurers, it’s equally important that we work with advisers to engender the same level of trust within their client bases.”
Mitigating pressure faced by intermediaries
The role of technology in the life insurance sector, according to Neil, is more pronounced than ever. “Digital tools have not only streamlined operational processes but also enhanced client-adviser relationships and created better experiences across the value chain.”
According to Deloitte, insurers must look to new technologies such as generative AI if they are to extract the insights required to provide customised solutions at scale. “The industry is already leveraging data and analytics to develop simpler, more targeted products. Integrating advanced technologies ensures that the evolution of products is not only cost-effective but also fit for purpose. This is the best strategy to enable advisers to meet their client’s financial needs now and in the future. Additionally, the potential for decision science – in which data provides solutions to business challenges, instead of challenges prompting a look at the data, which is the traditional analytics approach – combined with generative AI models, will enable a process of continuous improvement as far as enhanced personalisation and targeted product development go,” added Neil.
“Industry-wide, data and analytics are already being leveraged to develop simpler, more targeted products that provide comprehensive, affordable solutions for life insurance needs,” he continued.
Personalised advice and budget constraints
The importance of personalised advice, according to Neil, will remain essential as trust and integrity continue to be the most prized currencies in our industry. “Advisers are having to expand their expertise; focusing on risk solutions that address their clients’ budget constraints and also providing greater financial literacy for long-term portfolio stability.”
According to research conducted by EY, “…more precise customer knowledge is the foundation for more personalised service and richer client experiences delivered via preferred channels.” Flexible product solutions paired with a more personalised customer experience suitable for a challenging interest rate and inflationary environment will see greater success, Neil stated. “Education, for advisers and clients alike, is critical.”
Profitability and growth in 2024
“We anticipate seeing three drivers continue to shape the South African life insurance market: greater client empathy, a growing need for income protection, and the use of technology to improve service delivery,” said Neil.
“As we navigate through these changing times, the winning strategies will be those that outperform on cost-effective and customer-centric products. Relationship-building, product enhancement, and technological integration will accelerate industry progress and yield greater benefits for both financial advisers and South African customers in the months ahead,” he continued.
Shrosbree added that while every organisation is in the business of making money, this should not be the only priority. “As insurers, we have a responsibility to provide affordable financial plans, and we understand that consumers are far more risk averse and ‘looking out’ for potential risks that may impact their lives. Therefore, one of the key pillars is to ensure we guide consumers through potential risks and truly demonstrate why we can be a key partner on the long-term insurance journey. However, starting with the consultation phase, the journey is more than just securing new business. Every customer's needs should be met according to their unique requirements, ensuring customer satisfaction.”
“As the industry evolves, so should the way insurers do business. Our industry has become more fast-paced and competitive – stressing the need for insurers to deliver services efficiently. Our environment calls for technological innovations that will simplify advisers’ jobs – enabling them to deliver faster service to our clients and quicker through-the-line processing to get clients on board. Essentially, a better experience, whenever they engage with the adviser and enabling more clients to come on board quicker. Similarly, insurers need to adapt products to meet changing budget requirements of clients which serves not just the direct market but is critically important to the changing needs of advisers’ clients,” he continued.
“The current economic pressures are going to mute the growth in the sector and price sensitivity will be prevalent,” said Shrosbree.
Financial advisers play a critical role
“If we rewind a few years, we were under the impression that technology would take over from advisers. But the reality is BREAK that people still want to buy from people,” emphasised Neil.
He said life insurance, by its very nature, is a high-advice industry. He concluded by saying, “With needs that must evolve to keep up with changing life circumstances, and a multitude of factors that can be tweaked to optimise each client’s cover, along with financial pressures, consumers need as much advice as possible from skilled professionals. Financial advisers play a critical role in the longevity of customer relationships.”
Shrosbree concluded by saying that as technology continues to evolve, so will the insurance industry. “This will require insurers to develop new skills and capabilities to stay competitive now, and in the future.”
Writer’s Thoughts
In these challenging times, the South African life insurance industry faces a pivotal moment where empathy and innovation must go hand in hand. By blending advanced technology with genuine, personalised care, insurers can build stronger, trust-based relationships with clients and navigate the road ahead together. Please comment below, interact with us on Twitter at @fanews_online or email me - [email protected]
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