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Toughest period for financial advice in many years

18 October 2021 Myra Knoesen

Are financial advisers, brokers and agents resilient and relevant enough to thrive today? What about tomorrow? How have we adapted advice strategies under the current challenging political, economic and social circumstances?

At the 2021 Financial Intermediaries Association of Southern Africa (FIA) Advice Summit, local and international esteemed speakers shared their insights into business resilience and scaling for the future in the midst of an “apocalypse” – what many are calling the toughest period for financial advice in many years.

Setting the scene

Master of Ceremonies, and industry stalwart and expert on all things regulation, Caroline da Silva - Independent Non-Executive Board Member of Santam and Retired Deputy Executive Officer of Regulatory Policy at Financial Sector Conduct Authority (FSCA) opened the FIA Advice Summit by saying, “In today’s corporate world, it’s not about how big you are, but about thinking fast. Today, its about all the lessons we have learned in the past few years. If we haven’t changed and adapted, we will fail,” she said.

Changes in insurance

Steyn McDowall, Head of Business and Specialist Division at Indwe Risk Services then spoke about pandemic insurance and how this has that brought about changes in insurance.

“As demonstrated by COVID-19, a contagious virus can travel around the globe quickly, impacting a large part of the world at the same time - a characteristic which is shared by, e.g., cyber risk, where, because of the connectedness of computer systems, malware can spread around the world in very short time,” said McDowall.

“Digitised systems and processes, cloud-based services and automation are re-engineering the current status (AI and robotics, automation, customer and staff experience and the future role of the broker), introducing a wide range of complexity and challenges, to change the way we think about these processes. Capacity plays will be made - workforce agility versus channel overload, market cost of risk versus risk management, Covid blues (reduced staff), regulation versus digitisation, etc.,” he emphasised.

“Scenario planning and mitigation strategies are key. Understanding potential exposures, planning for claims, cost of service and increasing the value proposition for brokers, insurers and external stakeholders is key. Business continuity and resiliency planning will become a critical focus,” he added. 

“Looking at pandemic insurance… from human error, to outdated and badly managed systems … insurers should build resilience upfront in the form of sufficient capital and clear policy wordings with limiting risk accumulations - this is because executing contingency plans during a crisis often comes at a high cost and typically cannot fully recover to pre-crisis conditions. Scenario analysis can be improved by testing exposure to contract wording challenges and further considering how public perception may change when wordings are challenged,” he continued. 

McDowall concluded by saying, “the key factors to success are people development, system development and deployment, process rationalisation to prevent costly administrative errors, general control environment improvement, validation and accuracy of claims and policy information, proper portfolio management and increased vigilance to reduce PI.” 

Ready for change

Andrew Coutts, Executive Head of Intermediated Business at Santam discussed how intermediaries and the insurance industry in general can ready themselves for change.

“The world has moved from a complicated world to a complex world, where it’s not about survival of the fittest anymore but survival of the quickest. More than efficiency, this requires robustness,” he said. 

Looking at some of the trends, when it comes to the evolving risk landscape and the consumer, the Santam Insurance Barometer revealed that the majority of consumers have been negatively impacted by the pandemic but have shown resilience. There are behavioural and claims changes, for example, changes in driver behaviour and use of technology. Looking at the evolving risk landscape in the commercial space, aside from claims trends, 8 in 10 corporate and commercial entities were negatively impacted by the pandemic. In the face of financial loss, staff costs have been cut and business operations adapted to remain resilient. Despite recent difficulties, 83% of large companies and 73% of SMEs are optimistic about future business outlook. 

The top three emerging risks identified by commercial intermediaries are political unrest, cybercrime and pandemics. Such risks are a threat to both resilience and access to capital because they are increasingly difficult or expensive to insure against. 

Coutts said that in all of the change and challenges presented, the role of the intermediary will become even more important as the insurance risk landscape evolves. There are opportunities for insurers and intermediaries in the evolving risk landscape. These, according to Coutts, include: 

  1. Insure-led innovation
  2. Being technologically connected
  3. Escalating risk
  4. Risk transference not sustainable
  5. Effective risk management
  6. Client centric approach
  7. Tailored insurance solutions
  8. Leveraging customer data
  9. Personalised services
  10. Accelerated digital transformation 

Financial services value proposition

“Global trends have the power to transform insurance markets and have been accelerated by COVID-19, for example, digital platforms, ecosystems and mega-apps, telemedicine and cryptocurriencies,” said Hylton Kallner, CEO of Discovery Bank. 

“The disruption of technologies is impacting the nature of risk, for example, the behavioral nature of risk… make people healthier and live longer (health and life insurance), make people better drivers and have fewer road accidents (motor insurance), etc.,” he said. 

There are five digital and technological mega-trends shaping the financialservices value proposition. These, according to Kallner, are: 

  1. Digital healthcare
  2. The payments evolution (real-time payments, prepaid payments and ecosystem payments)
  3. Big Data and advanced analytics (fraud detection, accident detection, pricing)
  4. Revamped new business and advice processes (virtual financial advice has proven successful and efficient, advancements in key enablers for digital new business processes)
  5. Fintechs, platforms and ecosystems (growth in Fintechs, ecosystems and mega apps – mega apps have become a global phenomenon in 2021 and Insurtech and ecosystem strategies are increasing). 

Navigating a new era

In navigating a new era of digital technology and customer expectations, Kwena Moabelo, Head of Customer Excellence at Hollard Insure asked what direction do we take to navigate this new era?

In this tricky digital environment with heightened customer expectations, using a claims experience example, Moabelo highlighted some guiding principles.

“The first guiding principle for a great customer experience is for the insurer to put the customer AND the broker at the heart of its business. You can’t solve the customer experience without solving the broker experience. Do not start with the technology, you start with the customer. And the best person who knows the customer, is the broker. The second guiding principle for a great customer experience is for the insurer to empower brokers to serve customers. The third guiding principle for a great customer experience is to remember relationships are still king and customers are still interested in relationships with brokers… ‘a person they can trust’. There’s another relationship also emerging… Insurtechs and Fintechs. The coming together of two entities to provide solutions to consumers,” he said.

“This where the importance of digital creativity and agility is important. The fourth guiding principle for a great customer experience is the importance of harnessing technologies and the data they produce that are changing customer behaviour. And the fifth guiding principle for a great customer experience is to take increasing complexity out of the digital era in which we operate. Keep it simple,” he concluded.

Writer’s Thoughts
The advice summit was insightful and packed with topics that posed many questions and scenarios about the future. As the speakers mentioned above, the world has moved from a complicated world to a complex world, where it’s not about survival of the fittest anymore but survival of the quickest, and, if we haven’t changed and adapted, we will fail. Global trends have the power to transform insurance markets, and scenario planning and mitigation strategies are key. In this new era of digital technology and customer expectations… guiding principles are critical. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts [email protected]

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