Category Life Insurance

Zimele - Metropolitan well placed for national distribution

26 February 2007 Metropolitan

As part of an industry initiative to make financial services more accessible to the poor, Metropolitan Life today announced an innovative distribution strategy which will span the length and breadth of South Africa.

This week the life assurance industry launched its first product under the Zimele trademark which targets low income groups.

Zimele- which is similar to the banking sector's Mzansi product range - will initially provide more economical funeral cover aimed at an estimated 15,4m South African adults (aged 16+) currently earning less than R3000 a month- most of whom have inadequate cover. Zimele, which launched with a funeral plan, will be extended to provide various other types of cover including life.

Greg Buckle, Product Development Actuary at Metropolitan Retail, believes that the company has taken the industry lead in addressing distribution issues, which has been one of the largest constraints in servicing this market effectively.

Considering that a large proportion of the lower income groups are not resident in urban areas, life assurance companies will have to devise innovative and cost effective ways to reach further into the market.

Metropolitan is embarking on a multi-channel approach that will lean heavily on direct marketing in a bid to remain cost effective but will still retain a large component of face-to-face advice. Metropolitan intends to capitalize on cost savings and the additional geographical reach in face-to-face intermediation made possible through its Retail Enhancement Initiative (REI).

REI, which became fully operational last year in anticipation of Zimele, was the life industrys first fully telephonic process for capturing intermediated new business, including telephonic underwriting. Once the intermediary and customer reach agreement on an appropriate policy the telephonic capture process enables Metropolitan to finalise the new policy application within a day in most cases. Besides the cost savings and reduction in administration REI also extends the range of distribution as a broker can operate effectively wherever they are able to make a phone call.

Buckle points out that in anticipation of Zimele, Metropolitan has worked hard to remain ahead of the expressed and unexpressed needs of the market and will need to stay sharp. The Financial Sector Charter has created an imperative for other industry players to enter the lower income market- a market which Metropolitan has traditionally dominated for years but one largely ignored by some of the industrys big players in the past.

In the short term, Metropolitan does not expect to make any thing more than a very modest profit through Zimele because of the keen pricing and costs of extending distribution. In the long term, however "companies that effectively service this market will reap the rewards when people eventually graduate to higher income groups, where margins are more attractive," says Buckle.

In the short term, Buckle anticipates that life assurors will have to look at remodelling conventional distribution models. The challenge of wider distribution at lower cost will drive innovation and initiatives like REI are likely to become mainstream.

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