The devil is in the detail : growth is accessible

South Africa undoubtedly seems like the most saturated market in the continent as far as marketing and selling risk cover products are concerned.

The PricewaterhouseCoopers and KPMG insurance sector reports estimate the country’s insurance penetration rate to be around 14.2%. This figure is among the highest in the world. However, some argue that there is still a room for growth through innovation as many consumers have not adequately addressed all their risk cover needs.

Reviews and upselling

Growth is likely to come through policy reviews and upselling. There are many people who take out cover when they start their first jobs or buy property, but they never go back to review their insurance needs as their lives and needs change. Most of these consumers are probably underinsured, or they have not balanced out cover for their different risk cover needs. Different studies continue to show that areas like disability cover are grossly neglected by consumers.

The results of the updated True South Association of Savings and Investment South Africa Insurance Gap Study showed that only 40% of South African consumers’ permanent disability needs were insured in 2013. The figure for temporary disability events was even lower as estimates ranged between 12% and 27%.

For someone to be properly covered we need to consider that they need more than life cover and that they regularly need to reassess the level of cover that they do have.

Insure your biggest asset

The True South research shows that the average breadwinner should buy disability cover that can replace almost their entire income or the bulk of their income because unlike in the case of death, disability has the most severe impact on an individual’s finances.

A person’s living expenses actually increase in the case of disability, and given the 60% insurance gap uncovered in this research, it is clear that there is a greater need for advisers to have these conversations with their clients.

Susceptible to change

A large number of consumers still make financial planning decisions based only on interactions with their human resource departments. Such conversations are likely to take place only when a person starts a new job, yet a number of life events take place afterwards and few people stop to think about how such events affect their insurance needs.

Growth is going to come from both capturing new markets and cross selling or up selling to existing customers. People who already have insurance policies in place are more susceptible to engage in conversations about reviewing and plugging gaps in their cover.

But the industry needs to embrace new ways of communicating with these consumers; research shows that while many people prefer face-to-face initial interaction, they are more likely to look at product offerings and other discounts on their digital devices afterwards.

Apart from this, a KPMG survey on South Africa’s insurance sector found that while insurance penetration levels appear to be relatively high in the country, it is concentrated towards the top end of the market. Future growth may lie largely in capturing the large uninsured segment of the population.

Consider the numbers

If you consider that KPMG estimates show that advanced economies spend on average $3 677 on insurance premiums per capita, while South Africa spends around $1 047, you can see that while this is a matured market, it still has room for growth especially as more households move up to the income ranks.

The industry needs to work on creating an environment that makes it easier for consumers to access risk cover and to understand better which products best suit their needs.

In uncertain economic times it becomes more important for people to protect their livelihoods and their families. We as insurers therefore need to make it easier for advisers to advise clients on the right financial solutions.