Adapting to the ever changing trends

The general insurance industry has changed dramatically over the past decade. Concepts which were unknown just a few years ago, such as telematics, mobility, disintermediation, digital purchasing and Big Data now form part of brokers’ daily vocabulary.

What will our industry look like by 2020? And what can brokers do to remain relevant and successful in this fast-changing world?

The trends, challenges and opportunities which have been shaping our industry over the past few years, and which will continue to have a major impact on the way we do business, are numerous and require a certain amount of dedication from brokers.

Disintermediation

The shift from intermediated to direct business has already occurred in developed countries over the past 10 years. South Africa is starting to show a similar trend, from less than 10% direct penetration before 2000, to around 25% to 30% now. We believe this trend will increase at a steady rate going forward and reach equilibrium in about ten years’ time.

Consolidation

The pressure created by the growth in direct insurance and the requirements of the pending Retail Distribution Review (RDR) have led to increased consolidation of broker business and rationalisation of broker numbers. Treating Customers Fairly (TCF) is also having an effect. This movement, and other consumer protection legislation, are impacting our industry and will continue to do so in the years to come.

Social networks

The impact of social networks on the insurance value chain will continue to evolve. By 2020, peer reviews and crowd-sourcing could have a substantial impact on the way insurance is sold and marketed. We cannot ignore this.

Simplification

This pertains mainly to products and policy wordings in line with consumer legislation and to gain commercial benefit via differentiation. This trend is currently in its infancy in South Africa, with only a few players proactively simplifying language for their clients. By 2020, regulation will ensure that it is enforced across our industry.

International expansion

Short-term insurers are increasingly looking to diversify income through expansion to growth markets, especially Africa and Asia. The competition in South Africa is becoming increasingly fierce, forcing companies to hedge their exposure.

Telematics

Various forms of user based insurance programmes that track and reward clients for good driving behaviour have emerged both internationally and locally. This trend is poised to become commonplace in South Africa over the next five years.

New cars are likely to be issued with the telematics black boxes already fitted. It is important to note, however, that telematics form but one component of what is known as Big Data – using an insurer’s own and external data to understand clients and their needs better.

Online functionality

Online administration and self-help facilities in short-term insurance are now picking up rapidly in South Africa, on both internet and mobile channels; especially among younger clients. This type of functionality provides new opportunities not only for brokers, but also clients who have more personal control over their short-term insurance, and specifically with their claims process.

Digital purchasing

Recent international studies have shown that although online insurance purchases are currently lower than expected, the use of the internet as a research tool in insurance decision-making has increased substantially. We expect that the percentage of digital insurance purchases will increase steadily over the next few years.

So what does all this mean for brokers? We believe the biggest shift brokers will have to make is a mental one; from the idea of being the client’s administrator to becoming primarily an adviser.

How can brokers facilitate this shift? Brokers need to be far more strategic, and decide where they want to compete. Their focus should be on specific functions and core competencies, not administration, which can easily be handed over to insurers. Many large insurers have developed toolkits to assist brokers and enable them to focus on their most important stakeholders, their clients.