Stagnant risk pool – how to attract the uninsured

This causes significant problems when considering intermediaries and insurers alike as in order to sustain themselves, growth is required which in the current environment is almost impossible to find.

 

 

In essence, operating costs continually grow at best only at inflation, but often by much more. But with insurers’ top line remaining stagnant this creates diminishing returns. An additional problem facing risk carriers is the fact that the Rand/ Dollar rate has soared during the first half of this year. This drives up the cost of replacement parts which will ultimately drive up premiums to ensure that a balance is maintained. Clearly, we have entered the realm of "difficult times.

 

With all of this negativity and slowing down dominating the media and market place it can become commonplace to hold up one’s hands and say : "OK, let’s accept the difficult times and concentrate only on client retention to minimise the expected loss of income” whereas there are possible avenues of growth available which are often overlooked.

 

One such area of possible growth is undeniably the so-called "uninsured” market of South Africa. Admittedly, this segment often lives from hand to mouth, has acquired very little assets or capital and are in general rather uneducated when it comes to insurance and the protection that is arguably needed especially when self-replacement is impossible without increasing the debt spiral.

Over the last few years we have seen certain growth areas in this arena, concentrated on funeral and legal products, where this client base identifies and understands the need for this type of insurance.

These polices have historically been sold through religious groups and burial societies with premiums being collected at these venues mainly in cash without any FSP licences in place. Today however, as the regulatory aspect is tightened up, this has all evolved into a more structured set up as all entities trading in the industry today are required to be licenced in order to trade.

 

Another evolution has been the impact of retail outlets getting involved. They have become legally authorised distribution agents, facilitating a far wider reach when it comes to policy sales. But beyond this, the industry has been arguably unsuccessful, more particularly when considering the general short term arena. In my opinion, what is required is some level of innovation with a rebalancing of the expectation of rates of return required, over the medium term, knowing full well that the viable premium entry point is much lower than with other living standard measurement groups- understood to be in the hundreds of rands rather than in the thousands.

 

Motor remains a product which requires less marketing than other products, as the general populous has a greater understanding of vehicles and the risks they pose. On this basis, perhaps motor is the area that needs to be looked at where the conventional comprehensive motor policy is stripped down and completely revised on the basis that it becomes affordable to this segment of the population. It is undeniable that looking only at cover and rates is not enough, as to ensure viability of this new profile one must consider in addition a fully revised claims and administrative service.