Do we have to polish the looking glass for 2015?
As we approach the festive season, the insurance industry is breathing a collective sigh of relief that 2014 is finally coming to an end. Many people have their own views about the challenges and opportunities that played a role in the performance of the industry during the year and it’s good to see a balanced mix of positive and less positive comments about the year that was and the year ahead. Adam Samie, CEO of Lion of Africa, shared his views on what he believes 2015 will have in store for the short-term industry.
The insurance industry in 2015
The short term insurance industry is the grease which ensures that the economy functions successfully: it enables businesses to manage their risks and to focus on what they do best. Through transferring risk to an insurer’s balance sheet, a firm can mitigate the negative impact of insurable adverse circumstances.
Challenges exist
The current business environment of low domestic economic growth and rising costs, with relatively pedestrian global growth, poses certain challenges for the short-term insurance industry and we can expect a few difficult years ahead for the sector.
I expect to see some rationalisation of products within the industry with poorer performing lines being dropped by some of the players and this is likely to place upward pressure on premiums. Premiums on motor insurance, for example, are razor thin at present. If some insurers opt out of this market segment, we can expect those premiums to rise.
Insurers will need to adapt to and embrace the new regulatory environment. Treating Customers Fairly (TFC) has (quite rightly) been introduced and the Solvency Assessment and Management (SAM) risk-based supervisory approach is coming into being.
TCF, as the name implies, is policy aimed at ensuring that all players in the industry treat their customers “fairly”. Fairness needs to be at the centre of a firm’s culture and we need to market products in such a way that they are easily understood and appropriate for clients’ needs. Transparency is vital in all aspects of our business – from the fee structure to the performance expectations of products.
The SAM regime is not unlike the Basel II banking regulations. This regime aims to ensure that all insurers will be able to meet the claims made on them and to protect policyholders from a failure of the insurance company. It is designed to improve confidence and stability in the insurance industry.
We certainly applaud these moves to improve customer experience and the long-term viability of the insurance industry, but they will add to cost pressures for the sector and insurance companies will need to adapt accordingly.
But opportunities are always available
Having said that, there are definitely opportunities to develop in under-serviced market segments and I anticipate the emergence of new products to satisfy specific market niches.
There is also great scope for the industry to up its game in the servicing of clients, to create more efficiency in the claims chain and to introduce innovation in procurement strategies. Insurance companies often provide a service to clients via a third party, such as a panel beater in the case of vehicle damage or for the replacement of geysers (incidentally, one of the biggest claims on home-owners’ policies). By driving change within the procurement chain – such as providing training and support for entities which support the industry and looking for cost efficiencies – we hope to be able to render an even better service to our clients.
We are continually looking at ways in which we can provide a swifter and more cost effective service to clients. I believe that technology will be instrumental in helping us achieve this: our IT needs to be constantly evaluated. At Lion of Africa we undertake a client satisfaction survey annually which we use to continuously evolve our services and offerings. We aim to move ahead of the curve: our challenge is always to improve beyond expectations.
Insurers also need to simplify the claims chain for clients, making the process easy and transparent. By cutting the number of enquiry points and making use of cutting edge technology, we believe that this can be achieved. As we say at Lion of Africa “Behind every claim there is a real person.”
Opportunities in third party insurance
Another area for insurers to grow lies is the potential for compulsory vehicle insurance, at least for property damage claims – notably, the balance of third party insurance. This is one of the most important risk mitigation steps that the industry is taking and it will assist in providing access to financial services in entry-level markets.
Africa is another great opportunity beckoning insurers. The emergence of a new middle class on the continent, with rising disposable income, offers great potential for insurers. This, coupled with the growing democratisation of the region, underpins the prospects. We expect the financial service industry to benefit from the consumer growth, especially as those consumers move to greater product sophistication. I believe that insurers which look north and find ways to expand into Africa, will be able to take advantage of a great growth opportunity.
To thrive in 2015, as insurers we will need to place customers at the centre of our business. We need to review our products, policies and processes to ensure that they are relevant to customers’ needs and that they can deliver on the promises that we make through them.
Editor's Thoughts:
It is clear that the challenges we faced in 2014 will persist, but we can only hope that the opportunities that Samie points out outweigh these challenges Let us enter 2015 with a positive attitude, it is after all a new year filled with new opportunities. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts [email protected].
