Going into 2015 with optimism and vigour
As the industry reflects on 2014, the general view is that the year was challenging and the common thread going into 2015 is that there are worries over the economic growth of the country as it impacts the insurance industry.
Insurance is increasingly being seen as a grudge purchase by some, the question is whether this trend proliferates through to other sectors in the industry? Vivienne Pearson, Acting Chief Executive Officer (CEO) of the South African Insurance Association (SAIA), reported that 2014 was rocky for the short-term insurance industry with rising costs and slow domestic economic growth. In 2015 we will need to get back to basics and focus on building and nurturing relationships with our stakeholders.
Kalim Rajab, Strategic Director at New National Assurance Company, agreed with this sentiment pointing out that the fact that the country has gone through close to 14 consecutive quarters of poor and unstable conditions is worrisome for the industry.
Remaining relevant in the industry
Despite the fact that the year was difficult for insurers, Rajab feels that there is nothing quite like challenging times to instil resilience and discipline in leaders. “One feature which I think will continue into 2015 is the extent of innovation which has been so characteristic of our industry recently. By innovation, I mean not only being adept at technological advances, but also being innovative at how we conduct business, how we make the best out of the cards we have been dealt- and how decisively we act, in whatever strategic decision we have taken,” said Rajab.
Motor insurance and the demand for motor insurers to provide appropriate, relevant and affordable products and good service at the claims stage still remains the biggest business class for the short-term insurance sector.
“It is with these challenges in mind that SAIA has identified three main areas to be addressed in 2015 and the good news is that 2014 became the year for progress in many of these areas. Road safety should be one of the key areas to be addressed, and the end of 2014 saw several meetings occur at which various relevant business sectors agreed to establish a Business for Road Safety’ initiative, under the leadership of SAIA and with the assistance of Business Against Crime South Africa (BACSA). This initiative will be driven further in 2015, to create a strong voice for road safety issues to be addressed in South Africa, while support and assistance could also be provided in this area,” said Pearson.
Behavioural based insurance models
Anton Ossip, Chief Executive Officer (CEO) of Discovery Insure said that behavioural-based insurance models will be key drivers of growth and competiveness in the sector in 2015.
“The application of behavioural economics coupled with telematics technology is set to continue to disrupt the insurance space. Behaviour-based insurance models enable insurers to better understand the evolving nature of risks that are increasingly based on behavioural factors while technology remains a key enabler,” said Ossip.
He added that societies are increasingly expecting companies to fulfill a socially progressive core purpose to create shared value. “The short-term insurance industry in particular has a material role to play in contributing meaningfully to individuals’ lives. One of the biggest challenges is South Africa’s alarming road accident death rate, which has a severe impact on the economy and the short-term insurance industry,” said Ossip.
Another initiative, in which positive progress was made in 2014, was the call for compulsory third party motor property insurance in South Africa. “A SAIA task team is currently in the process of addressing various issues within this topic, and we hope to show some real progress in 2015, although we are aware that the road ahead is long and still has a few potholes,” said Pearson.
Embrace the winds of change
One of the most pertinent topics in the industry last year was regulatory reform and the effects it will have on the industry. Over the past two years, the industry has been in a constant state of change, which makes it difficult for insurers to settle into a rhythm which would allow them to concentrate on adding value to clients.
“Overall, SAIA also finds itself in a constant state of change, which although sometimes uncomfortable is exciting, progressive and necessary. As the environment continues to change, the insurance industry, as well as its representative body, will need to adapt in order to remain relevant and valuable to our members,” said Pearson.
Rajab is also positive about the opportunities 2015 will present. “I think we will finally see discipline returning to the market, and the hard work which many of us have instituted finally bearing fruit. From a regulatory and compliance perspective, I think many of us are looking forward to the final stretch to the finish line of the Solvency Asset Management (SAM) implementation. I cannot claim that it will be easy, but I am confident that we will end the year in a better place than when we started it,” said Rajab.
Educate the public
One of the core principles of Treating Customers Fairly (TCF) is that the public is educated on the intricacies of the insurance industry. The Financial Services Board (FSB) wants to create an industry that is easily understood, and easily accessible.
Ossip explained this view by pointing out that as short-term insurance products become more sophisticated, the need for consumers to fully understand their cover increases as well. Consumers are increasingly exercising the ability to purchase insurance directly without going through an intermediary.
“The Ombudsman for Short-Term Insurance (OSTI) is seeing an increase in consumer complaints but fewer which are finalised in favour of the consumer. Statistics from the Ombudsman reveal that in 2012, 37% of complaints lodged were finalised with some benefit to the insured compared to only 32% in 2013. This downward trend can be attributed to the lack of consumer knowledge of their policies and highlights the importance of intermediaries as risk coaches to advise consumers adequately in a changing insurance environment,” concluded Ossip.
Editor’s Thoughts:
While 2014 proved to be difficult for short-term insurers, the general consensus is that 2015 will be a year full of opportunities. I tend to agree with this outlook, provided that insurers can remain disciplined and reduce the effects of rising costs on their business. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts [email protected].
