Using telematics to give you the edge in the industry

South Africa has some of the most renowned insurers on the African continent. These insurers operate within a highly developed industry which has long been regarded as a shining example of how to offer financial protection to the public.

Some people even go as far as comparing the South African financial services industry with international markets which are much larger, particularly when it comes to the short-term industry.

Staking an international claim

The competitive nature of the South African insurance industry was the key element of the presentation by Mike Pritula, Global Head of Insurance Practice at McKinsey & Company, at the 2014 Insurance Conference which was held at Sun City from the 27^th to the 29^th of July.

“The South African insurance industry is one of the most competitive industries I have ever come across. Telematics is starting to play a major role in the industry by giving South African insurers a cutting edge when it comes to increasing the value proposition it offers to policyholders,” said Pritula.

He added that this is a testament to the intermediated model which drives the South African insurance industry. Brokers play a major role in the industry. Their knowledge of the target market and the unique aspects which influence the purchasing patterns of the South African consumer is providing insurers with the information that they need to grow within the market.

Stay relevant

Since 1994, the South African insurance market has opened up to the international world by inviting insurers who have a significant global footprint to make their presence within our industry. Due to the high level of competitiveness in the South African market, international insurers are making sure that they bring only the best products into the local market.

While this competitiveness is healthy, it does come with a cautionary note. While the South African industry is only starting to see the value of telematics, international insurers have been operating in markets where telematics has a long and rich history. In fact, in some of the markets that these insurers operate in, telematics devices are compulsory for all vehicles. This will be the main goal of South African insurers, but as Sedick Isaacs, National Head MU of Zurich Insurance, pointed out, the reality of travelling in a motor vehicle in South Africa is the fact that the car next to you might not have insurance, as it is estimated that only 25% to 30% of vehicles on our roads are covered.

“These international companies are becoming increasingly interested in competing in the global market place. If we look at the revenue trends of these companies, there is an increasing trend for these companies to generate higher revenue streams outside of their markets of origin. So South African insurers will need to be increasingly vigilant,” said Pritula.

We have seen over the past year that Africa is also opening its doors as an appealing growth market for South African and international insurers. Research indicates that the African short-term industry will generate over $80 billion in revenue within the next twenty years. Pritula adds volume to this by pointing out that Africa is becoming as important as Western Europe in terms of premium growth.

“This is all being driven by science and advanced analytics which will determine the industry’s winners and losers. Because of the growth of the internet, social media and mobile devices, we are able to generate century’s worth of data every year. Storing this data is becoming cheaper and there are new vendors in the industry which is making it possible to make data meaningful.

What does this mean for the local market?

Because of the growth of the internet, the accumulation and packing of data can be used as an effective tool for insurers. However, it is one thing to collect all of this data but what kind of data are you collecting, and what are you using it for?

Discovery Insure has been instrumental in using telematics to gain insights into driver’s habits on the road. While the public still views telematics as a case of Big Brother is always watching,Anton Ossip, Discovery Insure, Chief Executive Officer (CEO) has continuously assured Discovery Insure clients that the information gathered by telematics will only be used as a motivator to change driving habits. This has been primarily driven by the Discovery Driver’s Challenge.

“Because of the competitive nature of South Africans, clients who are participating in this challenge are becoming better drivers and are starting to see the benefit of their new driving behaviour,” said Ossip.

The short-term industry has always been characterised by a healthy relationship between brokers and their clients. However, Ossip pointed out that if the clients are going to change their mindset towards the way they drive, brokers may need to play a new role with their clients.

Adapt or feel the pinch

In order to remain relevant in the industry, insurers have been encouraged to adopt telematics early and with as much capacity as possible. During a telematics briefing before the insurance conference, Rhys Collins, Head of SSP pointed out that if we do not transform successfully to being truly digital businesses, we will not survive in our current form.

“As a traditionally risk averse industry, it is time to start understanding the digital world better by learning what works and what does not work so that we can start the process of transformation sooner,” says Collins.

Editor’s Thoughts:
Telematics can offer a distinct advantage in the South African industry if insurers are going to improve relationships with clients going forward. By making the information gathered by telematics available to policyholders insurers can price their risk appropriately as well as negotiate discounted rates with drivers who display good behaviour. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts [email protected].

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