Positive change

16 July 2019 Jonathan Faurie

Once a year, the short term insurance industry descends upon Sun City for what is now known as the African Insurance Exchange (AIE).

Hosted by the Insurance Institute of South Africa (IISA), and the South African Insurance Association (SAIA), the focus of this year’s conference is growing and learning together. 

Outside the comfort zone

Transformation is a topic that has been taking centre stage among insurers as the financial services industry increases its role within the economy, which government has stated needs to be an inclusive economy. 

However, this is always not an easy topic to deal with. It is a topic that can either inspire companies or terrify them. Often, humans tend to think about how hard and painful transformation is. 

The need to change

Professor Mamokgethi Phakeng, the Vice Chancellor at the University of Cape Town, pointed out that transformation is a system problem rather than a people problem. 

“Organisations and industries strive for congruency. Companies are designed to deliver results and have developed systems that help achieve these results. Companies are reluctant to embrace transformation because there is an inherent inability (reluctance) to think beyond their current success. Therefore, success is at times holding insurers back,” said Prof Phakeng. 

However, if insurers are comfortable with the fact that there can be a lot more success after an initial period of uncomfortably, transformation can benefit the organisation. 

“This is not a topic that the industry can sweep under the carpet. There is no room for a head-in-the-sand approach here. “Transformation is something that the industry needs to get serious about. Where there is diversity, there is success,” said IISA CEO, Thokozile Mahlangu. 

Constant change

Transformation deals with the need for change within organisations and brokerages. The constantly changing business environment is an external risk which is currently significantly impacting business models. 

“Business unusual is a catch phrase which the insurance industry has coined over the past few years. Not only is the business environment constantly changing, but the world is constantly changing. With this change, there is significant risk and insurers are frantically trying to find a way to cope with this change. It is not easy,” said Tracy McLaughlin, MD of GIB Insurance Brokers. 

This is being driven by technology and the changing nature of consumers which is having a major impact on the evolution of risk. 

“The consumer is evolving and is becoming more educated. Through technology, they have better access to information and are changing the game. Products need to be innovative and need to address a unique set of risks,” said Garth Napier, MD of Old Mutual Insure. 

The industry heavyweight

Perhaps the biggest driver of change over the past two years has been regulatory reform. 

“Regulation is changing the game. It is making it harder for new players to enter the market. In addition, the cost of doing business has significantly increased which has caused larger insurers to find ways to manage this. I think that in the future, we will see a lot more industry consolidation as larger insurers look to take on smaller insurers in order to increase their skills sets which will enable them to effectively manage costs,” said Napier. 

McLaughlin pointed out that regulatory reform is something that the industry has been weary of, and possibly opposed to, in the past. However, it is time that the industry comes to terms with regulatory reform and accepts that it is here to stay. 

“Let’s focus on what regulatory reform hopes to achieve. It is there to protect the consumer and it provides a set of rules that helps companies protect themselves, provided that their focus is on Treating Customers Fairly (TCF). This will bring about positive changes within the industry,” said McLaughlin. 

Editor’s Thoughts:
Growing the insurance industry within the context of financial inclusion has been a challenge over recent years. Through collaboration and skills development, the industry can show why insurance plays such a vital role in the economic ecosystem. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts

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