Technology poised to be a key industry role player
The motor business plays a huge role in the South African short-term insurance industry. According to the most recent statistics available, motor insurance makes up about 45% of the insurance industry’s gross underwritten premium.
However, the motor business has its challenges.
At the recent Motor Forum, hosted by the Insurance Institute of South Africa, industry role players who are at the ‘coalface’ of the business presented and discussed interesting trends and stats.
Claims and trends
The first presentation set the tone for the day and painted a good picture of the motor business in the industry. Sedick Isaacs, Project Lead Sales and Underwriting at Zurich, debated the point as to whether or not the industry is currently in the midst of significant technological change.
“Telematics will be a game changer in the in the industry. It gives the insurer the ability to profile their clients, look at their driving habits and to price their risk accordingly. But perhaps more importantly, it can paint a good picture on the events leading up to a claim,” said Isaacs.
With crash data technology, it is possible for insurers to reconstruct the events leading up to an accident scene in order to see whether a claim is valid or not. While not saying that every claim in the industry is fraudulent; Isaacs points out that fraud has become a R4 billion to R5 billion problem for the industry. And this is a yearly figure.
However, as with all things, Isaacs was realistic and pointed to the fact that technology is not the silver bullet which will solve every challenge that the industry presents. Technological applications need to be refined and with that, the skills to interpret the data in the proper manner need to be acquired, taught or developed.
The great debate
We are all aware of the advantages that technology can provide. Telematics is becoming a game changer on a global scale with many clients insisting that telematics forms part of their insurance policies. However; which is better, telematics or defensive driving? This is the debate that was raised by Alan Eustice, Managing Director at Execuline Motor Underwriting Managers, who swears by the latter as the former needs more refinement.
“Does harsh breaking mean that a person is a bad driver? What if a taxi cuts in front of a person and it is necessary for them to break harshly? Is a person that is driving home in the early hours of the morning always under the influence of alcohol? What if that person is a shift worker or does not drink?” These were the hard questions that Eustice opened up his talk with.
These are very relevant questions, and are the concerns that we have all asked ourselves when facing the telematics debate. However, something needs to be done to improve the driving on our roads, be it telematics or defensive driving. Accidents cost the South African economy an excess of R306 billion a year and the number of road fatalities per 100 000 road users is currently 27.6, this is close to unacceptable for any market.
Defensive driving may also be a key game changer in the industry; it allows drivers to identify and rectify the most common areas of driving weakness. Following distance is a major challenge on the roads as people are not aware of the optimal following distance relative to their speed.
Anticipation is also a problem in the industry. We tend to look at what is in front of us and concentrate on that risk. However, very few of us look ahead to see if we are approaching any risks such as a slower driver, an intersection where the traffic lights are out of order or a driver that is driving erratically.
Perhaps key to this is the fact that defensive driving should be used in conjunction with telematics. Eustice showed that defensive driving can take away the guess work at claims stage and can provide a 32% reduction in accident rates and an 8% reduction in fuel costs.
Sustainability concerns
While the motor industry is a key contributor to the industry, there are some concerns over the sustainability of the motor business in the industry.
Despite various initiatives in the industry, Dawie Buys, Insurance Risk Manager at the South African Insurance Association, pointed out that affordable comprehensive insurance is still not currently sustainable in the country.
Given the fact that the majority of the cars on South Africa’s roads are uninsured, this is an issue that needs to be resolved.
In the past, there have been many calls for the implementation of compulsory third party insurance, but this has been met by many hurdles. This is likely to change as Buys points out that SAIA has now got the appetite to seriously petition government about this, and they are working on stronger collaborations with the Department of Transport and the Road Traffic Management Corporation to facilitate this.
Customer is king
Has this not been the mantra in the industry since its establishment? Why would we be focussing on this again? Heidi Dias, Head of Claims Transformation at Mutual and Federal, said that we are focusing on this because we have entered into a new age where the customer has evolved.
“Experience is all that matters. Experience is an overall contributing factor when purchasing a product. Customers want change, and we need to take a step back and ask whether we truly understand our customers,” said Dias. She added that the short term industry is built on trust, and that trust between companies needs to be built by brokers.
Editor’s Thoughts:
While there are a number of challenges in the industry, does it mean that it is all doom and gloom? No, but this will depend on how quickly insurers embrace technology as a key role player in their business. Please feel free to comment or send me your thoughts jonathan@fanews.co.za.
