Your Motor and Household Insurance Premiums Can Now Fund Your Investment

27 November 2019 Solvency
Mutoda Mahamba, Co-Founder and Chief Executive Officer of Solvency

Mutoda Mahamba, Co-Founder and Chief Executive Officer of Solvency

Fintech start-up reimagines the ultimate grudge purchase to deliver tangible financial returns for insured consumers

For most consumers, motor and household insurance is the ultimate grudge purchase. It’s that one thing that you must have because things can and do go wrong unexpectedly – and when they do, the financial implications of an uninsured event can be disastrous. But if you’re part of the nine out of 10 insured consumers who claim far less than you will pay in premiums, or maybe you haven’t claimed at all for years, then that hefty monthly premium debit that essentially amounts to nil benefit for you, can really grind a hole in your budget and sense of humour.

The bottom line is that up to 90% of the short-term insured pool (and non-claimers) like you, subsidise 10% of multi-claimers who don’t manage their risks well, and the rest of your hard-earned cash goes to insurer profits without you receiving any return for your investment. It’s this reality in a tough and constrained South African economy that new fintech start-up, Solvency, underwritten by GENRIC Insurance Company, aims to challenge and up-end the outdated way of delivering insurance. Instead, Solvency provides a seamless way for your motor and household insurance premiums - which you’ll be paying anyway - to be used to create an investment for YOU, and not the insurer.

Cornel Schoeman, Chief Commercial Officer of GENRIC Insurance Company adds: “GENRIC is focused on taking niche insurance solutions to market by partnering with specialist underwriting management agencies (UMAs), brokers and Fintechs. Key to these partnerships is our support and encouragement of entrepreneurial skills, customer centricity, and specialist knowledge that is typical of small-yet-highly-focused businesses. We recognise the essential and much-needed synergy between entrepreneurial outfits and established companies, to create new insurance solutions and business models. We believe that the insurance sector in South Africa, can be a major driver of transformation and an incubator of Fintechs that challenge the status quo; thus building sustainable businesses, communities and the economy,” says Cornel.

“Most consumers acknowledge that being insured appropriately for a catastrophic event remains more crucial than ever, but for the vast majority who never or seldom claim, it remains a grudge purchase that could be delivering better returns with a new and innovative financial model. Solvency was created with the simple and core purpose of giving consumers greater control over their money spent on insurance. Simplistically, Solvency replicates the medical savings concept of a medical aid, with some key enhancements,” explains Mutoda Mahamba, co-founder and Chief Executive Officer of Solvency.

“As client, you decide what percentage of your monthly motor or household insurance premium goes to risk and what percentage - up to a maximum of 25% - goes to savings based on what excess you are prepared and able to pay, should you ever need to claim. This provides a savings solution for you to use to partially or wholly fund any excess should you need to claim. If you don’t claim, you can choose to draw off up to 50% of your savings in a 12-month period in cash for your own use, or better still, leave the money invested to grow and earn interest,” explains Mutoda.

Insurers have traditionally provided the option of increasing an excess payment – the first amount payable that you are liable for in the event of a claim – in return for lower monthly insurance premiums. The risk of this approach however is that high excess payments can leave you in dire straits if you have not provisioned for the excess and need to claim – few consumers, if any ever do make this provision. Solvency makes this provision for you in the form of an investment which also earns interest and is 100% yours. Even on so-called ‘cash back’ models offered by some insurers, the offering is only 10% of premiums paid and you must be claim-free for three years. The smallest claim will nullify any benefit to you and you then have to start all over again to build up a new claim-free track record for the next three years – with no savings on your premiums each month. With Solvency, regardless of whether you claim or not, the savings component in the investment account is your money, for your benefit,” explains Mutoda.

Solvency is premised on three key components:

• Automatic Savings that earn interest: 5% of the Solvency premium by default goes into your Insurance Savings Account, with the option to increase this up to 25% of the premium. As the savings amount increases, the excess increases in the event of a claim. If you consider that actuarial statistics show that the average insured person only claims once every four years, for an average amount of R18 000, the benefit of Solvency’s model for consumers is loud and clear. On an average insurance premium of R1 000 per month without taking escalations into consideration, you will pay almost R50 000 in premiums alone. If you don’t claim during this time, you will have paid R50 000 for no return whatsoever. Even if you claimed for an average of R18 000, that leaves R32 000 that provides no dividends for you whatsoever.
• BetterDrive Savings Booster - is a driver-behavioural feature, which allows the driver/s the opportunity to self-manage your premium and cash back rewards through responsible driving. You receive up to 25% of cash back spent on premiums every three months which is paid into your Insurance Savings Account (ISA).
• Pay as you Insure - With Pay As You Insure (PAYI), you pay insurance premiums for the insured items for which you need cover for in that month. The premium for items for which cover has been switched off is allocated to savings.

“The importance of having comprehensive insurance, especially for catastrophic events like a home fire, or a car being written off is crucial. In being responsible about properly insuring your assets, Solvency delivers an innovative yet simple financial model that makes the money you spend on premiums work much harder for your direct benefit,” concludes Mutoda.

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