Breaking convention to become growth pioneers
Salvador Dali and Jackson Pollock established themselves as successful artists mainly because of their originality and their innovation. Later, these painters were hailed as pioneers in their respective fields and are regarded as some of the most progressive artists of all time.
The key to their success was the fact that they broke away from business as usual to grow in a specific field. In essence, this is the opponent facing the insurance industry in its battle for finding growth.
Unconventional growth
At the recent PwC Insurance survey, Victor Muguto, Long Term Insurance Leader at PwC, said that the industry is starting to come to terms with the challenges that it faces and that it is looking for new ways in which to overcome them.
Digitalisation is the first challenge that companies are starting to turn into opportunities. The youth of today are the clients of the future, and insurers have realised that they can no longer stand back and let technology slowly take their clients away.
“Financial technology companies are growing in the financial services industry. We have seen it with Google – who are now starting to offer insurance – and we have seen it with clients who prefer to go online to do research on a product before they sit with an intermediary. Companies are now growing their online presence in anticipation of finding new clients,” says Muguto.
Know your market
Customer segmentation is something that insurers and intermediaries have done for many years; it is not new to the insurance industry. But what they do with this information will be a critical factor in the future.
Clients are no longer happy with blanket offerings. Self-actualisation is becoming a big part of the industry whereby clients are asking their intermediaries what insurers can offer them to cater for their specific needs. If a blanket offering is placed in front of them, the intermediary should prepare themselves for a speech about the uniqueness of their risk profile. Personalisation is king for the selfie generation.
Long-term overview
Despite a challenging environment, Dewald van den Berg, PwC’s Insurance Technical Partner, says that the industry performed well. “The combined values of present value of new business premiums among the industry’s three biggest long-term insurers reflect fair results. The 6% year-on-year increase is in line with CPI for the period. However, the competitive environment took its toll on the embedded value profit margins achieved on new business written.”
Insurers struggled to manage actual expenses within the range of the projected actuarial assumptions set at the end of 2014. As in the prior year, all insurers profited from better-than-expected mortality and morbidity experiences, which contributed approximately 5.3% to 2015's embedded value earnings.
Acquisition costs incurred by the businesses of the long-terms insurers increased by 8% to R18.1 billion in 2015. The growth in the annual premium equivalent of the industry was less than last year as a result of the economic climate.
To watch a more in depth interview with van den Berg click here.
Short-term overview
Chantel van den Heever, Short-Term Insurance Leader for PwC Africa, says: “Short-term insurers showed significant improvement in 2015 in their IFRS earnings and key ratios. Insurers are actively managing to reduce their claims handling costs as well as to improve the quality of their policyholder books.
“There were no major catastrophe events during the year except for the severe drought which affected the majority of South Africa’s farmers. This line of business’ gross underwritten premiums decreased significantly due to lack of significant claims.”
An estimated 65% of the country’s vehicles and household items are not insured. Consumers are not expected to purchase new assets due to economic difficulties. Consequently this will affect the growth in gross written premiums going forward. “It is of the utmost importance that insurers continue to place emphasis on their pricing models to ensure they remain competitive and not lose policyholders who are considered to be good business due to the premiums becoming unaffordable,” adds van den Heever.
Editor’s Thoughts:
Growth in the industry is not impossible. It is available to companies and intermediaries who are dynamic and can come to terms with a new way of doing business. What have your experiences been in this regard? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts jonathan@fanews.co.za.
