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Challenging the bull that threatens productivity

24 August 2015 Jonathan Faurie
Jonathan Faurie, FAnews Journalist

Jonathan Faurie, FAnews Journalist

Are we entering an era where life insurance will take centre stage? After attending the launch of the KPMG Insurance Survey, it was pointed out that the life industry is thriving, and that there is a steady inflow into what is a key industry sector.

This is an indication that there is genuine interest in the market for life products and that the public is becoming aware of the benefits of insuring themselves against unfortunate events.

Claims by numbers

The demand for products is possibly best indicated by the level of claims found in the industry. In a press release by Old Mutual, Jaco Gouws, Protection Marketing Manager at Old Mutual, said that of the R3.4 billion in claims paid out by Old Mutual through some policies in 2014; R2.6 billion was for death claims, R343 million was for disability, R441 million was for illness and physical impairment and R8 million was for retrenchment. In the last five years, Old Mutual’s policies paid out R19 billion.

He says it is important for South Africans to understand why these staggering amounts in claims were paid. “When most people consider the need for risk cover, they often don’t think about all the possible reasons for illness, disability or death. As a result, many tend to adopt the attitude that it won’t happen to them. However, our claims statistics show just how many things can, and do, go wrong,” said Gouws.

Diving into claims

He says when it comes to death claims, while many were as a result of obvious causes such as cardiovascular disorders, cancers and tumours, and accidental and natural death, a significant percentage also stemmed from more unexpected reasons such as digestive, blood, urinary system, soft tissue, nervous system and respiratory system disorders.

In light of these claims statistics, Gouws says it is critical that policyholders ensure they select a policy that is both comprehensive and tailored to meet their individual needs.

Increased interest   

The demand driven market has also been reflected in the latest results released by Liberty. Liberty Chief Executive, Thabo Dloti, reported that assets under management across the group are currently R645 billion, and that the value of long-term insurance new business up 7%.

One of the areas where Liberty saw the most growth was in individual arrangements. At the release of the results, Dloti pointed out that this growth was achieved through the on-going growth in both new and experienced advisers, as well as the ability to retain a large number of experienced advisers.

Indicative strategies

KPMG indicated that saturated markets in the short-term sector are forcing insurers to seek alternative avenues to improve results. While this may be endemic to the short-term industry, the life insurance pool of business cannot be massively bigger. It is therefore plausible that life insurers will see this as indicative of a strategy they too need to follow.

Liberty embraced this by diversifying its distribution model which saw an improved performance in the company’s group arrangements. Dloti said that the company put significant focus on improving the diversification of sales volumes through multiple channels as well as the launching of its consulting business.

The new client

That the traditional view of who the customer is changes on a daily basis. Clients are becoming more educated and demanding and expect a certain level of business acumen from advisers which has never been experienced before. Dloti points out that in the new environment, it will not be uncommon for clients to know just as much about a specific product than the adviser of five years ago would have known.

Further, clients are not bound by geographical regions. Long-term insurers are realising the untapped potential that Africa offers, and are in the process of executing significant expansion plans into the continent.

This is something that the industry has heard in the past, but has left some companies wondering what the real extent of the African opportunities are. Dloti indicated that the value of new business of Liberty Africa grew by more than 100%. This was driven by premium growth in Botswana, Namibia and Kenya.

Liberty Africa’s new business in Zambia also delivered ahead of expectations. The growing middle income market in Africa possess massive earning potential and are more enlightened on the financial services industries then the generations preceding them.

Editor’s Thoughts:
While there are a lot of reports in the industry concerning the challenges that it faces, we are seeing companies who are taking the bulls by the horns and are making genuine attempts to overcome these challenges. Among these, the influence of technology and African expansion cannot be ignored.  Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts

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