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Changing at a rapid pace

23 March 2015 Jonathan Faurie

In an age where the whole world seems to be going digital, transactions are increasingly being done or are stored over the internet. This is known as our digital footprint, be it credit card swipes to comparing products from different insurers on the internet, there are seemingly very few functions that we perform in this day and age that is not recorded in some way shape or form.

While this is seemingly frivolous information for us, it is invaluable for insurers. One man’s trash is another man’s treasure. Big Data provides key insight into spending and browsing habits which insurers can use to design and market products which clients genuinely want. In addition, it can provide information to formulate an effective expansion strategy if you are looking to expand into other markets.

Attractive option

Expanding into Africa has been a definite and outspoken strategy of Standard Bank who has been on a mission to gain a presence in as many African countries as possible.

Sim Tshabalala, Joint CEO of Standard Bank Group, says that while this has been an exciting prospect for the company, it could not just spread its wings blindly. “Companies need to resist the urge of jumping over into Africa off the back of simplistic views regarding its growth.”

Africa has been one of the growth success stories of the new decade. While growth in developed economies is slowing, growth in emerging markets is increasing. It is reported that five of the worlds fasted growing economies are coming from Africa. This is largely due to the fact that Africa is opening its doors to the world and companies are beefing up their infrastructure backbone which allows them to conduct business with international counterparts.

“Sub-Saharan Africa is currently growing at a rate of 5.6%, which is expected to continue in 2016. This is well above the average seen in other emerging markets. Data also shows that growth in Nigeria can pick up to 7% a year from 2016 onwards while Angola will slow down to settle at 6% growth. This is all valuable information and shows one of the values of big data.”

Sell to your market

The South African insurance industry has a long history, and insurers have a wealth of experience designing products for our market. But Africa is a largely unknown market.

The standard form of insurance such as motor or household insurance will be easily taken over into other markets, with a slight adjustment to pricing, but it is liability products and life products which need to be specifically designed to suit the market of the country you are expanding into. Nigerians don’t like talking or even thinking about death, so funeral cover is basically useless in that market.

Products also need to be funky and reflect the fact that insurers are not only targeting clients in their mid-thirties, but that they are also mindful of the growing young middle class. This is a growing trend and Tshabalala points out that 160 million  people across Africa will be able to be classified as middle class individuals over the next ten years.

This is where the spending power of the new generation will be, and insurers need to take advantage of this and grow at double the rate of the growth in income in these households. “The majority of products will be focused on retirement. Currently, the culture of savings on the continent is low, but it will increase as the middle class grows.

Develop a winning strategy

A big issue with Big Data is that if it is collected and collated in the wrong way, it becomes useless. Companies have had to learn this the hard way, and Tshabalala says that there are a few key strategies that companies can follow.

-       Watch your price: because of global economic uncertainty and rising prices, clients are sensitive when it comes to the pricing of insurance products. If you are not cost competitive, you will be muscled out of the market. This will also apply to intermediaries who will now have to charge a separate fee for advice once commission is scraped.

-       Improve customer care: with the new dynamics which will be driving the industry (regulation), intermediaries cannot afford to only see their clients once a year. Ongoing engagement will increase your credibility with clients who will see that you genuinely care about their needs. Value added services over and above the product offered to clients will be what sets brokers apart in the future. 

-       Be innovative: this speaks more to insurers than to intermediaries. The most successful companies are those that are able to take a product and customise it to suit client’s needs. We are seeing a number of products internationally where clients can insure specific parts of their vehicles as opposed to the whole vehicle. Won’t this be a perfect solution to increase insurance penetration in Africa?

These are all valuable considerations which insurers - and intermediaries - can take on board when they are considering growing into expansion markets; or even if they just want to expand in the South African market. We need to break down our silo approach to the market where we think markets act in isolation with each other, because they don’t.

Editor’s Thoughts:
Big Data has been threatening to be an industry game changer for a number of years now, but it hasn’t had a significant impact because we were not quite sure how to collect and interpret this data in a meaningful manner. This is changing at a rapid pace as companies are picking up on trends prevalent in international markets. Companies, and intermediaries, who do not see the value in big data will find themselves becoming redundant in an industry that is ever changing. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts jonathan@fanews.co.za.

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