An honest picture of the industry painted at the insurance conference
What type of an industry are we moving towards? Are we so focused on the past that we are failing to notice present opportunities? Are we in tune with our target market’s buying power and are we taking advantage of it?
These are some of the key questions that are being asked at the Sun City Conference 2014, which is brought to you by the Insurance Institute of South Africa, the Financial Intermediaries Association of Southern Africa and the South African Insurance Association. We tend to sit back and think, do we know our clients and are we in tune with the challenges that the industry poses. This may be the case, but are we embracing these challenges and finding solutions for them?
Polishing the rose tinted glasses
In essence, the industry is battling to come to terms with the challenges which are ever present in the world today. Before the 9/11 incident, airline carriers spent less on insurance. Three days after 9/11, the expenditure on insurance increased tenfold.
While there were some terrorist events in-between, then and now, we have become complacent. Now that there are a number of terrorist acts affecting airlines once again, we are realising the danger of our complacency.
How do we overcome the industry’s challenges? Paul Jardine, Deputy Chairman of Lloyds, says that the only way that one can overcome this is to embrace three key aspects and make them the core of your business.
The first aspect is underwriting. Jardine says that it is every insurer’s duty to provide fair and good policies to clients which will take the greatest amount of risk away from them. While this is seemingly a task only for insurers, it is also the duty of intermediaries to recommend the best product to facilitate this.
The second aspect which needs to be taken into account is that we need to be underwriting experts. In 2011, global insurers paid out almost $20 billion in claims, $7 billion of these were natural catastrophe claims. “The true measure of an insurer is how efficiently they deal with claims. It is important for companies and intermediaries to embrace these issues. For example, within the first month after Hurricane Ike Lloyds paid out $224 million,” says Jardine.
The third aspect that needs to be taken into account is developing products which suit the market. “There is a gap of worry about global underinsurance. We just sell the value of insurance products. We need to develop and sell products in such a way that it will encourage the public to not see insurance as a grudge purchase. This year is bound to be another bad year for natural catastrophe’s and if the public is using savings to recover from this, it is unsustainable. Insurance can help build economies and build communities as it will take significant pressure off the rest of the world when it comes to financial aid,” says Jardine.
Innovation is the key to the secret
One of the central themes of Jardines talk was that insurance companies need to be innovative and develop products that are tailor made to the client’s needs.
Stephen Cross, Chairman of AON Global Risk Consulting, says that this is something that the insurance industry can embrace. The first step in this is making products and policies simple and understandable. He points out that during the Cold War, the National Aeronautics and Space Administration (NASA) spent $12 billion and many hours developing a pen that could write in zero gravity. The Russians, the US enemy during the Cold War, sent up a pencil.
“The first step in this is noticing the unique risks that markets present. Africa has a number of risks that act as deterrents for international investors. Some of these include labour actions and dispute resolution, political upheaval and failing infrastructure,” says Cross.
What is scary about this is that South Africa has just come off the back of its longest strike in history when the platinum mining industry went on strike, and we have another strike which was just resolved yesterday, which lasted a month in the metal working industry. There is also significant political upheaval in South Africa with the Economic Freedom Fighters flexing their muscles and making life significantly difficult for the African National Congress. Not to mention the farce that is the Medupi Power Station.
Industry drivers
There are a number of drivers that will shape the future of the insurance industry. Cross points out that Big Data will have a major role to play in this. He adds that this is fantastic, provided you know what to do with it. “This is a driving force that is shaping how we look at the world. We can use Big Data to supplement the knowledge of insurance executives and we can take this to customers to empower them to make educated decisions. However, there is no substitute for human instinct. If your gut is telling you that something needs to be done, follow that rather than Big Data,” says Cross.
The second biggest driver will be how we interact with our clients. There was a bit of a debate here in that Jardine believes that human interaction is the key to selling an insurance policy, while Cross says that the new age buyer wants as little human interaction as possible. He painted an example of his own children who are growing up and are at the right age to shop for insurance. Cross says that they shop for prices on the internet, they look at the comments and then they buy a policy never directly interacting with the person who sells them the policy until claims stage.
Relevance to the intermediary
As a parting word, Cross asked if we can afford to be dinosaurs and ignore change, or are we able to anticipate change and provide value to clients.
A lot of what Jardine and Cross said was aimed at insurers. However, there is some relevance to the intermediary, specifically when it comes to client interaction. Ideally there should be a mix between using technology to anticipate buying trends and personal interaction to make sure that changing risk profiles are always catered for. Speaking to FAnews during one of the breaks at the conference, one of the few independent brokers attending the conference said out that Jardine’s and Cross’s talks had a lot of relevance to the intermediary.
Editor’s Thoughts:
The conference promises to paint a picture of what the industry will look like in the future. There are a number of risks that need to be resolved, and we need to recognise how clients are buying insurance and we need to use this to our advantage. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts jonathan@fanews.co.za.
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