Change is needed, now and for the future

Schalk Malan, CEO of BrightRock

When looking at the life insurance industry, we know that change is needed to remain competitive. FAnews spoke to Schalk Malan, CEO of BrightRock to ask him why change is needed in the group risk market, why it is so important for insurers to constantly innovate in the life insurance space and how insurers can offer more sustainable efficient cover in contrast to traditional group risk products.

Inequitable and inefficient structure

According to Malan, employers are finding themselves in an increasingly competitive job economy where they are struggling to attract and retain talent and, as custodians of their employees’ financial wellbeing, are facing growing pressure to offer valuable benefits that better meet their needs. 

BrightRock has become known as a disrupter in the individual life market, where advisers and policyholders alike have responded positively to their world first needs-matched product, which precisely matches clients’ needs and then adapts to their changing financial needs over time. “BrightRock is now also entering the group risk market because we believe that South Africans are not getting the value they deserve for the estimated R18 billion per year they spend on their group risk products. We are changing the way group risk products work,” says Malan. 

“Traditional group risk products are standardised, commoditised and one-size-fits-all solutions that fail to meet both employees and employer needs. At their core, the insurance structures offered to employees today are the same as they were in the 1980s, based on a flat multiple of salary model, which in practice, leaves scheme members, by and large, substantially underinsured at younger ages when they face the largest financial exposure, relative to employees at older ages, who are nearing their retirement age,” he says. 

“This inequitable and inefficient structure has meant that, to remain competitive, insurers have cut the benefits offered to employees, introduced limited pay outs and barriers to claim, creating uncertainty for scheme members and undermining their sense of financial security. The structure of traditional products also makes it difficult for employers to understand the solution they are buying for their employees, as there is no clear alignment between the benefits provided and the underlying financial needs they protect. For advisers, this also hinders the advice-giving process. Change is needed,” emphasised Malan. 

The ones who are getting it right

“The standardised, inefficient, mass-produced product solutions traditionally offered by the life industry are becoming increasingly out of touch with clients’ needs and expectations. In addition to this, consumers are under increasing financial pressure, demanding better value and transparency in the products and services they sign up for,” he says. 

“The insurance industry has tended to respond to the demand for better value for money by making price a key differentiator in the industry or offering add-ons, such as loyalty benefits. However, the underlying product structures have remained unchanged, offering an inflexible, one-size-fits-all approach to structuring clients’ cover, which does not take into account the different trajectories of clients’ long, medium and short-term needs,” he continued. 

“This has resulted in inefficiency, unnecessary premium waste and, ultimately, we believe, the eventual unsustainability of traditional life insurance structures, as cover becomes unaffordable and progressively more disconnected from clients’ ever-changing needs over time. Very few market players have looked at ways to improve underlying product structures by harnessing the latest technology. The life cover providers that are truly getting it right, are the ones who utilise the latest technology and think on a continuous basis. And in doing so, they are able to sustainably match customers’ needs by incorporating premium efficiency, flexibility and accessibility into their product design,” he says. 

“There is a clear need to provide innovative, consumer centric products that offer premium efficient cover that matches clients’ needs. In the intermediated space, these products should enable financial advisers to give the best advice with solutions that precisely meet their clients’ needs sustainably and address any shortfalls in their cover. Cover providers also need to harness the sophisticated technology at their disposal and use its incredible processing power to create products that are intuitive, flexible and customisable to match clients’ needs very precisely and offer good value for money. In doing so, they will offer much better value and up to double the cover that traditional products offer for the same premium,” says Malan. 

“Interestingly, where a product offering uses the latest technology to offer significantly more value, we have seen a flood of interest from clients who want to make their Rands go further. In our view, this is a key factor driving business growth,” he says. 

Finding the perfect fit

When asked how insurers can offer more sustainable efficient cover in contrast to traditional group risk products, Malan said, “Insurers can start by calculating each employee’s financial need – that is, the total value of future pay cheques; then basing the cover on protecting as much of this need as possible. They can then cover the same proportion of this need for each employee – which not only works out on a fairer split of the group’s cover but is also a far more efficient way to structure and price the cover – resulting in about 40% more cover for the group, for the same premium.” 

“Insurers should also remove barriers to claim, such as unnecessary 14-day general survival periods or subjective occupational criteria and post-claim reassessments of permanent disability claims, to introduce greater certainty and clarity. Lastly, insurers should make it easier for members to access additional cover when they need it and offer benefits that are portable, even if a member should later leave the scheme. Members should be able to access a comprehensive individual product, free of any underwriting on moving from the group. The cover will meet employer and employee needs, and provide greater certainty and flexibility, now and in the future. It also better suits the demands of a changing workforce,” he says. 

“Financial advisers are uniquely qualified and experienced to find the perfect fit for their clients’ risk cover needs. In their ability to relate to their clients, financial advisers are not only able to understand their clients’ concerns and aspirations, but they are able to relate those concerns and aspirations back to clients’ underlying financial needs and, in turn, to a life insurance solution that can adequately cater for these needs,” concluded Malan. 

Editor’s Thoughts:
Change, innovation and disruption are essential to remain competitive. A standardised, one-size-fits-all approach will no longer work because the connected consumers of today want efficiency, flexibility and accessibility. Do you agree? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts myra@fanews.co.za.