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The VIP ticket to profitability

14 March 2019 Jonathan Faurie

The insurance industry is at a tipping point where clients are expecting extremely high levels of innovation to be present in every product and interaction that takes place on a daily basis. This is being driven through disruption, and the increased use of online advise channels.

This is not a situation that is unique to South Africa. FAnews recently met with Richard Hurley – a Partner at Deloitte Consulting – and Andy Masters – Director: Strategy Practice Deloitte – who pointed out that the UK went through its own digital awakening and that this awakening had significant benefits for the industry. 

South African context

According to a recent press release, FNB Life pointed out that 44% of life insurance quotes generated on its digital channels in January this year were processed after hours when traditional customer service channels were closed. 

Additionally, in January, FNB Life generated more than 20 000 quotes worth over R35 billion of life insurance cover on FNB’s digital channels. 

These are frightening statistics for a market that was once solely driven by a highly skilled adviser force. 

No excuse

Unfortunately, the fact that the South African insurance industry was once solely dominated by advisers is no excuse to put the breaks on digital innovation. 

“If you look at mature markets, advisers and insurers have been contemplating the digitisation question; particularly when it comes to financial advice and long-term savings,” said Hurley. 

Hurley adds that in the past, there was a slow uptake in digitisation as insurers sat back and contemplated what digitisation meant for the industry. “It is now improving, and we are starting to see companies, advisers and consumers thinking about how they can put the consumer at the centre of the business,” said Hurley 

Onward and upward

Hurley adds that from an adviser’s perspective, it is about how they can get clients to engage with long-term savings and think more about the advice ecosystem. 

Implementing digital solutions allows insurers to see what the adviser has done when it comes to servicing a client. Additionally, it allows advisers to understand if any changes need to be made to the advice that they have provided. For consumers, it is about taking charge of the small decisions in the advice process. 

“If a client wants to change their contribution level or change their address/other personal information, they do not want to have to sit with an adviser,” said Hurley. 

There seems to be a worldwide trend where insurers are contemplating how they can offer simple advice in a cost-effective manner. At the end of the day, insurers and clients have budget constraints. 

“A consumer does not want to pay a fee for a piece of simple advice. Consumers want to be able to do this online where artificial intelligence can provide the basics,” said Hurley. 

A little bit of trouble

This may be appropriate in developed markets where the average consumer may possibly know the difference between a living annuity and a life annuity. However, in a market where financial literacy is a problem, following this model may become dangerous. 

“Financial education is a problem in developed markets as well. The average consumer in London and Manchester do not know the difference between products. And that is not where advice should be. Advisers should be asking clients basic questions such as when do you want to retire or are you saving for your child’s education and then offer appropriate products. Clients don’t need to, and don’t want to, know how they work,” said Hurley. 

Masters points out that there are ubiquitous robo advise models everywhere in the world, and they are appropriate if you consider that they offer universal advice that is narrow. There is no individualisation. 

“There is a lot of interest in the UK to use robo advise models alongside financial advisers. Clients are happy to engage with robo advise up until a certain level, then they want to sit with an adviser to talk about the specifics of a product. By using digitisation, advisers can find out key details about their clients easier. They will also be able to see more clients and service their needs better,” said Masters. 

Cost efficiency

While digitisation is necessary within the future context of the industry, it needs to be pointed out that it is costly and that insurers need to digitise at a pace that is appropriate for their business. 

Return on investment and balancing concerns need to motivate this decision. Hurley points out that companies should not digitise for the sake of digitising; there needs to be a clear thought process put behind the decision. Digitisation is not cheap. 

Editor’s Thoughts:
There are ways around digitisation that are cost effective and can benefit clients. Do you feel that these options are appropriate, or do you feel that insurers need to spend extensive capital when it comes to digitisation? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts


Added by andre, 14 Mar 2019
I would like to know how many of the business stay on the books?
Consumer education still have to go a long way, as said, they do not know the difference between the products and will lead to lots of lapses, but I suppose for companies, that has never been a problem. After almost 40 years in the industry, I have seen many big producers running a huge lapse ratio and the companies does not care, neither about the lapses, nor about the money clients loose in the process....those advisors are all not in the industry anymore, causing untold damages to the feeling is that there is a huge bubble at the moment as far as robo- advisors is concerned and it does not seem to be on a level playing field. I do not believe that it is in the interest of the clients and that they really get the benefit of the lower costs...very difficult to prove....
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