After many years of challenges, 2018 proved to be a year of quite a few adjustments for many insurers.
Some insurers found that there were opportunities in adjusting to a new paradigm where business and distribution models came under intense scrutiny. Other insurers found the going tough, but still came out of the other end of the tunnel.
Overriding all of this is the fact that many insurers have said that there is a new wave of positivity that can be seen in the industry. FAnews caught up with Centriq and Liberty to find out how 2018 treated them.
Insurance for the masses
One of the issues in 2018 was that government is on a mission to increase financial inclusivity. This was even mentioned in the 2018 State of the Nation Address as well as the 2018 National Budget Speech.
For many South Africans, the insurance industry is accessed through cell captives as many people do not have the financial means to get advice from a broker. These are typically basic products that are sold at till points in major commercial retailers.
Martin le Roux, Managing Executive of Centriq, said that it is positive that the role that cell captives play in the industry is being highlighted.
“Currently, the nature of the cell captive is governed by a cell shareholders’ agreement, which sets out the rights and obligations of the shareholder (the cell owner), and the insurer. Changes in legislation will be important for the industry as it will further define which types of businesses may own a cell captive,” said Le Roux.
He adds that the clearer rules that have been set over the past few years regarding cell captives and the ownership thereof is important for the industry as it helps all parties to focus their attention on the right type of cell ownership and the products that cell captives will provide to the public.
Remaining the same
Going forward, Le Roux adds that Centriq expects the rationale for the underwriting manager cell captive to remain the same.
Cell captives will typically, but not always, be a niche player that is confident in their ability to produce a consistent underwriting profit throughout the insurance market cycles.
“For the affinity scheme cell owner, Centriq believes the underlying rationale for the cell facility to be the attachment of underwriting profits generated by the business,” said Le Roux.
He adds that, as such, underwriting managers who are confident in their ability to produce good underwriting margins for their business would typically benefit from a cell structure as it enables them to share in the underwriting profit they generate not just today, but tomorrow.
Mega (regulatory) trends
One of the issues that had a poignant impact on insurers (short term and long term) was regulatory reform. This year was significant for the industry in that Twin Peaks was implemented and the Financial Services Board (FSB) because the Financial Sector Conduct Authority (FSCA).
Johan Minnie, Group Executive: Client and Adviser Experience at Liberty, pointed out that before the industry faces regularity compliance, it needs to deal with the changing of the guard.
“Insurers work with regulators on a regular basis to ensure that the client gets the best possible experience when dealing with them. With the split in powers, it becomes a bit confusing at times to know who will rule on specific aspects of the industry or guide insurers. However, the industry is working through this and is finding the renewed approach of the regulators when it comes to engagement very encouraging,” said Minnie.
The other trend that insurers need to come to terms with is regulatory reform itself. Minnie said that the industry appreciates that the new regulation that is being implemented in the industry will ultimately be beneficial. However, it is a bit of a rough ride for insurers who have massive legacy systems.
“Large insurers have a lot of systems and processes that they need to change in order to adjust to the new regulatory paradigm. At times, it feels as if you are just finishing adjusting the system or policy to adjust to one law when you have to do it all over again for another,” said Minnie.
Increased consumerism
The last mega trend that is having a significant impact on the industry is increased consumerism.
“This presents a massive opportunity for the industry, but it has also caused a slight challenge. Consumers are becoming more aware about what they want from insurers, and those who have the funds are prepared to sit down with intermediaries and plan for their future. This has also brought new players into the market who are driven by technology; these players offer their services to clients and assure clients that they can explain the complexities of insurance in a clear and concise manner. Unfortunately, these explanations are not always achieving this. Nothing can replace the role of the adviser when it comes to trusted advise,” said Minnie.
Riding the new wave
Again, Minnie said that although some insurers found that 2018 was a year of adjustment, there was still positivity to be found in the market.
“2018 was a massive year for the country politically. Cyril Ramaphosa’s became President and made a wise decision to appoint Nhlanhla Nene as the finance minister. Before his departure, me made some positive decisions when it came to driving the economy. He was then replaced by Tito Mboweni who is well respected globally. A strong finance minister is good for the insurance industry,” said Minnie.
Editor's Thoughts:
As iron sharpens iron, so one man sharpens another. Regulation and new industry participants may present challenges, but it ultimately shapes insurers into better versions of themselves. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts jonathan@fanews.co.za.
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