Clients are desperate for value

The very essence of the insurance industry is changing. We are seeing several signs that are indicating that this change is very encouraging. In the past, insurers developed products that covered a specific risk or need from the standpoint that the client is placed in the same financial position than what they were in before the loss occurred. However, 74% of respondents to a recent industry survey believe that future differentiation in the insurance market will become more focused on risk management and prevention services than on the price of compensation-based insurance.

At the recent media forum, which was hosted by Momentum, Zureida Ebrahim, CEO of Momentum Client Engagement Solutions, pointed out that if the insurance industry wants to get serious about adding value to clients, the shift to risk management needs to be a key focal area for insurers. 

Implementable change

To embrace the shift towards risk management, insurers need to be more involved in their clients’ lives, and Big Data is a massive enabler when it comes to this. 

“Data shows that it is possible to focus on risk management through basic engagements. It is estimated that diseases of lifestyle account for 71% of all deaths worldwide. In some cases, diseases such as cancer, diabetes, cardiovascular diseases and chronic respiratory diseases (all of which are major causes of death) can be avoided if insurers and intermediaries focus on helping clients manage alcohol consumption, smoking, unhealthy diets and by encouraging increased physical activity," said Ebrahim. 

When we think of risk management, the natural gravitation is towards managing lifestyles in order to decrease risks when it comes to life insurance. However, there needs to be a sharpened focus on helping clients manage their finances. 

“Statistics show that South Africans are heavily indebted. Only 13% of South African consumers pay off their credit cards on a monthly basis. Further, 51% of the same consumers are in arrears. This is an area where the financial services industry can make a significant impact,” said Megan Harrison, Executive Head of Multiply Money who added that it is also shocking to discover that 52% of South Africans spend more money than they earn. 

How does it begin?

So how does the risk management revolution begin? If South Africans truly want to manage their risk responsibly, how does the financial services industry become the catalyst of change? 

A carrot needs to be dangled in front of the horse. Clients need an incentive to put their hands up and say that they will take the first step towards change. We have seen rewards programmes in the industry; but do they really work? 

“Clients are desperate to be empowered with solutions to manage their risk; to save more and manage their finances better. The whole movement towards risk management underpins the new kind of partnerships that insurers need to have with clients. How does the industry make this palatable? By taking a one day at a time approach. The journey of a thousand miles begins with one step,” said Ebrahim. 

Again, we have heard this before. In a world that is inundated with rewards programmes, what differentiates one insurer from another? What is their unique selling point? 

“If we look at the current state of the industry when it comes to rewards programmes, it is based on the premise that clients can redeem rewards with reward programme partners; a free coffee at a specific coffee shop, discounted movies at a specific cinema. While clients are happy with this, they deserve more. If an insurer can reward better risk management with discounts on insurance products, that is where we will see true innovation,” said Johan Kleu, Executive Head of Multiply. 

Where do you fit in?

We can talk about the risk management revolution until we are blue in the face. But if we do not have the right army to fight this revolution, it will fail before it even starts. 

Intermediaries form the army that the industry desperately needs. They engage with clients every day and are perfectly poised to provide key insights to both insurers and clients when it comes to risk management. 

“The secret to a successful revolution will be premium pricing based on current behaviour underwriting. Intermediaries engage with their clients about their risk profiles and they want to see clients achieve their goals. Intermediaries are, and will always be, key to this revolution,” said Kleu.   

Editor’s Thoughts:
Insurers do not have a choice but to reimagine the value that they are providing clients. It can happen now, or it can happen later. However, those who profit the most are early adopters. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts jonathan@fanews.co.za.