Facing the moment of truth in insurance
Scan the QR code with your phone to watch the FAnews interview with Inga Beale.
Dr Andreas Shell, Global Head of Claims Short-tail Allianz AGCS
Scan the QR code with your phone to watch the FAnews interview with Dr Andreas Shell.
“In order for Africa to be strong, South Africa needs to be strong.” These were the words of Inga Beale, CEO of Lloyds of London, and were sentiments that were echoed all through the first day of the 2015 Insurance Conference held at Sun City.
While idealistic, this is the challenge that faces the industry. But while industry participants may find it daunting, it is a challenge that may define the very future of the industry in an ever increasingly risk inherent world that we live in.
The important need
Anyone in the industry can see the need for the industry to transform itself and to improve. But is there room for growth, and how can the short-term industry participate effectively in a society that prides itself on being among the toughest in the world when it comes to overcoming challenges?
Lloyds has been active in the South African market for a number of years, and is no stranger to the challenges that it faces. Beale pointed out that while the life sector in South Africa is fairly developed, the short-term sector has potential for serious growth as the gap in insurance is significant.
“The best way to describe this is through two international examples. In 2007, Japan was hit by a serious earthquake and subsequent tsunami. Only 17% of the loss during that event ($35 billion) was covered by insurance; the rebuilding operation cost the country $200 billion which was predominantly funded by taxpayers money. By contrast, the 2007 earthquake in Christchurch New Zealand was a completely different scenario. A massive 75% of the losses from that event were covered by insurance, and the rest of the infrastructure rebuild programme was funded without relying on the tax payer to fund a cent. We need to ask whether South Africa wants to face a Japan situation or a New Zealand situation when catastrophes strike,” said Beale.
Be diverse
Over the past number of years, the industry has seen a lot of change. The industry we see today, and the way we do business today is not the way we did business ten years ago.
Almost certainly, the risks we see today are not the risks which were inherent in the industry ten years ago. Beale pointed out that insurance is a perfect way to protect companies and individuals against unconventional risks. The most pertinent of these seems to be cyber insurance which brought in $2.5 billion in global underwritten premium.
“New products need to be innovative and companies need to employ a workforce that embodies cultures and business strategies that are inherent in different markets. We need to be diverse and we need to challenge the status quo,” she said.
Work on claims
For the most part, there are a lot of aspects that insurers can work on to improve the service they offer clients. But according to Dr Andreas Shell, Global Head of Claims Short-tail Allianz AGCS, only 40% of the business can be worked on by companies. Issues such as goodwill and trust make up 60% of insurance, and there is little that companies can do to influence it.
However, companies – and brokers alike – can work on their claims management processes as this is the moment of truth for insurance.
Some of the best ways in which people can manage claims effectively is to manage clients expectations effectively and to show them examples of excellence when it comes to constant, positive engagement.
The biggest issue when it comes to claims is the length of time it takes to process them. Constant engagement with clients eliminates this, and as Dr Shell pointed out, when everyone is on the same page claims move quick. And a happy client is a loyal client.
Room for growth
This is probably one of the biggest questions that insurers are asking. Is there really room for growth in the South African market? Beale actually pointed out that penetration levels of short-term insurance in South Africa are actually quite low when compared with international markets. And there will be opportunities in the future to address this.
“There is major scope for expansion in the future. The South African government is planning to spend over R1.4 trillion over the next five years on infrastructure projects; and for insurers who have an international footprint, R4 trillion will be spent on infrastructure projects within the BRICS countries,” said Beale.
Editor’s Thoughts:
Perhaps our moment of truth is asking whether we are geared towards change. The ever controversial Ismail Momoniat took a few swipes at the short-term industry while on his soap box, questioning whether the short-term industry is geared towards doing business in the new South Africa. Whatever happens, the world is changing at a faster pace than ever before and we need to change with it. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts [email protected].
