#BizTrends2019: What's shaking up the short-term insurance industry?

Wynand van Vuuren, head of legal, King Price

Then along came the direct insurance model, and everything changed. Insurance by phone? What a pleasure. Sign me up. And while you’re at it, change insurers every month based on where you can get the lowest prices. It sounded revolutionary – but in reality, it was just automating an old process.

Words like disruption and transformation are bandied around a lot. And with good reason. Consumers are tired of the old models of insurance, and they’re driving a bit of a shake-up in the short-term insurance industry. How big a shake-up? Here’s what we can look forward to in the coming year.

The year of the consumer

The days of simply putting insurance products into the market and hoping people will buy them are over. Consumer demand is increasingly dictating the products they want to see, and this trend is only going to pick up in 2019, with insurers having to deal with more niche demands and products tailored to specific risk profiles.

A prime example of this is cybersure – mainly for businesses, but increasingly for individuals as well. South Africa is a major target for hackers, and businesses are literally being brought to a halt while criminals try and extort money from them. The market demand was clear: We need money for lawyers and to keep the lights on while we sort out the issues..

At the same time, people are asking questions of their insurers: Why does my business need R10m liability cover, if I’m not exposed to many of the risks? If I feel secure in my complex, why do I need to pay an extra 50% on my home contents premium for theft when all I want to cover is so-called “fire and fury”? This year, insurers are going to have to be more flexible than ever to meet their clients’ specific needs in a highly competitive market.

The rise and rise of technology

There’s no doubt that technology is changing the face of insurance irrevocably, both for consumers and insurers themselves. From a consumer point of view, 2019 is going to bring with it a host of new ways to interact with their insurers. We live in a world where most people have smartphones, and they want to insure themselves through apps, the internet, and even social media. Know your car is going to be standing in a garage for three months? Cancel accident cover using your app.

This obviously opens up entire new markets for insurers, as well. People who have internet access and a social media presence are not only more reachable, but more able to access and use insurance products.

But the big disruptor in insurance is data-driven technologies. For consumers, technologies like AI, apps and chatbots are driving a range of digital-first, human-friendly services that are tailored to the exact needs of the client. For insurers, the ability to analyse data better provides the ability to determine risk to a point of near-perfection. This essentially results in more accurate and fair premiums to industry – which means lower-risk clients will pay less for insurance. Look out for more telematics-style products, where you exchange your driving data for an exact premium tailored to your specific risk profile, for example.

The regulation train is coming

There’s little doubt that increased regulatory oversight is becoming a fact of life. A great example of this is the automotive industry, where the competition commission has proposed a new code of conduct that will give car owners the right to repair or service their cars at a provider of their own choice, without voiding their warranties.

This will obviously have a major impact on the insurance industry. In the past, insurers would insist on cars being repaired at approved suppliers, but the new code will open up the repair and service market in a big way. This is an incredibly positive move, as more competition will drive more competitive prices, and lower costs of parts and labour – which will ultimately translate to lower premiums.

The ongoing relevance of intermediaries

In the early days of the direct insurance model, consumers took back ownership of their insurance affairs from brokers and did their own homework and shopping around. Today, we’re seeing the wheel turning again: The increase in the number of specialised insurance products on the market, and the explosion of technology, means that suddenly we’re seeing the re-emergence of brokers and financial advisors to help people make sense of complexity and choose the right products at the right prices.

The bottom line: There’s never been a better time to be an insurance consumer in South Africa – or a savvy insurer, for that matter.