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Santam’s ST Insurance Barometer – Risk increase cannot be addressed by merely hiking premiums

Although South Africans believe that insurance provides them with peace at mind, more than half polled in a recent study indicated that affordability was a key barrier to uninsured risks. These were just some of the key findings of the Santam Short-Term Insurance Barometer, South Africa’s first general insurance barometer.

The survey specifically measured the role of insurance in the economy, risk trends impacting South Africa, insurance as a risk mitigation tool, the role of intermediaries and the opportunities for the insurance industry in South Africa.

The majority of corporates and consumers polled in the landmark survey see the challenging economy as the biggest risk in South Africa over the next two years, followed by political unrest and social change risk.

“This is not about uninsured people. It’s the insured market actually saying we are selecting to uninsure certain risks. Affordability is a huge driver in our insurance market,” according to Andrew Coutts, Santam’s head of intermediated business. “In the space where risk is exploding on the ground, we can’t just follow the old process of increasing rates because, fundamentally, that’s going to make us fall off the cliff. The only option insurers have is to try to prevent these incidents from increasing,” Coutts said.

According to Quinten Matthew, Executive Head of Specialist Business at Santam, the Barometer’s findings will allow the entire industry to add as much value as possible to South Africans who trust them with their insurance. “We are also hoping that by highlighting trends and insights, we can convince more and more people to ensure they are adequately covered. In so doing, the Barometer will play a role in minimising the impact extreme weather events, accidents and crime have on our economy,” Matthew added.

What are the key findings of Consumer / Personal Lines?

Motor vehicle accidents, burglary and theft are the key risks perceived by consumers.
23% of consumers made claims in the last 12 months.
Motor vehicles account for the greatest proportion of claims by consumers in the last year:
Motor vehicle (49%)
Cell phones (33%)
Home contents (16%)
Buildings insurance (12%)
Consumers mainly want traditional asset cover, but there is some demand for niche products; of those purchasing insurance 78% purchase motor vehicle cover, 58% cell phone, 47% home contents, 6% individual items, 5% portable possessions, and only 2% cyber insurance.
38% of consumers have uninsured risks, mainly portable devices (cell phones, laptops tablets), home contents (appliances, furniture) and jewellery/watches.
58% of respondents indicated that affordability was a key barrier to uninsured risks.
80% of polled consumers said that insurance provides them with peace of mind.

What are the preferred purchasing channels?

Personal lines clients said they prefer to purchase directly due to their simple needs.
62% of consumers purchased insurance directly from a traditional insurance company, 15% from independent brokers, 13% from retailers, 8% from banks, 6% from cell phone companies, 4% through internet-based quotation portals, and 2% from car dealers.
Of those that have used brokers, 71% say that brokers add value in respect of knowledge/expertise, 60% say they understand their needs.
82% of consumers are calling for greater use of technology (devices) to monitor behaviour and price premiums accurately.
82% advocated for the use of technology to help consumers manage risk.
66% of consumers are calling for the use of AI when purchasing / making a claim.
Insurer switching is less common than expected, with 69% never doing so, 18% less frequently than every 5 years, 5% every 2-3 years, 5% every 4-5 years and 2% annually.
46% of consumers say cost is the key trigger to searching for a new insurance solution in the personal lines market, 31% list bad experience on service delivery, 30% say bad experience on claims handling, 29% want better cover, and 8% are prompted by a broker.

“We have a strong, well-established insurance industry in South Africa, and positively, confidence in the industry is high. Our Barometer showed a net 16% of commercial and 33% of consumers expect increased use of insurance in the future, but to remain relevant, we need to be client-centric and innovative. This means using technology to speed up service delivery and training new recruits in line with succession planning to avoid skills shortages,” Matthew added.

Whilst this survey is all about the insured market, there is a vast section of the population who, for various reasons, are not insured. Perhaps it is time to investigate ways of getting those who afford insurance into the fold. How often does insurers and their clients have to bear the cost of motor vehicle accident damage, for instance, where the other party had simply not felt compelled to take out insurance?

Click here to read the detail of Santam’s Short-Term Insurance Barometer that also includes findings of Corporates / Commercial Entities.

Click here to access a Business Day article that focusses on the affordability aspect.

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