South African Short-term Insurance – what are the latest trends, drivers and challenges?
A question that more than one research house asked and surveyed in the last few months.
In today’s rapidly changing environment, identifying trends in your industry, market and customers can give you a competitive edge. Research findings and reports give you access to data and information that assist you to make informed decisions.
Insight Survey, Accenture and PwC presented survey reports that all indicated, in some way or another, that digital technology is radically changing the behaviour and expectations of consumers and it is also a major driver for growth within the Short-term insurance industry.
Let’s look at this similarity and other findings:
1. Low profitability, increased premiums and digitalisation
Insight Survey’s SA Short-term Insurance Industry Landscape Report 2018 describes the market drivers and restraints as well as the relevant global and local market trends to present an objective insight into the South African Short-term Insurance industry environment, market dynamics, and its future.
Globally the Short-term Insurance markets, including South Africa, remain in a phase of below-average profitability. Although the South African Short-term insurance market holds 44% of the African market, it has shown weak growth in 2017, mainly due to political uncertainty and slow economic growth.
The report also shows that serious devastation caused by major natural disasters in 2017 further contributed to lower profitability of the South African Short-term Insurance market players. However, there seems to be cautious optimism for the situation to improve in the near future.
Despite the low growth in 2017, insurance premium volumes increased by 17.8% between 2016 and 2017, and the potential exists for Short-term Insurance providers to significantly increase their gross premiums by 2020. Market players surveyed in South Africa and other African markets are anticipating reasonable growth in both the life insurance- and Short-term Insurance markets over the next three years.
The major trends and drivers currently set to drive growth within the local market are centralised around digitalisation. Such trends include the use of drones in the commercial and non-commercial sector, collaborative digitisation between tech companies and insurance companies and AI-powered Insurance.
However, the market is also expected to face major challenges over the next few years as indicated below. As a result, growth will ultimately be dependent on market players’ flexibility to adapt to the changing market environment, and it will be imperative for local players to take economic, social transformation and the risks associated with climate change into consideration going forward. Furthermore, regulatory developments are also set to profoundly impact the local market and the potential costs associated with abiding by these regulations is expected to have a negative impact on the market.
2. Technology and data most important trend
The PwC Africa Insurance Survey also strived to remind insurers of the key trends that are changing insurance markets, both globally and across Africa.
In this survey, technological advances also moved to the front of insurers’ minds. The survey found that technology and data are now considered the most important global trend disrupting the industry, but they are also increasingly being used by the industry to accelerate growth.
Despite the slowed down economic and insurance sector growth, Africa’s insurance market remains one of the least penetrated in the world and the opportunities for growth are huge. Africa’s CEO’s who were surveyed expressed a willingness and readiness to continue to grow in the changing environment.
3. Preference for digital solutions
To further complement the findings, the Accenture survey posed the question: is the Short-term insurance market ready for digital disruption? The Accenture survey tested customer sentiments and perceptions, their behaviour and preferences in terms of communication with insurance providers, and their responses to digital offerings and insurance value propositions.
The survey results showed a clear preference for digital insurance solutions and readiness for digital engagement. However, insurance providers will need to do more than just make digital an additional channel of distribution. Digital needs to be embedded into systems and processes.
An important conclusion from all these surveys is that the industry will have to re-imagine business services and solutions around the customer, especially in the light of increased focus by the regulatory authorities on the fair treatment of customers.
The Short-term insurance industry’s successes will be measured in how these challenges and opportunities, that the digital disruption presents are confronted.
Are you ready and aligning your actions yet?
In our Technological Speaking article, we will further unpack some of the key Accenture insights.