The Journey to On-Demand Insurance

Worldwide references to “disruption” and the “on-demand economy” have been around long enough for us to have witnessed the start of its meteoric rise and globally, parts of the transport, food and general retail sectors have already made forays into this consumer-obsessed sphere, proving wildly successful at last check.

No, the world is no longer disruption-averse but what form will it take in the financial services industry and more specifically, what might that look like in South Africa?

Considered by many to be the ‘father of disruption theory’, Clayton M Christensen maintains that taxi service Uber’s “disruptive” model “failed to fulfil several critical tenets of disruption theory. Christensen argues that Uber did not really introduce a transport “alternative that was necessarily lower priced, simpler or differently positioned so as to allow a whole new market instant and affordable access to it”. In fact, in the South African economy, the debate about Uber’s cause and effects may well have a different spin if one considers that generally, “disruptive” services (sometimes inadvertently) help further the goal of wealth inequality.

It has previously been suggested that the South African financial services industry’s “disruption” is very likely going to happen incrementally. In the local context of income and policy disparity, the head of the Alexander Forbes Research Institute Anne Cabot-Alletzhauser argues that South Africa needs “products that actually help/teach people how to solve the real financial problems they face and they must do it in a holistic way.”

Says Cabot-Alletzhauser: “If housing is a top priority for me and my family, how do I construct a roadmap that gives me that step-by-step process to realising that dream? This is not just a question of getting access to financing; it’s about taking people through the whole complex process of knowing how to re-arrange their budgets and buying habits to secure that funding right down to determining which protections are worth having to protect this asset (insurance).”

Building a tool or accompanying service that helps all or most South Africans navigate a generally opaque (and often fragmented) industry in order to achieve certain life goals may well be the ultimate local financial services disruptor but it seems that global and local financial services companies are far more attuned to the ‘on-demand’ zeitgeist.

The “on-demand” trend emerging in short- or long-term insurance industries seem almost inextricably linked to a ‘pay-as-you-go model’ which is turning the idea of traditional short-term insurance on its head. In November 2016, UK-based insurance company Trov introduced a smartphone app which people can use to swipe right and turn on pay-as-you-go insurance on an item when it is on the go or not covered by other insurance. In short, get life insurance when you need it for as long as you need it and when you’re finished, switch it off.

A very similar insurance model was launched by South African life insurance giant Sanlam last year in the form of Go Cover – an app-based, on-demand accident cover product which offers adrenaline junkies, holiday-makers and seasonal workers life cover of up to R1 million for as little as R30.

Can we thus insure our lives and our assets in the same way we use a light switch? In a great number of cases, the consensus seems to be that this is entirely possible but only where the degree of complexity is easily navigable. Not only does this raise further questions about the future of financial service intermediaries; it also takes us back to a previous point: How far are we from properly democratising financial services for the underserved majority of the South African population? And how will technology aid us in this pursuit?

Florence de Vries is a communications manager in the South African short-term insurance industry.

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