How will increased internet connectivity impact on the online insurance industry?

There has been much development in the direct insurance industry the past few years. Many new insurers have registered as financial service providers and all the major “traditional” insurers have entered the market either directly or through a shareholding in specialist direct insurers.

On a visitor has commented as follows on information about the traditional insurer -broker business model as compared to direct insurance:

“Direct insurance service providers have spoiled us with their business model and for me it is the preferred channel when it comes to a basic item such as camera equipment.”

The growth in the direct insurance markets depend mainly on access to the internet – and the growing comfort and trust in purchasing insurance online.

Direct insurers will be smiling at the newly releases estimates for internet access as revealed by PricewaterhouseCoopers (PwC). I would like to share the info found on I-Net Bridge.

The total number of internet users in SA is expected to increase to 22.8 million in 2015, from six million in 2010, according to a PricewaterhouseCoopers (PwC) report released on Thursday.

“As the Entertainment and Media (E&M) industry emerges from the recession, one of the key characteristics of its recovery is the rapid consumer migration to digital formats, triggered in large part by the device revolution,” said Vicky Myburgh, PricewaterhouseCoopers SA E&M sector leader.

The second edition of PwC’s South African entertainment and media outlook revealed that the total E&M spending in SA for 2010 rose by 21.1% to R98 billion, helped by the FIFA World Cup. This contrasted with the modest 3.7% growth seen in 2009 and the 4.6% growth experienced globally in 2010.

According to Myburgh, in the medium term, the demand for digital experiences will become the norm.

“In this dynamic environment, we are seeing an upsurge in collaborative partnering, which is transforming the E&M industry into a digital collaborative ecosystem,” she said.

Off the 2010 base which includes FIFA World Cup spend, PwC expects total spend in the E&M market to decline by 0.6% in 2011, and then to grow by around 9%-10% each year to reach R140 billion in 2015. During this period, the internet will be the only segment to average double-digit annual growth, with a projected 24.8% compound annual increase to reach total spend of R37.7 billion in 2015, it said.

Myburgh cautioned that structural changes in the E&M market, principally the ongoing shift from higher priced physical distribution to lower-priced digital distribution, would limit spending in the sector.

“Online ad rates are substantially lower than those in the traditional advertising media, and end-user prices for digital content are also generally lower than prices for physical content. As a result, the shift in usage from traditional media to digital media is not revenue neutral,” she said.

Importantly she noted that the sector would ultimately have to convince consumers to start paying for content.

“A situation in which content cannot be effectively monetised is unsustainable. Companies must therefore aim to become trusted providers of paid-for content experiences that consumers will value above the no-charge alternatives,” she concluded.


Insurers will take note of the expected growth in internet connectivity in South Africa and will continue to develop new products, enter new business areas and do battle in this highly competitive market. This may only be positive for the client and the expectations of affordable premiums!!

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