There is value in insurance, but products must have a holistic proposition for both customers and intermediaries

Evolving consumer preferences, coupled with increasing use of big data and analytics, changing regulatory environment and the uncertainty brought about by the current challenging economic conditions, are changing the face of the insurance industry.

The outbreak of Covid-19 has resulted in millions of people being laid off, and many have had to contend with salary cuts. The disposable income of many consumers has come under immense pressure from the rising cost of living, and consumers have become more discerning in their insurance requirements. They want tailored insurance cover that is not only affordable; but is customised to their needs.

Mark Berrington, Head of Strategy and Insights at Hollard Life Solutions, points out that customers are becoming increasingly concerned about affordability, sustainability and the frequency of inflows into their bank account. “Due to the high unemployment rate and declining disposable incomes, more than ever before customers are increasingly aware of their spending habits and the areas that they need to prioritise,” he said. “These shifting consumer spending patterns provide critical insights for insurers, as they compel them to create propositions that offer value to their customers and meet client needs. The lesson we have learnt in the past few months is that we need to start solving problems rather than selling products.”

Berrington notes that the insurance industry, like many sectors of the economy, is increasingly using big data and analytics to ascertain changing customer preferences, and also for other operational requirements. The insurance industry needs to use this data to identify gaps within the market and to enable intermediaries to close these gaps.

“We have identified that a growing number of funeral policyholders seek semi-underwritten life cover or a change in their memorial benefit. There is already evidence that big data works. Hollard Life Solutions has seen a 30% increase in persistency and take-up, thanks to certain propensity models,” he said.

“Our external data findings have enabled the insurer to identify areas where its products are not meeting the needs of its customers. In addition to helping us design solutions that are relevant to our customers, digital applications and data analytics will add real value in managing claims and detecting fraud, especially since paying claims is the insurer’s most valuable value proposition.”

According to Berrington, other benefits in using digital applications and big data include its ability to enable sales and distribution by developing the right propensity models that can inform consumer affordability on specific products and provide insights on who is going to buy what. Digital applications and big data also enable the identification of pricing risks and enable these to be addressed in real time.
“Digital applications and big data are important in propelling us to that future state and future proposition,” added Berrington.

Trends show that customers want quick and responsive processes. However, this does not imply that every transaction must be done digitally; it can rather be enabled or augmented by a digital idea. This means keeping the idea that a physical person is responding to the customer’s concerns. This way digital applications enable more efficient conversations through responses that help resolve the customer’s concerns.

Berrington concedes that while there is a place for innovation, digital applications should not entirely replace human interaction: the meeting of eyes and shaking of hands (elbow bump within the context of Covid-19).

“South Africans want to have genuine conversations, meet with intermediaries and brokers, and gain a clear understanding of what is going on in their landscape. That personal touch will continue to be important in the channel and distribution model that we are aiming for,” he said.

He points out that in an ever-changing world where there is uncertainty and risk, customers feel safest in the comfort of their homes. “This means that from a value proposition, insurers need to understand that clients would like to interact and to engage in very complicated conversations around insurance in the places where they feel safest. This also applies to intermediaries, and insurers need to figure out how to make both the customer and the intermediary feel safe,” he says.

Berrington adds that one of the most significant shifts in the market over the last few months has been the growing realisation of the importance of family structure as opposed to individual wellbeing.

“Our clients are indicating that they are concerned not only about themselves but also about their families. Mutuality has gained popularity with customers. The conviction of ‘what’s good for one is good for the other’ has gained traction. We believe that if you solve the customer’s problem, you solve the business problem, and that’s our idea of mutuality.”

Berrington is of the view that Hollard Life Solutions’ global presence, coupled with local insights, has enabled the insurer to gain insight into the behaviour of customers, brokers and intermediaries.

“As consumer needs change or evolve, so should the approach taken by intermediaries in engaging with policyholders.

“The nature of the products that we are developing at the moment is evolving, enabled by digital applications and big data. Changing macro-economics, and the demands of regulation and compliance are also helping to accelerate the changes and trends we are seeing in the industry.”

Berrington adds that, “Of importance is that insurers must be cognisant of the needs of the customer’s core solutions, build on the fundamentals and remove the general exclusions in policies, and design them with the customer in mind,” he concluded.