Covid highlights need for life insurance, risk cover

• Consumers prefer personalised cover instead of one-size-fits-all solutions, writes Lynette Dicey

SA has one of the most competitive life insurance markets globally and is well capitalised, resilient, adaptable and innovative. This is despite the fact that the industry has been faced with a number of challenges in recent years.

South African life insurers reported a 53% surge in death claims for the six months between April and September 2021 compared to the same period in 2019, according to the Association for Savings and Investment Schemes South Africa (Asisa). The six-month death claims statistics reveal that more than half a million claims (565,522) were received in this period, valued at R44.42bn, compared to 369,892 claims valued at R19.53bn in 2019.

During the course of 2021, life insurers paid out R608bn in claims and benefit payments. These included claims against life, disability, critical illness and income protection policies, as well as retirement annuity and endowment policy benefits.

Prior to the Covid-19 pandemic there was a concerning trend of policyholders stopping their risk policy premiums. In 2021, however, there was a drop in lapses with only 7.4-million policies lapsing, compared to 10.4-million in 2020 and 8.8million in 2019. Hennie de Villiers, deputy chair of the Asisa Life and Risk Board Committee, says there was a strong growth in life, disability, dread disease and income protection cover policies in 2021 after the Covid19 pandemic highlighted the importance of having risk cover and savings in place.

Agility and the ability to adapt and evolve has been key to the sustainability of the industry, says Schalk Malan, CEO at BrightRock. Among the changes the industry has had to contend with are changes in financial regulations, technology, distribution channels and consumer behaviour.

“The industry is informed by frequent changes in international insurance markets which have resulted in local regulatory changes, typically aimed at improving the sustainability, transparency and conduct of large financial institutions to protect consumers,” he says.

In addition to responding to the impact of the pandemic, several regulatory and technology-led changes are changing the insurance landscape including the new IFRS 17 standard and the Twin Peaks model for financial regulation.

The local life insurance sector has also had to keep up with the global shift to digital channels, which has affected how both individuals and businesses behave. The shift, says Malan, means customers now have greater expectations in terms of service delivery.

“While we are seeing several insurers starting to digitalise customer journeys, significant opportunities still exist to accelerate this in many markets,” he says.

Insurtechs — technology-led companies in the insurance sector that aim to provide coverage to a more digitally savvy customer base — have been quick to step in.

At the same time, reveals Malan, insurance distribution channels have evolved, driven primarily by the transition from a sales to advice mindset, as well as improved market conduct regulations.

“Brokers and agents remain the most prominent channels, although direct sales and bancassurance — arrangements between a bank and an insurance company allowing the insurance company to sell its products to the bank’s client base — have increased their share,” he reveals.

“Since our market entry 11 years ago we have seen a significant increase in the number of tied-adviser and direct-to-consumer channels in the market, alongside the continued growth of the independent financial advisor (IFA) market, with a notable increase in the professionalism, advice focus and value-add of intermediated channels.”

As consumers have become more familiar with the digital journey, there have also been significant shifts in consumer behaviour in the past decade, he says. “Technology has enabled personalisation and customisation. Consumers are increasingly much more aware and demanding, preferring personalised insurance cover instead of the one-size-fits-all products that are currently available.”

His predictions for the life insurance industry over the next decade include putting strategies in place to tackle the next challenge that comes along; ensuring that long-term insurance is more accessible to more people and cutting out unnecessary waste so that clients only pay for what they need; demystifying products and their benefits better; providing financial literacy and education to ensure sustainable and effective financial inclusion; and a greater focus on treating customers fairly.