Far-sighted insurers are capitalizing on major shifts in their traditional markets by teaming up with organizations beyond the insurance industry. Retailers and telcos are ideal candidates for such alliances.

Rapid advances in digital technology are fast blurring the boundaries of the insurance industry. A swarm of tech-savvy firms, ranging from giant digital service providers to nimble insurtech start-ups, are pushing into the insurance market. And they’re taking significant business away from established insurers.

While many insurers are scrambling to adjust to the disruption caused by digital technology, some far-sighted carriers are moving quickly to capitalize on the shifts in their traditional markets. They’re changing their business models and teaming up with organizations outside the insurance industry to expand their distribution and tap new opportunities. Our 2015 Technology Vision survey found that as many as 45 percent of carriers, worldwide, are looking for partners beyond the insurance industry. Alliances with organizations from other sectors will certainly increase in the next few years.

Telecommunications companies (telcos) and retail chains are likely to become key partners for insurers operating in South Africa and neighbouring countries. Already some insurers have established strong ties with big retailers and telcos in the region. Hollard, for example, is using the extensive distribution networks of retailers, such as PEP Stores, Spar and Game, and multinational telco MTN to sell funeral cover, life insurance and personal accident policies.

For insurers looking to expand their businesses, telcos and retailers have the potential to become valuable long-term partners. Here’s why:

  • Major telcos and retail chains have extensive networks of highly-engaged customers. Many of these customers have yet to buy insurance.
  • Most prominent local telcos and retailers are powerful marketers. They boast strong brands that are often better known and more trusted by consumers than insurance brands.
  • Big telcos and retailers offer credit facilities to many of their customers. With the correct mandates in place, insurance premiums could be easily deducted from the accounts of credit-worthy customers.
  • Some telcos and retailers in South Africa have already started to provide financial services. They can serve many low-income consumers more effectively than insurers and not only receive premium payments but also pay out claims. Such pay-outs could include retail and airtime vouchers as well as cash.
  • Retailers’ loyalty programmes and telcos’ service contracts generate huge volumes of consumer data. Access to this valuable information, in compliance with local regulatory requirements, would help insurers better develop and distribute personal insurance products.

Telcos and retail chains certainly have plenty to offer local insurers. But the converse is also true. There are good reasons why these organizations are likely to be open to working more closely with insurance providers:

  • Flat economic growth, falling profit margins on key product lines and rising competition are forcing telcos and retailers to look for new sources of revenue. They’ve long relied on partnerships to conduct business and, therefore, are likely to be open to new alliances.
  • Just as insurers are being buffeted by digital disruption, so too are retailers and telcos. Technology-driven shifts in their traditional markets are forcing them to search for new ways to conduct business.
  • Telcos and retailers looking to move into the insurance business rarely have sufficient resources and expertise to succeed on their own. Well established insurers are able to provide them with the information, systems and knowledge they require and also tailor products that meet their specific markets.

In my next blog post, I’ll discuss how advances in digital technology are disrupting insurers, telcos and retailers.

Until then, have a look at these links. I think you’ll find them useful.

Technology Vision for Insurance 2016. People First: The Primacy of People in the Age of Digital Insurance

Technology Vision for Insurance 2015. Digital Insurance Era: Stretch Your Boundaries

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