Sanlam’s proposed purchase of a majority stake in BrightRock will help the fast-rising insurer, and its network of brokers, push into new financial services markets.

Sanlam’s recent announcement that it intends buying 53 percent of niche insurer BrightRock is a big fillip for the local broker community. The deal also highlights the growing importance of personalized services in the South African insurance industry.

Consumer demand for tailored and trustworthy insurance information and advice, as I discussed in my recent blog series, is soaring throughout the world. It’s being driven by rapid advances in technology, greater access to information on digital platforms and rising service expectations among customers.

BrightRock has built its fast-growing life insurance business on its ability to provide customers with highly flexible personalized services. By tailoring its products to its policyholders’ specific needs, and making it easy for customers to revise their cover when their circumstances change, the company has been able to contain costs, win customers and generate significant revenues. It claims its “needs-matched” products are up to 40 percent cheaper than traditional life policies – partly because customers can easily drop from their contracts cover they no longer need.

Founded by four former Discovery executives, BrightRock has become a major disruptor of the local life business. Since coming to market in 2012, it has sold cover valued at R148 billion and currently boasts annual premium income of around R611 million. Sanlam’s proposed investment, which is pending regulatory approval, values the company at close to R1.4 billion.

One of the keys to BrightRock’s success has been its strong ties with independent brokers. It sells all of its products through its broker network. The company’s close affinity with intermediaries looks set to remain. Sanlam plans to market BrightRock’s products through its broker distribution channels alongside its own Matrix insurance offerings. The group’s financial advisors will also have access to the BrightRock products.

Sanlam, like many other major insurers, has adopted a multi-channel distribution strategy. As well as bolstering its indirect distribution channels, through its proposed investment in BrightRock, the local insurance giant has significantly enhanced its direct sales and marketing capabilities. The group was one of the first South African insurers, for example, to launch an online intelligent robo-advice service, Smart Invest, for its wealth management customers. It recently introduced an on-demand insurance product, Go Cover, that allows customers to use their mobile phones to buy accident or death cover for between one to 30 days. 

Sanlam’s investment in BrightRock will provide the insurance start-up with a capital injection of around R700 million. BrightRock intends using these funds to grow and broaden its operations. The young company has made no secret of its plans to expand into other sectors of the financial services business.

With Sanlam’s backing, a proven business model with a growing portfolio of innovative services, and substantial financial resources, BrightRock looks set to become a powerful disruptive force not only in the local life insurance business but also in associated markets. This is likely to be good news for its growing ranks of customers and its extensive network of brokers, as well as its new parent. 

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