Cell phone operators, for one, pose a potential challenge to insurers—they need to think through their strategies now.
In my previous blog, I discussed how South African consumers are pretty much in line with their overseas counterparts. The flip side is that South African insurers face the same challenges as their international peers, and need to start playing to win.
One of the key data points, I noted, was the willingness of many consumers to buy insurance from companies other than insurers. And not just banks either, but also online service providers, home service providers, retailers and so on.
In this country particularly, mobile technology is well established, and has become the primary communication channel for the population, many of whom still do not have access to fixed lines or ADSL. Indeed, according to Arthur Goldstuck of World Wide Worx, a local research house, in 2012, “…five years from now, mobile broadband and smartphones will be the conventional means of [broadband] access”.
South Africa is truly a mobile nation, and this places the mobile telecommunications companies in an enviable position to act as disruptors across a number of market sectors, including insurance. These companies have strong brands backed up by saturation advertising—they are household names. More important, they already have an enormous (and ongoing) stream of customer data from which they can derive insights into their customers.
And, of course, they control the channel most used by South Africans.
On the face of it, then, they are potentially very strong competitors should they decide to enter the insurance market.
The bad news is that some of the cell phone operators have already started selling simple insurance products: short-term insurance on mobile devices, contract cover, funeral cover and even simple life insurance. Currently, these offerings are being underwritten by some of the traditional players. What could happen is that the cell companies could build their own underwriting and actuarial capability and use their licences to offer more sophisticated products.
More likely, perhaps, they would continue to use existing carriers to provide the products and insure the risk—insurance is complex, after all—while retaining the all-important customer relationship. This development would see the insurer reduced to a low-cost, high-volume manufacturer. Only a few companies would find that an attractive or profitable positioning.
The good news, for insurers at any rate, is that the cell phone companies haven’t yet taken full advantage of their pole position. Many of them are still struggling to implement personalised service models, as can be seen in the industry’s very high rates of customer churn.
Insurers thus have a window which they should be exploiting to hone their own abilities to serve customers better. This means implementing and then using data analytics to understand their customers’ needs and wants more precisely—and then working out how to meet those wants and needs. Becoming customer-centric insurers will, however, only be possible through digital transformation.
For more information, read Four capabilities insurers need on the journey to digital mastery and high performance and Achieving payback in insurance analytics.