11 Oct 2018
SA life insurance market faces need for significant structural change
For the life insurance market, the outcome is not disruption for disruption’s sake, but rather should be a deliberate effort to challenge what seems to have become an industry that finds comfort in complexity by design, writes Investec Life CEO, Michael Goemans.
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If the South African life insurance market does not actively embrace the need to rid itself of institutional complexity then it faces the very real risk that it will suffer the same fate as the dinosaur.
The stark reality is that we have a life insurance industry faced with a fundamental need to change. If it does not evolve to offer a more compelling proposition, then any group with its own footprint within a meaningful client base can - and likely will - move quickly to close the gap with financial solutions that clients feel better meet their personal needs.
Not only will this disrupt the current life insurance model for good, but it will likely also trigger structural changes that much of the sector might not recover from.
From technology companies, to social media platforms and even retailers, there is an obvious business opportunity.
But, the opportunity for some is also a shot over the bow for others. For the life insurance market, the outcome is not disruption for disruption’s sake, but rather it should be a deliberate effort to challenge what seems to have become an industry that finds comfort in complexity by design.
Indeed, for the life sector this complexity has arguably prevented some of the fundamental changes that should have taken place in terms of challenging the status quo for how life products are typically provided.
This is the change that’s needed. A greater partnership with clients is required, and with this, a partnership that empowers clients to choose how to structure their own financial portfolio backed by advice that is independent of a “product sale.” We cannot shift away from insurance being a “grudge purchase” if we continue to label what we do as a sale.
With this is an appreciation of the shift from a product-centric passive relationship with clients, towards a deliberately more active relationship focused on life insurance that delivers within the overall financial portfolio. One can then consider what the real needs are at a product design level where one size does not (and should not) fit all.
This change should be supported across three key areas, simplification, personalisation and integration:
To a large degree simplification is about challenging product design and client processes. Our own research clearly shows that client demand is focused on less complex products, simpler ways to access these and far simpler ways to customise these to suit individual needs across all life stages, at a reasonable cost. With this is the clear effort to ensure we are far clearer with our clients about what value is, and how they benefit from it without moving goalposts.
Simplification will come off the back of already increasing levels of convergence in financial services, where providers seek to offer a holistic range of solutions that avoid the need for clients to look elsewhere. The integration of our own life offering into Investec’s broader One.Place™ proposition is just such a case in point where solution and convenience anchor everything.
Critically, it is not about being simple for the sake of being simple. One shouldn’t confuse complexity with product comprehensiveness and increased certainty about what it is that clients are getting.
For too long now the life sector has promised personalisation. The gloomy reality of this is that, beyond the marketing buzz, the sector remains focused on traditional legacy models and products that do not meet the ever-evolving requirements of client-centricity.
What clients really want are life solutions that integrate into their overall financial portfolio but do so with a far greater level of personal choice and flexibility. And this implies real flexibility, not just perceived personalisation within a predefined group.
In many ways, real customisation is the “new” innovation for the life sector. Having a better understanding of client needs has underpinned our approach since launching in late October this year. Moving forward we will embed this in some first to market solutions in the South African market.
The omnichannel integration of technology is where the life sector will be able to deliver meaningful client-centricity to its process. Simply put, this new technology married with new processes enables clients to get what they want, how they want and when they want it.
Technology will be the key enabler of truly great client experience. Investec remains a high-touch, high-tech business delivering great people when you need them and great technology when you don’t.
The potential for innovation in the South African life market is clear. While it hasn’t always been as client-centric as it could be, reduced complexity and increased levels of client personalisation, flexibility and technology will be what defines a more compelling proposition. The traditional “grudge purchase grudge process” must change. What we do know is that there will always be a space for new solutions that better meet client needs.
Successfully delivering this will mean good business growth for the sector as a whole.