Outsurance to offer financial robo-advice
OUTSURANCE plans to offer robo-advice and is applying for licences with the Financial Services Board to enable it to sell investment products.
“We think Outsurance is pretty well-placed to play in [the robo-advice] space. We have a direct brand already so we think it’s a natural fit,” said CEO Willem Roos.
Robo-advice refers to online financial advice platforms that use algorithms to provide generic investment advice and products to their users, based on the financial needs and goals inputted by the user.
It costs less than traditional asset managers and financial advisers, a number of which have launched their own online advice platforms in a nod to the disruption this technology will cause. Robo-advice had particular applicability with smaller investments, where the cost of independent financial advice was too high, Roos said.
While it would cross-sell to its existing 700,000-odd South African policyholders, Outsurance, which is majorityowned by Rand Merchant Investment Holdings (RMIH), planned to offer a high-quality, low-cost investment product to all South Africans.
“Any product must stand on its own and offer value for money on its own,” Roos said.
Depending on the regulatory process, Outsurance hoped to launch its robo-advice offering before June 2017, he said.
In the next few months, it would launch a telematics offering in the form of a smartphone app, Roos said. Outsurance had sold very few policies with its existing telematics tool, which was pricey to install. Advancements in smartphone technology made it possible to have a lower-cost product that was sufficiently accurate, said Roos.
There would be no cost to access the product, which would be optional for customers.
“A large number of people would not want [their driving] to be monitored, and that’s fine. If you think you’re a better than average driver and can benefit from that, we’ll give you a combination of better Outbonuses and lower premiums,” he said.
The Outbonus refers to a cash bonus that rewards customers with 10% of their paid insurance premiums back after three consecutive claim-free years. Roos said he was “a bit gloomy, as I suppose most business people are” about the weak economic growth outlook facing the country.
“Our new business volumes are under pressure. We have not changed our market share in five years,” he said, noting it was about 18% in the personal lines insurance market.
Lower employment levels, a decline in new car sales and fierce competition have hurt the profit margins of short-term insurers. “We’ve had a very good year from a profitability point of view, but our prospects in terms of growth are a bit deflating,” Roos said.
For the year to June, Outsurance grew headline earnings 43% to R1.98bn, boosted by the performance of its Australian unit, Youi. The group accounted for more than half of RMIH’s normalised full-year earnings.
In SA, headline earnings grew 8.8% to R1.57bn. The group’s gross written premiums climbed 18.3% to R14.8bn, while new business premiums grew a more modest 3.1% to R4bn.
In the year ahead, Outsurance would ramp up efforts to sell commercial insurance to small- and medium-sized business, Roos said.