Metropolitan: bringing Jimmy Stewart’s ghost and Afrillennials under one roof

• For now funeral policies remain the mass market insurance brand’s core product and the easiest sell

Metropolitan is the larges insurance brand focused entirely on the mass market. Its main competitors, Old Mutual and Sanlam, believe their brands can stretch right down from the super affluent buying R10m single premium policies to the R200/month funeral policy contributor.

So long as it gets productivity and persistency (keeping the business on the books) right, Metropolitan can be a highly profitable business. In the year to June 2021 it had a new business margin of 4.3%, compared with a 1% margin for its sister company Momentum Life. The big difference is that more than half of Metropolitan’s business is in funeral policies, which give the fattest profits to life assurers of anything in their product suite.

Funeral policies account for about 60% of their book and life policies just 3%, which shows how much work is still to be done. “Savings” covers a multitude of policies, including retirement annuities (RAs) and annuities, but the discretionary savings book is not large and is not disclosed separately. Many clients have gathered up to five funeral policies to get enough capital not just for the funeral itself, but to take care of dependants afterwards. Yet it would be much more cost effective to put that money into a life policy — multiple funeral products is a highly inefficient way to save for a potentially bereaved family.

Metropolitan’s head of client solutions, Abulela Gazi, argues that funeral policies meet a need, as they provide immediate access to cash for a dignified funeral, for which there will always be a strong desire in most SA cultures. And the only tool against sick people buying the policies is a three-month waiting period before the policy kicks in — even increases in policy values are subjected to waiting periods. The ability to insure multiple lives on one policy is also an advantage.

But Gazi says Metropolitan is investing a significant amount in consumer education to alert Metropolitan’s clients to the range of products outside funeral policies they can offer. The back-to-back annuity, for example, is well suited to its market. They are sometimes uncertain about the value of a fixed annuity after retirement, as it expires on death, but Metropolitan takes care of this, offering a bundled life policy that ensures the family can still benefit from the early death of the main policyholder.

Momentum-Metropolitan used to centralise product development through centres of excellence. But Gazi says Metropolitan clients need a much simpler product set. It is skewed towards the public service, primarily police, nurses and teachers, but its target audience can earn up to R30,000 per month.

One area in which Metropolitan has a relatively small book is savings. In the past this was dominated by smooth bonus funds. They gave peace of mind, as they ensured that clients would not be hit by shortterm dips in the stock market when their five-year terms expired. Gazi says Metropolitan is moving away from smooth bonus, which requires high capital charges. It is even telling clients to opt for the unit trust wrapper instead of the traditional five-year endowment.

“Endowment policies have a 30% tax rate, which is higher than the effective tax of most of our clients.”

Metropolitan is opting for a couple of unit trust options, which are run as part of the Momentum outcomes-based investment range, mirroring the low risk Factor 3 (which usually has 30% in the equity market) and the mid risk Factor 5 (with 50%), coupled with a low risk money market investment for emergencies. But even these funds have a demanding reduction in yield when they are purchased as recurring premium investments, shaving off at least 3% in commission and fees.

For now funeral policies remain Metropolitan’s core product and the easiest sell. It has plenty of market share to take, as it has about 18% of the market now. Head of distribution Japie Mostert says there are 4,000 Metropolitan-tied agents. They focus on the government payroll as about 65% of business remains on the books — it is stop-order business and lapses are much rarer than on debit order, where lapses on inception (or not-taken-ups) can be as high as 75%. He says clients are much more likely to buy products after they have been subjected to a lecture at a worksite marketing session, and agents are rarely productive if they don’t have access to a worksite marketing site and simply try to sell policies door to door.

Metropolitan puts great emphasis on community and the ability of agents to fit into their communities. Advertising is highly nostalgic and based around family values. In its latest TV commercial, you expect the ghost of Hollywood movie star

Jimmy Stewart to appear and say, “It’s a wonderful life.”

But the life office is also aiming for a younger, more urban and more self-reliant cohort through Metropolitan Get Up. Headed by fintech veteran Berniece Hieckmann, it relies on digital distribution to millennials and Generation Z. So far there is only a 5% overlap between the mainstream, older Metropolitan client base and Get Up.

Hieckmann says there is still demand for funeral policies in the “Afrillennial” market as they are not as preoccupied with emancipation and autonomy as their counterparts in Europe and the US. “Afrillennials can navigate between traditional and modern life. They are equally comfortable donning traditional cultural regalia as they are in Zara,” says Hieckmann, who is staunchly Gen X herself.

The initial products in the Get Up range all focus on funerals. Atom Funeral Cover allows for maximum flexibility, adding and removing benefits as needs change, so no need for multiple policies. It also offers the mainstream Metropolitan funeral cover, which has its supporters, and Funeral Fusion, giving a chance to consolidate funeral policies. About 90% of policies have been onboarded digitally and the majority have worked with chatbots and without human intervention. Life products will follow, just with an underwriting questionnaire. No blood or saliva will be taken to keep it simple and keep human intervention to a minimum.