Traditional, fresh and in between
New developments in technology and other factors have made digital cover possible, but the old way is still popular
It is now 20 years since Outsurance was formed. With its direct-to-consumer model it proved that most generic personal-lines insurance could be done without a broker: call centre staff could always answer any questions.
Now there are several challengers to this model that offer no human interaction at all. The newest insurer, Naked, underwritten by Hollard, says it can get a car covered in 90 seconds. Naked co-founder Sumarie Greybe says the insurer doesn’t even have a call centre — and wouldn’t think of doing outbound calling, though it does have a help desk for those who like old-fashioned, human interaction, particularly when they claim after a traumatic event.
There were no apps back in 1998, when Outsurance was established, but now online life business Simply Financial Services, which is a year old, does 85% of its business through cellphones or tablets and just 15% through personal computers.
Simply takes a bit more than 90 seconds to provide life cover — it has to ask a few questions about smoking and marital status — but approval should come in at about five minutes.
Simply CEO Anthony Miller started the Lightstone property valuation business, and believes that with good internal and external data the right product can be delivered at the right price.
“I don’t believe standalone funeral cover is appropriate for most people at entry level. Our combo product makes more sense, as it provides life and disability as well as family funeral cover,” says Miller.
Miller adds that Simply’s operating model is entirely inbound. The company experimented with buying third-party leads but found these caused too much irritation and brought in too little business. Its advertising is focused on the tech savvy, with most going to
Google and Facebook and a few niches, such as the kulula.com khuluma magazine.
But Miller does not believe the direct way is always the answer. Simply is recruiting field agents for group insurance products, which target companies that are too small for traditional employee-benefits consultants.
The company is also having a stab at the highchurn domestic worker insurance market. Miller says that unlike some incumbents the firm focuses on insurance cover only, not on bells and whistles such as discounted airtime.
A few factors have made it easier for the new generation of digital insurers to get off the ground. One is the increased willingness of large companies to host them. Both Simply and Different Life, which is a couple of years older, work off the Old Mutual Alternative Risk Transfer licence. Ultimately the Old Mutual balance sheet stands behind both of them.
Another factor is the significant decline in Hiv/aids-related mortality, which makes it viable for a company such as Simply to provide cover without blood tests.
But the most significant development has been the growth of open-source codes and low-cost cloud services, which have dramatically reduced the expense of building these firms.
Just 10 years ago corporates had to throw hundreds of millions into developing their direct brands. Examples are Liberty’s Frank.net and Old Mutual’s iwyze. Now the cost is a fraction of that, allowing niche experimental businesses. MMI, through its Guardrisk subsidiary, supports Hero Life, which focuses on five-year term cover for parents aged between 20 and 40. Term life is quite unusual in SA, and clients need to be careful, as it can be increased sharply on renewal after five years. But it presents another choice in the market.
It is far easier to innovate in a business that does not have legacy systems. Naked’s most impressive innovation to date is Coverpause, which allows clients to suspend their accident cover when they are not driving their car for a day or more. It also allows clients to cancel policies immediately, and then refunds the balance of the month’s premiums to their account.
There is complexity behind the scenes, but the new insurance apps are often easy to use. Naked director Ernest North believes that anyone in a Whatsapp group is more than capable of navigating the Naked app.
It is confusing to see Sanlam open another direct business when it already has Miway Life. It’s called Indie, and its CEO, Peter Castleden, says that while there is nothing wrong with the existing Sanlam product set, it makes no sense to offer the same online — no-one can be expected to choose (or even understand) 18 choices of the shape of policy and six guarantee periods. And Indie includes an investment reward, depending on age and other factors, which is paid on maturity, much like a loyalty bonus. But it doesn’t like motorbike riders and loads their premiums heavily.
The success of these businesses does not yet mean that the point has been reached where incumbents such as Outsurance, Miway and 1Life are in decline. They all have profitable operating models — Outsurance in particular. 1Life CEO Laurence Hillman says 1Life was the first insurer to sell life cover online, back in February 2009, and through cellphones in June 2011. It also allows premiums to be deducted off mobile airtime.
But Hillman says 1Life, part of Douw Steyn’s Telesure group, stands for direct client engagement, mostly done by telephone consultation.
The new insurers are aiming to attract the millennials in different ways. Sometimes it is not subtle. Indie dresses all the models on its website as rappers. Castleden says Indie is designed to give a sense of what Sanlam 2.0 will look like. Indie will be the laboratory where the group works out the potential of new technology such as chatbots and blockchain.
Others believe it is important to be seen as a caring business. Different Life, for example, gives the first premium of the year to a nominated charity. Naked has a more complex arrangement, in which it takes no more than 20% for costs and profit. In years when there is a surplus after claims from the remaining 80%, it is given to charities. In years when costs and profit might exceed the 20% it screams for help from Hollard next door.
Different Life CEO Philip Tomlinson says it is cheaper to acquire business through direct channels than through brokers, but the churn of direct insurance is much higher, especially in the early years of the policy.
Long-term insurance unavoidably has high upfront costs and a long recruitment period. We won’t know for some years which business has been an overnight success.