Eco­nomic hard­ship ahead but Mu­tual & Federal has a plan

Finweek English Edition - - INSIGHT -

The year 2014 will be a year in which eco­nomic hard­ship will con­tinue for Mu­tual & Federal’s clients, par­tic­u­larly in our per­sonal lines di­vi­sion. Al­though the year has just be­gun, some trends are al­ready quite ap­par­ent. Ris­ing in­ter­est rates and a slow­ing econ­omy are all bad omens for dis­pos­able in­come in the com­ing year. Typ­i­cally, when dis­pos­able in­come comes un­der pres­sure the short-term in­sur­ance in­dus­try suf­fers. Ini­tially with clients can­celling poli­cies. This is to their own detri­ment, I should add, be­cause it is unimag­in­able to be with­out cover. Per­haps more in­sid­i­ously, the weak econ­omy af­fects the in­sur­ance sec­tor by leading to spikes in crime and fraud in­ci­dents. All of these be­hav­iours put pres­sure on claims cost and ul­ti­mately pre­mi­ums. Still on the macroe­co­nomic front, a ma­jor chal­lenge the in­dus­try is fac­ing is the weak­en­ing rand. The weaker ex­change rate is a key cost driver in the busi­ness and in­dus­try. It leads to an in­crease in the cost of mo­tor spare parts, thus con­tribut­ing to an in­creas­ing cost of claims.

An­other trend we’re pick­ing up in per­sonal lines is the in­crease in the fre­quency of dam­age caused by ex­treme weather. While it is clear that the cli­mate is chang­ing, it is how­ever dif­fi­cult to ac­cu­rately mea­sure the pace of change. We have had two un­ex­pect­edly bad years and this is go­ing to put pres­sure on in­sur­ance costs. Cli­mate change also af­fects the in­sur­ance sec­tor in­di­rectly, mainly through the in­creased costs as­so­ci­ated with mit­i­ga­tion strate­gies.

As cli­mate change in­ten­si­fies, one of the re­sponses by commercial en­ti­ties has been to con­struct more en­ergy-ef­fi­cient build­ings. Al­though these build­ings prom­ise to re­duce op­er­a­tional costs as a re­sult of more ef­fi­cient use of re­sources, their sys­tems are more ex­pen­sive to con­struct than con­ven­tional build­ings. This has an im­pact on the cost of in­sur­ing them.

How­ever, at Mu­tual & Federal we are not sit­ting back and wring­ing our hands in de­spon­dency – we’re tak­ing solid steps to re­duce in­ter­nal costs as­so­ci­ated with our prod­ucts.

Tech­nol­ogy will play an ever more im­por­tant role in re­duc­ing these costs in fu­ture. The phe­nom­e­non of the app will be at the heart of that. On the hori­zon

are apps for claims and ac­ci­dent man­age­ment and in the near fu­ture we’ll see telem­at­ics tech­nol­ogy that will as­sist in bet­ter pric­ing and be­hav­iour. On the ad­min­is­tra­tion side, tech­nol­ogy plays a vi­tal role in stream­lin­ing and pro­vid­ing a bet­ter ser­vice for clients.

How­ever, tech­nol­ogy is not a sil­ver

bul­let. Hence, an­other im­por­tant step that we’re tak­ing to im­prove the qual­ity and value of our in­sur­ance ser­vice is to em­bed key cus­tomer-friendly reg­u­la­tion even deeper.

In­sur­ance has al­ways been a grudge pur­chase, some­times for good rea­sons. Treat­ing Cus­tomers Fairly (TCF) reg­u­la­tion will go a long way in soft­en­ing that sen­ti­ment. These reg­u­la­tions will de­fine gen­eral con­duct in the in­sur­ance in­dus­try, which will lead to cus­tomers be­ing treated more fairly. We will also see the Of­fice of the Om­bud play­ing a more prom­i­nent role in en­sur­ing con­sis­tency where the fair treat­ment of cus­tomers is con­cerned.

Cus­tomers want choice in how they buy their in­sur­ance, and I do see more cus­tomers go­ing more di­rect in fu­ture but I can­not see ad­vice dis­ap­pear­ing, there will al­ways be a need for it. Through our iWyze prod­uct, we’re per­fectly po­si­tioned to ful­fil the mar­ket’s pref­er­ence for the two sales mod­els (di­rect and in­ter­me­di­ary). De­spite the cur­rent chal­lenges, we’re con­fi­dent and en­thu­si­as­tic about the fu­ture of the short-term in­sur­ance in­dus­try.

Coen­raad De Jager Ex­ec­u­tive: Per­sonal


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