BRIGHTROCK’S SCHALK MALAN ON SHAKING UP LIFE INSURANCE

By ap­proach­ing life insurance dif­fer­ently, as ex­ec­u­tive di­rec­tor Schalk Malan puts it, BrightRock has ex­pe­ri­enced ex­cep­tional growth de­spite tough com­pe­ti­tion in the sec­tor.

Finweek English Edition - - FRONT PAGE - By Jana Ja­cobs edi­to­rial@fin­week.co.za

go­ing through the process of sign­ing up for insurance can be te­dious and some­times ex­tremely over­whelm­ing. Fur­ther, find­ing the insurance prod­uct that suits your spe­cific needs is not al­ways pos­si­ble, which means you may come up short or re­alise you have been pay­ing too much.

This is why the founders of BrightRock, who had a lot of ex­pe­ri­ence in life insurance and fi­nan­cial ser­vices in gen­eral, de­cided to de­velop a sim­pler and bet­ter way for con­sumers to ob­tain life insurance.

“Of­ten fi­nan­cial ad­vis­ers and clients just have to ac­cept the prod­uct. About five or six years ago, we thought we could cre­ate a sig­nif­i­cant step-change,” says co-founder and ex­ec­u­tive di­rec­tor Schalk Malan.

They found that con­sumers were ex­pe­ri­enc­ing a sig­nif­i­cant amount of wastage when it came to tra­di­tional life insurance prod­ucts be­cause in­stead of these prod­ucts “fit­ting con­sumers”, con­sumers had to fit into prod­ucts that did not nec­es­sar­ily suit their spe­cific needs.

And so BrightRock be­gan de­vel­op­ing its life insurance prod­uct in 2011 and went to mar­ket in 2012.

Thanks to the four founders hav­ing col­lec­tive insurance ex­pe­ri­ence rang­ing from prod­uct de­sign and ac­tu­ar­ial skills (Malan’s spe­cial­ity), to pro­cess­ing, mar­ket­ing and dis­tribut­ing insurance prod­ucts, the team was able to take on the im­mense task of start­ing a new busi­ness from scratch.

Malan be­lieves that all these skills were crit­i­cal in build­ing a strong team that would be able to en­ter a mar­ket of large, suc­cess­ful in­cum­bents.

“Our vi­sion was to cre­ate a prod­uct that looks at life insurance very dif­fer­ently. A prod­uct that ac­tu­ally takes into ac­count those ‘change mo­ments’, as we call them. So when you have a new ad­di­tion to the fam­ily, for ex­am­ple, can your pol­icy adapt to that new event?”

BrightRock de­vel­oped a prod­uct that can adapt, and when tack­ling the ex­ist­ing mar­ket, it was im­por­tant for the com­pany to en­sure con­sumers un­der­stood that flex­i­ble life insurance was now a re­al­ity, says Malan. “Our mes­sag­ing was crit­i­cal, as well as lis­ten­ing to cus­tomer feed­back in or­der to adapt the prod­uct.”

Back to ba­sics

To use Malan’s words, insurance had be­come in­creas­ingly about the “siz­zle” of the sell, and they wanted to go “back to ba­sics”.

With a tra­di­tional life insurance prod­uct, the lump sum you are be­ing in­sured for is based on cer­tain fac­tors, ir­re­spec­tive of the du­ra­tion of cover and how a con­sumer’s needs may change over time, ex­plains Malan. So, as an ex­am­ple, a client’s cover amounts to a to­tal of R10m. Premi­ums are then paid to this ef­fect, but as time goes on, the client will ser­vice down the pre­mium.

The prob­lem is that the client was pay­ing too much from the start, says Malan, “by as much as 30% to 40%”.

“By de­vel­op­ing a prod­uct that un­der­stands your needs, matches them and gen­er­ates sav­ings of 30% to 40% from day one, we were able to put for­ward a com­pelling propo­si­tion.”

An­other el­e­ment that Malan says was miss­ing in tra­di­tional life insurance was be­ing able to ad­just a pol­icy as the client’s life changes – as it in­evitably will.

With tra­di­tional, com­modi­tised life insurance, con­sumers are locked into their ini­tial prod­uct choices and changes ei­ther re­quire ad­di­tional un­der­writ­ing later in life when the client’s health is likely to have de­te­ri­o­rated, or mean that there has been sig­nif­i­cant pre­mium wastage up to that point. This means their pol­icy is not flex­i­ble as their life changes and new needs arise, or oth­ers fall away.

“With us, if you need more cover, you can get up to R10m more. Or if you re­alise that you no longer need debt cover, you can re­di­rect that pre­mium, say to crit­i­cal ill­ness cover – free of un­der­writ­ing. It’s built into the prod­uct,” ex­plains Malan.

For Malan and the BrightRock team it re­ally is about be­ing con­sumer-cen­tric. “We want to em­power con­sumers.”

This prob­a­bly ex­plains why BrightRock has ex­pe­ri­enced 72% year-on-year growth in rev­enue in the 2015/16 fi­nan­cial year, com­fort­ably beat­ing the in­dus­try av­er­age of be­low-in­fla­tion growth.

And in terms of pay­ing claims, BrightRock is not shy, or un­will­ing, as is so of­ten the per­cep­tion con­sumers have of insurance com­pa­nies. To date, BrightRock has al­ready paid claims in ex­cess of R220m.

From start-up to the big leagues

Start­ing a new busi­ness is never easy. En­ter­ing as com­pet­i­tive a mar­ket as the insurance in­dus­try, where many play­ers are off­shoots of prom­i­nent fi­nan­cial ser­vices com­pa­nies, the BrightRock founders knew they were in for a chal­lenge, and were re­al­is­tic about the dif­fi­cul­ties they would face, but were dead-set on mak­ing their busi­ness a suc­cess.

“We were quite for­tu­nate in terms of fund­ing. We knocked on the door of Miles Japhet, chair of Lom­bard Insurance, who is an in­dus­try stal­wart and en­joys new start-ups. At the time I didn’t even re­alise the priv­i­leged po­si­tion – to have such an ex­pe­ri­enced chair­per­son look­ing at this [BrightRock] as a part­ner­ship. It was a two-way street.”

Japhet also shared the BrightRock vi­sion, which was to dis­rupt the sta­tus quo and build a new busi­ness model for con­sumers, adds Malan.

This sup­port, cou­pled with a “never-giveup mind­set” has seen BrightRock achiev­ing great suc­cess, with Malan point­ing out that they have truly seen the com­pany’s value build over the last two years.

Like the prod­uct they have de­vel­oped, Malan be­lieves that BrightRock’s abil­ity to adapt, both in terms of tech­nol­ogy and con­sumer feed­back, has been crit­i­cal to this value build.

Of the BrightRock busi­ness model Malan says, “We are al­ways will­ing to learn from the mar­ket and al­ways feed that back into our R&D [re­search and de­vel­op­ment]. Fur­ther, our model af­fords all stake­hold­ers the clear abil­ity to raise en­hance­ments. There is con­stant con­tact [with ad­vis­ers and clients] – ev­ery­one is at the coal­face. As a re­sult, our mar­ket is start­ing to feel that and re­sponds well.”

As for the fu­ture life of BrightRock, Malan says there are cer­tainly plans to ex­pand the busi­ness.

“We want to eval­u­ate op­por­tu­ni­ties that align with our vi­sion of sup­port­ing our clients through their life changes. In the South African mar­ket the op­por­tu­ni­ties are there. Our mis­sion is to build BrightRock into a sig­nif­i­cant fi­nan­cial ser­vices busi­ness, not just a life insurance com­pany.”

“By de­vel­op­ing a prod­uct that un­der­stands your needs, matches them and gen­er­ates 30%sav­ings of to 40% from day one, we were able to put for­ward a com­pelling propo­si­tion.”

BrightRock’s founders and direc­tors, from left: Suzanne Stevens (mar­ket­ing), Leopold Malan (pro­cess­ing), Schalk Malan (prod­uct de­sign) and Sean Han­lon (dis­tri­bu­tion).

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