Crafting a comeback
Something is brewing at Momentum Short- term Insurance ( MSTI). This relatively new player in the shortterm insurance space made the bold move just over a year ago to end its partnership with OUTsurance, forego the immense capability this offered, and bec
Open and friendly is how I immediately characterise the four executives sitting across the table from me. I switch on my recording device as the interview begins, assuring them this shouldn’t make them nervous, to which chief executive officer Brand Pretorius is quick to respond, “And you think we’re not recording this, too?” Of course, this elicits much laughter from his colleagues, which include MSTI’s chief actuary Rudolf Britz; chief commercial officer, Imran Mahomed; and chief marketing officer, Marius Lock.
MSTI began as a joint venture with OUTsurance in January 2006, operating almost entirely off OUTsurance systems, leveraging its IT infrastructure and actuarial support. Since both Momentum and OUTsurance were part of the FirstRand Group at the time of MSTI’s launch, it made sense for Momentum to utilise the direct insurer’s technical expertise to bring shortterm insurance products to its agency force, independent broker community and client base. Short- term insurance was, at that time, the only product not offered by Momentum, and introducing it would provide a means for Momentum’s brokers to generate additional income, while positioning its brand in the shortterm insurance market.
MSTI grew at a faster pace than the rest of this market and was profitable within three- and- ahalf years, which is sooner than most shortterm insurance start- ups. But the size of the opportunity and the ability to penetrate its existing broker base didn’t entirely live up to expectations.
“When MMI came into being through the merger of Momentum and Metropolitan, a greater number of short- term insurance opportunities began to present themselves. Coupled with the fact that OUTsurance needed to protect its own intellectual property, this made it difficult for Momentum, and by definition MMI, to leverage its investment in MSTI for further growth opportunities,” explains Pretorius.
The sale of MSTI to MMI Holdings on 1 July 2012 signalled a fundamental change in the direction of the business. “Our mandate has changed from building MSTI for the purposes of Momentum, to building an operation with skills and expertise that can be used by MMI Holdings for short- term insurance opportunities outside the direct ambit of MSTI, but of strategic importance to MMI’s other divisions,” he continues. It would have been very difficult for MMI to pursue these opportunities were it
not in control of its own technical expertise, distribution, marketing, IT systems and strategic direction.
While it is true that certain skills and operational capabilities within MSTI will be used for the expansion of Metropolitan International, ( MMI’s Africa division), MSTI’s own focus is squarely on the South African market and, in particular, brokers.
Back to brokers
MSTI’s success will be largely dependent on the extent to which brokers get on board with its new developments and direction. In excess of 1 000 brokers currently have active policies with MSTI, and in any given month, an average of between 400 and 500 brokers quote with the insurer. This includes a mixture of Momentum’s agency force, as well as independent short- term and retail brokers. While MSTI’s penetration into Momentum’s agency force has not been as high as the insurer hoped it would be, growing its broker force is high on its list of priorities.
“Our historical business model was not necessarily optimal for some of the more specialist short- term insurance brokers and larger corporate brokers. Going forward, we plan to make it easier for brokers to do business with us and be more flexible in the way we interact with them,” notes Pretorius. “This involves marrying the key components of our business, namely our specialised underwriting philosophy and understanding of risk, with a commitment to worldclass service.”
“We want to understand where our brokers want to be in five years’ time, and then work together with them to reach their goals. The way that brokers have done business in the past is no longer sustainable. They need to change their perspective, focusing on risk management rather than sales, and we want to support them in doing that,” adds Britz
Cross- selling and integration with Momentum’s other product houses will remain one of MSTI’s strategies, as it seeks to build a comprehensive value proposition for Momentum clients. For one, MSTI plans to make its products more market comparable, as this has been a complaint of brokers in the past. It will also leverage technology better and has invested a fair amount of capital and human resources into developing in- house capabilities, as part of the process of concluding its partnership with OUTsurance.
A clear goal
None of OUTsurance’s systems or expertise, on which MSTI was formerly largely dependent, were included in the sale of MSTI to MMI. This means that MSTI has rebuilt most of its support functions from scratch, a process that is now drawing to an end with exciting new developments not far from completion. “We fully understood that there was a risk. OUTsurance was a great shareholder and played a very important role in ensuring our business grew profitably, based on sound fundamentals,” admits Pretorius. “But in order for MMI to grow its short- term insurance presence and explore other opportunities, it made long- term strategic sense for the group to acquire OUTsurance’s stake in MSTI and invest reasonably heavily in building a proper shortterm insurance capability.”
With market share of less than one per cent, growth is a key part of MSTI’s story over the next few years, with the aim of making MSTI a more significant contributor to MMI’s earnings over time. In this context, selecting the right strategic opportunities will be challenging.
“MMI has not said that short- term insurance is an area of focus only to be satisfied with meagre growth. Each of us accepts this challenge, but will be responsible in the way we approach it. We must ensure our foundation is solid, selecting and then prioritising the right opportunities,” says Pretorius.
Building many of its processes and systems from scratch, MSTI is in a good position to embed sound risk management principles into the core of its operations, rather than having to add them on as an afterthought. “It’s a lot more difficult for companies to develop a risk management culture when risk understanding is not already part of their internal culture. In these instances, the approach often becomes one of merely ticking boxes for compliance purposes,” says Mahomed. “Starting from scratch means we can implement regulation in a way that is natural and works well with business processes, rather than having to force implementation after the fact.” Britz agrees, adding, “Our business will succeed if we have the ability to understand and manage risk better than our competitors.”
MSTI is clearly capitalising on the opportunity to do things differently, but managing a smooth migration from OUTsurance’s systems onto its own presents tactical and operational challenges. “Some of our competitors have changed systems over the last couple of years and lost business as a result. We are putting considerable effort into ensuring an effective transition, with rigorous testing and the appropriate processes in place,” Pretorius comments.
Building with a big brother
As a subsidiary of a large, listed entity, MSTI is accountable to the MMI Holdings board, which in turn is accountable to shareholders for the results and performance of MMI. While it has its own board of directors, is a registered financial services provider and a separate legal entity, MSTI must adhere to certain governance processes by virtue of its ownership.
Pretorius is confident, however, that its parent company has given it significant support to define and execute its own strategic direction. He describes this as an emphasis on entrepreneurialism within a culture of accountability and notes that while subscribing to the overarching values of MMI Holdings, MSTI has its own sub- culture.
“We try to maintain the spirit of a small company, which is agile and innovative, with a can- do attitude,” he says. At a total of 172
staff members – a figure that Lock knew exactly after having personalised mugs made for them – the average age of MSTI employees is under 30, due in large part to a reasonably sized call centre. This means that there is no shortage of energy or excitement around the business, especially now that it is entering a new growth phase.
“The vibe and energy at Momentum is great,” says Mahomed. “Having been here for a number of years, it remains exciting and our values have not changed. It is inspiring to be part of such an incredibly strong team and everyone with whom I interact on a daily basis is enthusiastic about the future.”
“We are very serious about what we do, but we don’t take ourselves too seriously,” adds Pretorius. “This is not a place of important people or hierarchy; nobody has designated parking and you don’t feel the carpet grow thicker when you walk into an executive’s office,” he jokes, referencing patriarch Chris Edwards of the historically popular South African soapie, Egoli: Place of Gold. “This is the spirit we want to take to our clients and brokers. We want to be accessible, as we believe in the philosophy of partnership. Our success is to a large extent tied to the success of brokers and we can’t have that without mutual trust and respect.”
Perhaps its greatest challenge will be to change market perceptions borne out of previous experiences that brokers and clients have had with the business. “The old MSTI and the new one will be quite different, but for the better.”
“Our future success and growth is to a large extent dependent on our ability to engage with brokers and offer a value proposition that is more compelling than our peers. We have a lot of work to do to establish that Momentum is a worthy short- term insurance product provider in the minds of brokers and consumers, but we are determined to move much higher up on their shopping list,” says Pretorius.
“We want to position our business differently than we have in the past; and over the next six to 12 months, we will voice this positioning more strongly through the way in which we do business and develop products,” adds Mahomed. “MSTI is back. Watch this space,” enthuses Lock.
Proving just how serious he is about putting Momentum on the short- term insurance map, Pretorius ends the interview by asking me the final question: “Can we get a broker to come and see you about your insurance?”
Chief executive officer, Brand Pretorius
Chief commercial officer, Imran Mahomed
Chief marketing officer, Marius Lock.
Chief actuary, Rudolf Britz