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

RISKSA Magazine - - SHORT TERM -

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?”

Hanna Barry

Chief ex­ec­u­tive of­fi­cer, Brand Pre­to­rius

Chief com­mer­cial of­fi­cer, Im­ran Ma­homed

Chief mar­ket­ing of­fi­cer, Mar­ius Lock.

Chief ac­tu­ary, Ru­dolf Britz

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