The survey, a summary of the annual financial results of 81 insurers in South Africa (of which 42 are short-term insurers) over the past year, revealed that industry performance was negatively impacted by premium rates that lagged the increased cost of claims and large catastrophic losses.
The report also reveals that, despite being under pressure, the local long-term insurers market has produced impressive results. “This was as the result of higher asset management fees through the JSE All-Share Index, which increased by 18 percent. However, life insurers remain cautious about the sustainability of this result in a volatile investment market,” explains Gerdus Dixon, KPMG Partner & National Head of Insurance.
According to the survey, South African insurers continue to venture into other African markets through acquisitions in Kenya, Rwanda, Ghana, Nigeria and Zambia.
“Though companies are making inroads, the main challenge remains building scale in these markets. To address this, companies are focusing their efforts in underwriting or in selling products that are in demand in a certain geography,” says Dixon.
“Another key priority is building consumer confidence in insurance products in these markets; that is, changing consumer mind-sets, for them to buy into the necessity and benefits of insurance. This is largely a generational issue, which can be addressed by financial education of the markets,” adds Dixon.
This approach extends to the retention of customers in the lower income segment, where affordability is the main driver. Insurers are closely monitoring the effects of lending in this unpredictable environment, and the link to the unsecured lending sector, as consumers are increasingly unable to service debt.
The survey also includes industry-related, investigative articles on a range of topics, such as creating new opportunities for insurers in high growth markets, delivering customer excellence in the midst of changing behaviour, and the use of Data & Analytics (D&A) in the insurance industry.
“The insurance industry is increasingly recognising the merits of D&A,” says Dixon. “Admittedly, data analysis is not new in the industry. What has changed, however, is the volume and range of data that is now available due to telematics, social media and other unstructured data sources. Engagement with D&A provides new insight and ability to, for instance, cross-sell and upsell products, measure campaign effectiveness, offer competitive pricing and to mitigate risk.”
The research highlights some of the innovations in high-growth BRIC (Brazil, Russia, India, and China) countries, focusing on what has worked and is in development in these markets.
“The potential here is clear,” explains Dixon. “There are billions of prospective new customers, a growing middle class, maturing regulatory landscapes and increasing financial literacy, all combining to create important new markets for the insurance sector.”