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Rheinhardt Schnetler | Are your insurance partners innovative enough?

Rheinhardt Schnetler | Are your insurance partners innovative enough?
23-06-22 / Staff Writer

Rheinhardt Schnetler | Are your insurance partners innovative enough?

The insurance markets, and South Africa in particular, are facing massive challenges that include under-insurance, dated risk management practices and/or complete lack thereof, aging risks and little to no maintenance or risk improvement processes, and one of the biggest uninsured populace

Most prevalent is the motor insurance book, with only about 30-40% of the automobile population insured, and an estimated 800 000 accidents a year (increasing yearly). With average recovery rates of less than 30% on uninsured risks, insurers face substantial unrecoverable financial losses on the uninsured market and a slim possibility of recovery on these claims. Such are the figures that give many actuaries panic attacks and many more grey hairs.

These are all factors that impact underwriting books of all insurers, leading to high loss ratios, less underwriting profitability, higher reinsurance costs, and even so far as impacting customers with rates far exceeding what the risk warrants. All these contribute to a potential further increase of the financial underwriting deficits to a market that is already balancing on knife edge.

Client buildings are antiquated and adequate risk management processes for their infrastructure and business activities are not a widespread practice. The risks, especially amongst the manufacturing, production, storage/warehousing, and transporting industries remain extremely high. High-risk businesses such as waste recycling, plastic manufacturing, and woodworking are high up on the list of risky assets requiring insurance. However, a lot still need to be achieved in ensuring that the inherent poor risk management practices and inadequate fire protection processes are addressed as a matter of urgency.

These noted risks have been impacting on the insurance markets for years, and often leave the insurance industry with more challenges than solutions. Some of the factors that have played a major role in industry performance in the last few months are:

  • Post-COVID recovery pace
  • Economy, both national and global (sluggish growth)
  • Crime (Increase in crime, especially cyber)
  • Labour issues
  • Environmental issues (Climate change - floods and wildfires)
  • Technology (Cyber security, new technologies)
  • Fierce Rivalry
  • Rising costs

Simply stated, risk cannot be avoided, it forms a part of everyday life and will forever be. However, it can be mitigated/reduced, or transferred so that the cost of the risk is evenly distributed.

The last few years have been quite a tumultuous period for all South African businesses as well as consumers, forcing everyone to reprioritise, and reconsider what they regard as important in the survival. While businesses have been forced to adapt to rapidly changing markets, often leading to a convergence of market players in an even more regulated environment, most areas have unfortunately seen an exodus of talent and knowledge.

What used be be viewed as a niche industry has now turned into a flooded field with a number of veritable insurers and UMA’s, and incumbent on the Financial Advisors to constantly ask themselves what their insurer is doing to improve their value proposition.

Some of the questions advisors have to ask themselves are:

  • Have they remained current?
  • Do they actively involve themselves in the client’s risk?
  • Do they motivate Risk Management with the proverbial “carrot” or
  • Do they beat the client with the proverbial “stick”?

For brokers and financial advisors, there are a number of things to be on the lookout for in your choice for insurance partners. Below are some of the factors:

  • Inclusion of digital data and analytics
  • A positive product value proposition to you and/or your business
  • Trend monitoring, staying ahead of the curve
  • Constant transformation in Talent Models, Risk Management, Customer Engagement, Service Delivery
  • Cost and process optimisation
  • Tech development and deployment

As brokers and financial advisors our advice and concern should not just be client-focused, but must also take into consideration a lot of factors in the environment within which we operate. Behavioural science in the insurance market is undoubtedly allowing for improved decision-making on risks and client preferences, but this is a two-way street.

Rheinhardt  Schnetler is the Head of Insurance at VCiB.

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