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SA’s shifting insurance landscape: The only constant is change

SA’s shifting insurance landscape: The only constant is change
10-10-22 / Chris Smit

SA’s shifting insurance landscape: The only constant is change

Johannesburg - In a short period, the local short-term insurance sector has had to continually pivot and adapt to various challenges - from the recent impact of the pandemic to several regulatory and technology-led changes which continue to shape the landscape. Fueling this, the industry has also had to continually address the increase in weather-related catastrophic events and related claims.

According to Thabo Modise, Head of Claims at Western National Insurance, the increase in weather-related catastrophic (CAT) events and claims, as well as the scarcity of experienced loss adjustors, continues to be a significant hurdle for the insurance sector at large to overcome.

Weather-related claims set to increase

He says that earlier in 2022, the South African Reserve Bank noted in its African Economic Outlook 2022 that climate change had a high probability to escalate the frequency and severity of physical climate-related risks. "This rising frequency of climate-change risks is likely to further translate to a spike in claims."

A primary example of the multiple industry challenges faced when it comes to weather-related claims is the recent KZN floods, which severely impacted countless communities and business within the province, explains Modise.  

"Access to various parts of the province, as well as the availability of building materials where immediate repairs were needed, were difficult to mobilise, as the infrastructure - particularly roads - were severely damaged. The damage was so extreme in certain locations that some insurers went as far as waiving the applicable excesses as a means of additional relief for policyholders."

He believes that a key consideration is the need for a specialist weather-related disaster pool as mentioned (by the World Bank, "Financial Protection of the State Against Natural Disasters—A Primer", 2010) provides cover for civil commotion, public disorder, strikes and riots. "This is something the industry reinsurers need to look at in the future.   Although it could increase premiums for consumers - as any disaster affects the entire industry from a pricing perspective – it will enable the industry to be better prepared in dealing with impending natural disasters."

Skills shortage: Growing risk for the industry 

Insurance assessors perform a very important role in the processing of insurance claims.  Unfortunately, the industry is losing this specialised knowledge as the distribution of knowledge and succession models are not robust enough in their current state.  "Engineers and assessors are working post retirement because of the lack of market skills. There is now a significantly increased risk of assessment(s) not being administered by adequately trained assessors which, in turn, leads to more risk," explains Modise.

He points to a "status of skills in the industry" report by the Insurance Sector Education and Training Authority (INSETA) - which facilitated interviews with Human Resources Directors from leading industry brokers, short-term insurers and underwriting managers and reinsurers. The report found that in-house training, and, in particular mentoring, are seen as key approaches to up-skilling staff. "Most respondents in the report spoke about the crucial need for the transference of skills from older experienced employees to the newer generation."

Modise says that the retirement of insurance experts has left a huge gap in this regard. "There is a high unemployment rate in the country, and therein lies an opportunity for the government to partner with experienced insurance professionals to offer skills development to previously disadvantaged areas.

"The silver lining lies in the fact that the insurance industry is trying to address the upskilling issues through various programmes offered annually by the Insurance Institute of South Africa (IISA), but there is always more than can be done," he says.

Adaption and innovation

Market disturbances like recessions, lockdowns and, currently, wars, are contributing factors which have impacted the insurance industry at large across both local and global markets. "The ongoing Russia-Ukraine war showcases how cover needs to be accordingly adapted and new policies formed due to unforeseen circumstances.

"For example, the shortage of key components such as semiconductors which were imported from the Ukraine has brought the product line of new vehicles to a standstill. The unintended consequences are the lack of new vehicle production and an increase on car hire costs for customers."

In an ever-changing landscape, the role of digital innovation within the insurance sector will continue to play a big part in making sure that efficiencies are effectively driven.

Some of the innovative changes Modise feels need to be adopted are the submission of claims via mobile/app, 24/7/365 online support, auto approvals of fast-tracked claims, and integration and user-friendly digital interface. "We need to ensure we are also striking the balance between needing to know when to provide the efficiency of digitisation versus the comfort of human engagement," he says.

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