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Top trends shaping the niche insurance sector in 2024

Top trends shaping the niche insurance sector in 2024
27-03-24 / Sisanda Ndlovu

Top trends shaping the niche insurance sector in 2024

Johannesburg - As societies and economies face a rapidly evolving risk, regulatory and economic landscape, the insurance sector is seeing a significant shift in the demand for niche insurance solutions, as well as how end-users are approaching risk management. 

“Gig-economy workforces, hybrid work models, tougher economic conditions, higher interest rates and inflation, and pressured household budgets are having a profound impact in terms of how consumers approach their risk management, with their changing needs and financial circumstances demanding greater innovation and flexibility in insurance solutions,” explains Cornel Schoeman, Chief Operating Officer of GENRIC Insurance Company Limited (GENRIC).    

GENRIC Insurance Company unpacks what the key trends and drivers are, and how niche insurance solutions are increasingly in demand as consumers become far more granular in their demands, and want the certainty that what they value most is protected. 

Consider the following drivers behind the take-up and demand for niche insurance solutions: 

  • Technology is opening new underserved insurance markets - Spatial mapping technology and IoT devices are enabling the creation of new insurance solutions for customers whose property and assets were previously ‘uninsurable’ – notably informal housing and businesses built outside of traditional building frameworks. 
  • Usage-based Insurance (UBI) - With the help of telematics and IoT devices, insurers are implementing usage-based insurance models to meet changing consumer behaviour. This approach involves determining premiums based on the actual usage or behaviour of the insured, leading to more personalised and potentially lower-cost insurance – for example, mileage-based motor insurance. Innovation in this space gives customers greater control and transparency of their insurance cover, when they need it. 
  • Cyber Insurance: With the increasing frequency and severity of cyber threats, there is growing demand for cyber insurance coverage in the individual space. As eCommerce and reliance on digital and mobile banking and transactional platforms grows, cyber or online risks have soared. Personal cyber risk insurance is now as important as home, vehicle and life insurance in your personal financial planning portfolio.
  • Gap insurance becomes indispensable as healthcare costs rocket - The steep uptake in gap cover is not unwarranted as recent mega claims paid by Sirago Underwriting Managers show massive shortfalls upwards of R40k for in-hospital treatment not covered by medical schemes. In many instances gap cover is paying more than what the medical schemes are paying to doctors for in-hospital treatment, with specialist doctor and hospital fees now running levels many times more than the rate at which medical schemes reimburse. Even if you’re on a medical scheme benefit option that pays at 200% of tariff, it may very well not be enough. There is marked growth in take-up of gap cover by medical scheme members looking to protect themselves against the risk of onerous financial shortfalls on in-hospital treatment and procedures - notably as the buy-down on medical scheme options to core benefits continues as consumers face mounting affordability challenges. 
  • Focus shifts to primary health insurance coverage - As medical scheme membership and private healthcare remains unaffordable for a huge swathe of the population, insurance companies have stepped in to offer more flexible and affordable coverage options, especially in the primary healthcare space.  Customisable primary health insurance plans with add-on benefits such as maternity and accident and emergency cover benefits, and family-specific benefits that offer unlimited GP visits especially those with younger children, are in high demand. 
  • Growth in emergency medical support as an insured solution - GENRIC is seeing significant demand for emergency medical support and evacuation insurance from the likes of cycling, hiking and running clubs where participants are at high risk of being involved in road accidents and even falling victim to crime. Similarly, employer groups in heavy industry, trucking, transport, logistics and so on are using this solution to protect employees who are at higher risk for accidents, hijackings and armed robberies.  A medical evacuation insurance product is one of the solutions in providing a safe working environment for employees in high risk sectors, especially where an employee may not have underlying health insurance coverage to pick up these costs.       
  • Mechanical Warranty and Service and Maintenance Insurance in demand as cars are driven for longer – South Africans are driving their vehicles for longer and delaying new vehicle purchases, which increases the risk of ‘out of manufacturer warranty’ breakdowns as well as the expiry of manufacturer service plans. Savvy vehicle owners are taking up Mechanical Warranty Insurance which covers the repair of an insured vehicle due to mechanical failures or breakdown once it falls outside of its factory warranty period. Similarly, demand for Service and Maintenance Insurance is also on the up - instead of having to pay for the vehicle service in one large lump sum, especially in the case of a major service. As affordability pressures mount, vehicle owners are looking to spread their servicing costs versus paying a large lump sum of a few thousand Rand which they may not have. 
  • Rental Insurance - Owning and managing rental properties comes with risks, and one of the most significant is the potential for tenants to default on their rent payments. To safeguard their financial well-being and protect their property income, landlords and managing agents are turning to rental insurance designed to mitigate the risks associated with defaulting tenants. Rental insurance protects the landlord for loss of rental income due to non-payment by the tenant (up to three months), as well as for the costs (up to a specified limit) for eviction costs and legal support, should this become necessary.
  • Pet Insurance - An analysis of pet insurance claims by GENRIC shows that the average claims costs for veterinary treatment is on the rise, with mega claims for bills upwards of R15k increasingly common – putting the cost of veterinary care in the realm of private healthcare for people. Pet owners are taking up insurance solutions that take care of their pet’s healthcare needs - in much the same way as people rely on medical insurance in a health crisis.  The uptake of pet insurance has seen sharp growth, notably where people have multiple pets and where veterinary expenses, even for routine care, can quickly ratchet up to very substantial amounts.

Another key driver of insurance product and distribution development is the entrance of tech-savvy Gen-Z consumers entering the insurance market, which is having a profound influence on the type of insurance products in demand, as well as how they purchase them.  While older generations preferred broker and advice-led insurance, millennial and Gen Z consumers want instant information and gratification that comes from digital fulfilment, which in turn demands simpler insurance product design. 

“This is driving opportunities for Insurtech companies to help fill the gap.  However, while Insurtech companies may have the tech covered, many have limited experience in meeting the onerous compliance and regulatory requirements, nor the financial muscle to manage the solvency requirements of operating an insurance licence. This has seen a move whereby established insurance companies are working closely with tech partners to help bridge the divide between insurance, advice and distribution.  We expect to see more innovation in how insurance products are designed, underwritten and brought to market, and more simplified insurance product design, including event-specific insurance solutions that can be purchased and fulfilled online without onerous underwriting,” concludes Cornel.

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