Presentation on theme: "South African Insurance Trends Report November 2014 Unlock Strategic Foresight Johannesburg Office PO BOX 3521, Dainfern, 2055 SOUTH AFRICA Tel: +27 11."— Presentation transcript:
South African Insurance Trends Report November 2014 Unlock Strategic Foresight Johannesburg Office PO BOX 3521, Dainfern, 2055 SOUTH AFRICA Tel: +27 11 460 5100 Cape Town Office PO BOX 84, Franschhoek, 7690 SOUTH AFRICA Tel: +27 21 876 3401 Fax: +27 21 876 3212 RN 1993/007619/07 Directors: Alan Todd Gordon Hooper
3 Anticipated Trends In the South African Insurance Market In a survey conducted with senior South African insurance brokers in November 2014, 26 key hypotheses about the future of the industry were posed to respondents. For each trend hypothesis, brokers were asked to indicate their level of agreement (or not) with its possibility of occurrence. In addition, brokers were asked to indicate how well-placed they feel their business is in respect of responding to the trend. Each of the 26 trends was developed out of hypotheses cited by at least one broker during a pre-seeding qualitative “idea generation” phase of the project. We are most grateful for your participation in the survey, and as promised, here is a report of the findings in respect of its Future Trends component. This report provides a written summary of the findings. It is supported by the accompanying chart presentation which indicates the quantitative answers in respect of each question. As an overall observation, brokers appear to be fairly cautious in respect of the future. It has not been an easy few years, especially from an economic and regulatory point of view. These two factors have driven many organisations to look at their businesses in new ways. One gets the sense of cautious and reserved optimism in respect of the years to come.
4 The Top Trends “The Big Five” The top trends, five of them, are ones with which 60% or more of brokers “completely agree” with. Topping the bill is technology. Nearly all brokers agree that there is a need to further embrace technology with a view to being more competitive in the industry. Reading between the lines, this means that brokers see technology as a route to increasing profitability in the face of flat market conditions and increasing competition. It is hoped that technology will take costs out of the system as well as improve service to customers. Next, comes the regulatory body. The past few years have seen dramatic changes in the rules of the game, many making it more costly to service customers effectively. It is strongly anticipated that this “tightening” of the regulations will continue. Third in the top trends set is industry and broker reinvention. There is a strong feeling by brokers that they, and the industry, will need to “reinvent itself” to better be able to deal with the future environment. Fourth in the big 5 set is anticipated continuation and exacerbation of skills shortages in the industry. Strong agreement that there is an inadequate supply of quality up-and-coming insurance professionals prevails.
5 Last, but not least in the top trend set is, unsurprisingly, the continuation of tight economic conditions. There appears to be little optimism that what seems like a perpetual recession will start to recover. The Big Five Technology + Regulations + Skills Shortage + Economy = Reinvention! The Intermediate Trends The intermediate trends are those with which between 40% and 60% of brokers agree - about half. It is anticipated that crime, especially burglaries and car theft, will continue to increase and therefore increase risk for insurers. Coupled with this, it is expected that South Africa’s infrastructure (especially roads) will continue to deteriorate. Once again, this will increase risk, especially in the automotive sector. As a consequence of ongoing recessionary circumstances, clients too are feeling the pinch. Accordingly it is perceived that clients will continue to become even more demanding of value for money and service. Further, it is perceived that clients will become less open to telesales activities as they develop lower tolerances from being “phoned out”.
6 Just under half of brokers feel certain that many small brokerages will be consolidated into fewer larger ones as the industry rationalises under the anticipated pressures. Greener pastures? Nearly half of brokers interviewed strongly perceive that there will be a continued and intensified “race for Africa”. Subsidiary Trends Between 20% and 40% of brokers completely agree with the views that competition will increase in the industry, changing weather patterns will increase risk, direct insurers will make further inroads into brokers’ business, underwriters will become more inwardly focused as a consequence of increased regulations and that consumers will become more discerning in their purchases. There’s a fair degree of ambivalence as to whether premium cutting will continue, claim repudiation will increase and whether clients will tend to inflate claims. Please refer to the chart presentation for the facts in more detail, along with summary matrix comparing trend sentiment against how well placed brokers feel to deal with each trend.
7 Once again I’d like to thank you for participating in the survey. Please let me know what you think, and I hope you enjoy this report as well as find it useful. Very best regards, Gordon Hooper B.Sc. (Civ Eng), G.D.E., MBA (Wits) Managing Director 083 212 2739 Mobile firstname.lastname@example.org www.bateleurbp.co.za Bateleur Brand Planning (Pty) Ltd RN 1993/007619/07 Founded 1988 Johannesburg: PO Box 3521, DAINFERN, 2025 | +27 11 460 5100 Cape Town: PO Box 84, FRANSCHHOEK, 7690 | +27 21 876 3401
9 Expectation – Vulnerability Matrix % Completely Agree (Expectation) %Feeling Vulnerable Vulnerable Low Expectation Well placed Low Expectation Vulnerable Hi Expectation Well placed High Expectation
Hypotheses on future trends… Economic conditions continue to be tight, even tightening Changing weather patterns are increasing the risk of asset insurance. The risk is set to increase in years to come Premiums are set to remain soft and low for the foreseeable future How strongly do you agree or not with the trend?To what degree do you feel well positioned to deal with the trend? Trend
Hypotheses on future trends… Deterioration of South Africa's infrastructure, especially roads, is predicted to continue There is an increasing trend for recession pressed consumers to not pay their premiums There is an increasing trend for consumers to inflate their claims How strongly do you agree or not with the trend?To what degree do you feel well positioned to deal with the trend? Trend
Hypotheses on future trends… Crime, especially burglaries and car theft, continue to increase with commensurate increase in risk for insurers Direct insurers are continuing to take share away from brokers and administrators Direct insurance providers are making inroads into the broker market How strongly do you agree or not with the trend?To what degree do you feel well positioned to deal with the trend? Trend
Hypotheses on future trends… Broker served underwriters are cutting their prices in reaction to market conditions Industry regulations have become extremely tight and are expected to tighten even more so in future A host of new, innovative insurance products and distribution channels is anticipated in the near future How strongly do you agree or not with the trend?To what degree do you feel well positioned to deal with the trend? Trend
Hypotheses on future trends… Claim repudiation has been increasing, and is expected to continue to increase Regulation has caused underwriters to become inward looking rather than intermediary or end user focused Recent years have seen huge growth in competition in the insurance industry. This growth of competitors is set to continue into the foreseeable future How strongly do you agree or not with the trend?To what degree do you feel well positioned to deal with the trend? Trend
Hypotheses on future trends… Technology will continue to play an important role in being competitive in the insurance industry Clients are becoming more and more disintermediated between various insurance providers, cellular providers and retailers making retention more difficult Insurance companies and brokers will need to continue to reinvent themselves as the future environment becomes more difficult and legislated How strongly do you agree or not with the trend?To what degree do you feel well positioned to deal with the trend? Trend
Hypotheses on future trends… Telesales will become more difficult in the future as consumers become reluctant through being 'phoned out' There is an ever increasing shortage of skills in the insurance industry, and this trend is likely to continue into the foreseeable future Consumers are likely to become more aware of their options and discerning in respect of purchasing insurance in future. That is, they are less likely to simply go for the cheapest option How strongly do you agree or not with the trend?To what degree do you feel well positioned to deal with the trend? Trend
Hypotheses on future trends… The African continent is providing opportunity for the insurance industry to grow, and this trend is likely to continue Many people are leaving the insurance industry as a consequence of difficult trading conditions The future will see the consolidation of many smaller brokers into fewer larger ones How strongly do you agree or not with the trend?To what degree do you feel well positioned to deal with the trend? Trend
Hypotheses on future trends… Clients have become more demanding in recent years, and will continue to become even more demanding in future Client based Self Service Technology will continue to develop and places a threat on intermediated business How strongly do you agree or not with the trend?To what degree do you feel well positioned to deal with the trend? Trend