As the insurance industry continues to evolve while facing new challenges, catastrophes, technological disruptions as well as uncertain, volatile and complex economic conditions, insurers and brokers have no choice but to adapt to constant change in order to thrive.
According to Malesela Maupa, Head of Insurer Relationships at FNB Insurance Brokers, there are five key trends that are likely to shape the South African insurance industry this year:
Regulation — regulatory changes will be at the top of the agenda for insurers as they ensure that their businesses comply with key amendments impacting the entire financial services industry, namely:
* Retail Distribution Review (RDR) — revolutionises how financial services companies offer advice and distribute products to customers.
* Twin Peaks — introduces a new prudential regulator located in the South African Reserve Bank (SARB) to ensure that consumers are offered more protection and make the financial services system more resilient.
* Policyholders Protection Rules (PPRs) amendments – aim to improve market conditions in the insurance industry and further ensure that consumers get access to adequate products.
* Protection of Personal Information Act (POPI) – regulates how customer data is managed.
* Treating Customers Fairly (TCF) – ensures that all financial institutions adhere to the required customer treatment standards.
Climate Change — the increase in the frequency and severity of extreme weather conditions, coupled with intensifying natural catastrophes will continue to have a significant impact on clients and ultimately on the bottom line of insurers. “Natural catastrophes, business interruption and cyber incidents are the top three risks that clients should protect their businesses against to avoid incurring severe financial losses,” says Maupa.
Stringent underwriting measures — due to the ongoing strain endured by global reinsurance and insurance markets as a result of increasing catastrophic losses and insurance costs, we are likely to see more stringent underwriting and proactive risk management measures being taken.
Products innovation — insurers will continue working around the clock to develop innovative products that meet the ever changing needs of customers. “For example, as South Africa increasingly becomes a litigious country, more liability based products like Social Media Liability cover are being introduced in the market,” says Maupa .
Technology — traditional insurers will be required to put in more effort to catch up with start-up disrupters who are progressively using technology and data analytics tools for policy management and administration, amongst other innovations that challenge the traditional insurance model.
“Given the unprecedented challenges and changes that continue to shape the global insurance industry, it is essential for insurers and brokers in South Africa to always remain prepared, be a step ahead and flexible enough to navigate uncharted territories,” concludes Maupa.