The insurance industry should aim to provide enhanced advice and assistance to a greater proportion of the country’s population.
This is among the finding of a PwC report on the future of advice and engagement in the South African insurance industry.
Riaan Singh, digital transformation leader for PwC South Africa, says: “South African financial services providers have long been under pressure to reimagine advice and engagement with their customers and intermediaries. South Africans from all segments and walks of life want greater assistance in navigating their financial futures. Few people, however, get the full suite financial assistance they desire. In many cases advice is accessible only to those who can ‘afford it’.
“More assistance needs to be given to a far wider section of the population – and these individuals need different forms of advice. A ‘one size fits all’ approach will not meet the needs that South African’s are looking for.”
The Covid-19 pandemic has accelerated the demand for financial services organisations to digitise their existing processes and enable virtual engagements to continue with the current advice, sales and engagement models.
Singh comments: “Many financial services players are currently focused on building capabilities such as end-to-end digitised processes that are seamless to navigate, a single view of holdings, better practice management for intermediaries, 24/7 self-service availability and are rationalising tools/touchpoints. The insurers that prosper and win in the future will be those that also successfully navigate the factors driving the future of advice and engagement.”
For insurers to succeed in the future, PwC’s Strategy& report focuses on eight forward-looking scenarios:
* Fulfilling the demand for holistic advice: Customers are increasingly expecting more meaningful and diverse value than to just be sold a product or service. They are looking for partners to help them achieve their personal goals by speaking to many different financial needs, beyond just protection and long-term savings. PwC suggests that insurers get a deeper understanding of their customer segments. Industry players looking to engage on a more holistic basis would need to revisit their advice models, ensure they have a fit-for-purpose distribution network and refine their business architecture, to support these increasing consumer demands.
* Becoming more authentically purpose driven: A number of financial services organisations have embraced sustainability principles and launched related offerings. Sustainable investment is increasingly growing in importance. Companies are now expected to openly encourage and promote diversity and equity, as well as actively promote responsible outcomes. Insurers should refine their advice models, solution offerings and engagement strategies to promote a socially sustainable approach to engagement that resonates with and wins the heart of their customers.
* Engaging in the channel of choice: Customers want to engage in ways that are convenient for them. Financial services businesses with high frequency engagement (banking and medical) have seen much success with digital engagement, whereas insurance and investment apps/portals struggle to gain the same traction unless they can link higher frequency reasons for engagement. Insurers should aim for true omnichannel capabilities rather than being multichannel. Service providers should also gain an understanding of their customers’ behaviour and preferences and understand the right channels and experiences for each segment for each type of interaction and then invest in the architecture to enable this.
* Enabling non-linear purchase decisions: Increasingly, customers are looking for a variety of inputs in making purchase decisions for financial products. They want to be able to share their portfolios and offers within their respective circles to collectively understand what it means for them. The future winners in financial services will be those players that can enable platforms for potential customers to make better purchase decisions. Insurers need to understand the trusted networks that customers turn to for help and support, and how to position their offering in a transparent and simple way that aids in decision-making.
* Embracing hybrid advice models: Industry leaders are using technology to enable advisors both in the advice they dispense and how they dispense with it. Technology is also enabling intermediaries to sell more, with greater alignment to their needs as artificial intelligence (AI) and other technology reduces admin, aids decisions and lowers the bar in terms of accessibility, thus reducing distribution cost. Providers should redesign their existing advice models and streamline their product offerings accordingly. In launching or refining their robo capabilities, providers should also examine their current technologies and capabilities and make decisions whether to build or white-label/rent the needed components.
* Helping customers to connect to their future selves: Financial services providers often communicate poorly with consumers around their financial goals. Information tends to be communicated in technical terms that regular people find hard to understand. Incumbents need to relook their existing engagement model and advice tools and financial education capabilities, with a view of what it is really like to drive better-informed decision-making using a blend of gamification, multimedia content, peer sharing and scenario modelling.
* Scaling up hyper-personalisation: Customers expect hyper-personalised services that meet their specific needs in a certain time and place that is most convenient for them. Their expectations have been set by their interactions with various social media platforms. When it comes to financial freedom, individuals need to set their own goals. Incumbents need to think about how to deliver personalised communications, nudges and interactions at scale, while balancing personalisation and scalability.
* Experimenting with remuneration models: The financial services industry is faced with two winds of change – the introduction of new regulation and changing consumer expectations. Since the COVID-19 crisis, many financial services organisations have had to shift sales to online channels or use virtual engagements. However, the fees being charged are still mainly the same.
The introduction of the Retail Distribution Review (RDR) will fundamentally change the South African financial advice industry. The implementation of RDR will change how advice is given and how advisors are incentivised and remunerated. It aims to bring about more transparency and fairness for investors by changing the way that financial advisors charge fees and making it clearer to consumers exactly what advice they are getting.
Insurers will need to align their business and fee models to the proposed changes ensuring full transparency on fees both on the insurer side as well as with brokers and other third parties.
On the whole, the desired financial well-being outcomes in the industry are not being delivered at scale.
Singh concludes: “We believe that there is a great opportunity for insurers to truly differentiate and build themselves a winning business of tomorrow. In doing so they will need to embrace more agile ways of work, using new skills, new mindsets and co-creation with customers and brokers. A coherent customer and advice strategy also needs to be developed to leverage fit for purpose distribution on top of target scale architecture.”