On the face of it, South Africa has a robust and competitive insurance sector. Though there may be more than 170 or so companies playing in the insurance space, if you dig a little deeper, it becomes evident that it’s actually quite concentrated and difficult to break into this sector as a new entrant.
A 2021 paper from KPMG, for instance, found that 21 life insurers account for 88% of the total market. Of those, the top five life insurers account for 82% of the market’s total assets. Things aren’t much different in the short-term insurance space, where Santam alone accounts for more than 22% of all market share.
In the long term, those levels of concentration may have negative consequences for both industry growth and innovation. It’s therefore critical for the industry’s future that barriers to entry are overcome, making it easier for new insurers and brokers alike to enter the sector.
One of the biggest such barriers is regulatory compliance. As Vis Govender, co-founder of Everything.Insure and group CEO of firstEquity Group, notes “that’s not to say regulation and the enforcement of compliance aren’t important”.
“In many ways, the extensive compliance requirements and perceived red tape in the financial sector are actually good things,” he says. “One need only look at the good work done by the Financial Sector Conduct Authority (FSCA) in preventing fly-by-night operators from starting businesses to see how important a robust regulatory environment is to protecting consumers.”
For much of the sector’s history, however, compliance has come at a significant cost.
“It takes significant investment and a lot of staff for an insurer to stay compliant,” says Govender. “That means that any new players looking to enter the space have had to have substantial backing or capital before being able to do so.”
But, he adds, it’s not just new companies that have been affected.
“Compliance also makes it costly for traditional, big insurers and intermediaries to effectively transform and digitise,” says the Everything.Insure Co-founder. “As a result, solutions are often bolted on to legacy systems, ultimately resulting in a poorer customer experience.”
“Costs are exacerbated by the need to keep up with regulatory changes,” he adds. “Every time the regulator adds a new regulation, companies have to absorb the cost of ensuring that they’re compliant with those changes.”
The entrance of digital and the rise of what is broadly referred to as “insurtech” is, however, changing that.
“Taking a digital-first approach has allowed new players to enter the market without the same constraints,” says Govender. “By automating as many processes as possible, including compliance, these digital-first players are able to open up shop with less capital and without the cost of fully-fledged compliance departments.”
This approach, he adds, comes with other benefits too.
“Digital-first players opening up the sector are helping create new jobs,” he says. “But it’s also enabled insurers to focus more on the consumer because they don't need to spend so much time keeping up with compliance.”
As a result of those lower costs, insurers can also become profitable faster, further accelerating the sector’s growth.
But this wave of digitally-driven change isn’t just benefiting insurers. Everything.Insure, for example, offers ordinary people the chance to earn passive income by getting into the insurance industry without all the red tape, by allowing technology to tick the compliance boxes.
“Our all-in-one insurance platform will empower you to sell insurance products to your network with no licence or qualifications required,” says Govender. “By simply introducing their networks to the Everything.Insure platform, people can earn annuity income for the life of the policies sold.”
“When you consider that only a third of South African cars are insured and around 80% of South Africans are considered underinsured, there is clearly room for growth,” he concludes. “Digital technologies are going a long way to helping secure that growth. In doing so, they’re not just helping traditional and emerging insurers but ordinary people too.”
PERSONAL FINANCE