Project Basics
The Hollard Insurance Group was established in 1980 and is today the largest independent, privately owned insurance group in South Africa covering both life and short term (non life) insurance. Hollard Insurance Group has had a long history of focusing on the low income market and views this market as a core element in its international strategy.
Key to Hollard’s sustained growth has been its partnership philosophy, which permeates all of Hollard’s day-to-day activities and which is focused on recognising like minded partners, understanding respective strengths and then driving long term value through optimised structures to ensure mutual success.
In 2008 Hollard Insurance Group sought funding from the Microinsurance Innovation Facility to explore how to deliver voluntary short term insurance (eg household structure and contents) to the low income market in South Africa and the region.
In South Africa, only 11% of adults have asset insurance, 10% life insurance, 10% medical insurance, whereas 46% have funeral insurance (albeit 20% of funeral cover is made up of informal burial societies)[1]. In the low income market, penetration of short term insurance is particularly poor where less than 2% of the poorest 60% of the population have asset insurance[2].
The aim of the project is to assess whether short term / non-life insurance is a viable proposition in this market, with a particular focus on asset based insurance such as household structure and contents insurance. There is negligible data in this market for risk pricing, high cost structures only suited to the upper income market, and limited delivery mechanisms for the market. A considerable investment in the following areas is required in order to reach this market:
- Investment in new technology and development of administration systems: to enable sales and claims processes through use of MMS for identification of persons / property as well as GPS, Google Earth to assess location and viability of insured assets.
- Redevelopment of the claims processes: Training of unqualified runners to reduce cost of claims assessment through the use of technology (as above).
- Market education:in support of effective decision making and brand awareness. High quality market education will be needed to create an understanding of the benefits of risk insurance which will also allow interaction with the distribution channel.
- Market insights: Core qualitative and quantitative research will need to be undertaken of the consumer base at (a) the outset to ensure approach is optimal (b) on an ongoing basis to ensure adaptation and response to developments in the field. NB Innovation by its nature often requires adaptation to the reality on the ground.
- Actuarial support: The lack ofexpertisemeans thatthe risk of uncertainty loading is high so will require dedicated and experienced MI actuarial capabilities, which is not fully available in the Hollard Group.
- Reinsurance and reserving: The lack of risk experience in this market segment may mean that the pricing is completely off and so, rather than just boost the uncertainty loading so that the product becomes unaffordable, reinsurance or reserving will be required until such time as Hollard can price based on real experience data.
The proposed channels are as follows:
- Banks: Such as WIZZIT Bank and MTN Banking who are focusing on the low income market
- Major retailer: JET Stores is a part of the Edcon Group, a long term partner of Hollard, focused on the low to middle income market
-
Minor retailerssuch as the informal ‘spaza’ shop