How South African insurance providers are innovating for what's next

South Africa is a leader on the continent when it comes to insurance, with the largest and most established insurance market in Africa. Over ZAR 12.3 billion is spent on insurance premium payments monthly in South Africa. About 60% of South Africans report having some sort of insurance, according to the 2022 Financial Sector Conduct Authority (FSCA) Financial Sector Outlook Study.

Life and non-life insurance penetration (in terms of premiums as a percentage of GDP) was just over 12% in 2021 – more than 5% above the global average. However, it should be noted that the majority of this insurance comprises funeral products - and coverage declines significantly when funeral insurance is excluded.

As of 2022, 15.8 percent of South Africans, or about 9.7 million residents, were members of private medical aid schemes. However, only 10% of South African consumers have life insurance once funeral insurance is excluded, according to the FCSA study. Non-life and health insurance policies, while growing in popularity, represent a smaller subset.

Reasons for lower adoption rates range widely - from the difficult economic climate and declining disposable income, to misconceptions around the reason for and purpose of insurance policies, to challenges during the application, purchase and payments processes, as well as hurdles in receiving payouts in times of crisis. Not to mention challenges associated with making regular recurring payments.

One major hurdle is that, in general, the way traditional insurance works hasn’t changed much over the last 50+ years. Younger, tech-native generations struggle with the rigidity and complexity, and may fail to see the value of insurance as much as those that their peers.

However, some South African insurance companies are attempting to tackle the insurance gap with innovative and simplified solutions, demonstrating a real understanding of the changing market and their needs. They’re bringing new thinking around product offering, a simplified purchase experience and high touch customer support. South African insurers, for instance, invented cell insurance, which has grown into a large industry today.

We’ve highlighted five companies we believe have the potential to impact the trajectory of insurance adoption in South Africa and propel the market forward.

Sanlam

“Flexibility for the client is good for the client, full stop. It leads to the ability to collect premiums more effectively and give them more optionality.” - Peter Castleden, Chief Executive at Sanlam Studios

One of the latest initiatives coming out of incumbent provider Sanlam is its tech-first solution built for the younger generation: Sanlam Indie.

As a product, it illustrates a deep understanding of younger generations and what they value:

• Simplicity: no long documents or endless options full of jargon, and a fully digital process
• Flexibility: coverage won’t stop if a payment is missed
• Choice: products are designed to fit within the lifestyle and affordability of younger clients 
• Speed + convenience: claims are paid out quickly and efficiently, increasing trust in the process
• Added bonus: the ability to build wealth as a reward for consistent premium payments

Last year, the firm also announced a partnership with investment platform EasyEquities to offer life insurance for their users under the age of 45. The policy provides comprehensive life insurance cover of up to R2 million directly through the EasyEquities platform. Customers can also adjust the cover amount as their investments grow.

Previously, Sanlam backed MiWayLife to offer fast and affordable life and funeral insurance for South Africans. 

Outsurance

The Outsurance app was designed specifically for tech-forward individuals. It offers emergency medical or roadside assistance, as well as self service options, allowing clients to sign up for new services, manage their policies and submit claims through the app.

They also offer a distinct variety of products that meet very specific needs, including things like portable possessions insurance, pet insurance and a variety of options for businesses.

Outsurance has a range of digital innovations aimed at helping customers – for example app-based panic assistance, which enables customers to request emergency services and even armed response to their location. It also has broad app-based functionality, enabling customers to call roadside assistance or request urgent home repairs, as well as make claims for windscreens, geysers and complete digital vehicle inspections. 

Momentum

Momentum Insurance has also launched a range of solutions targeted toward a younger, more technically-savvy demographic.

One such initiative is its Ingwe Option, an affordable medical cover offering aimed specifically at first-time earners or students that need affordable medical cover. While this offers many of the benefits one might expect from a medical insurance provider, it also incorporates new features such as a set number of virtual GP appointments for policyholders each year.

Following this theme, Momentum also offers an Evolve Option, a form of affordable hospital cover explicitly aimed at digitally minded consumers. This offering includes the virtual GP functionality from other plans, but also enables policyholders to manage their membership entirely through their smartphone.

Hollard + Naked

Naked Insure is an AI-driven insurtech that uses artificial intelligence and machine learning to streamline the customer-service experience, allowing the entire process to be automated – from getting a quote to resolving a claim – without any human intervention. This allows Naked to pass the savings along to customers, resulting in more affordable premiums. Customers can manage their entire policy online without needing to phone and speak to anyone.

In addition, the company offers a feature known as Coverpause for its auto insurance, which allows policyholders to pause accident cover when their car is not in use, lowering the premium while still maintaining coverage against other risks such as theft.

Its approach has garnered attention from traditional insurers, and in early 2023, Naked received an investment from insurance giant Hollard, as part of a Series B fundraising round worth R306 million. 

Old Mutual + Pineapple

Pineapple Insurance is another example of an innovative new insurance company with backing from a well-established industry giant, in this case Old Mutual.

Pineapple is pioneering the use of photos for insuring items. Using its app, customers can use their phones to take a picture of the item they want to insure. The photo then forms a key part of the 2-minute quote process.

In addition, Pineapple offers customers the ability to buy policies on a per-item basis, allowing them to slice and dice their coverage to only pay for insuring the things they really want to, and saving money on the things they don’t.

Across all of these insurance innovators we can see a few key themes. The first is that they start from customers’ needs, looking at what is most valuable to the consumers they’re targeting and what they really want – or don’t want – as part of the insurance offering.

Secondly, they are finding ways to leverage technology to meet those needs. This can be in the form of cutting edge technology such as AI, but it can be as simple as having a seamless, clean mobile app experience.

And finally, they offer their customers flexibility. They are finding ways to allow policy holders to customise their policies in ways that suit them, and to buy and manage those policies easily, wherever they are. 

The impact of payment options on collection rates + renewals

As we saw in our recent consumer research report on the insurance space, there are two key touch points that have the largest impact in driving a customer to choose one insurance provider over another. These are when they pay their premiums, and when they receive a payout for a claim.

Customers value the ability to pay their insurance premiums flexibly, and want to be able to choose from a variety of methods to pay their premiums. Insurers that offer their customers more options when it comes to ways to pay can benefit significantly, as this flexibility ultimately drives customer satisfaction, loyalty and retention.

In addition, the payouts process following a successful claim submission is a highly critical touchpoint. The customer’s experience when requesting a payout in a time of crisis - particularly for those new to insurance or submitting their first claim - is vital to the prospect of that customer renewing their plan. Any delays or perceived hesitance to pay out a claim can be extremely damaging to the customer relationship, frequently leading customers to switch insurers entirely.

Stitch can help enterprise insurance businesses streamline both the collections and payouts processes, with multiple recurring pay-in solutions and automated payouts over API.