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Insurance of the future

The insurance industry is undergoing dramatic evolution during the COVID-19 crisis, but it is an evolution that began years ago, writes ARTHUR GOLDSTUCK

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Life insurance rebooted

Marius Botha, managing director of life insurer Stangen, sees lockdown and social distancing having a similar impact on long-term insurance. Ironically, for a company that has been around for more than 80 years, it was also prepared. Recently acquired by short-term insurer King Price, it was in the process of launching King Price Life when the pandemic began.

“We call ourselves a restart-up because the company has been transformed and re-transformed many times, and has been using a direct life insurance model since 2017. When the short-term industry moved towards a direct sales models and even online sales models, it was only a matter of time before the life insurance industry did so. But large insurance companies have seen a slow adoption of direct fulfillment online channels.

“It was a market heavily dominated by brokers, which then transitioned into more of a call centre-based model. COVID-19 and the lockdown will start changing those dynamics, so life insurance can also move increasingly towards online sales models. I don’t think that necessarily has to diminish the role of brokers and intermediaries in the advice space. There’s a large need and purpose for advice. But even some of the advice engagement needs to happen online.”

Life insurance is not the same as short-term insurance, however, as so many risk factors come into play. Medical check-ups were a key element of addressing that risk. Doubly ironically, the current health crisis has meant that check-ups increase risk.

“One of the things that was most unexpected for life companies was that the regulator intervened to stop medical tests in the underwriting process,” says Botha. “They specifically asked us to no longer do medical underwriting tests so that the laboratories have capacity to test for COVID-19 instead.

“That is a major disruption for a life company from a sales point of view. Many companies can’t adapt to that, and some of the traditional players still used paper application processes in their broker models. Those brokers couldn’t reach the customer, and then they struggled to get customers to complete the forms.”

Stangen had one advantage: it had been a sister company to African Bank when that company went into curatorship, although it was the one entity in the group that avoided that fate. Nevertheless, it had to reinvent itself.

“As one of the smaller players in the industry, given our history and the need to set ourselves up after the African Bank era, the best way to describe it was innovation through necessity, not design. So we ended up in a position where we had to invest in a new technology stack that was fully integrated front and back end. We wanted to create a cloud-based solution that bolted online direct fulfillment capabilities.

“Pre COVID-19 a large part of sales, about 75%, was all done through call centre assistants. Direct fulfilment, where customers do the full journey on their own, was 25%. Post-lockdown, although it’s obviously early days, we’ve already seen another 10% shift to direct fulfilment compared to the call centre.”

Stangen also found itself well-positioned to operate from staff’s homes, due to all operations being cloud-based. The challenge that then presented itself was addressing medical risk. Here, too, emerging technology came to the rescue. But so did a strategy adopted several years ago.

“When we launched three years ago, we cut out full blood tests in terms of a medical underwriting process, and everything was done through an online health-based questionnaire and then only a small percentage of customers was sent for an HIV test based on a scorecard. When we couldn’t send out the travel nurses to go and do HIV tests, we launched an Express Life product, which cuts out the need for even an HIV test.”

Botha is adamant, however, that Stangen is not a fully digital insurer. Since many find the online process alienating, it also uses SMS marketing and human interaction. The key, he says, is in the customer journey. Where technology facilitates this, it will be embraced.

For example, it is piloting the use of tools like facial recognition software, which allows the patient to take a selfie for identification, as well as verification of age and gender, and even assessment of body mass through analysis of facial features.

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