Jason Mellow, Head of MiWay Business Insurance

COVID-19 has prompted great changes in society and business. Insurers must take this opportunity to re-imagine how they serve their clients, and ensure they continue to prosper.

The insurance industry has been in a state of disruption for the past few years as agile new fintech companies enter the sector and disturb long-standing business models. But it’s safe to say that COVID-19 has been an even more profound disruptor because it has changed the way businesses see risk and shown just how rapidly firm ground turns to jelly. 

SMEs, long recognised as the vital engine of growth and South Africa’s best chance of creating inclusive economic growth, have arguably borne the brunt of the pandemic and the wide-ranging measures taken to curb it. The insurance industry’s imperative to change how it approaches its clients is nowhere more important when it comes to these businesses. 

Insurers have traditionally seen their role as basically confined to helping their clients recover from loss. Over the past several years, more innovative companies realised that clients were looking for a more proactive approach, and began piloting ways to help clients avoid losses, primarily by helping them to understand the particular risk landscape they must confront, and what mitigation measures they need to take. This kind of approach has subtly been altering the dynamics of the insurer/ client relationship – insurers are having to become more informed about the nuances of their clients’ businesses in order to provide this kind of help. I believe that this trend will strengthen as SMEs regroup and the economy returns to normal. 

At this point, it’s worth reminding ourselves that insurance is built on the legal concept of uberrima fides, utmost good faith. Trust is obviously crucial to a long-lasting relationship between the insurer and insured, and one way for insurers to build this is to show a commitment not only to understanding their clients’ businesses but to developing the products and services they need, and at the right price. In so doing, one might add, insurers will go a long way towards repositioning themselves less as commodity providers (where price is the deciding factor) to true service providers or business partners. 

Here are some of the factors that are shaping these trends in the insurance industry: 

Better products. The risk landscape has become far more volatile as the world has globalised and digitalised. Insurers need to be much more active in developing new products in line with where business is going. A good example is the fact that digital businesses need proper advice and protection against system outages. Compliance risk relating to data privacy is also another key area. 

Promote understanding of products. SMEs are often short of resources, both in terms of money and talent – a surprising number simply don’t have the time or skills to understand the cover they have in depth. This gap between what is assumed to be covered and what is actually covered is a significant contributor to the negative perception of insurance companies. Helping clients align their risks and cover is a great builder of trust. 

Expand the service offering. One way of positioning the insurer as a true business partner is for it to offer value-added services that are not directly related to risk identification or management, but that contribute to the business’s viability. Innovative insurers have already begun to construct such offers, often in partnership with the third-party supplier. Examples include offering financial, legal and labour advice, office emergency assistance and an IT help desk. Basic marketing services (such as setting up Facebook and Web pages, and a direct e-mail marketing campaign), as well as a telephonic concierge-type service for procuring goods and services, arranging bookings and making calls.  In the current circumstances, guidance about how to apply for COVID-19 relief is an obvious service. 

A final point is that in order to respond to new market imperatives, insurers are also going to have to collaborate more widely with other members of the financial services – and other – value chains. In particular, brokers, with their intimate knowledge of their clients’ businesses look like natural allies for insurers and could really be coming into their own. 

MiWay is a licensed non-life insurer and Financial Services Provider (FSP 33970).