A study by Santam, the country’s largest short-term insurer, has revealed the majority of corporates and consumers polled in a landmark survey on insurance trends see the challenging economy as the biggest risk in South Africa over the next two years, followed by political unrest and social change risk.
Called the Santam Short-Term Insurance Barometer (Barometer), the study found that 67% of corporates and 91% of consumers saw the challenging economy as the biggest risk in the country.
Quinten Matthew, Executive Head of Specialist Business at Santam said the first-of-its-kind barometer in South Africa had been developed to accumulate deep insights into the general insurance sector.
“Our aim is to take the collective ‘temperature’ of consumers, intermediaries and corporates on an annual basis and to draw seminal conclusions which will highlight the contribution the insurance industry brings to the country besides protecting assets of consumers,” he said.
The study was collated polling more than 400 respondents that included intermediaries, corporates, commercial entities and consumers.
“The Barometer’s findings will allow the entire industry to add as much value as possible to South Africans who trust them with their insurance. We are also hoping that by highlighting trends and insights, we can convince more and more people to ensure they are adequately covered. In so doing, the Barometer will play a role in minimising the impact extreme weather events, accidents and crime have on our economy,” Matthew said.
The in-depth body of research showed the biggest concern among corporates and commercial entities in South Africa to be theft, followed by motor vehicle accidents and fire. On the consumer front, the top risks are motor vehicle accidents, burglary and theft.
Matthew said the Santam Insurance Barometer specifically measured the role of insurance in the economy, risk trends impacting South Africa, insurance as a risk mitigation tool, the role of intermediaries and the opportunities for the insurance industry in South Africa.
Consumer / Personal Lines:
- Motor vehicle accidents, burglary and theft are the key risks perceived by consumers
- 23% of consumers made claims in the last 12 months
- Motor vehicles account for the greatest proportion of claims by consumers in the last year
o Motor vehicle (49%), Cell phones (33%), Home contents (16%), Buildings insurance (12%)
- Consumers mainly want traditional asset cover, but there is some demand for niche products; of those purchasing insurance 78% purchase motor vehicle cover, 58% cell phone, 47% home contents, 6% individual items, 5% portable possessions, and only 2% cyber insurance
- 38% of consumers have uninsured risks, mainly portable devices (cell phones, laptops tablets), home contents (appliances, furniture) and jewellery/watches
- 58% of respondents indicated that affordability was a key barrier to uninsured risks
- 80% of polled consumers said that insurance provides them with peace of mind
Corporates / Commercial Entities:
- There is a reasonable level of business confidence despite a depressed economy, although variations by industry sector, i.e. 76% among corporates, 52% large commercial, 46% mid-size commercial and 45% small commercial
- Around 1 in 4 expect protectionist policies in other countries to have a negative impact on business in South Africa and the Southern African region
- Theft is by far the most prevalent risk according to corporate/commercial entities, followed by motor vehicle accidents and fire
- 38% of commercial entities/corporates made claims in the last 12 months
- Motor vehicles accounted for the greatest proportion of claims by corporates/commercial entities in the past 12 months
o Motor vehicle (59%), Theft (37%), Accidental damage (19%), Goods in transit (19%), Electronic equipment (14%), Machinery breakdown (13%) Fire/explosion (13%), Office contents (13 %), Cell phones (11%)
- Insurance provides peace of mind to 75% corporate and commercial entities polled
Purchasing Channel Preferences:
- Personal lines clients said they prefer to purchase directly due to their simple needs
- 62% of consumers purchased insurance directly from a traditional insurance company, 15% from independent brokers, 13% from retailers, 8% from banks, 6% from cell phone companies, 4% through internet-based quotation portals, and 2% from car dealers
- Of those that have used brokers, 71% say that brokers add value in respect of knowledge/expertise, 60% say they understand their needs
- 82% of consumers are calling for greater use of technology (devices) to monitor behaviour and price premiums accurately
- 82% advocated for the use of technology to help consumers manage risk
- 66% of consumers are calling for the use of AI when purchasing / making a claim
- Insurer switching is less common than expected, with 69% never doing so, 18% less frequently than every 5 years, 5% every 2-3 years, 5% every 4-5 years and 2% annually
- 46% of consumers say cost is the key trigger to searching for a new insurance solution in the personal lines market, 31% list bad experience on service delivery, 30% say bad experience on claims handling, 29% want better cover, and 8% are prompted by a broker
“The Barometer shows people want tech-led solutions that are personalised, flexible, and often limited to specific circumstances – such as insuring electronics only, rather than investing in home contents insurance. Additionally, consumers need more proactive mitigation of emerging risks like cybercrime. The Barometer found it is not yet considered an imminent threat, possibly due to cyber-attacks being massively under-reported,” Matthew said.
“We have a strong, well-established insurance industry in South Africa, and positively, confidence in the industry is high. Our Barometer showed a net 16% of commercial and 33% of consumers expect increased use of insurance in the future, but to remain relevant, we need to be client-centric and innovative. This means using technology to speed up service delivery and training new recruits in line with succession planning to avoid skills shortages,” he added.
Going forward, partnerships will be critical to thwart risks
“We believe the insurance industry can do even more to promote good risk management, including lobbying government to maintain infrastructure, invest in emergency services, enforce laws (like building regulation compliance) and make 3rd party insurance compulsory. We remain committed to these kinds of partnerships. This Barometer is a way for us to lay the groundwork for the discussions that will make us all more secure in the long-term – especially the most vulnerable in our communities,” Matthew said.
Santam’s Short-term Insurance Barometer will be published on an annual basis focusing on key topics addressing risk and considering trends driving change.
Additional Barometer findings:
Other key risks identified in the Barometer included:
- Adverse weather impacting costs and cover. Property damage, flooding, drought and fire were highlighted as concerns, especially as buildings insurance is not available in certain areas.
- Increasing incidence of cyber-crime, but limited insurance uptake. The main barrier? Again, affordability. Also, people tend to underestimate the impact of this crime.
- For corporates/ commercial entities, there are industry-specific risks, like infectious diseases spread via air travel in tourism, truck hijackings in transport, armed attacks on transit vehicles in security, and attacks on teachers by learners in education.