What's Happening?

South African consumers and businesses tap into the certainty of niche insurance solutions as the economy bites



As the covid-19 economy bites and consumers scrutinise every aspect of their discretionary spending, specialised and niche insurance products are seeing a significant uptick in enquiries. Consumers as well as business owners are looking to cut the fat, but at the same time, they want the absolute certainty of financial protection in specific ‘what if’ and worst-case scenarios.  

“There is so much disruption and uncertainty in every industry right now as the fallout from Covid-19 is still making its presence felt and will continue to do so for months to come. Everyone understands that discretionary spending has come into sharp focus given the times we find ourselves in, and that insurance is one area that is getting serious scrutiny in household and business budgets. What has been very interesting as a trend, is that while broad insurance coverage like motor, household and business assets covers remain under pressure, other specialised insurance products are seeing growth – notably in areas such as healthcare including gap cover and health insurance, mechanical warranty products, Goods in Transit cover, personal cybercrime insurance and so on,” explains Cornel Schoeman, the Chief Operating Officer of GENRIC Insurance Company. GENRIC is an authorised Financial Services Provider and licensed insurer. 

Consumers and business owners are looking for certainty in very uncertain times. They are also realising that when budgets are as tight as they are, any sudden knock or loss, especially one that is uninsured, could be a major financial setback that they might not recover from.   

“As just one example, gap insurance products are seeing significant growth in enquiries as consumers focus on their health and whether they are appropriately covered for a crisis. There are two drivers here – firstly consumers and even corporates are increasingly buying down on medical schemes and employee benefits due to affordability challenges, moving to more affordable ‘core hospital plans’.  In doing so, they are being advised to take up gap insurance to cover any potential in-hospital tariff shortfalls on in-hospital treatment, which occurs when specialists charge more than the rate at which medical schemes pay. Without gap cover, these shortfalls would have to be paid directly from the consumer’s pocket. In many instances these shortfalls breach over R40-R50k, and in more serious circumstances, shortfalls of R100-R150k are becoming more common. The same trend is evident in the employee benefits space where employer groups are having to look at the affordability of the health benefits offered,” explains Cornel. 

“Another niche product that has maintained volumes and where we are seeing growth is mechanical warranty insurance. Millions of South Africans are choosing to drive their vehicles for much longer and are delaying new vehicle purchases, which exposes them to the risks of ‘out of manufacturer warranty’ breakdowns. In such circumstances, a Mechanical Warranty Insurance policy covers the repair of your car due to mechanical failures or breakdown once it falls outside of its factory warranty period. For a low premium from around R150 per month, a major mechanical breakdown such as an engine, cambelt or turbocharger failure – which can easily top R20k or more in costs – will be taken care of and you’re buffered from these large and unplanned expenses.” 

Specialised or niche insurance is designed for specific – and in some cases unusual – circumstances and it provides coverage for the completely unexpected. It is interesting to note that consumers and SMEs are specifically looking for solutions and added peace of mind where they feel most vulnerable.   

“Going forward the value of travel insurance is likely to see more focus, as a black swan event like Covid-19 has thrown into stark focus just how vulnerable international and business travel is to a major catastrophe, and that these events are certainly no longer in the realm of the unrealistic.”  

“Likewise, the huge growth in online shopping and transacting has seen South Africa hard hit by cybercrime and online fraud, rating in the global top three for number of cyberattacks.  “While cyber insurance solutions exist for commercial entities, protection against cyber crime and fraudulent EFTs and online purchases for consumers is not commonplace. GENRIC’s ‘MyCybercare” policy is one of the global leaders in personal cyber insurance policies, and as the new normal of online transacting settles in, is seeing a lot more traction from consumers anxious to protect their personal data and bank accounts. Fraudulent online and in-app purchases, malware or viruses that harvest personal data, fraudulent EFTs and phishing scams are driving home the need for cyber insurance protection as a necessity for individuals, as importantly as they are for commercial entities,” adds Cornel. 

Sasria – which provides insurance cover for losses caused by riots and political upheaval – is another specialised cover which policyholders of personal and business insurance need to ensure they have.  Given the growing poverty, unemployment and social unrest which has been amplified by the lockdown, service delivery protests and riots are likely to increase in coming months, leaving property and assets vulnerable to losses that are not covered by traditional insurers.   

There are many other things that can cause major financial problems for businesses, and if anything, an event like the current pandemic has pushed small businesses to take a serious look at where their vulnerabilities lie.  

“One example is that of goods in transit insurance. Thousands of SMEs transport valuable stock and customer orders to sites around the country without the protection of insurance against loss of their goods to accident, theft, hijacking, and the latest trend of truck looting. This overlooked but essential cover for any business that transports goods between sites has gathered a lot more attention over the last few months. A loss of cargo in transit whether due to accident or criminality could spell disaster, closure and reputational ruin for many businesses, especially in the current constrained economy. Recent reports of truck looting and criminality has driven a significant increase in enquiries for goods in transit insurance from operators who up until now, have been operating without it.” 

At the same time, consumers who have bigger assets like homes and vehicles realise the need for insurance to protect their most valuable assets, but may be struggling to pay for it, and are looking at trade-offs.  “A product like GENRIC’s Safe Homes policy embraces technology by using the internet of things (IoT) to connect to home devices like a geyser as just one example. A smart geyser device – which is provided free of charge with each Safe Homes policy – allows the user to firstly reduce their electricity costs by scheduling their geyser’s heating cycles, and secondly reduces insurance premiums by pre-empting risks such as a burst geyser and water leaks. These direct savings on electricity costs can easily amortise some of the costs of the monthly insurance premiums, and the reduced risk to the insurer typically means increased savings on the premiums,” explains Cornel.  

Insurance has changed over the years and it is crucial that consumers understand how to make this work to their advantage in the current circumstances. There are many new insurance products and technologies available that allow insurance buyers to become a lot more granular in their approach to their risks and get the absolute certainty that they are covered for specific and unique events.  

“You can’t put a price on peace of mind, and in increasingly uncertain times, consumers are looking for more certainty in highly defined insurance covers. Specialising in insurance gives policyholders a greater deal of comfort and peace of mind. People respect the value and certainty that specialisation provides at a time when everything else seems so out of control and uncertain. We expect this trend towards specialisation and niche risk solutions to continue in our radically changed world where there is a far greater appreciation of just how unpredictable and far-reaching risk can be,” concludes Cornel.