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Keeping Up With Change

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Lana Ross, Chief Operating Officer, Discovery Business Insurance

Covid-19 has affected many aspects of our lives as well as our consumption and spending habits, a shift that advisers should watch carefully

Consumer behaviour is largely based on habit. Scientific studies indicate that 40% to 95% of human behaviour falls into the habit category. These habits are based on what people have done in the past and are also influenced by their location.

Methods financial advisers use to sell products and provide advice to clients are also usually based on what they have done in the past. For example, selling through telesales, emails or physical meetings with clients. Advisers may also keep selling the standard, vanilla product and the same value-added benefits they have been selling for years.

However, there are key drivers that can impact consumer behaviour. Examples of such drivers include major life childbirth or getting married, advances in technology, such as online shopping platforms, changes in regulation such as consumer regulation, and unpredictable ad-hoc events such as a pandemic like Covid-19.

Covid and the consumer

The pandemic has affected consumption and spending habits in the following pivotal ways.

Increasing digital adoption
There has been an increase in digital adoption as people are staying at home and practicing social distancing. In a Deloitte survey, over 70% of South African consumers indicated that they shop online at least once a month and 33% said they will increase their online shopping in 2021 due to ongoing concerns about Covid-19 and the convenience that online shopping provides.

Working from home
Many people are working from home, and so they are driving less. Over 53% of South Africans say that, in future, they would prefer a job that allows them to work from home at least occasionally and 44% say they want to work fully remotely.

Careful spending
People are looking into their finances more carefully and want to get maximum value for the money they spend. They are willing to purchase less well-known brands and prefer local brands.

Adopting healthy habits
Consumers are also taking care of their health. There’s an increase in people buying wearable devices, spending on these is expected to reach $81.5 billion in 2021. An increase of 18.1% from 2020. This has the effect of increasing people’s awareness of the need for health insurance. In India, for example, before the pandemic, only 10% of people were interested in health insurance. During the pandemic, this proportion increased drastically to 71%.

Assessing interpersonal issues
Consumers are also looking at interpersonal issues and making choices in pursuit of quality of life. During the Covid-19 period, there’s been an increase in pet adoption. Marriages have also been impacted, with many countries seeing an increase in divorce cases, including South Africa, China and the US. In some countries like the United Kingdom, the impact on marriages has been more positive and lockdown has had a solidifying effect on relationships.

Advisers must innovate
In the 2021 World Insurance Report, digital channels scored high points for 24/7 availability, ease of updating information for insurers and search capabilities. However, their inability to provide personalised advice to clients interested in complex products emphasised the significance of agents and brokers when purchasing insurance.

To keep up with these changes in client behaviour, advisers must anticipate how the changes will impact client needs for insurance and adopt innovative solutions in response. For example, the increase in pet adoption is expected to increase the demand for pet insurance by 16% between 2020 and 2027. Divorce may leave the spouse who is dependent on the policyholder with a gap in cover as they may lose family cover. Advisers need to bring insurance solutions that will meet these anticipated client needs in future.

They need to partner with the right insurer – one that provides flexible insurance that responds to client needs. In anticipation of reduced driving by clients during the Covid-19 lockdown period, some insurers introduced pay- as-you-drive solutions where the client’s monthly motor premium is based on the distance they drive during the month.

Also, with many people working from home, cyber risk exposure was expected to rise during the Covid-19 period. To ensure that clients are adequately protected, some insurers provide cyber solutions that include core cover as well as cyber protection packages that help clients proactively manage their cyber risk.

Insurance solutions must provide clients with the best value for money. On the commercial insurance side, for example, innovative insurance solutions can include access to essential business resources such as access to funding, training courses and legal support services at discounted rates.

Advisers also need to adopt virtual solutions because clients are on these platforms. One of the lessons arising from Covid-19 is that virtual financial planning is the core of future financial services. Some insurers, like Discovery, assist advisers with their journey to developing a virtual presence. They provide guides and tools to help advisers get started with their virtual financial advice practice. They also give access to digital tools where advisers can interact with clients, from generating quotes to submitting claims.

Access to these resources can make all the difference in the future success of the adviser, helping them remain connected and able to service their clients virtually and, therefore, remain relevant.