As the world continues to face new and ever-evolving risks, the non-life insurance industry plays a vital role in providing protection and peace of mind to individuals and businesses. From natural disasters to cyber-attacks, the non-life insurance sector is constantly adapting to meet the changing needs of its clients. In this article, we will explore the current trends and risks facing the global and South African non-life insurance industry. More importantly we explore whether insurance companies should be doing more, creating a more resilient system for clients and society that focuses not only on protection but prevention.
Insurtech: The rise of insurtech has been a major trend in the non-life insurance industry over the past few years. Insurtech companies use technology to streamline the insurance process, making it more efficient and accessible to consumers. From telematics-based policies to digital claims processing, insurtech is changing the way non-life insurance is bought and sold. The global insurtech market is expected to double in size by 2025, reaching $10.8 billion. The use of telematics in personal motor insurance encourages good driving behaviour, leading to safer roads. Our data shows that Vitality Drive diamond clients are 58% less likely on average to have a personal accident claim than a non-Vitality Drive client. Similarly, this can be observed for business motor insurance and we could see telematics possibly extend even further to home insurance.
Cyber Risk: As technology continues to advance, the risk of cyber-attacks also increases. In fact, the World Economic Forum now considers cyber risk one of the top global risks. Non-life insurers are responding to this threat by developing specialised cyber insurance policies to protect against data breaches and other cyber-related incidents. Some insurers go a step further by partnering with specialists who can help clients understand their cyber risks and thus aim to reduce cyber events.
Climate Change: Climate change is also a growing concern for the non-life insurance industry. The increasing frequency and severity of natural disasters such as floods, hurricanes and wildfires are putting pressure on insurers to adapt. Many are now incorporating climate change risks into their pricing and underwriting practices, and some are even developing new products specifically to address these risks. Swiss Re is taking a proactive approach to climate change as an investor in next-gen carbon removal technology, which will significantly reduce the carbon footprint and global warming.
South African trends
Load shedding: South Africa has been experiencing a significant increase in load shedding, surpassing 4 800 hours of load shedding over the past year – equivalent to 200 days – which has led to a rise in power surge claims. Insurers have responded by advising clients on mitigating actions, such as installing power surge protectors and offering power surge cover. This space opens further opportunities for innovation and addressing the changing needs of our customers.
Theft: According to Stats SA a staggering 42 000 households experienced theft of motor vehicles during the 2021/22 reporting period. There has been a shift in the type of vehicles being stolen in South Africa, with high-end vehicles being targeted at nearly triple the rate of the previous year. This increase in theft-related claims has prompted insurers to encourage clients to take precautionary measures such as the installing tracking devices. Due to advancements in technology and use of the latest telematics, we have seen that the recovery rate on vehicles with the Discovery Crowd Search Sensor is 90% greater than the recovery rate on vehicles with a traditional tracker.
Severe Weather: Severe weather conditions such as longer rainy seasons and devastating floods have also hit the South African insurance industry hard. During the KZN floods in April last year, 40 000 people were displaced, over 13 500 homes were damaged or destroyed, and over R25 billion in damage was incurred.
Staying abreast of trends
In addition to these risks, South African consumers, in particular millennials and Gen Zs, are also demanding more from their insurance providers.
They seek an insurer that plays its role in addressing environmental, social and governance (ESG) risks and partakes in shared-value initiatives. Initiatives such as Pothole Patrol and Fire Force aim to make an improvement to broader society. Pothole Patrol – a partnership between Discovery Insure, Dial Direct and the City of Johannesburg – has repaired more than 142 000 potholes on South African roads, which protects not only our clients but society as a whole and reduces claims for the entire industry. Fire Force is an initiative that aims to reduce fire risks and provide emergency fire services to clients and broader society. We are likely to see more cross sector partnerships that aim to reduce risk.
One of the latest trends that everyone is talking about is ChatGPT. The artificial intelligence developed by OpenAI is said to be the most advanced AI to date, and may be the next communication tool in customer relations or simply selling insurance directly through a third-party app.
In difficult times insurers tend not to focus on innovation, but that’s when you need innovation the most. Insurers who are able to consistently identify trends and respond to developments in the rapidly changing environment will persevere in the long term.