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Technology driving change to cell captives’ value proposition



Thirty years ago, South Africa’s first cell captive insurer opened its doors, for the first-time offering clients all the benefits of owning their own insurance company without the inherent capital, costs and administrative implications.

Guardrisk pioneered non-life cell captives in 1993 and extended the structure to the life insurance industry in 1999. Initially, non-life cell captives were used to self-insure corporates’ risks; and life cell captives were earmarked for employee benefit programmes.

Inherent in the cell captive structure is the ability to innovate and customise insurance programmes. When first party cell captives were introduced three decades ago, they offered a sharp, and warmly welcomed, contrast to the much more rigid, one size fits all, traditional insurance market. First party cells are used by corporates to self-insure their own insurance programmes. Before long, cell captives were extended to third party cell structures, through which clients can sell insurance cover to their customers, boosting their business’ earning potential, building their brand and enhancing their value proposition to customers.

Time has shown that corporates and other entities, such as retirement funds, have embraced first party cell structures; not only because they could now share underwriting profits boosted by prudent risk mitigation (and continually extend their self-insurance programmes as reserves accumulate in the cell) but also because they were now able to tailor make their insurance programmes, according to their unique risk profile and risk mitigation programmes. All while being able to offer new benefits to customers, employees, and members.

During the Covid-19 pandemic, the world saw a major shift towards new working patterns with employees working from home. Now, in the wake of the pandemic, most companies continue to offer hybrid working solutions, no longer restricting staff to office buildings, or even geographical locations. Significant technology investment and advances supported and accelerated the move to a more digital world across all sectors.

“Even a few years ago, it would not have been possible to do the things in the insurance industry that technology makes it possible for us to do today,” said Francois Schaap, Managing Executive, Guardrisk Life.

“In fact, technology has significantly enhanced the value proposition of cell captives, and particularly third-party cell captives. We’ve moved from offering just a wholesale structure to offering an end-to-end insurance solution, encompassing product, pricing, administration, etc. Our digital platform now makes it easy for clients to simply plug and play, to deliver innovative products and solutions to their customers, quickly and easily,” said Schaap.

With staff no longer restricted to specific geographic locations, employers increasingly find themselves needing to accommodate employees located in different countries. The flexibility of first party cell captives means that employers can easily apply multinational pooling, accommodating all their employees – regardless of where they work from – in the same structure.

“Instead of having to build massive ‘engines’, as we would have needed to do a couple of years ago, technology has made it possible for us to quickly, easily – and cost effectively – enable employers to streamline benefits, easily administer and enhance benefits,” said Schaap.

“Certainly, the key differentiator of the cell captive, that is the structure’s intrinsic ability to tailor offerings quickly and effectively has stood it in good stead as it sharpens its value proposition.”