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The Insurtech Uprising

ARTICLE BY

  • Jaco Oosthuizen
  • MD
  • YuLife SA

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As customers increasingly look for digital offerings to suit their modern lifestyles, a new wave of tech-first companies is entering the market. Can legacy insurers keep up?

According to a study by PriceWaterhouseCoopers, the average insurer spends 70% of its annual IT budget on maintaining outdated systems. That means that despite grand promises about being digital first, your average insurer is a paper-led, photocopy-heavy house of cards.

Brokers know this well and have first-hand experience of the impact this has on clients. Switching to truly digital processes would speed up claims processing and allow insurers to create products that actually work for their consumers. However it’s currently the other way round, with consumers needing to find ways to fit in with their insurers. Fortunately, the digital age is upon us and all of that is about to change.

Lagging behind

PwC’s South African Insurance Sentiment Index notes that, “The insurance industry is seen as a laggard in technology when compared to other vertices like banking.” As it stands, sentiment for claims processing, short-term insurance, long-term insurance and account admin ranges between -22% and -61% – proof that the public have become increasingly fed up.

Shackled by outdated, cumbersome systems, there is a strong possibility that legacy insurers could find themselves out at sea as a new wave of digitally savvy competitors enters the market. There is a gap in the market for savvy new players, which also means there’s a world of opportunity opening up for brokers who can see beyond the horizon.

In the almost two years since group insurtech YuLife arrived in South Africa, it has achieved 40% new-to-market business. Other digital newbies have managed to raise funding in the region of R500 million. The new kids on the block are growing fast and are more agile with respect to consumer requirements. Brokers who can match that agility will be able to better meet the needs of a new generation of clients.

Disruption is dead, it’s time to be agile

The era of disruption was all about moving fast and breaking things. But insurance doesn’t work like that. Breaking things affects lives. For years, this worked for legacy insurers, allowing them to calcify in outmoded, inefficient systems. However, today’s consumers are demanding more.

Jaco Oosthuizen, MD of YuLife SA says, “Consumer wants have changed dramatically. Not only do they want instant gratification, but companies are desperately trying to give them just that. For example, at YuLife we can create bespoke products in just six weeks from inception to launch. That lets us adapt to our customers’ needs much faster than some of our legacy competition.”

Fortunes favour the brave

There is a lot of cannibalisation in financial services and the new insurtechs seem to be the piranhas. In 2023, Pineapple secured Africa’s largest ever insurtech fundraiser, pulling in R400 million, while Naked Insurance managed a tidy R290 million worth of funding in the same year. Both have managed to attract tens of thousands of customers with their offerings and YuLife is following suit.

Speaking to IOL, Riaan Singh, PwC South Africa Digital Transformation Solutions Lead, explained: “There is a pressing need for insurers to shift from ‘digital’ capabilities to becoming truly tech-enabled. Integrating emerging technologies and advanced analytics can provide robust data insights for a more targeted understanding of how to meet customer needs and increase overall sentiment.”

There aren’t only big fish to fry

Another gap that brokers can capitalise on is small and medium sized enterprises. A 2023 article in EBnet observed that the SMME market has traditionally been thought of as difficult to insure, but with simple products suitable to this market, that needn’t be the case.

Those products exist, they just require forward thinking brokers to connect them to the right client.

The future is fleet-footed

Technology has enabled consumers to have more control, and the use of digital platforms and AI has transformed the way people experience a brand. While regulations may be strict, change is inevitable.

Digital-first solutions offer clear advantages for advisers, insurers, and consumers. Automation gives new insurtechs a leg up by giving them real-time insights into member needs and market trends. It’s an advantage that can’t be papered over by shiny points systems. Legacy insurers have a head start, but in three-to-five years, the landscape could look very different.

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