Do closed doors open new avenues for growth? That is the question confronting South African bancassurers.
Expanded digital services, pandemic-driven pressures, and cost-cutting measures have led to thousands of bank branch closures globally, including in South Africa1. Drawing on responses from four out of five of the largest bancassurance players, RGA’s 2021 South Africa Bancassurance Pulse Survey reveals the ways the market is adapting and offers strategic lessons in product development, distribution, and consumer engagement.
The COVID-19 pandemic prompted many once-reluctant digital adopters to go online. In South Africa, digital sales rose during the pandemic for all participants in RGA’s survey. Every bancassurer in RGA's survey indicated an ability to complete sales fully online, but four of five also relied on inbound or outbound telephone calls to close some of the transactions originated online. In addition, South African bancassurers added new sales channels to reach underserved markets, including messaging apps (e.g., WhatsApp), mobile USSD codes, and virtual contact centers. At the same time, three out of five major bancassurers reported decreased in-branch sales.
Even with bancassurers going virtual, survey responses suggest at least some consumers remained pragmatic in their product preferences. Some bancassurers identified rising interest in products such as funeral and life coverage, which could be attributed to growing awareness of the need for financial protection amid a pandemic. Notably, credit life and mortgage coverage proved particularly popular amid ongoing economic disruptions. COVID-19 also appears to have spurred increases in claims for life protection products, potentially due to excess mortality.
Lowering Lapses, Targeting Offers
Financial distress also has a way of fueling lapse risk. To counter this, South African bancassurers launched an array of strategies ranging from offers of grace periods and premium holidays to flexible premium payment arrangements. Survey respondents also reported embracing new online self-service options to reduce friction in the policy renewal process, walking away from wet signature requirements, and increasing incentives for automatic renewals. One established a retention team to work with policyholders at risk of lapse, while others began offering low-interest loans to those facing temporary job losses or other financial setbacks to help them continue paying their premiums. Ultimately, the impact on lapses was less severe than initially feared, with only two out of five respondents reporting higher than expected lapse rates during the pandemic period.
The survey also highlighted the use of bank data and analytics by South African bancassurers to support insurance sales and customer retention. Four of five respondents reported leveraging consumer data, such as bank transaction and credit history, deposits, and marital and homeownership status, to target customers with tailored product propositions. They indicated using data analytics for upselling or cross-selling insurance products to those bank consumers more likely to buy, simplifying underwriting to improve the purchasing experience, offering additional benefits or reduced prices to lower-risk customers, and assessing and managing lapse risk. Claims data is currently being used by one participant.
Incentivizing Wellness, Accelerating Innovation
Bancassurers also acknowledged interest in insurance-linked wellness offerings to strengthen long-term relationships with policyholders. Three out of five respondents indicated wanting to incorporate more wellness-type products into their bancassurance offerings to encourage positive behaviors. Participants provided examples of recent investments, including linking wellness rewards to a loyalty program, integrating wellness offerings within a mobile banking app, and introducing gamification strategies. Two respondents implemented or enhanced loyalty programs and incentives to further engage their policyholders.
Digital transformation requires adequate resources and expertise, and South African bancassurers forged external partnerships to accelerate change. All respondents to RGA’s survey reported relying on reinsurers for guidance, and nearly all turned to technology experts. Areas of support spanned product development, information technology, underwriting, and data analytics.
Winners emerging from any major market disruption are those willing to adapt – to meet immediate consumer needs brought on by disruption with an eye toward long-term growth and increased consumer engagement. The same will hold true for the COVID-19 pandemic. The crisis has forever changed the global insurance landscape, increasing consumer awareness of the value of protection products while accelerating digital distribution. Bancassurance – a channel with access to large amounts of risk-relevant data and insights on consumer needs – may serve as a harbinger of what is to come for the entire industry. Results of RGA’s South Africa Bancassurance Pulse Survey point to a future of online processes, tailored products, and data-driven engagement – developments that were well underway before the pandemic but now appear imminent, if not already in place.