The 2016 edition of the annual KPMG Insurance Survey revealed that insurers are attempting to overcome tough times by embracing disruptive innovation. The vast possibilities of insurance innovation are undeniable, though, what is making insurers reluctant is the uncertainty associated with spearheading a change of this magnitude.
With market share hard to come by in this industry, insurers need to harness technology to enable innovative opportunities and change their operating models to give their clients the products and superior service experience that they now expect.
“Over the past 12 to 15 months, we have seen that disruptive forces are driving insurers to embrace innovation in order to surpass their competitors and, ultimately, protect their business. Finding a winning formula in this regard is key, especially for traditional insurers who want to enjoy the growth rates that more innovative and niche players have attained,” says Gerdus Dixon, KPMG Director and National Head of Insurance.
The results revealed that short-term insurers participating in the survey increased their premiums by 11 percent year-on-year. The common view is that the number of insureds has not increased, but that most of this premium growth is from rate increases and lumpy corporate premiums. The four largest insurers still dominate the market and underwrite 52.7 percent (2014: 52.1 percent) of the market’s gross written premiums, although, there has been some adjustments in the individual rankings.
Santam remains the largest insurer by some margin with 24 percent of the industry premium but Hollard, with 11 percent, has now replaced Mutual and Federal (10 percent) as the second largest insurer.
Over the years, our survey has shown that when investment markets steadily increase and bond yields remain largely unchanged, the long-term insurance industry is prosperous. And 2015 offered that, or at least for the first eleven months and, therefore, the financial results for the life insurance industry covering the 2015 financial year were largely buoyant. Overall, the participants in the survey reported a 5 percent increase in total assets year-on-year.
“The increase should be acknowledged, however, long-term interest rates and equity markets have come under extreme volatility due to the events of December 2015, and more recently the Brexit developments. The country’s lack of economic growth has resulted in consumers having less income to allocate to insurance products. Consequently, this manifests in higher lapse rates for risk products, especially in the lower income segment. All this is keeping management teams of insurers on their toes,” concluded Dixon.
Generally, a forward-looking approach needs to be adopted by players in the insurance sector, taking the coming changes to the regulatory environment into consideration. With the go-live date for Solvency Assessment and Management (SAM) planned for 2017 and the implementation of the Twin Peaks regulation also likely to happen next year, it will be an accomplishment to deal with both these changes to regulation over the next 12 months, especially at the same time having to grow revenue in an ever changing competitive environment.