Insurtech explodes around the world

SIMON BROWN: I’m chatting now with Vis Govender, CEO of Everything.Insure. Vis, I appreciate the early morning time. Our local insurance sector – on the one hand it looks like there’s tons of competition, 100-plus companies operating in the space, but in a recent note you put out you make the point that actually it’s deeply concentrated. Around 21 life insurers control 88% of the market; the top five 82%. It’s actually deeply concentrated, and this [presents] challenges for new entrants trying to break in.

VIS GOVENDER: Yes, Simon, that’s true. It is quite concentrated – not just insurers, but the brokerage space too. In South Africa probably 70% to 80% of the market is businesses placed through brokers. You have the same issue on the broking side as well. You have the established and traditional brokers who are there and it’s very difficult for the new guys to get in. It really is.

In the note you referred to one of the things that we speak of is regulatory compliance that’s creating the hurdles. And it is. As we said, regulation’s good, it’s a good thing. It’s really there to protect the consumer and we are all for it but it makes it so expensive, so difficult. It requires significant investment to get your systems compliant, to get your processes compliant, to train your people to be compliant. So that it really is quite a barrier for new guys to come in.

SIMON BROWN: Well, what we have seen – I was going to say in the last few years, but truthfully it’s probably a decade or more, and certainly you guys have been in operation for longer than that – insurtech, in other words the technology side, which I would imagine solves a number of the concerns [and] helps with regulation. I take your point, we need the regulation and the compliance, but they [the regulators] can help make that simpler for new entrants and of course make it significantly easier for the end user as well. It removes brokers, removes call centres. Is that the big sort of game changer in the sector?

VIS GOVENDER: It certainly is. For probably the last three to five years insurtech has exploded around the world, and South Africa is no different. Quite a lot of investment has gone into it. Quite a lot of the private equity and venture capitalists are putting money behind startups – and these are people who have no real established track record in the industry, but they have a good idea as to how to solve [insurance] in better ways of doing what we did traditionally in the industry. So we’ve seen a lot of that.

It does lower barriers because you can use AI, you can use ML [machine learning], you can build rules engines. You can codify the compliance into your systems and that makes it a lot easier for your people and your processes to be compliant. It’s a one-time investment as opposed to an ongoing continuous investment in people and processes.

We as a firm took that view a couple of years ago, about three years ago, and started to digitalise our business. We’ve seen a significant difference in how easy it is to do business using insurtech or in the insurtech space.

SIMON BROWN: It’s the changes to it, it’s things like being able to pause insurance. It’s things like being able to insure certain items. I can remember that insuring a laptop was onerous and now it’s quite a breeze because, as much as we talked around concentration at the top of the interview, we also as a country are actually quite underinsured.

VIS GOVENDER: We as a country and as a continent are extremely underinsured. The levels of insurance penetration across the continent are really low; in single-digit figures in a lot of countries, in South Africa, much, much better. But nevertheless still very underinsured. If you talk motor insurance, which represents the vast majority of premium in the short-term industry, it’s one in three cars that are insured. So two-thirds of the cars on the road aren’t insured. That’s been the case for a very, very long time. For as long as I’ve been in the industry the number’s been about that. So we’ve got a little better, but not much better.

As you say, that’s because of the difficulty in getting access to products and the difficulty to get a quote. If you’re not using one of the insurtech platforms to get a quote, it requires forms, 12- to 20-page forms, half an hour to an hour with a call centre agent, etc.

So insurtech is exchanging it, making it a lot easier, and giving you a lot of more features like the ability to pause cover when you don’t need it. You can say, ‘I’m going to use my scuba gear only in December, so I don’t need to insure it on an all-risk basis except when I’m using it’. So I pause the cover. That’s quite neat, and that’s quite new. We weren’t able to do that historically.

SIMON BROWN: I take your point around that paperwork and sometimes it ends with a request for a fax – at which point the young’uns are like, ‘What the heck is a fax?’

Viv Govender, CEO of Everything.Insure, I appreciate the early morning.

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