Since the first COVID-19 case was reported in South Africa, life for South Africans has changed drastically and there has been a significant impact on the economy. From a short-term insurance perspective, many insurers across the industry faced the risk of reduced affordability of their clients, the potential for lapses, exposure to the volatile stock market that will affect earnings, and the exposure to claims because of the pandemic. On the other hand, South African citizens faced lower incomes and employment uncertainty and looked to their service providers, including their insurers, for assistance during these times.
The need for insurance
As citizens have been encouraged to stay home during the lockdown, some may not understand the need for their insurance. However, clients’ vehicles are still exposed to risks other than accidents and our own data shows that, despite a large drop in driving, there were 10 times more hail-related vehicle claims during levels 5 and 4 of the national lockdown, from 27 March to 31 May 2020, than there were in the same period last year. In addition, we have also seen increases in burst geysers and pipes, power surges and other weather-related claims under the buildings and household contents sections of cover.
Addressing affordability through premium relief
While the need for insurance is clear, many clients faced the challenge in affording their monthly insurance premium. The challenge of ensuring adequate protection for clients while addressing their affordability issues was an opportunity for insurers, including Discovery Insure, to step up and assist clients through this difficult time. The commitment to our clients and the need to assist them in this time comes from our core purpose of making people healthier and enhancing and protecting their lives which is more relevant right now. We have therefore seen a great manifestation of the Shared-value Insurance model where we provided a number of enhancements to our clients since the start of the lockdown.
This started with enhancements to our Vitality Drive programme where clients could still get rewarded and receive a cash back even if they were not driving or filling up with fuel over this time. We then introduced relief benefits that let clients access their future fuel cash back to fund their entire Discovery Insure premium.
We also identified a significant drop in the kilometres of driving of our Vitality Drive clients. Since there is a strong correlation between the risk of being in an accident and mileage driven, we experienced a reduction in our overall loss ratio. We therefore announced our Motor Premium Relief Benefit. Through our use of telematics technology and the ability to measure driving behaviour through the Vitality Drive programme, we were able to give all our clients an up to 25% discount on their May vehicle insurance premium if they drove less than 500 km in April.
A recent survey reflecting consumer sentiment and behaviour during level 4 of the lockdown showed that 79% of consumers believe that working from home will become the new norm3. We therefore extended the Motor Premium Relief Benefit to create the Dynamic Distance cash back benefit, which will award clients with a monthly premium cash back of up to 25% based on mileage driven during all levels of the lockdown, making it the most extensive premium relief offered to date.
More clients are interested in telematics
Along with this, technology and usage-based insurance proves even more relevant today. Usage-based insurance involves offering insurance that depends on how much clients drive and how well they drive2. Research shows that 31% of clients have shown increased interest in telematics devices due to the belief that kilometres driven will remain low in the foreseeable future1. The Discovery Insure Dynamic Distance cash back benefit is based our access to large amounts of telematics data and requires clients to have a working telematics device installed in their vehicle. Therefore, clients whose driving behaviour we can measure will benefit the most.
Knowing your customer is more relevant than ever to encourage customer loyalty
This period has also highlighted the importance of having loyal clients. 87% of South African consumers said that how companies conduct themselves during the pandemic would impact whether they would do business with them in the future3. Research showed that clients who were aware of such premium relief benefits valued them, and satisfaction levels by these clients were similar to that of pre-COVID-19 levels. Consumers expect their insurers to reach out to them about the options available to them yet more than 50% of consumers had not heard from their insurer. Those who don’t are more likely to shop around for another insurance provider1.
While the industry is facing uncertain times, there is a lot that insurers can do to assist their clients. It is important to recognise that the impact of COVID-19 may be long-lasting and may permanently change the environment in which we operate. The need to adapt and respond to these changes is crucial to ensure the sustainability of the industry as well as ensure the protection of our clients. Insurers who are able to respond and adapt quickly to the changing circumstances of their clients are the ones who will benefit from increased client loyalty and satisfaction.
By: Precious Nduli – Head of Technical Marketing and Vitality Drive engagement at Discovery Insure
References:
- AUTO INSURANCE DURING COVID-19: Anticipating consumer needs by J.D Power insurance intelligence, in partnership with CMT https://discover.jdpa.com/hubfs/Files/COVID-19/20200515_PULSE%20Insurance%20During%20COVID19_Distribution.pdf
- https://www.sentiance.com/2020/05/06/covid-19-impact-auto-insurance/
- https://modernmarketing.co.za/consumer-pulse-research-reveals-sa-consumers-concerns-during-covid-19/
