By: Arno Jansen van Vuuren
Seats with the kind of legroom that would make Eben Etzebeth and his bomb squad buddies proud. An ample baggage allowance. At least one main meal, multiple snacks, and drinks on tap. Heck, you could even light up a cigarette, if you were so inclined.
Jump ahead to the 90s, and new players such as EasyJet, Ryanair, and AirAsia drove (or rather, flew) the world into its Budget Airline Era. No more frills, hot towels, or roomy seats – and if you want a bite to eat or to take along a suitcase any bigger than a mid-size bag of dog pellets, you pay. The up-side? You pay a lot less for the basic air ticket…and therein lies the appeal.
Because at the end of the day, when difficult economic times hit, it’s easier to separate the essentials from the luxuries. And so we streamline, simplify, and cut back. We don’t want the bells, whistles, or priority boarding – we demand decent, fast, and most importantly, cheap.
We’re seeing this same scenario play out across all facets of life. You might opt for the fancy medical aid with the rewards programme that gives you discounted gym and free smoothies – or you could choose the basic plan that gives you essential cover, for a third of the price.
In the world of insurance, we’re seeing this too. Traditionally, insurance was sold by brokers and financial advisers. These products were designed to take into account the expertise of these intermediaries, resulting in solutions that were layered and complex, with the cost of this advice built into the product.
Don’t get me wrong: financial advisers have an important role in providing people with sound, impartial, and expert advice, helping them navigate complex financial decisions. But the question we need to ask is this: is this level of expertise always necessary for every financial need, especially in the age of the internet where empowered consumers have a wealth of information at their fingertips? Does the conventional insurance model cater to everyone – not just the upper-earning echelons of society? And most importantly, is it affordable?
Spoiler alert: nope.
You know how the story unfolds from here. Digital-first insurers entered the South African market. We also saw big financial services providers introducing streamlined products with reduced premiums and fewer underwriting requirements. More omni-channel service options emerged, with consumers able to kick off the process online before the mandatory screening telephone call.
But not until recently did we see this loop closed with a fully digital end-to-end consumer journey, in parallel to the introduction of insurance products specifically designed to meet a certain need.
Needs-matched insurance, as a category, dovetails with the end-to-end eco-system, delivering a solution that addresses one thing – not one million things – and does it very well. Complexity is stripped, underwriting is reduced, distribution fees are removed, premiums are lower and the benefits are clearly articulated – all with technology supporting the process.
There are several types of needs-matched insurance, with education insurance – specifically designed to cover a child’s education should a death or disability event occur – being one of these. Education insurance sees funds ring-fenced so that they are paid directly to the educational institution and cannot be used for anything else. There are also no invasive medicals, as is the case with traditional life insurance, and premiums are vastly more affordable.
But if you really think about it, the concept of insurance matched to a specific need – while perhaps not specifically framed as such – is not new to us. Funeral cover, the most popular insurance product among South Africans, offers an excellent case study of the value that needs-matched products can bring. Dying is a big business in Africa, with massive cultural and societal significance placed on the pomp and circumstance attached to one’s passing. But resources are limited, and so comparatively more affordable funeral insurance products offer the much-needed funds that can provide a dignified funeral for the deceased (and even a little extra towards basic needs), with no cumbersome underwriting requirements to contend with.
I believe that fully digital needs-matched insurance across all categories – from short-term insurance to education and more – will soon become as ubiquitous as funeral cover in SA. Education, for example, is just as pressing a need in this country as funerals – perhaps even more relevant, as it serves not the past generation, but the future.
Perhaps you don’t need lounge access, an onboard meal, or a pre-selected seat – you just need a flight to take you where you want to go, at a price you can afford. In a country where the needs of the population exceed the means, needs-matched insurance bridges this gap by safeguarding that which is most precious to us.
*Van Vuuren is a managing director at Futurewise.
PERSONAL FINANCE