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Direct-to-customer insurance set to rise in 2022

Published Dec 20, 2021


By Edwin Theron

I can’t remember the last time I went into the shops to buy a whole trolley of groceries. It’s how my family used to stock up on the things we needed two years ago, but today we order the bulk of our groceries online and only pop to the shops for a few, very specific, items.

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I’m mentioning this situation because it is just one simple example of how consumer expectations have evolved. We’ve been able to make the change from doing most of our grocery shopping in-person to doing the majority of our shopping online quite seamlessly. And our spend has shifted significantly to retailers who offer a seamless home delivery service.

This self-service, direct-to-consumer trend is present across all industries. According to McKinsey’s consumer sentiment research, Nike’s digital sales grew by 36% percent in the first quarter of 2020 and the athletic footwear and apparel brand intends to grow its DTC sales to 50% in the near future. If you just look at South Africa’s Black Friday figures for 2021, you’ll see that the pandemic has dramatically improved the online shopping landscape; with online transactions up by 30% year-on-year in 2021.

We’ve seen this trend in action in our business too. Even in 2021 we have witnessed a further increase in customers visiting our website and helping themselves to the products they need without any need for human interaction. The amount of investment going into digital financial services and the speed of change in our industry is exciting because this competition is bound to raise the standard of services offered to customers. Today, it’s a strategic imperative for all insurers to provide a digital solution in addition to their more traditional offerings.

Getting digital channels right

For years, traditional insurance providers have had plans to be more digital. They knew it was necessary, they knew it would change how they operate, and they understood how it would transform customer experience. And yet, they hesitated; in part, because making the move to digital wasn’t seen as “urgent” and also because it requires a business to fundamentally change how they do things. But when the first lockdown happened, everything changed. The insurance industry was forced to adapt very abruptly. They had to fast forward their digital transformation plans in order to survive.

In the beginning, this meant moving everything online. In some cases, insurers simply lifted and shifted their in-person processes onto the Internet. So, the same forms and processes that someone would have to complete manually could now be completed online. But as the pandemic has progressed, financial services providers have started to focus more attention on refining things; making these online experiences better, simpler and more efficient for users.

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Enter the intermediaries

Globally, we have seen traditional providers either focus on a more administrative role (they issue the policies, collect the premiums, provide the products, hold the investments and pay out the claims but they have less of a relationship with customers) or they have to work really hard to retain the relationship they have with clients who choose the direct-to-consumer route. This is especially true as more bespoke digital players and platforms come onto the scene. Similarly, insurance is also being bundled in with other items. For example, if you buy an air ticket, you can purchase insurance directly from the airline without ever having to interact with an insurer.

Direct-to-consumer models make it imperative for insurance products to get simpler. And as more and more competition enters the industry, the hope is that improvements will be made not only to the products but also to the whole experience for customers.

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The scenario also makes it possible for platforms to bundle different things together so that they can offer customers a more holistic solution. Customers won’t have to go to one insurer for one thing and another provider for something else, like their investments.

Going into the New Year, this situation presents an incredible opportunity for digital insurers to offer their clients more, in a way that makes sense to clients and ultimately adds value.

Edwin Theron is CEO of Sanlam Indie.

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