Short-Term insurance brands are among South Africa’s most successful businesses and have changed consumer perceptions of what used to be grudge purchase with smart branding and ongoing product innovation. Nonetheless, short-term insurance remains a slippery transaction. Consumers often pay premiums for years on end, without claiming or receiving anything in return for their purchase.
But this year everything will change.
Solvency, an emerging financial services challenger brand, is disrupting the status quo with an Insurance Savings Account (ISA) that is funded through car and household insurance premiums. Solvency is a product underwritten by GENRIC Insurance Company.
“The Solvency solution offers crucial insurance cover combined with an easy and structured way to save and invest,” says Mutoda Mahamba, Solvency CEO and Founder.
“It is a unique product that helps South Africans deal with two vital challenges: protecting themselves against claims and saving for the future.’
A former insurance executive, Mahamba worked at a range of prominent South African insurance brands for over a decade. Through his actuarial and product development work, he saw the opportunity to create a financial product that empowers consumers while still equipping them to manage the risk of negative life events, from burglaries to a car being written-off.
The Solvency website is a key feature in its arrival on the South African market. The website offers easy-to-use features that allow anyone to asses exactly how much they can save, supported by a quick sign-up process. Users only need to enter a few details to begin their Solvency relationship, which is 100% digital and can be managed using only a smartphone or a computer.
The Solvency solution is filled with innovation and is easy to understand. Clients choose how much of their monthly premium (up to a maximum of 50%) goes to their Insurance Savings Account (ISA), like the medical savings components on medical aids. The decision is guided by how much excess the client is prepared and able to pay in the event of a claim. The excess is paid from the ISA and should the funds in the client’s ISA not cover their excess payment, only then would the client need to pay the difference from their pocket.
“The average short-term insurance client claims an average of R18 000 every four years,” explains Mahamba.
“With an insurance premium of R1000 per month, and without considering escalations, the client would have paid almost R50 000 in premiums over this time. Up to nine out of ten clients will claim far less than the premiums paid, or not claim at all, but receive nothing in return. Solvency changes this and puts that money to work.”
Whether or not the client makes a claim in a year, they have the option to withdraw in cash up to 50% of their savings in a 12-month period, for their own use. Alternatively, they can leave the money invested to grow and earn money-market rates.
Solvency also includes two other important innovations.
The BetterDrive Savings Booster, which allows clients to self-manage their premium and cash-back rewards through responsible driving. The driver can receive up to 25% of cash-back spent on premiums every three months, which is paid into the ISA.
The Pay as you Ensure feature sees the consumer pay premiums for insured items, they need cover for in that month only. The premium for items which cover has been switched off is allocated to savings.
“We’re still in the launch stage, but the response from the market has already been incredible,” concludes Mahamba.
“Consumers love the savings opportunity, but they are also very positive about the structural innovation that finally gives them control over what used to be a largely negative process. All indicators are that the brand will enjoy a very positive launch year.”