The experience of living through COVID-19 has changed consumer behaviour, reshaping wants and needs and reprioritising what’s important and what’s peripheral. Some of these behavioural changes are likely to endure after the pandemic; including, greater health awareness, digital adoption, value-driven purchasing, and remote working and ‘nesting’ as homes take centre stage in more socially-distanced lives.

These consumer behaviour trends, however, have implications for the traditional as well as new risks that we face in this very different world. Carl Moodley, Chief Underwriting and Claims Officer at GENRIC Insurance Company Limited, unpacks some of the key trends in personal risk driven by the pandemic experience and what this means for insurance and personal financial planning going forward.

“The consumer trends we are seeing have strong geographic dependencies and are largely a result of circumstances specific to South Africa’s social-economic environment . These trends will shape how consumer behaviours play out and the domino effect on all aspects of daily living.  Although the pandemic and its associated responses have highlighted inequalities in South Africa, the long-term effects cannot be assumed at this point. However, the key trend of digital adoption in terms of work, learning, transacting and shopping is here to stay. So, it is worth unpacking the knock-on effects and whether traditional risks have changed in terms of prevalence and intensity as a result,” explains Carl.

The pandemic has heightened the understanding of the need for risk protection, notably in the life and healthcare space. There is also a clear drive by consumers to avoid any ‘hard knocks’ of unexpected costs and uninsured losses, and this is seen in the attention being given to insurance policy renewals as well as in the uptake of niche risk solutions that deal with very specific risks. 

“There is a clear interdependency between risks and behaviours – as one behaviour changes, another risk area is also directly impacted. For example, as more employees work from home, their mobility risks may decrease, however, their cyber and property risks increase due to less robust cyber security measures (especially on personal devices and infrastructure at home) and greater use of their home property for work functions. Similarly, health exposures other than COVID-19 increase. Concerns around job security and the work-from-home trend have weighed heavily on many people. As a result, depression and mental health is now in the spotlight as people struggle with the uncertainty and isolation of the pandemic. Additionally, the impact of the delay in regular health checks and elective surgeries due to fear of COVID infections have had implications for detecting serious health conditions early, such as cancer and the subsequent cost of treatment at a more advanced stage, and, overall prognosis,” explains Carl. 

GENRIC further unpacks some of the key considerations of how risk and insurance needs are changing for South African consumers as a result of the pandemic.

Increased digital adoption

Increased digital adoption sees an increase in cybercrime impacting individuals. As eCommerce and reliance on digital banking and transactional platforms grows, cyber or online risks have soared. South Africa now has the third-highest number of cybercrime victims worldwide with approximately R2.2 billion a year lost to cyber-attacks. ‘Card-not-present’ (CNP) fraud on South African-issued credit cards remains the leading contributor to gross fraud losses in the country, accounting for 79.5% of all losses, while the country has seen an increase of more than 100% in mobile banking application fraud, according to an Accenture report. This is one of the key reasons why personal cyber-risk insurance is now as important as a home, vehicle and life insurance in one’s personal financial planning portfolio.

Mobility patterns have changed

Remote working and learning, which is already becoming an established trend, means people are driving their vehicles much less. Less time on the road means lower risk for accidents and theft. The integration of vehicle telematics will become increasingly important in insurance solutions that aim to reduce insurance premiums based on reduced mileage and better driving behaviour. You can also expect so see a big shift to insurance solutions with a pay-as-you-go component as consumers drive a lot less and thus expect to pay less for their reduced risk.  

Changes in purchasing behaviour

A move to value-based purchasing has seen consumers increasingly looking at cost versus benefit with sharper detail. With household budgets under tremendous constraint, consumers are looking at ways to mitigate financial distress due to unexpected large costs. This is one of the drivers behind the high policy retention rate and new take-up of Mechanical Warranty insurance that GENRIC has seen over the last 12 months. Sales statistics show that new vehicle sales have plummeted while used-vehicle sales are way up, driven by affordability. It also means that for used vehicles that fall outside of the manufacturer warranty period, a mechanical warranty insurance solution provides essential protection against any major parts failures or breakdowns down the line. For a low premium from around R150 per month, a major mechanical breakdown, such as an engine, cambelt or turbocharger failure, which can easily top R20k or more, will be taken care of and you’re buffered from these large and unplanned expenses. Another important development in the motor space is a recent ruling by the Competition Commission that comes into effect on 1 July 2021. The new guidelines will make it possible for motorists to service their vehicle at any independent service provider, which means that they will not be restricted to the original dealership, without risking their warranty. It’s good news for motorists who now have greater choice in terms of the costs to maintain their vehicles and paves the way for more competitive ‘service plan’ insurance solutions, independent of the original car manufacturer.

Healthcare is top of mind

The pandemic has amplified the need for healthcare insurance as consumers realise the implications of a health crisis on finances, especially in the presence of co-morbidities. GENRIC has seen significant pick-up in enquiries related to health insurance, such as its Sirago gap cover, as well as affordable alternatives to medical scheme benefits such as its Wesmart health insurance solution.  Where consumers are buying down on their existing medical scheme benefits due to financial distress, they are taking up gap cover insurance to protect them against potential medical scheme financial shortfalls on specialist and in-hospital treatments. The steep uptake in gap cover is not unwarranted as recent mega claims paid by Sirago show massive shortfalls between R40 000 and R160 000 not covered by the medical scheme. Without gap cover, the consumer would have to pay for this from their own pocket. The pandemic has undoubtedly motivated people to reconsider not only their health insurance covers but also the likes of critical illness and life cover.

Interpersonal behaviour has changed

While relationships and marriages have taken strain during the various lockdown levels and increased time spent at home, other relationships have thrived. People have spent more time with their pets than ever before, and pet adoptions have gone up too.  This has driven new demand for Pet Insurance as pet owners want the reassurance that if things do go wrong and their pet gets sick or injured, they’ll never have to decide between their finances and Fido’s health and wellbeing.

Crime has and will continue to increase

The increase in crime is a significant concern. According to SAPS’ crime statistics released at the beginning of March, notable increases include car and truck hijackings, which have increased by 6% and 32% respectively in Gauteng. As the economy falters and more people find themselves unemployed and desperate, crime rate will likely increase. Taking extra safety and security measures at home and on the road are essential mitigating measures, as is checking that insurance covers are in place for all potential scenarios. Insurance solutions that add extra layers of protection and private response to emergency situations are increasingly in demand. As one example, GENRIC’s SafeHomes insurance solution provides for an emergency panic button that dials up the closest contracted security provider when activated, sending location details based on your phone’s position. The call can also be routed to receive emergency medical attention as part of the solution offering. In South Africa where road accidents and crime are a daily occurrence and where public emergency services have proven unreliable and under-resourced, it is not hard to see why demand for emergency medical assistance and evacuation insurance like the Evac24 solution has increased.  

Nesting and Home Improvements have soared

Home improvements and building extensions went into overdrive in the last months as people had more time at home to attend to maintenance and upgrades. Working from home has additionally triggered a need for home workspaces, especially since the home-working trend is likely to become a permanent fixture for many, who are also upgrading security and safety measures as a result. Consumers are also spending on renovations, DIY projects, gardening and luxury goods to compensate for unrealised holidays and other out-of-home experiences. Other areas of investment include solar PV solutions for homes as load shedding and spiralling electricity costs push more consumers to grid autonomy.  These renovations and additions add significantly to the value of your building and contents and need to be accounted for in the sums insured on your insurance policy.  The tech underpinning a SafeHomes insurance policy provides access to a property valuation with immediate assessment of a property value using spatial and geo-technologies, and mapping this back to deed’s office information regarding property values in the area. It’s essential that these ‘lockdown’ upgrades are correctly insured to avoid the risks of under-insurance in the event of a catastrophic loss.

Political uncertainty and social unrest is increasing

Given the growing poverty, unemployment and social unrest which has been amplified by the lockdown, service delivery protests and riots are likely to increase in coming months, leaving property and assets vulnerable to losses that are not covered by traditional insurers. Sasria, which provides insurance cover for losses caused by riots and political upheaval, is a specialised cover that policyholders of personal and business insurance need to ensure they have.

“Risk and insurance have changed over the years, but more radically so as a result of the pandemic where there is now a far greater appreciation of just how unpredictable and far-reaching risk can be.  It is crucial to understand your evolving risks and how to make the risk solutions available work for your changed circumstances. There are many new insurance products and technologies available that allow you to become a lot more granular in your approach to risk, and, to gain absolute certainty that you’re covered for specific and unique events.  As these risks become more complex and interrelated, the guidance and advice of a professional broker will prove invaluable in structuring an insurance and risk management strategy that is fit for your changed circumstances,” concludes Carl.

Article by Carl Moodley

Chief Underwriting and Claims Officer

GENRIC Insurance

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