Digital disruption brings life cover to SMMEs

Anthony Miller
Anthony Miller

Cape Town – After ten years in the industry Anthony Miller, an entrepreneur operating in data, technology and financial services was still seeking to start something with a sense of purpose.

That's when he saw a gap for digital disruption in the financial services offering for particularly SMMEs.

"I looked at the number of opportunities, one of which was mass market life insurance in South Africa," said the founder and CEO of Simply, a financial services provider.

Miller said together with his partners, who are actuaries, they tried focusing on giving people the right mix of cover for their money. Their strategy was to target lower earners via their employers.

The result: Simply was launched around 18 months ago with a focus on a low cost combination of life, disability and funeral cover, where sign-ups take place online.

But as with any other venture, they had their fair share of challenges, said Miller, who flagged collections as their biggest challenge. "We found that the market is very stressed financially and collection rates have been far worse than we anticipated, especially where we do what everyone else does."

Fin24's Liziwe Ndalana caught up with Miller on how his digital operation disrupted the industry:

WATCH (edited transcription below):

LN: What made you start this type of business?

AM: I’ve been an entrepreneur for 9 or 10 years in data, technology, and financial services and was keen to start something that felt like it had a sense of purpose. I looked at the number of opportunities, one of which was mass market life insurance in South Africa, and quickly realised there’s an opportunity here for digital disruption.

LN: Why SMMEs?

AM: I felt there was an opportunity to provide something different, where I tried to focus, with my partners who are actuaries, on giving people the right mix of cover for their money. Where we tried to target the staff directly, the staff can’t pay. We feel that in order to secure people financially, we need to target that segment through their employers.

LN: How do people ensure they get the right cover for themselves?

AM: That’s a good question. One of the things that we chose to do for that reason, was choosing Old Mutual alternative risk transfer as our underwriting partner. This means we write our company on an Old Mutual group companies license, which has helped give us credibility. We’ve also had to spend quite some time doing user-testing to understand what they need in order to feel comfortable. In reality, what we found was that a lot of people would start the process online, but would actually want to complete the process telephonically with one of our agents. We still have, relative to what we like, a higher proportion of call centre fulfilment than we expected.

LN: If everything is done online, is there any need for brokers?  

AM: In the SMME space specifically, we have a mixed strategy, in that we have a big digital marketing focus, with self-service and there are quite a lot of companies out there that are comfortable with that; they’ve been banking online for sometime and that’s given them the confidence to do their transactions online. There are also a lot of people who want to see a human being, so for that reason, we are also recruiting and hiring our own agents and looking to work with independent brokers. The reason that we think this makes sense for independent brokers is it’s because our product is essentially an online product. A broker can now serve a small company in an economically viable way. Now with commission regulations as they are, there’s not a lot of commission for brokers where the company has a small workforce, for example – with us they can provide for a very little effort, knowing the cover is good value for money. We think it’s going to be a win-win for both parties.

LN: What happens when an employee leaves the company?

AM: Practically, the removing and adding of employees on the system is a pretty simple process that happens via a user console, so employers can add and remove employees as they come and go. The cover essentially adjusts by the premium of the person who is coming in or leaving the payroll. When people leave, they have the option of converting their group policy to a retail policy without having to go through a waiting period. They go directly onto a retail policy, which is generally at a very similar price to the price of the group policy. In most cases, the group policy is at a slight discount, but in general where people convert, it’s in the same ballpark. Our prices are such that people pay almost the price they were paying for the group cover.

LN: What growth have you seen so far?

AM: It’s been early days, we’ve launched the group product in November 2017 and we’ve had more than 3 000 unique visitors to the group on our site. People are signing up kind of roughly in line with what we were hoping for. What has been interesting is that we’ve had a few companies that are significantly bigger than what we expected. Our target market was companies with staff between five to 25 staffers as we felt these were under-served by the traditional players via their traditional broker models. Surprisingly, we've had larger companies signing up for the product and that’s quite exciting for us. It’s actually causing us to rethink our product mix a little bit. It seems like we may need to add some slightly more sophisticated component to cover, for example, critical illness and occupational health disability options as we currently don’t have those as part of our standard offering.

LN: What products do you currently offer specifically?

AM: Currently, we have a simple disability product, which is essentially a physical impairment and it’s very easy to administer. We also have a family funeral product, which is the traditional family funeral cover for the principal member, his or her spouse, and up to five children.

LN: Any expansion plans in the pipeline?

AM: Certainly, adding critical illness and occupational disability is definitely in our near future.  We are looking at potentially going into other markets geographically. There’s been quite a lot of interest in our products from big players who are keen to partner with us into other markets, that’s something that we’ll probably be looking at seriously in 2018. We’ve just launched a referral programme in which people will be able to donate their referral fees to charity, so we’re quite excited about that. We are thinking what the appropriate charities and NGOs are. Ideally, organisations that are consistent in terms of their mission with us. In our retail business, we’re going to be adding some additional rating factors and increasing our cover limits, which will hopefully mean now we can serve even more of the market than we do right now.

LN: Challenges?

AM: The South African market is very competitive; there are some big players as well as sophisticated players. Marketing has been more of a challenge than we anticipated. What we found is that where we try to do what everyone else does, we fail, but where we back ourselves and do our own thing, we do well. Our main challenge has been collections. We found that the market is very stressed financially and collection rates have been far worse than we anticipated, especially where we do what everyone else does.

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