In 1909 Henry Ford made the famous comment, “Any customer can have a car painted any colour that he wants, so long as it is black.” How far we have come in a hundred-and-some years. These days we can drive a car in any colour we choose. We can also choose from hundreds of models and thousands of optional extras. We can even opt not to have a car at all, but purely to make use of ride hailing services.
If all this has changed since 1909, just imagine what lies ahead. Hendrik Heyns at Brolink says the future of cars – and, by extension, motor insurance – is enormously exciting.
“We have a lot of positive change to look forward to in the South African motor industry in the next 10 to 15 years, and the insurance industry will have to keep up in terms of the morphing risk profile that all these changes will bring,” he says.
The South African motor vehicle market today
There are close to 11,5 million vehicles on our roads today, of which 65% are passenger vehicles and 23% are light delivery vehicles. Minibuses, motorcycles and trucks make up about 3% each.
According to Brolink, market research indicates that 40% of South Africans plan to keep their vehicles for five to 10 years, while 35% of us intend hanging on to our cars for more than 10 years. This means the vehicles on our roads are getting older and older. The research also notes that the average age of vehicles on our roads is around nine years, while the average car is sold with just over 74 000 km on the clock.
What does the future hold?
Heyns says there are several areas of the motor industry that will see significant change in the coming years, all of which will impact the way we do motor insurance.
Reduction in claims and premiums
During the first half of lockdown, Brolink noted a significant reduction in accident, theft and windscreen claims.
“With people using their vehicles less, the result has been be a reduction in claims, with a commensurate reduction in premium,” says Heyns. “A lot will obviously depend on trends that emerge as the economy starts to open up, but we believe that working from home will become far more commonplace than it was before Covid-19, even after lockdown has ended.”
Advanced telematics, ecosystems driven by AI and machine learning
Vehicle telematics is growing from a niche feature into a mainstream product. South Africa is considered a mature market when it comes to telematics penetration. Around 12% of vehicles on our roads are fitted with some sort of telematics device.
“The use of telematics influences premium amounts and discounts or cashbacks received,” says Heyns. “The technology employed in telematics can be seen as a precursor to an environment that relies more heavily on artificial intelligence and machine learning – ultimately leading to situation where apps and telematics are connected to external data sources, creating a one-stop, interconnected environment.”
Usage-based insurance has created a more personalised experience for customers, but Heyns believes we are still only 30% of the way there.
“Right now clients are able to make changes to their policies as their circumstances change, but not in real time,” he says. “This results in delays when it comes to processing the changes.
“We see a future of flexible rating models that adapt in real time to the changing circumstances of clients.”
Insurtech and digitisation
The most innovative companies today are forging insurtech partnerships in order to compete effectively for new digital-native customers.
“The companies that survive into the future will be those that disrupt the status quo with new digital products and businesses that reinvent conventional insurance offerings,” says Heyns. “Digital innovation is key to winning customers and creating new revenue streams.
“Analytic innovation – which includes predictive and prescriptive analytics of big data, artificial intelligence, and optimisation – is conquering the world, and the insurance industry along with it.”
Ride hailing services
Over the years we have seen the rising popularity of ride hailing services such as Uber and Bolt (previously Taxify). With rising vehicle and fuel costs, ride hailing is expected to grow exponentially and eventually integrate into the introduction of autonomous vehicles.
“Ride hailing services may reduce vehicle ownership to a more niche population,” says Heyns. “These services look set to disrupt the motor insurance industry as more people opt for e-hailing and ride sharing over owning a personal vehicle.
“The insurance industry will have to adapt and become more flexible in its cover and product offerings in light of this trend.”
The Brolink future
Telematics is a smart device (sensor) and most definitely fits into the Internet of Things, where the world becomes more and more interconnected. In this connected world, companies are expected to provide a complete customer experience and need to embrace digitalisation, which sees the merging of digital, strategy and innovation.
Brolink has an eye on both the long- and short-term future and is developing technology that can adapt to a changing insurance environment as it unfolds. Technology has always driven our industry forward, and the digital evolution currently being experienced is no different. We have embarked on a mission to be at the cutting-edge of the developments in our industry and have put plans in place to gear our offerings towards this goal.
“As we prepare for a radical and digitalised new normal in 2025, we plan on an acceleration of our digital transformation journey, started in 2017, with key focus on our digital portal to support the increase in digital brokers,” confirms Brolink’s Howard John.