Credit: Retha Ferguson / Precium 
Unpacking South Africa’s insurance gap
If the average South African earner wants to ensure that their family can maintain their standard of living in the event of their death, provision needs to be made for R1.8 million. However, the average South African earner has life cover of less than R800 000 – leaving an insurance gap of R1 million. This increases to a gap of R1.4 million in the event of disability.
The insurance gap is reported for different segments of the population in terms of income, education, age, province, and gender.
The gap represents a significant risk to households – particularly those reliant on a sole breadwinner. Without appropriate cover, a family’s entire asset base can be decimated leaving them open to serious financial consequences.
As part of Precium’s women-focused audio series, Reclaiming Ambition, Berniece Hieckmann, COO of Abacus Insurance, a division of PEPKOR, shares how she thinks innovation and purpose-led ambition can contribute to a solution.
“Embed yourself in the reality of the consumer”
In a society as diverse and unequal as South Africa’s, insights development is an ongoing journey that must go beyond seeing consumers as demographics. “It’s not a project task, it’s a persistent task,” says Hieckmann, “because people aren’t frozen in time.”
To stop building antiquated products, organisations need to ensure that their consumer research isn’t done with a confirmation bias. This starts with understanding what problem the business is trying to solve. The innovation is then led by nature and size of the problem, rather than by trend or technology.
Hieckmann believes in a multidisciplinary approach to both insights and product development particularly as problems become more complex and systemic.
“You have to take people from very different disciplines into a co-creative environment where they can see [the problem] from different angles,” she says.
“Real, tangible, valuable”
With her background in traditional insurance, Hieckmann believes that the next step for the category will be transforming products into value for consumers. “I’m excited to see insurance becoming real, tangible, simple, and valuable for an ordinary person.” This will go a long way to facing a significant contributing factor to the insurance gap: a widely held mistrust of the industry by consumers and a lack of education.
Even at the top end of the income ladder (those earning >R713 000 per annum), there is an insurance gap of R3.2 million per earner*. “There was always this myth in the industry that insurance is sold and not bought, we need to be able to build products that are truly buyable,” she says.
“Ambition starts with purpose”
Having sat in every seat around the boardroom, Hieckmann’s ambitions are deeply rooted in purpose: she wants to do her part in creating better financial inclusion. Her purpose is echoed in her opinion on the operationalisation of artificial intelligence. “How do we make sure that the advent of artificial intelligence is beneficial to all market segments? […] I’m passionate about making sure that we don’t make the invisible economy bigger by excluding them through algorithmic and AI-driven decision making.”
Amidst the trend towards digital-first models disrupting South Africa’s traditionally intermediated insurance sector, this is a vital perspective.
Numbers from the ID4D Global Dataset (an initiative titled ‘Identification for Development’ by the World Bank) indicate that:
- at least 1.1 billion people do not have a digital record of their identity
- at least 1.25 billion people do not have a digitally verifiable identity, and
- at least 3.3 billion people do not have access to a government-recognized digital identity to securely transact online.
This prevents access to financial and other basic services, as people are unable to verify even the most basic of personal data – including their full name. Where unbanked consumers do have formal identification, they often lack the documentation and credit records required by financial service providers to assess creditworthiness and perform consumer due diligence (often referred to as ‘thin-file’ customers).
With artificial intelligence, organisations have the potential to further exclude “invisible” people or harness the power of alternative data, like mobile phone usage, monthly payments (e.g. school fees or electricity bills), social media activity and biometric identities to overcome barriers to financial inclusion.
“Wicked problems are those problems that are so big that it doesn’t look like anybody can contribute to a solution. So, global warming, poverty, access to medical care… The genesis of these problems is a power imbalance. Somebody needs to give. It’s sacrificial. I think that’s the biggest problem that humanity faces: everybody wants a solution, but nobody wants to give,” concludes Hieckmann.
Insurance, at its core, is about protection. To ensure that those most vulnerable to economic shocks can be protected, the industry must embrace purpose-led innovation that combines technological advancements with deep customer-centricity. This multidisciplinary problem solving starts with an ambitious proposition to executives and their employees: what is the change we need and how do you contribute to a solution? DM
Reclaiming Ambition is a women-focused audio series developed by Precium, the series delves into ambition and innovation seen through the lens of women in executive roles across categories. Precium is the first African payment platform purpose-built for enterprise. The company helps businesses optimise payment performance, automate financial operations, and craft extraordinary customer experiences through its modular payment platform.