Insurance industry… ripe for disruption

Johan Ferreira, Chief Legal and Compliance Officer, African Unity Life (AUL), chats to u|Chief about the changes and disruptions facing the insurance industry.

The insurance industry is undergoing seismic disruption globally and in South Africa, new legislation and advancements in technology are helping the local industry to move with the times. From interesting mergers between corporates and insurers to the newly signed Insurance Bill that will open up the market to new, dynamic players such as micro-insurers, it’s an exciting time to be in insurance. Johan Ferreira, Chief Legal and Compliance Officer at long-term insurance provider African Unity Life (AUL) plays a key role in mapping new legislation with business strategy to ultimately create new, innovative opportunities for lower-income earners specifically, to benefit from insurance cover.

What issue currently affecting the insurance industry keeps you awake at night?

The publication of the new Policyholder Protection Rules will have an enormous influence on the solvency requirements for insurers playing in the lower income group funeral insurance space. We are working on solutions but the influence on the current funeral group business models, for insurers, will be material.

Many believe that insurance is one of the industries ripest for disruption in South Africa. Where do you see the greatest opportunity?

Disruption will be in the low-income market and will, in all probability, be from a technology point of view. With micro-insurance on the horizon after the promulgation of the new Insurance Act, there will be an opportunity for all the players to totally disrupt insurance as we know it. To be successful insurance will have to become more accessible to the lower income market, it must be reasonably priced and should be available on a mobile application, all this while the protection of the client will be the number one priority of the insurer. A great example of this approach is AUL’s partnership with Spazapp to offer affordable funeral cover that can be purchased using a mobile phone at ‘spaza’ shops.

In terms of this disruption – what is the greatest threat? 

Like in most regulated industries the applicable regulator – although our regulator promotes innovation – will keep an eye on disruption to make sure the players stay within the lines. The problem, of course, is that disruption in a heavily regulated industry is much more difficult than in an industry with no regulation.

“The problem is that disruption in a heavily regulated industry is much more difficult than in an industry with no regulation.” – Johan Ferreira, African Unity Life.

The recent Budget announcements weren’t good news for the average South African, who will be worse off after 1 April. How do you think the insurance industry needs to (or can) adapt to these changing financial circumstances? 

The protection of risk incidents is our game and we need to find more ways to really add value to the everyday life of all South Africans when we develop financial products. I see cheaper bundled products with extra non-financial services-related value-adds that are extremely quick to access, and easy to use and provide a genuine value to the client that has an impact on their daily life. In future insurance products will add value during the life of the policy, not only when you need to claim.

What is the main purpose of your role as Chief Legal Advisor? 

From a strategic point of view, my main focus is to scan the regulatory environment and new legislative developments in order to make sure the company’s strategy is aligned with what is happening on the regulatory front. Regulatory change is a material risk in our industry and regulatory developments can effectively have a huge negative influence on your business if you do not plan ahead and align your business. At AUL we try to be involved as much as possible in the development phases of new legislation by engaging with the regulator and other industry bodies like ASISA. This way AUL can actually influence the development of legislation to the benefit of clients as well as industry. A balanced approach in developing new legislation is always important – development cannot be client-focused alone as the insurers need be taken into account as critical role players.

What would you say to someone who is keen to pursue a career in the insurance industry?

The insurance industry – and its many service providers – is enormous and there are a number of different career options available. I would suggest you study all the different career opportunities in the industry, find your interest, and pursue it. The scope for growth and development into different segments of the industry is limitless, which is why I would recommend it.

What are the key attributes one should have to be successful in this industry?

Always focus on solutions if you are on the legal side of the business – it is easy to point out the numerous obstacles to the business to grow, the challenge, however, is to find the legally correct solutions.

Where do you feel the most dynamic crossroad is between insurance and law?

If you involve yourself in the industry it truly is a way to be involved in and contribute to the development of new legislation/regulations/directives that influence the future of the insurance industry. At AUL we align the business strategy with legislative developments by taking a look at what is on the horizon and I find my involvement in this, from an internal legal advisor point of view, to be extremely fulfilling.

What is the best part of your job? 

Aside from being involved from a strategic point of view, I find a real joy in advising on litigation matters in our complex regulatory environment. I was fortunate (depends on your viewpoint!) enough to be the instigator and advisor on a matter that saw a successful end in the Constitutional Court during 2016. Even though I only act as an advisor on litigation matters, it still seems to get the adrenalin pumping!