Covid-proof your insurance

We look at pandemic consumer behaviour and what it means for your insurance and personal financial planning

WORDS: SUPPLIED – PHOTOS: SHUTTERSTOCK

T

he Covid-19 pandemic has changed consumer behaviour, reshaped what we want and need, and made us reconsider our priorities.

Some of these changes could continue as the pandemic subsides and include greater health awareness, digital adoption, value-driven purchasing, remote working, and ‘nesting’, as homes take centre stage in our socially distanced lives.

Carl Moodley, chief underwriting and claims officer, 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 emerging consumer trends have strong geographic dependencies and circumstances specific to South Africa’s social‑economic environment. Although the pandemic and its associated responses have highlighted inequalities in South Africa, the long-term effects cannot be assumed at this point,” he says.

However, the key trend of digital adoption in terms of work, learning, transacting and shopping is here to stay, so it’s worth unpacking the knock-on effects and whether traditional risks have changed in terms of prevalence and intensity as a result.

“There’s 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, but their cyber and property risks increase due to less robust cybersecurity measures, especially on personal devices and infrastructure at home, and greater use of their residential property for work functions,” says Moodley.

“Similarly, health exposures other than Covid-19 increase including depression and mental health as people struggle with the uncertainty and isolation of the pandemic.” He also highlights the impact of the delay in regular health checks and elective surgeries due to fear of Covid-19 infections, impacting the early detection of serious health conditions such as cancer, and the subsequent cost of treatment at a more advanced stage, and overall prognosis.

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How Covid-19 has changed risk and insurance needs

1.Increase in cybercrime

As e-commerce and reliance on digital banking and transactional platforms grow, cyber or online risks have soared. South Africa now has the third-highest number of cybercrime victims worldwide with approximately R2,2bn a year lost to cyberattacks. ‘Card‑not‑present‘ (CNP) fraud on SA-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. It’s one of the key reasons why personal cyber-risk insurance is now as important as home, vehicle and life insurance.

2. Mobility patterns

Remote working and learning mean people are driving their vehicles much less reducing accidents and theft risk. The integration of vehicle telematics will be increasingly important in insurance solutions that aim to reduce insurance premiums based on reduced mileage and better driving behaviour. A big shift to insurance solutions with a pay‑as‑you‑go component can be expected.

3. Changes in purchasing behaviour

With household budgets under tremendous constraints, consumers are looking at ways to mitigate against 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. 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.

4. Healthcare

The pandemic has amplified the need for healthcare insurance as consumers realise the implications of a health crisis on finances, especially where one has comorbidities. Where consumers are buying down on their existing medical scheme benefits due to financial distress, they’re taking up gap cover insurance to protect them against potential medical scheme financial shortfalls on specialist and in‑hospital treatment.

5. Interpersonal behaviour

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.

6. Crime increase

Car and truck hijackings have increased by 6% and 32% respectively in Gauteng, according to SAPS crime statistics released at the beginning of March. As the economy falters and more people find themselves unemployed and desperate, the crime rate is likely to increase. Insurance solutions that add extra layers of protection and private response to emergency situations are increasingly in demand.

7. Nesting and home improvements

During the pandemic, people had more time to attend to maintenance and upgrades as working from home triggered a need for workspaces and the upgrade of security and safety measures. Consumers are spending on renovations, DIY projects and luxury goods to compensate for unrealised holidays. Other areas of investment include solar PV solutions as load shedding and electricity costs push more consumers to grid autonomy. These renovations add to the value of your building and need to be accounted for in your insurance policy.

8. Political uncertainty and social unrest

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.

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