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Digital-first, digital-direct is here to stay

Some of the changes we have seen during lockdown in terms of consumers’ willingness and eagerness to interact digitally will be with us as a permanent fixture.
Read time 6min 10sec

As lockdown continues, I’ve seen increasing reporting that we need to get used to the “new normal”. In most cases, this is referring to social-distancing, mask-wearing and perpetual-fear as things that will be with us for a long time.

Call me a sceptic, but I’m not convinced this current-normal will be with us in perpetuity. After all, human history has shown us (with significantly more severe viruses than COVID-19 – like the Spanish Flu which is thought to have killed around 300 000 South Africans) that after a period of natural distancing and precautions, we as social humans revert back to the old normal surprisingly quickly.

However, having witnessed changes in consumer behaviour from the viewpoint of a digital business, I’ve become more convinced that some of the changes we have seen in terms of consumers’ willingness and eagerness to interact digitally will be with us as a permanent fixture.

Almost three years ago, we launched Sanlam Indie with the intention of making the process of buying life insurance through digital channels simpler, more intuitive and more rewarding. This mission was always going to be a challenge given that the status quo of buying life insurance involves advice-driven, face-to-face interactions with financial advisors or brokers.

In spite of this, Sanlam Indie really started to grow in 2019, and going into 2020, we were positioned to be able to serve an ever-increasing number of clients. Although we couldn’t provide the same depth of personal touch as financial advisors, and our product suite was designed to be simpler and quicker, we found there was a small, yet growing, potential client base who would choose to interact with a life insurer directly; both online and over the phone.

It made sense to us that younger, more digitally-savvy individuals would opt for a digital-direct experience – at least for their first cover purchases while their needs are simpler. It’s no surprise then that the average age of Sanlam Indie’s clients is significantly lower than Sanlam’s more traditional distribution channels.

The lockdown period has highlighted to us, and our stakeholders, what an advantage “digital” capabilities can bring to a business.

Once lockdown struck, we saw a number of interesting things happen. The demand for our digital-first approach increased almost immediately, with the number of new clients added in May this year being more than 4x greater than May last year (and 2x greater than January this year). Clearly, in the age of “social distancing”, the ability to interact with a financial service provider through zero-touch methods was appealing.

Anecdotal evidence from other digital financial services players suggests a similar increase in demand.

One might argue that this uptick comes as a result of fear – people insuring their life in the face of a health pandemic; but the corresponding downtick in traditional insurance channels indicates it’s a shift towards digital engagement rather than fear-based buying. There is every possibility that during this economic contraction, the overall demand for life insurance is lower, yet direct and digital players are picking up more of the shrinking pie.

I think we can admit, with humility, that the life insurance industry has lagged behind banks in terms of our ability to do more for clients through technology. For many of us, online banking has been the “normal” way to bank for years, so in the age of coronavirus, the way we interact with our banks hasn’t changed much. The same can be said for many investment providers.

However, life insurance was a difficult nut to crack for a number of reasons:

  1. Personalised advice is complex. Knowing what you should buy and how much you should buy can be a daunting task.
  2. Life insurance products are often unnecessarily complex. Relative to how simple banking has become (see Capitec), life insurance is a veritable minefield of complexity.
  3. On top of these, buying life insurance has been a pretty complex affair, not only in terms of how much data needs to be provided but also with the complexity and friction of the medical underwriting experience.

In traditional insurance where an intermediary is involved, a lot of this burden is removed from the client by the intermediation process itself. Therefore, since the advent of Sanlam Indie, we have been working tirelessly on these challenges (and many others) to overcome the “trade-offs” for clients to interact digitally.

We’ve made some big strides, especially around the simplicity of the product suite and underwriting process, where most of our new clients can get quoted, underwritten and covered in under 10 minutes. Yet we know we have much more to do as we strive to create better and better client experiences.

Looking forward, the lockdown period has highlighted to us, and our stakeholders, what an advantage “digital” capabilities can bring to a business. This is immensely encouraging and a positive sign for things to come.

We have also realised that we need to do so much more to remove the negative trade-offs which come with dealing directly with an insurance provider. We will not be able to replace the high-touch human experience, but we can still strive towards increasingly personalised and contextually-aware client experiences. In addition, there’s a lot of work to do around helping our potential clients understand their needs better, and how our solutions can (or can’t) meet those needs.

From our perspective, digital and intermediated experiences need not be mutually exclusive – but rather be seen as a consistent set of experiences along a continuum. We will have our fair share of clients who will evolve to having more complex needs that we can cater for (or who would prefer to migrate to a human intermediated experience). We need to be able to help our clients direct themselves to the right solutions for them, which is an easy idea conceptually, but comes with many practical challenges.

For intermediaries, this lockdown should reveal the importance of embracing digital technologies themselves. Those who were already familiar and comfortable with technologies like Skype and Zoom (and importantly had clients who were comfortable with these too) were better able to adapt to the new circumstances and had an advantage out of the gates. Increasingly, we need to be comfortable with the idea that personalised face-to-face experiences need not be “cheek-to-cheek”.

Ultimately, the biggest long-term winner from this experience will be our clients. We’ve all had to accelerate our efforts and hone our focus on the client’s experience again; and despite the challenges this lockdown has presented, it looks like it has been a necessary catalyst to energise organisations towards this goal.

There might be some truth in the quip that COVID-19 might be the fastest igniter yet of digital transformation.

Peter Castleden

CEO, Sanlam Indie

Peter Castleden is CEO of  Sanlam Indie , a wholly-owned subsidiary of Sanlam Life. He spent the majority of his career within the Sanlam group prior to starting  Sanlam Indie, most recently heading up the actuarial product management function. His experience has helped to mould the innovative product design at  Sanlam Indie, where the team is on a mission to bring digital together with design-led thinking in the financial services environment.

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