Successfully launching a new insurance product to market is challenging, requiring product innovators to pay more attention to the time and resources required to develop, refine, launch, distribute, administer and take the insurance product to market and break even, and finally, a sustainable and profitable business.

“This is where early-stage collaboration with the insurance underwriter is crucial in bringing invaluable expertise, technical and regulatory knowledge, capital and technology backing, and support to the table, identifying any potential challenges in the market before the product is launched. Equally important is to get a solid understanding of the working relationship and culture between the product developer - such as a UMA, broker or Insurtech business, and the insurer – establishing upfront whether this is a good match,” says Cornel Schoeman, Chief Operating Officer of GENRIC Insurance Company Limited.

“With insurance industry regulations requiring onerous capital adequacy limits forcell captives as well as delineating the types of businesses that may own a cell captive, GENRIC’s model gives Insurtech start-ups, underwriting management agencies, and entrepreneurs a more financially viable and practical alternative to bring new insurance products to market outside of the traditional and prohibitively costly third-party cell captive arrangements. It is here where our partnerships with UMAs have been the backbone of a growing insurance business able to innovate and meet the needs of highly specific and rapidly evolving market needs,“ explains Schoeman.

The role of UMA and Insurer

The UMA is essentially given the underwriting and claims authority via a Binder Agreement by an insurer, which means a UMA determines the terms and conditions and pricing of the policy, issues the physical policy to the insured, and handles all the administration, claims management, product marketing, and client engagements, distribution and so on. As the product innovator, the UMA retains business control while participating in the insurance sector.

The insurer provides the underwriting on the insurance product offered by the UMA, the insurance license, and onerous capital, solvency, and technology/systems integrations to bring an insurance product to market. Some examples of these niche insurance products that typically operate on this basis include specie insurance, cash-in-transit insurance, equine insurance, gap cover, goods-in-transit cover, mechanical warranty cover, and so on.

GENRIC unpacks some of the challenges of bringing a new insurance product to market and why early-stage collaboration with an insurance partner is critical:

• Product design: An underwriter can provide input on the design of a new insurance product to ensure that it is profitable and sustainable, including determining appropriate coverage limits, deductibles, and premiums, as well as identifying potential coverage gaps.
  
  
• Regulatory Compliance: Complying with complex regulations and obtaining necessary licenses and approvals is time-consuming and very costly not only from a financial perspective but also from a systems/tech and human capital perspective.
  
  
• Market Saturation: The insurance market is highly competitive, with well-established players offering a wide range of products and protecting their market share. Breaking through the noise requires a solid value proposition to differentiate in the market, and even then, effective (and expensive) marketing and distribution strategies are critical to go from awareness to conversion.
  
  
• Risk Assessment: Developing a new insurance product requires research, data analysis, and actuarial expertise to determine pricing, coverage, and underwriting guidelines. Insufficient risk assessment can lead to adverse selection, inadequate coverage, and outright failure.
  
  
• Distribution Channels: Insurance distribution is incredibly challenging in the South African market, where consumer financial education levels are massively disparate. For all the hype around direct and online insurance, traditional broker models of insurance distribution where brokers provide financial education and advice remain critical in South African insurance models, and these can be difficult to break into without the backing of a big insurance player. Developing alternative distribution channels, such as online platforms or partnerships, takes much work as it requires substantial capital investment.
  
  
• Customer Trust and Perception: Launching a new product requires establishing credibility and demonstrating value to potential customers, and this is where the backing of the insurance partner makes a big difference.
  
  
• Claims Management: Developing robust claims management systems and processes to handle potential claims promptly and fairly is essential. Failing to provide satisfactory claims experiences can harm the reputation of a new insurance product before it is properly out of the starting blocks.
  
  
• Capital Requirements: Insurance products involve managing risk and paying claims requiring substantial capital reserves. Adequate capitalisation is necessary to meet regulatory requirements and instil consumer confidence.
  
  
• Technological Integration: Developing user-friendly, multichannel digital platforms, implementing data analytics, and ensuring cybersecurity are complex tasks. Investing in the right technology and expertise can be demanding, particularly for startups or companies without prior experience in the insurance industry.

The retention of entrepreneurial skills in the partnership is critical

UMAs and Insurtech start-ups are known for their innovative and agile approach to business. They are owned and run by business individuals and entrepreneurs with a great deal of insurance industry experience and specialist skills in certain niche lines of business. As smaller businesses, they are also typically much closer to their clients and have invaluable insights into the niche markets they serve.

Candice Hobday of Arco 360, specialist brokers in equine insurance and the market leader in their field, and Francois Haasbroek of Automotive VAP Solutions, which offers one of the most comprehensive niche insurance offerings for the automotive market, provide their insights into what makes for a successful Insurer partnership.

• Smaller businesses typically know their customers and markets better - as they are close to their clients and tend to have more frequent personal interactions with them too. Arco 360 points out this is particularly true in equine insurance, where they have personal relationships with their horse owner clients, given how small and specialist this market segment is. This proximity to clients provides valuable insights into customer needs and preferences, which can inform product development and marketing strategies. In many instances, the UMA or broker partner can provide specialised and bespoke cover for their clients and facilitate this with the insurer.
  
  
• Niche focus: UMAs are focused on serving a specific niche market, which allows them to develop a deep understanding of their customers' needs and preferences. This means their products and services are more effectively tailored to meet the needs of their target market.
  
  
• Flexibility: UMAs are flexible and adaptable, allowing them to respond more quickly to changes in the marketplace. This can help them stay ahead of trends and meet the evolving needs of their customers.
  
  
• Customer-centric culture: UMAs emphasise customer service and satisfaction because of the more personal nature of their customer relationships, which helps them build strong and enduring relationships with their customers.

• Innovation: Because UMAs will have a specialist focus, they can bring an innovative approach to business and develop new products or services by having their finger on the pulse of their client’s specialised needs.
  
  
• Culture: UMA businesses have a unique collaboration, creativity, and innovation culture. From the outset, the culture fit between the UMA and Insurer is critical – the UMA partnership model is designed to promote ownership retention, allowing the entrepreneurs behind niche insurance businesses to leverage existing and robust frameworks of the underwriter while focusing on their specialist, expert skills that differentiated their products and solutions in the first place.

“The very existence of entrepreneurial businesses is premised on the fact that they are driven by people with highly specialist and expert skills who want to operate and grow their insurance businesses without the distraction or red tape of large corporate environments and bureaucracy. As GENRIC, we aim to enhance both businesses through a partnership approach that establishes the regulatory, compliance, capital, and good governance controls necessary to differentiate the market by focusing on niche and specialist insurance segments. GENRIC has invested heavily in developing a fast and responsive business partner model that can bring a specialist insurance solution full circle from conceptualisation to live in the market within three months. Our goal is to collaborate early, find ways to help improve the customer experience, develop new lines of coverage that meet the market's evolving exposures, and optimise and modernise traditional insurance distribution to compete and deliver in a rapidly evolving market,” concludes Schoeman.

-- ENDS --

GENRIC Insurance Company (Pty) Ltd is an Authorised Financial Services Provider (FSP 43638) and licensed non-life insurer.