SIKI MGABADELI: Lizé Lambrechts is the first female CEO of Santam, the country’s largest short-term insurer. Santam is the short-term insurance arm of Sanlam, where Lizé has spent her entire career. She joined Sanlam as an actuary in 1985.
She was at the insurance conference taking place in Sun City, where Moneyweb’s Hanna Barry caught up with her. And, given that Lizé has only been in the short term insurance industry for a few months, Hanna asked her what surprised her the most about the short-term industry.
LIZÉ LAMBRECHTS: What I noticed first, immediately, was how different it is to the long-term industry – completely different. I wasn’t expecting it to be so different. You think financial services is financial services, but it is completely different. I also noticed that there is a huge level of skills and capabilities in the industry, which I found almost pleasantly surprising. The people in the industry are extremely knowledgeable. And the partnership between the brokers and the insurers and even the reinsurers is quite a powerful partnership that works for the benefit of the clients in the end.
HANNA BARRY: So lots of positives in the sector. What do you think the short-term insurance sector can learn from the long-term sector?
LIZÉ LAMBRECHTS: I think the one thing for me – and it’s my viewpoint, I could be wrong, people could differ from me and they are welcome to – but I still see very much a product-centric approach in the short-term industry. It’s about the product, how do we sell the product to the client. I think we need to certainly maybe engage a lot more with clients to really understand what it is that they really want, and hopefully in that way we can actually increase the penetration because we do have a big problem with penetration in the industry. Too few people are utilising short-term insurance and that’s not just bad for the individuals but also for the economy in general.
HANNA BARRY: Certainly one of the challenges is increasing that insured pool. And then short-term insurers I think face a number of challenges from regulation to increasing the insured pool, and to the unpredictability of their risks. As an actuary you like, I’m sure, predicable risks. You like to model risks and, on the long-term side I think you can do that quite effectively. On the short-term side those skills are there, but you can’t necessarily predict all those risks like a fire, like a hailstorm in Gauteng in July. How do you approach that sort of unpredictability of risk?
LIZÉ LAMBRECHTS: I think fundamentally I’ve had to make peace with the fact that the industry is a lot more volatile. So you are not going to be able to predict with a huge degree of confidence what’s going to happen in the next ten years. Having said that, the short-term industry actually has masses of data, a lot more than I expected, and they use the data very well. Unfortunately what has happened in the past isn’t always a prediction of what’s going to happen in the future – but it’s actually quite sophisticated. It’s a credit to the actuaries and the statisticians and all the other people in the industry that they have what they have at the moment.
What we do in the short-term industry, also to help with this inherent volatility, is to make use of reinsurance, a lot more than on the long-term side. And if there wasn’t a reinsurance market, it would actually be very difficult to provide short-term insurance to anyone, I guess, in any country but particularly in South Africa.
HANNA BARRY: Back to that insured pool – the cost of insurance is an issue for the majority of South Africans. Short-term insurers complain about margins being pressed – is there space for the cost of insurance to come down?
LIZÉ LAMBRECHTS: For the cost of insurance to come down – it’s a bit of a Catch-22 I guess – we will have to increase penetration because, if you are spread over a bigger pool, of course the cost will come down. But I guess which comes first, the chicken or the egg? Affordability first and then you will increase the penetration. So that’s one way of bring the cost down. The other way of course is to make sure that we reduce the risk. So change or incentivised behaviour, whether it’s good driver behaviour or good behaviour in terms of running your factory, making sure that you’ve got a working sprinkler system, and then working with government to change other risks on the ground. In the end the premium is largely determined by the risk. So if we can reduce the risk, that’s I think the best way to actually reduce the premium.
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