Telesales pivotal in reaching underserved insurance markets

By increasing insurance penetration and stabilising marginalised communities, telesales can help drive SA’s economic growth.

The insurance sector plays a fundamental role in South Africa's economic growth. Lloyd's research shows that just a 1% increase in insurance penetration leads to increased investment equivalent to 2% of national GDP. The London based specialist insurer adds that insurance brings greater stability to governments, business and communitieis. It takes the financial burden of recovery after catastrophes off taxpayers and boosts economic growth. 

KPMG’s ‘Insurance in Africa’ report cites an article by Imara, an investment banking group, that says most traditional insurers target only the wealthiest 5% of the adult population, with the poor having no insurance.  In South Africa, despite its well developed insurance market, less than 30% of low-income adults have any form of insurance. This presents a significant opportunity to grow insurance penetration in SA’s underserved markets. This needs to be done by providing access to low-cost, simple insurance products (known as micro-insurance) to lower income consumers, providing greater financial security within these communities.

Micro-insurance starts with risk management products designed to meet the needs of lower income households. It plays an important role in financial inclusivity for all South Africans.  A more financially inclusive, better risk-prepared society supports the country’s overarching macroeconomic objectives of economic growth, job creation and poverty alleviation.

“There is no denying that the financial impact of an uninsured loss or event is particularly hard felt in lower income populations. Low-income households and families are hardest hit by risks such as disability, disease, accidents, and death of a family member or breadwinner. People without appropriate cover are more likely to find themselves in debt traps. They have less access to proper care, are less likely to recover from a crisis, and more likely to remain trapped in the cycle of poverty perpetuated by uninsured setbacks.

Another significant challenge according to the KPMG report is that many urban poor consider savings and access to loans as a means of managing their risks.  The concept of paying now for protection against a future potential event is abstract and not something these consumers intuitively accept. Educating consumers about the availability and role of simple, affordable insurance products is paramount, and a cornerstone of delivering a more secure and economically active society,” explains Rogan Davies, Group CEO of O’Keeffe & Swartz. 

This is where insurance telesales plays an invaluable role. With 59 million registered mobile phones out of an approximate population of 52 million, telemarketing’s role in the growth of the insurance sector in South Africa’s underserved markets should come as no surprise,” he adds. 

O'Keeffe & Swartz (OKS) is an outbound call centre selling up to 60 000 policies every month for simple insurance products via direct marketing methods.  Established in 1993, its clients include the major banks and insurance companies in South Africa.  

As a distribution channel, telesales has proven omnipotent in providing consumers with financial products that they would otherwise never have known about, or had access to. Proof of its efficacy lies in the fact that within South Africa’s bancassurance sector, telesales is the primary sales channel, with an estimated R429million in premium sold through call centres according to an RGA Bancassurance 2014 report. Telesales, coupled with the trust of an existing client-provider relationship, is a tough act to beat.  

“Telemarketing is effectively used by product providers with affinity databases, such as banks. They leverage the relationship of familiarity and trust to sell, upsell and cross-sell added value insurance products to existing clients.  Consumers are more receptive to a telesales pitch when it comes from a known and trusted service provider. In this space, we’re also seeing a growing demand for and take-up of healthcare, cancer and disability benefits. We expect this to continue as marginalised consumers recognise that their lifestyle risks extend beyond funeral cover alone,” adds Rogan. 

But is telemarketing still effective in the face of new technology?

It's easy to be pessimistic about the future role of telemarketing. Some of that perception is justified when one considers the heady ‘free for all’ days prior to the Consumer Protection Act (CPA) and the Protection of Personal Information Act (POPI). Unprofessional operators did a great deal of damage to the telemarketing industry by burning out databases and pitching products to wholly unsuitable markets.  Now, regulation has played an important role in cleaning up the industry and levelling the playing fields.

“Direct marketers are specialists in target marketing by combining database capabilities and analytics to target the right customer, through the best channel, with the right product, at the right time, and at the right price. O’Keeffe and Swartz has over 23 years of experience in getting the formula right and we set the standard in terms of ethical selling and regulatory compliance,” explains Rogan.  

For many consumers, their first insurance product is sold to them via a telephone call. It is their very first step onto the insurance ladder and first exposure to the concept of financial planning.  For many there will be a natural evolution to more sophisticated products, and a greater propensity for them to seek financial advice as the complexity of their financial portfolios grows.

“Telesales plays a fundamental role in unlocking new and emerging insurance markets that traditional distribution models have typically been unable to reach. The insurance industry simply cannot grow beyond the top 5% of the population unless we use channels that educate consumers and clearly demonstrate the inherent value that simple and affordable insurance solutions can bring to their financial stability.  Policies cannot be sold without making the offer first.  Telemarketing of simple insurance products has proven to be a highly effective tool to reach consumers. It provides valuable information, access to products that consumers would otherwise not be exposed to, and a progression to more secure lifestyles that support financial inclusion and in turn, economic growth,” concludes Rogan.

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