InsureTalk42 – underinsurance, Eskom, therapy and Bili the bot

InsureTalk42 took place online on 23 May, 2024. Our host, Christelle Colman, opened proceedings by reminding delegates that the CPD deadline is fast approaching, before introducing our event partner for the day, Old Mutual Insure – the oldest insurance company in South Africa at 178 years old.

Our first speaker was Carolyn Thompson from Old Mutual Insure, who spoke on “Exploring the impact and factors of underinsurance”.

Carolyn’s talk focused on the issue of underinsurance and its growing impact on the insurance industry and customers. Here are the main points covered:

Underinsurance occurs when a policyholder’s coverage is insufficient to cover the full extent of a loss, she said. This can happen due to various reasons, including taking lower coverage to save money, failure to update policies as life circumstances change, and not understanding policy coverage.

Inflation and increasing costs of goods and services further contribute to underinsurance as the value of insured items rises but the coverage does not adjust accordingly.

She gave a few examples of underinsurance for homeowners, both in terms of property values and contents. Inflation in the cost of goods, construction, and imported items significantly affects insurance adequacy. Fluctuations in exchange rates and the increasing cost of precious items like gold further exacerbate the issue.

“Intermediaries have a duty to advise clients properly, including warning them about the risks of underinsurance and ensuring they obtain adequate coverage,” she said. “Proper needs analysis, record-keeping, and clear communication of policy limitations and potential underinsurance are crucial to mitigate risks for both intermediaries and clients.”

Carolyn shared a number of strategies to avoid underinsurance, including regularly reviewing and update insurance policies to reflect current values and life circumstances. She recommended using expert evaluations and data tools to assess appropriate coverage levels.

She called on brokers to educate clients about the importance of adequate coverage and the potential financial consequences of underinsurance.

Clive Hogarth, also from Old Mutual Insure, was up next. He spoke on “Eskom and its impact on insurance” (or, as he termed it, “Eskom se pricing”).

“It’s going to be a very tight winter,” he warned.

Clive’s presentation covered four main areas: history of load shedding, its impact on the insurance industry, future expectations and global trends.

The government first admitted to load shedding in 2008, he said, linking it to issues like wet coal or lack of coal. Initial reactions included a sudden loss of power without prior notice, causing significant disruptions. The 2008 financial crisis reduced global demand, temporarily alleviating load shedding. But it returned, peaking in 2023 with 335 days of impact.

The impact of load shedding on the insurance industry has been wide spread.

“It has increased power surge claims, which were once minor but now tracked at board level,” said Clive. “Insurance products have been adjusted, often removing automatic power surge cover due to high costs. In addition, fraudulent claims have increased, requiring insurers to implement stricter verification processes.”

Clive said insurers has introduced exclusions for total electricity grid failure due to reinsurance constraints.

“The potential economic impact of a grid failure would be catastrophic,” he said, “prompting the industry to take cautious legal measures.”

But it’s not all doom and gloom. Beneath the obvious obstacles, there have been some positive stories. The growth of the solar industry, for example, presents new opportunities for insurers, though Clive warns it comes with risks like increased fire hazards from lithium batteries and installation issues.

“Load shedding has significant economic consequences, with costs rising for both consumers and businesses,” he said. “The insurance industry has had to adapt with new product offerings and pricing strategies for solar installations. Premiums have come under pressure due to inflation and increased claims, with commercial customers in particular facing high operational costs during load shedding.”

The future of load shedding is uncertain, with factors like demand, maintenance, and unplanned losses influencing outcomes.

“While there have been improvements in capacity and maintenance, winter demand and potential emissions control measures pose challenges,” he said. “The long-term outlook includes potential privatisation of electricity supply and reliance on renewable energy.”

Clive spoke of other countries like the UK and Germany who use pricing strategies to manage electricity demand, highlighting a global issue of energy supply shortages.

“South Africa could adopt similar measures, though social constraints limit full implementation,” he said.

His talk ended on a hopeful note, acknowledging the creativity and resilience of South Africans in addressing power challenges.

“As an industry we need to emphasise the importance of balancing customer needs, economic impacts and industry adaptation in navigating the complexities of load shedding.”

Thokozile Mahlangu gave her traditional IISA update, encouraging delegates to focus on getting their 18 CPD hours before the end of May, inviting those who haven’t already registered to sign up for the upcoming African Insurance Exchange, and encouraging non-members to join the IISA to add value to their careers as insurance professionals.

Rianet Whitehead, editor of FA News and founder of The Insurance Apprentice, reminded delegates to get their CPD sorted before the 31 May deadline.

“As the deadline approaches, the FA Newa CPD system gets increasingly slow, so try to complete your tasks soon,” she said.

In broader news, she said the upcoming national election has shown inspiring voter turnout among South Africans abroad.

“Many would return if issues like crime, corruption, and education were resolved.”

She also mentioned the NHI bill, which was recently signed into law, sparking controversy and numerous press releases.

“Additionally, the two-pot retirement system and hybrid working models are hot topics,” she said.

Upcoming events include several industry conferences, and a noteworthy achievement is a South African student team reaching the top eight at Risk World in San Diego.

“Our magazine has also been named best insurance and financial services magazine in South Africa for 2024! Stay updated through our FA News portal and newsletters, and feel free to reach out with any queries,” she concluded.

Cape Town-based acoustic pop performer and songwriter John Neil returned to the InsureTalk stage to perform a medley of soulful tunes, before Temwa Nyirenda, reinsurance underwriter at Santam Broker Solutions and winner of The Insurance Apprentice 2024, took the hot seat.

Temwa, who runs as The Wolf of Small Street on X, spoke on “Tools to master your mind in the insurance industry”, followed by a brief recap on how he plotted his victory in The Insurance Apprentice.

“Today, I will be your therapist, discussing tools to master your mind in the insurance industry, sharing tips I’ve used myself,” he said. “The only thing about a man that is truly human is his mind; everything else you can find in a pig or a horse. This emphasizes the importance of our minds, our biggest asset in the industry.”

Temwa shared five simple tools, not from ancient textbooks but practical ones you might already know.

“Firstly, be aware and deliberate about using these tools,” he said. “Tool number one is the power of perception, which influences how we view our world and how the world perceives us. For instance, my positive perception of expanding my practice led to greater opportunities.”

Tool number two is avoiding echo chambers, which limit our perspectives: “Surround yourself with diverse opinions to challenge and grow your thoughts,” he said.

Tool number three is understanding the poison of perfection: “Perfection limits growth and innovation,” he said. “Instead, strive for continuous improvement.”

Tool number four is guarding your mind: “Verify information and be selective about what you let into your mental factory, as it shapes your intelligence and perspectives,” he said.

Finally, tool number five is rest: “True rest is not just sleep but completely logging off, rejuvenating your mind, and experiencing the world beyond work. Rest is crucial for maintaining efficiency and well-being.”

Simon Colman, who was our very first InsureTalk MC back in 2020, now CEO of The Liability Company, shared news of his latest insurance venture in the liability space – Bili the liability bot.

Bili was initiated in July last year and is currently in the test phase on the company’s website.

“The project highlighted the rapid pace of AI development and its learning capabilities,” said Simon. “AI tools like Bili can significantly assist brokers by providing plain language responses to complex insurance questions, improving the quality of information available to clients and aiding in deeper, more informed discussions.”

Simon said Bili was designed to help brokers navigate the complex array of liability products, drawing inspiration from his personal experience of poor customer service at a hardware store.

“The bot provides clear explanations of technical insurance concepts, such as the differences between various liability policies, directors’ duties, and liability exposures for different professions.,” he said. “This is aimed at enhancing brokers’ ability to communicate effectively with clients.”

Simon addressed common concerns about AI, including job displacement, potential errors, bias, data security and privacy issues.

“Before working on Bili, my experiences with bots were generally negative. I often found them unhelpful. However, the goal with Bili is to offer a reliable assistant to brokers, not to replace human interaction but to complement it by providing quick, accurate information.”

Simon concluded by highlighting the potential benefits of AI in the insurance industry, such as improved risk assessment, faster interaction times, and better client interactions.

Here’s the recording, in case you missed it:

Colin is our resident wordsmith. He can write absolutely anything and loves to read, too. He even has his own book club.