Direct life insurer Frank.net’s research shows that 70% of Generation Xers (age 17 to 37 years old) indicate that they would use the internet to purchase life insurance and would not consider going through a traditional insurance channel.
The research found that the most effective means of capturing a share of the Generation X market is through technology and service delivery platforms aligned to these channels and not through a broker network.
This is according to Lenerd Louw, CEO of Frank.net who says that the Generation X market is not traditionally serviced by broker networks as they are a technologically savvy generation and have access to information to make their own informed decisions.
“Market statistics indicate that smaller niche players are taking market share from traditional players in the market,” says Louw. “Traditional insurers are losing dominance in the personal insurance space,” Louw adds. “We see this with the emergence of a number of direct players and the migration of banks and traditional insurers offering life insurance through direct channels.”
He says that larger players in the life insurance space are now setting up direct businesses in order capture the market that are not traditionally serviced by brokers, which has turned the industry on-its-head. “Life insurance is no longer just sold, it is also bought, with consumers investigating their options and making their own decisions,” he adds.
Speed, convenience, simplicity
According to Louw, Generation Xers value qualities such as speed, convenience and simplicity. “Direct insurance when kept simple, negates the need for advice. “They require transactional engagement, as they place no significant value on the advice because they get this themselves, and they have direct access to unbiased information through mobile, internet and media,” he explains. “Direct is accessible and immediate and there is a definite drive behind the trend towards a direct business model.”
Arthur Goldstuck, Managing Director of World Wide Worx, said that last year there were 3.9-mlilion people who had been online for five years or more and that by 2015, that figure will be 6.8-million – almost double the potential e-commerce market of today.
Louw says that the Frank.net business was set up in light of this internet growth and the consumer move to go direct. “We have seen substantial growth since Frank.net launched in November last year, with over R5-billion in cover sold to date.”
Louw says that potential revenues from the Generation Xers purchasing life insurance directly, coupled with the fact that South Africa’s internet users are set to increase substantially, will result in direct players making up at least 25% of the life insurance protection market in SA over the next few years.
“This is not to say that direct will totally take over the traditional insurers, but rather service the gap that traditional channels do not cover making personal insurance more accessible to all South African’s,” he adds. “This will see a drop in underinsured people in the country.”
He said that Frank.net uses an inbound approach in that they wait for consumers to respond to their call to action via aggressive straight talking marketing campaigns. “Our call centre, website, mobile site and social media platforms are also important channels that we use to generate business.”
To overcome one of the largest obstacles to convenience and efficiency in the traditional life insurance space, Frank.net has turned to cutting-edge technology and a consumer focus.
Louw estimates that the acquisition costs in a direct business used to be about a third of those in traditional business models, however, he says that they have probably increased to about a half over the past four years, as competition has increased in the direct industry.
“Growth in the direct space is not about offering more complex investment products, it is about simplicity and transparency and giving people what they want,” he says. “The growth will also come from product expansion into new lines of business such as health insurance and simplified investment products and in the medium term geographical expansion.”
For more information visit: www.frank.net <http://www.frank.net> <http://www.frank.net> or m.frank.net on your mobile phone.
(Press release, Frank.Net, September 2011)