Short Term Insurance Heading Direct

August 1 - It has become impossible to ignore the growing trend of customers purchasing their insurance policies online, especially when it comes to short term insurance.

According to the Chief Executive Officer of Telesure, Leon Vermaak, the South African market could even see over 80% of all its short term insurance policies purchased over the internet in the next few years.

Several insurance companies are already making the necessary changes to adapt to this trend. Mutual and Federal, one of the country's largest insurance companies, recently announced that it would be cutting its staff by a fifth, citing the need for 'pruning' as a major factor behind its decision.

"We had a dreadful first quarter, but quarter two has picked up slightly," said the Chief Executive officer for Mutual and Federal, Keith Kennedy. "That said, we are not yet at the bottom of this cycle but I do not think the trough will be as low as it has been in previous cycles."

Kennedy explained that some of the changes to the company involved cutting back on staff in order to accommodate direct buying. "We have offices around the country, and while we have to have a wide base from a sales perspective, the back office can be streamlined in order to better employ economies of scale from a claims processing point of view. This also helps from a client point of view because clients are then able to make claims all the time as opposed to during working hours as is the case currently in many of the smaller offices."

Other companies agree that direct short term insurance is growing in South Africa, but not as much as predicted by Vermaak. The CEO of Santam said that while the UK has a market share of around 50%, the South African market would be able to accommodate around 35%. "What is interesting to me," commented Ian Kirk, "is how much of the new business is coming from existing direct clients, rather than traditional clients."