As we approach the decade’s midpoint, the personal insurance industry is on the cusp of significant transformation. Driven by technological advancements, changing consumer preferences, and evolving regulatory landscapes, insurers in South Africa and globally are poised to adapt and innovate. Here are the key trends shaping the personal insurance market in 2025.
Widening Protection Gap and Market Expansion
The global protection gap, which stood at US$1.4 trillion as of 2020, is projected to widen to US$1.86 trillion by 2025. The Asia-Pacific region accounts for nearly half of all uninsured risk. While this presents a challenge, it also offers insurers in South Africa a substantial opportunity to expand their market and bridge this gap through innovative products and services.
The insurance penetration rate in South Africa is relatively low compared to other developed markets. According to the South African Insurance Association, it was approximately 14.1% in 2022. This indicates a vast untapped market that insurers can target with tailored and accessible insurance offerings.
Shift from ‘Promise to Pay’ to ‘Promise to Help’
A significant shift is anticipated from the traditional ‘promise to pay’ model to a ‘promise to help’ model, particularly in health and car insurance. This shift involves moving beyond mere compensation for losses to encouraging proactive preventative measures. For instance, health insurers might offer incentives for improved exercise and diet, while car insurers could promote safer driving behaviours through telematics and driver coaching.
This trend is already gaining traction in South Africa. Insurers collaborate with healthcare providers and technology companies to offer personalised health and wellness programs. For example, Discovery Health, a leading health insurer in South Africa, provides a Vitality program that rewards members for healthy behaviours such as regular exercise and healthy eating.
Digitally-Driven Customer Experience (CX)
The insurance sector is increasingly leveraging digital technologies to enhance customer experience. This includes engaging in digital ecosystems, building unique customer intelligence, and designing products and services to meet the demands of a digital world. Insurers must adapt to the digital and AI-driven landscape by incorporating new technologies like no-code platforms and real-time data analytics.
Insurers in South Africa are focused on digital transformation. According to a Gartner report, 58% of South African insurance respondents reported increased funding for digital innovations during the COVID-19 pandemic. Insurers like Old Mutual and Sanlam invest heavily in digital platforms to provide seamless and personalised customer experiences.
Climate Risk and Sustainability Focus
Climate change and sustainability are becoming critical factors in the insurance industry. Insurers must move beyond relying solely on historical data and instead use real-time data to understand and mitigate climate-related risks. This involves analysing vast amounts of data to identify emerging trends and make more informed business decisions.
In South Africa, climate-related risks such as droughts, floods, and wildfires are increasingly common. Insurers are responding by developing climate-resilient insurance products. For instance, the African Risk Capacity (ARC) initiative provides parametric insurance to African countries, including South Africa, to help them manage climate-related disasters.
Consumer-Centric Models and Embedded Insurance
The transformation towards more consumer-centric models is evident, with embedded insurance being a notable trend. This involves integrating insurance services within other consumer-oriented platforms or services, enhancing the accessibility and relevance of insurance offerings. According to Chubb, 81% of financial executives believe that embedded insurance will become a must-have by 2025.
In South Africa, embedded insurance is gaining popularity. Financial services companies like FNB and Standard Bank offer embedded insurance products through their digital banking platforms. This trend allows insurers to tap into a broader market, provide more relevant products, and ultimately increase customer satisfaction.
Regulatory Evolution and Talent-Tech Transformation
The evolving regulatory landscape poses both challenges and opportunities for insurers. Insurers must adopt agile operational models to adapt to changing regulatory and market conditions. Additionally, there is a growing need to balance talent and technology to ensure resilience and competitiveness.
In South Africa, the Financial Sector Conduct Authority (FSCA) continuously updates regulations to ensure insurers remain compliant and customer-centric. Insurers are responding by investing in digital literacy and democratising data through self-service analytics, enabling their employees to make more confident decisions and drive business growth.
Hyper-Personalization and Advanced Analytics
Data-driven hyper-personalization is set to become a cornerstone of the insurance industry. Insurers will use big data to analyse patterns and changes in consumer behaviour to identify and predict the products and services customers need. For instance, health insurers can use data from wearables to adjust premiums based on a customer’s activity level.
In South Africa, insurers already leverage advanced analytics to offer personalised insurance products. Companies like Discovery and Momentum use data from various sources, including wearables and IoT devices, to provide tailored insurance solutions that incentivise healthier lifestyles and safer driving habits.
As the personal insurance industry in South Africa and globally navigates the complexities of 2025, innovation, digital transformation, and customer-centricity will be critical drivers of success. By embracing these trends, insurers can survive and thrive in a rapidly changing landscape. Whether bridging the protection gap, shifting to a ‘promise to help’ model, or leveraging digital technologies, the future of personal insurance is poised to be more personalised, proactive, and protective than ever before.
About RBS
Risk Benefit Solutions, better known as RBS, originated as an entrepreneurial-focused services business in 1998 and today is one of the largest fully-fledged black-owned insurance brokers in South Africa and a Level One B-BBEE contributor. Celebrating 25 years in business this year, our growth has contributed to offering clients a unique approach to risk management by positioning our skilled resources as an extension of our client’s risk management team. Our company covers various services, including Insurance Broking, Risk Management, Commercial and Corporate Risk Advisors, and Corporate Vehicle Hire Services. With its head office in Cape Town, RBS has offices in Gauteng, the Eastern Cape, and globally, as represented by its board membership with WING (Worldwide Insurance Network Group).