Two years ago then Sanlam Personal Finance CEO Hubert Brody recognised that its clients were aging alongside its salesforce, and if the financial services company wanted to attract millennials it had better do something differently.
Brody has since left and been replaced by Jurie Strydom, but the thinking remains the same. “Product development within the conventional frameworks is unlikely to ever challenge the status-quo,” says the head of Sanlam’s Strategic Business Development, Ahmed Banderker. “New developments can get stuck for a year just because we are trying to ensure the client experience remains the same.”
The thinking is that by moving a team out of Sanlam and giving them wings to fly, innovators can take a more agile approach to product development. “They are funded and supported by Sanlam but they are 100% independent which means they can act fast and fail fast without damaging the brand,” he says.
One result, among other developments, is Indie and it looks set to help rather than hinder the Sanlam brand.
The start-up financial services business has launched its first product set – life insurance – which has been designed from the ground up, specifically for the digital generation. “We have not reinvented the insurance model itself – there is nothing wrong it, like there is nothing wrong with banking,” says Peter Castleden, former head of Sanlam’s Actuarial Product Management and now CEO of Indie. “The problem is the user experience.”
Thus Indie takes the tedium out of the application process, turning a lengthy paper-based process into a six-minute, online affair.
It also introduces a concept called Bounty, which in one step removes the two biggest problems facing life insurers: the notion that insurance is a grudge purchase and churn, which can see even established insurers losing up to 30% of its customers in a year.
Bounty is a financial reward that is delivered once a customer has signed up, whether via the broker platform, or direct via the web or mobile interface. It is real money that is invested in a fund of the client’s choosing (it defaults to a money market fund) to generate wealth for them over time. The initial amount is related to their age and premium – a 30 year old signing on for a R500 life insurance policy can receive a R50 000 bounty. This will remain invested until the client reaches the age of 70. The full bounty and interest earned is then paid out.
Recognising the need for instant gratification, a portion of these funds – up to 5% of the initial value – can be drawn every five years with ‘CashDrops’, should all premiums be paid during this time.
“We’ve been able to offer this value-add by using technology to drastically reduce the cost of acquisition and the administration of legacy life insurance,” says Castleden. “It does not add to the cost of the product – in fact it actually reduces the cost over the duration of the policy.
“We believe that this is a game-changing value proposition that will gain the traction we want in this market, as clients are literally paid to be insured,” he adds.
It was in the development of this product that the value of Indie’s ties with Sanlam became apparent. “We used their compliance team; their pricing actuaries to stress-test our models; and we drew from their 100-years of data.” For instance Indie asks prospective clients whether they ride a motorbike – it’s the only insurer to do so. “Sanlam’s data shows clearly that motorbike riders are as likely to claim as smokers,” he says.
There are many reasons that so many garage start-ups fail. “It’s not enough to have a good idea, it is actually bringing that idea to fruition. You need capital, and access to knowledge and resources. For instance Sanlam’s chief medical officer is a global expert who was willing to consult to us after he retired from Sanlam. You cannot put a price on that,” adds Shawn Roos, Indie’s head of product design.
Of course, being backed by the Sanlam brand is also priceless in a market where trust is in short supply.
The team, which now numbers 35 people, was also not sure that their bounty concept fell within the confines of SA’s financial legislation. Sanlam organised for Indie to present to senior people at the FSB. “They had some concerns, such as whether Bounty adds to the cost of the product,” says Castelden. “It doesn’t and the FSB gave us the go-ahead.”
While the Indie team continues to innovate around the life insurance product set – a funeral policy will be launched in two weeks’ time – it is busy with the next ambitious project – the development of the world’s first centralised investment platform.
It seems the marriage of institutional muscle with youthful energy and intellect is a potent combination.
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