CRA Insurance & Personal Finance – South Africa
By Ernest North
So, where does this leave car insurance? We can expect a difficult economic climate beyond the COVID-19 pandemic and South African consumers will be seeking the best possible deals.
There’s nothing like the smell of a new car and the thrill of driving your wheels off the showroom floor. But to get to that moment, you usually have to spend weeks listening to sales pitches from car dealers and going for several test drives. Once you’ve chosen your car, you’ll be bombarded with offers from the finance and insurance consultant employed by the dealership.
Their job is to ensure that your car deal goes through – and they’ll move mountains to ensure you get financing for your car. But before the financing house will pay the dealer for your car, it will want proof of insurance, as reassurance that it will be able to recover its money if something happens to your car.
This remains a frustrating, time-consuming experience, and, from the consumer’s perspective, there’s not much transparency.
Some of the typical customer frustrations include:
- You can’t be sure how much commission the dealer earns from the car financing companies or whether the deals they push are best for you.
- Car dealers will usually pass your details to car insurers rather than getting a quote for you. You’ll need to speak to one or more insurers on the phone just to get a quote. Again, you can’t be sure how much they earn for the leads they pass on to car insurers.
- It’s time-consuming to get car insurance the old-fashioned way – getting your quote, accepting it and receiving the proof of insurance can take anything from a couple of hours to a full day.
- You may get inundated with offers for credit insurance products (settling the loan in full if you die or lose your job for example) and value-added insurance products (scratch & dent, tyre cover, roadside assistance) – more time and more phone calls to deal with.
This situation is changing fast. Consumers were already embracing digital channels before the pandemic, and the speed of change is now accelerating with people seeking physical distancing where possible. They don’t want to spend hours in an office or a dealership filling in forms. It’s thus not surprising that we’re starting to see customers migrate online.
For example, many people are already researching cars online to narrow down the make and model they want to buy. Once they have done so, they may look at online car marketplaces or dealers’ websites to find the best deal. While they’re about it, many of them will start organising their own finance and insurance before booking a test drive.
But as they do so, they often find that financial services companies do not offer a quick or convenient experience. You can start a car financing application or get an indicative car insurance quote online, but you’ll generally still need to speak to a call centre agent to finalise the loan and the policy. We can expect this to change rapidly over the next few years.
The car dealer’s new role
We’ll also see the role of the car dealer shift as the initial parts of the car purchase journey go online – this trend was already in motion before COVID-19. According to Google’s research, twice as many people in the US start their research online versus at a dealer, and over 60% of auto shoppers reported visiting a dealership or dealer website after watching a video of a vehicle they were considering.
This trend will pick up speed because, for some time to come, many people will want to limit their time spent walking around different dealer floors, touching cars, and going for test drives with strangers. With ultrahigh-definition videos and innovations like augmented and virtual reality, you’ll be able to get a better feel for a car you’re considering than you could from still photos or standard definition video clips.
Plus, we are seeing innovations such as seven-day return policies in markets such as the UK. Ideas like this could help people feel more comfortable making a big-ticket purchase like a car online. There’s scope for disruptive thinkers to bring similar concepts to South Africa. The combination of digital channels and self-service could bring a great deal of transparency and efficiency into a market where customer experiences are still full of friction.
Digital car insurance has arrived
So, where does this leave car insurance? We can expect a difficult economic climate beyond the COVID-19 pandemic and South African consumers will be seeking the best possible deals. The ability to offer lower premiums – as a result of automated, self-service technology replacing costly traditional insurance processes – will be an even more important competitive edge than before. Consumers will also be more wary of buying ancillary insurance products, such as the infamous scratch and dent cover. Most car insurers will need to rethink their business models, but their legacy processes and infrastructure make it difficult for them to drive down costs and offer lower premiums.
What’s more, when you’re buying your car and applying for financing online, you are not going to want to spend 45 minutes speaking to call centre agents to get a car insurance quote and you won’t want to wait hours for your proof of insurance. To be relevant in this world, insurance companies will need highly automated systems that enable them to produce a quote and proof of insurance online and within minutes, as well as to run an efficient business.
COVID-19 has accelerated digital adoption, but Naked has been preparing for this future for years. The business opened its doors two years ago as an AI-driven company knowing that insurance customers are ready for a digital experience that offers better value for money as well as more fairness, customer control and transparency. Across industries, digital technology is bringing costs down, putting customers in control and making life easier – and car insurance consumers are benefiting from the shift.
Ernest North, co-founder at AI-driven insurance provider, Naked
Article Credit to Tech Financials.