Industry will be forced to innovate as GDP forecasts revised downwards
During the recent mid-term budget policy statement, Minister of Finance Malusi Gigaba confirmed the view of the majority of economists that growth in South African will likely fall to 0.7%. The outlook is set for a slight pick up to 1.1% in 2018, and 1.5% in 2019.
While this foreshadows a difficult economic environment for insurers and reinsurers, we foresee that this will spur a creative period for product development and cost containment. We have already seen the adoption of blockchain technology, PPK products, and combined service offerings in the motor vehicle insurance market.
Increased pressure on the market will likely see a race between re/insurers to capture the lower LSM market (largely non-participants in the non-life insurance market) firstly by cutting costs on traditional products, and secondly by rapid implementation of micro-insurance products after the promulgation of the Insurance Bill, 2016.
While tough macro-economic factors will keep the pressure on growth for insurers, this period will also be one of opportunity for those who embrace the challenge to adopt new solutions for the market.