Want funeral cover? Or life insurance? How about buying them with your next data bundle? Insurance, believe it or not, is one of telecommunications operator Vodacom’s fastest growing businesses.
Its “telcosurance” arm — the word is a play on the “bancassurance” trend that emerged in the past 15 years in the financial services industry — grew by 36% in the year to March 2015, reaching R441m, and Andrew Culbert, who heads the business, expects that figure will grow by a further 25% to 30% this financial year. That sort of revenue growth is far outstripping the top-line performance at the mobile business, although, Culbert says, the profit margins are lower.
Vodacom got into the insurance game properly about four years ago. Culbert, whose background is in bancassurance — he worked at Nedbank for many years — explains that the bulk of the business is made up of device insurance, where it insures about 525 000 customer devices connected to the Vodacom network. But the funeral and life side is growing rapidly.
“Trying to do insurance in the telco environment reminds me of my history of doing bancassurance,” Culbert says. “You are not the core business, but you can create a reasonable amount of value through being smart and using the power of the core brand.”
On the device insurance side, Vodacom insures a wide range of gadgets connected to its network, from smartphones to laptop and tablets. On average, the device insurance business processes
R1m per working day in claims. In many ways, it’s a natural extension of Vodacom’s business, and operators around the world offer such services.
But its move into funeral and life cover is unusual. Vodacom parent Vodafone is studying the model with a view to possibly introducing similar products in other markets in which it operates, Culbert says.
In its 2015 annual report, Vodacom said the number of policies in its long-term assurance business grew by more than 100% off a “small but fast-growing base”. Its focus has mainly been on device insurance but it said it intends to “scale up” its funeral and life insurance business.
“We are making insurance accessible to a broader range of consumers,” Culbert says. “We do not go for people who need sophisticated financial planning. A lot of people require these products but don’t have access and don’t know who to trust. Vodacom is a trusted brand.”
He believes insurance is a natural growth area for mobile operators, in much the same way that banks embraced bancassurance 15 years ago. “Every bank in the world now has a bancassurance model. Over time, telcos will look at how they can extract value out of their assets, too.”
Vodacom offers life cover from R200 000 up to R10m and funeral cover from R5 000 to R75 000, with an average of five lives attached to each funeral policy. The target market is typically “unintermediated” consumers — those that don’t have easy access to a broker. Average premium size for funeral policies is R150/month and on the life side it’s R250/month.
What’s next in insurance for Vodacom? “You have to be quite careful. Entry into some parts of the market can be quite expensive,” says Culbert. This is particularly true of vehicle and household insurance, he says. “But there are ways to enter through partners.”
Investment products such as retirement plans are another option, but that’s far in the future, he says. “We will have to build our insurance brand before we can offer those kinds of products successfully. We are definitely looking to grow quickly, incrementally adding products, but without taking enormous risk. We are not going to be foolish about it.” — © 2015 NewsCentral Media
