South African car owners behaviour may change as a consequence of the spread of the coronavirus impact.
Many are the areas that are already affected economically by the health crisis caused by the COVID-19 impact. One of the most affected areas is the car insurance industry.
Due to their own nature of protection and risk management, the large insurance groups, as well as different online car insurance companies, are the ones who should best adapt to these new changing times since they have the special task of reacting quickly and responding to needs.
Today, cars have almost no use except for those essential workers who are allowed to drive. The house became the only scenario of the day. With reduced traffic on South African roads, as most people are obeying lockout rules by staying home, the risk for car insurers like car theft, kidnapping and accidents have been dramatically reduced, making fewer claims during coronavirus lockdown.
On the one hand, the loss ratio has dropped dramatically, resulting in savings for companies, but, on the other hand, the slowdown in vehicle sales has decreased premium income.
According to the vehicle tracking company TrackerSA analysis, due to the measures taken to stop all non-essential economic activities in South Africa in order to flatten the curve, the activity of vehicles in South African routes dropped by 75%.
According to Ernest North, co-founder of Naked Insurance, many companies decided to keep the job remotely and plan to continue doing so in the future. This would cause fewer cars on South African routes, which means that the need for car insurance coverage will decrease.
A recent Gartner’s CFO survey of Covid-19’s impact on working areas reveals that 74% CFOs and Finance leaders intend to permanently relocate some employees to remote work.
South African insurance industry has no other choice but to adapt to the new customs and priorities of quarantine by offering discounts and other benefits to their clients.
Discovery Insure offers customers a motor premium relief benefit for May, according to how far customers drove during the month of April. Most motorists are expected to drive very little during the close of April.
Outsurance implemented a 15% discount on premiums on all car insurance policies for the month of May, which recognizes the reduction in kilometres driven and the frequency of claims during the month of April.
My Way has applied the same discount as the ones mentioned above. René Otto, MiWay CEO says “We follow a scientific approach to risk rating. When clients work from home, they drive less. This reduces the risk of them being involved in an accident. We believe the right thing to do is to reduce their premiums given the reduction in risk.”
Ernest North, Naked Insurance CEO, thinks the insurance car industry’s landscape will change forever. “If just a quarter of companies allow a quarter of their people to come in twice a week rather than every day, it could have a significant impact on car ownership, traffic and car insurance actuarial models. We could see some households question whether their insurance cover meets their needs when they rarely use one of the cars parked in the garage,” North says.
North believes that the myth that everybody has to be in the office from 8 to 5 has been destroyed in these present changing times and many companies will embrace remote work in the future. With connectivity and digital tools improving all the time, in the near future, we could live in a world where people with traditional office jobs only drive two or three times a week.
He added that “In many dimensions of our lives, Covid-19 will change what we believe to be normal and desirable. Having experienced the full power of some digital tools, consumers may not go back to their old behaviours. Services that are digitally enabled, allow consumers to save money and enjoy convenience are likely to be in demand during the pandemic and beyond.”