Capitec is looking to make a big move into South Africa’s insurance industry, allowing the company to leverage its large customer base to disrupt the market.
This was revealed at a media engagement on 22 August, when the bank explained its strategy for entering and disrupting the country’s highly competitive insurance industry.
Previously, Guardrisk underwrote Capitec’s credit insurance policies. However, the Competition Commission recently approved its purchase of Guardrisk Life’s life insurance business from Momentum.
Capitec also obtained its long-term insurance licence in its 2023 financial year and began issuing credit life insurance policies in May 2023.
By the end of February 2024, Capitec had 558,417 active policies issued on its own licence.
The average sum insured increased by 3% to R75.2 billion. The net result from credit life insurance was up by 13% to R1.9 billion.
Capitec CEO Gerrie Fourie said at the bank’s results presentation that the life product was being piloted among its employees, and about 15% of staff have taken it up.
“If I look at insurance, it’s all about the new systems that we’re building for us. It is bringing the whole Sanlam business across, making certain we’re ready for new products that we can attack the market from next year on,” Fourie said.
One of Capitec’s biggest advantages when entering this industry is its 23 million retail banking clients.
These clients provide a “captive audience” and a wealth of data Capitec can draw from to ensure its products are perfectly tailored for its target market.
Capitec Insurance executive Katherine Barker explained that the company’s insurance business is also learning from its founding value of simplicity to stand out.
In practice, this value looks like simplified insurance questionnaires – only six to eight questions – and offerings that can be completed through the app that Capitec banking clients already use or in-person at a branch.
She said this simplified strategy has proven remarkably successful, with very few clients struggling to understand what they are signing up for.
For example, she said the many languages spoken in South Africa sometimes make it difficult for all clients to understand the technical jargon often used in insurance contracts.
Capitec addressed this problem by, for example, not using the word “organs” but rather listing the organs – like the heart, lungs, and kidneys – that are relevant to the insurance product and more understandable across languages.
“You still get all the legal stuff that you have to get, but we want to make sure people know what they can claim for and how they can claim,” Barker explained.
“We want to pay as many valid claims as possible – that’s very important because if we don’t put that money back into the economy at the time when people really need it, we perpetuate the cycle of poverty.”
Capitec has also implemented a level premium structure, meaning there is no premium increase and “what you sign up for is what you get.”
Capitec’s insurance business is still in its early days, and the company is still in the process of carrying over third-party policies that Capitec offered through Guardrisk and Sanlam.
Barker said the priority, for now, is to ensure that these policyholders are comfortable under the new Capitec Insurance business.
She said the 13 million people covered by these policies need to be secure and happy before Capitec considers expanding.
Capitec currently offers life and credit insurance, and Barker said the demand for these products has been better than expected.
The company is looking to target an underserved segment of the market, specifically the R100,000 to R3 million cover segment.