The world is changing fast and to keep up you need local knowledge with global context.
In Episode 49 of Inside Covid-19, good news if you’re a careful driver or have a well-run small business; why remote doctor consults (telemedicine) is here to stay; an update on the search for an effective way to identify those with Covid-19 antibodies; the CEO of Sun International explains what the opening up of hotels means for the group on whom 20,000 livelihoods depend; and we take another look at Dexamethasone, the anti-inflammatory drug made in South Africa by Aspen Pharmacare, which is being hailed globally as a breakthrough saving the lives of 30% of critically ill coronavirus patients during a large trial in the UK. – Alec Hogg
Anton Ossip has been a very busy chief executive of Discovery Insure, and you would think that during lockdown, Anton, there wouldn’t be too many new products, but my goodness. Three in a week. Let’s start off with a Motus Financial Services deal that you’ve put together on warrantees. Did this come through because of Covid 19?
No. First. Good evening, Alec. It’s been a very busy time. In fact, we’ve launched close 20 new products or product variations since the start to lock down on the 27th of March. We needed to deal with all sorts of changes in the way people drive and how they drive and ways to help people fund their premiums and afford their premiums. All that led to a lot of very, very innovative thinking from the team and quick delivery, which has it’s been fantastic. This particular product didn’t come as a result of Covid.
It’s something that we have been working on for some time, but it’s probably as applicable as ever during Covid, where people will likely be extending the use of their car, not replacing that old call with the new car, and therefore the cars will be going out of warranty more than ever before.
With an excess of 50% of insured cars are out of warranty. We saw that this was an opportunity to come up with a product that was innovative from utilising what we’ve done with telematics over the last 9 years to create some real differentiation for good drivers, as well as we have always recognised that the warranty space hadn’t really been disrupted for a long time, therefore the need to do something different.
Telematics would presumably tell you a lot about what’s going on in the moving parts of a vehicle.
Correct. So how this came about was really a conversation between ourselves and Motus. Motus, being the largest supplier of vehicles, parts, huge experience in the warranty space and associated products. Together, we looked at it and we said, there must be a correlation between how you drive and how your vehicle is going to break down and how the parts are going to wear out.
Whether it’s your clutch or your engine, the better you drive, obviously, it must have an impact. By having the data, we could tell that and we could tell that there was a high correlation. That led us down this road of creating, we believe the first in the world warranty telematics product where the better you drive, the lower your premium and the better the value proposition that we can offer you.
Drive well and your premium will be less and we can give you better benefits, which we do in the form of a service benefit. Effectively you get a significant discount, up to 100% off of your service, up to R5000 a year, which pays for the vast majority of car servicing.
How granular is the information? What I’m getting at here, if somebody is always riding the clutch, as you said earlier, then the clutch would pack up more or more likely to pick up than somebody who’s not driving that badly.
So we can’t tell someone’s riding the clutch, but we can tell the acceleration and the forces applying to the vehicle, which would be a good enough proxy for someone that’s aggressively driving the vehicle. Somebody slamming on the brakes all the time because they don’t drive responsibly.
They want to see how far the car can go before it can come to a stop. We’re not talking about someone who has to drive, you don’t have to drive like a granny to take the product. We just we’re just looking for the more responsible type of drivers and those that are used to just racing their car should pay more for warranty insurance because that’s just a natural reason that their cars are going to be subject to more warranty claims.
It’s all part of the shared value concept?
Absolutely. The better you drive, the lower the premium. The more we can give you back in rewards. Another thing about it is that it is also risk-rated.
A lot of the warranty market is paying the same price for very similar cars or it doesn’t take into account the driver, the better drivers and the worst drivers, there are car that is subject to warranty claims more than others.
We’ve used all the things that you take for granted in insurance pricing, where we charge the right price for that risk. It may be that we are more expensive on a certain type of car because that type of car prone to high warranty claims, conversely, will be cheaper than the market for many different types of vehicles. Our data tells us that their client should be paying less rather than this kind of blanket approach where the goods could be subsidized by the bed.
Is this only for Discovery Insure clients?
For now, we’ve only offered it to Discovering Insure clients. That we had the telematics data, we have a quarter of a million clients. There’s a lot of clients that we can offer this product to, but we certainly will consider this for the wider market in time. It’s a conversation that ourselves and Motus will have.
And the partnership with MTN?
Yes, so this is something we launched today. This is something that’s in our Discovery Business Insurance segment. We offer insurance products for small and medium-sized businesses.
We’ve taken a very different approach to business insurance here, that we don’t only cover the typical risks that someone would want to be covered for, but we cover the risks of today. Social media, liability risk and cyber risk and things that small businesses should actually be worrying about because your business can go out of business quite quickly with a hack on your systems or someone posting things on Facebook that they shouldn’t.
We provide very different types of cover. We also provide a tool for businesses to analyze their business. We worked with an organisation called Endeavor, a Global Organisation that helps small businesses catapult to a bigger size. There have been some great success stories that have come out of Endeavor.
We’ve worked with them to really take their knowledge and put together an analysis diagnostic that companies can effectively complete, through that we believe that get information that will help them to become a better business. Our philosophy or understanding is that better businesses will be low-risk businesses. So if your business is growing quickly, if your business is cash flow positive, you’ll exhibit lower risk for an insurance company and you’ll be a better business for yourself and for society, employing more people.
Through that, we provide a number of partnerships to help companies with the tools that they need and one of the tools is IT Services and data, if you ask any business, what do you need? They all need data, they need more of it and they need it to be cheaper.
It’s becoming a big and bigger part of any business, no matter what industry. We approached MTN, been an incredible partner, really understanding the value proposition and effectively we are giving a deep discount to companies on their data, up to 50% off if I take out in a Fibre, broadband and other business-related data services from MTN.
The Endeavor connection, that’s an interesting addition.
It’s been a part of a long time. Adrian and Barry have been involved in the Endeavor from early days when Endeavor came into the country. They’ve mentored many of the organisations that have gone through Endeavor. It’s really been something that we’ve got to know quite well. They’re massive globally.
Lots of organisations around the world have been helped by Endeavor, where their aim is to help small companies access capital and mentoring and support. The likes of business leaders mentoring smaller companies and helping them to navigate complex business issues is one of the benefits. They help companies access technology.
They have a number of fields that they believe if they help those businesses get access to those services, there’s a better chance then not, that the business will grow. The whole philosophy of small businesses can become big businesses and what does this country need more than anything else? It needs lots of SMEs that grow and thrive and become the next big company to employ thousands of people.
Have you done anything like this before? It seems a very innovative, very different type of a partnership that you’re talking about here with Endeavor and with MTM.
We started it 2 years ago when we launched our Discovery Business Insurance offering, but it’s taken a lot more shape over the last couple of months through this partnership with the MTN and then the other one, which I can mention, is a partnership with a company called Merchant Capital.
It’s the type of company that Endeavor works with. It’s a small business in the financing space, became an Endeavor partner. Through that, they’ve had access to all sorts of support and help to become more successful and a faster-growing business. We met Merchant Capital through Endeavor and now we’ve struck up another partnership with them, which is directly focused on Covid.
What exactly is that one going to be offering?
So what Merchant Capital does is they provide loans to small businesses, typically in the retail and the hospitality and in related sectors. How it works, is they’ll provide a loan, but the loan is repayable as a percentage of credit card turnover. Instead of taking out a loan of a million rand or hundred thousand Rand or whatever the number is, and interest accrues on that loan, and the longer you take to pay it back, the more interest you have. How they work is they effectively recover the loan as a percentage of turnover.
They set out to do it over a certain period of time, but if turnover turns out to be less than expected, it will take longer to recover the loan and vice versa. Turnover is better than expected. They take a risk. They take a risk on how long it’s going to take for the loan to repay because compound interest is not applicable to the outstanding loan balance. If you think about what’s happening with Covid as a business, who knows what you know it’s going to look like tomorrow. Companies may get back on their feet quickly and they may not.
Therefore, that uncertainty is what I think a lot of companies faced with. If they take out a loan from their bank, not to say that there’s not a place for that as well, this is a different type of loan that can help the business sort of reboot and get back on their feet. If you’re a restaurant, it’s buying and trading stock that you need to sell or a shop, you need a trading stock to sell they, provide a loan to assist you with that.
What we’ve done with them is effectively we want to encourage the right behaviour. We want to encourage people to pay back those loans. We also encourage people to pay the insurance premiums because, right now, not having insurance covers is a massive risk for a company that can afford an unexpected loss.
A big car accident or a fire in the factory. You can’t afford that right now, particularly when your capital is under pressure. How are we rewarding that behaviour, is by giving a rebate effectively on insurance premiums 12 months later. Companies will be able to get between 15 and 50% back on their discovery business, insurance premiums, all they really need to do to pay the loan back on time, pay their premiums on time, and effectively they’re eligible for a rebate on the insurance premiums.
It’s helping companies and encouraging good behaviour, which is something that we believe we could do at this point in time.
Both of these, the MTN and the Merchant Capital partnership sound like a lot of research, a lot of homework has to be done before you can enter into these relationships. Who does that?
We have an incredible team, an incredible product development team. They work on lots of different ideas and not all that has come to fruition. They start by analysing the need. For example, the product we put together with MTN went through a lot of research to understand what is small businesses need.
What’s the one thing that’s common? How can we help them to become better businesses, which is what we want? If they are better businesses, they’re going to be low-risk businesses for us as an insurance company.
It’s that shared value approach of better businesses, lower risk, good for the insurer and better businesses that become good for society because they grow quickly and they employ more people. It’s this virtuous circle that we really focus on across every part of our business.
So, they work on a number of things and then they approach partners. Obviously, we’ve got to find the right economic model that works for everyone, that’s affordable, that’s sustainable. We like benefits that go for a long time and don’t need to change it much, it sustains.
We’re hoping that both these benefits will be long term benefits. The Merchant Capital one is focused more on Covid related relief, that structures is for the immediate term but I’m sure there’ll be other structures that we can look at down the line for companies in terms of sustainable finance.
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