CEO Schalk Malan on how BrightRock seeks disrupting group risk cover in SA

JOHANNESBURG — CEO of BrightRock Schalk Malan has developed a reputation for disruption in the insurance industry. And after pioneering needs-matched life insurance, particularly for individuals in South Africa, the company is now bringing this disruption to the group risk cover market. Amid notching up over R1.1bn in annualised premium income for cover in-force (API), Malan speaks to us about the latest developments in his company. – Gareth van Zyl

On the line is Schalk Malan, the Chief Executive Officer of BrightRock. Schalk, so BrightRock has just launched its Group Risk product that can provide schemes with up to 40% more cover for the same premium. Can you tell us more?

Gareth, when BrightRock came into the individual risk market, we recognised that there were certain key things to look at and improve. BrightRock came to market with what we termed ‘a needs-matched life insurance product’ – this involves buying what you need and not wasting your premiums by matching the cover to the needs. On a very similar basis, BrightRock is entering the Group Risk market with this same mindset. It’s an estimated R18bn per year premium market. In short Gareth, we’re changing the manner in which we calculate cover for individuals in a group by shipping out waste, creating a more efficient structure, and leading to that extra cover but also improving protection for those individuals. I’ll explain that to you with a couple of examples.

Schalk Malan, Chief Executive Office, BrightRock.

Okay, so can you please run through some of those examples of how you protect those individuals?

Yes, so if you look at current Group Risk solutions, when it comes to likes of occupational assessment (such as establishing when a person can’t work on a permanent basis anymore) they use a term commonly known in the industry as ‘own or similar occupation’. Now that results in a lot of subjectivity. It’s quite restrictive, so BrightRock is coming to market with a very clear set of definitions. For example, if you know that you have stage 4 cancer, you will be viewed by BrightRock, on diagnosis, as qualifying for that permanent protection. Also, we’re looking at making it much more individualised and designed for the client. It’s that efficiency that I spoke about Gareth. If you look at current Group Risk products out there, they’ll look to offer, for example, a three times annual salary solution or a five times annual salary solution for all the people in that group. That is not really appropriate for that individual. If you look at younger members of that scheme, you might find that the solution only covers 10-15% of their actual needs as represented by their future pay-checks. Then, with older ages, it might actually be too much or at a much higher level. What BrightRock is coming to market with is that we’re saying “let’s actually target a specific percentage of need covered”. The result of that is that it’s fairer between all people because everybody’s actually getting the same percentage of their needs covered. Another outcome from that is getting that additional cover in place for the whole scheme. We’ve seen some fantastic results with some of the schemes that we’ve looked at.

When is this option going live, and have you got any major groups signed up so far?

The launch started this week so it’s basically entering the market from this moment in time. We’re looking to have a set scheme in place from 1 July 2018 but we’re open for business and starting to quote on schemes. It’s quite an exciting next step for BrightRock. If you think about it, BrightRock has been in the market for just over six years – after entering the individual space. One of our stated ambitions is to become a multi-product financial services business and this is the next step in that story.

So, is that part of the reason why you decided to enter the Group Risk market or space? As you say, you’ve been in existence for six years, so is this the next step in your evolution?

Most definitely. I think another reason for entering the Group Risk market is that we fundamentally believe that the current construct of products out there do not provide the value that a lot of people deserve. Another example on the protection side is where products don’t really offer the ability to provide that extra access to cover. For example, if an individual member needs more cover, how do you get access to more cover? This product has got that built in – based on that ability to buy extra cover. Really, for us, it’s a step change. I think the individual products and group products are often seen as completely independent businesses in the financial services spaces and having that interaction between the two products and synergies is definitely a big step forward for us.

Just looking at BrightRock’s progression at the moment… Obviously, you’ve been running it for six years but you’ve also highlighted the highlights around your latest results – over R1.1bn in annualised premium income for cover in-force (API). You’ve achieved 64% growth year-on-year with in-force premiums. So you have really strong results still. How is business looking, especially going forward into the next year?

It’s quite interesting to pause one step there. If I look back at some of our previous discussions… In January 2017, we were just in excess of R600m with in force premium incomes. So we’re sitting at a point now where we’re over R1.1bn. It’s a testament to a really great performance. If I look forward, BrightRock is obviously looking to grow its footprint and its market share in the individual space, and that’s going very well. We’re also expecting to grow quite strongly on this Group Risk offering, given that it is such a new, innovative product. So, we’re looking forward to a great year Gareth, and I think we are delivering very strong results.

Obviously, during last year, you also received an investment from Sanlam who is now a majority shareholder. How is that whole relationship going?

We’ve now had a couple of board sessions and I must tell you that we are very excited about our relationship with Sanlam. They’ve been great partners. They’re also providing us with some great advice at a strategic level so that relationship is really doing very well and we look forward to working with them in the future.

In terms of customer growth as well, you list that you have 1.3 million customers that you’ve reached now. Obviously, with the group cover, I presume that you would expand that number a lot more in months and years to come.

Most definitely, Gareth. The value offering that we have on this Group Risk product has been received very well in our initial discussions in the market and I truly believe that this will be a major differentiator for those schemes. Like I said Gareth, I do believe that as an employer, you want to make sure that your people are taken care of when there are those changed moments and I do believe that this product delivers on that.

Just as a last question: obviously, you guys have targeted disrupting the market with your latest Group Risk cover offering and other offerings. Do you think that you’re going to disrupt the market even more and is there more to come from BrightRock in similar innovations like this?

Yes, I think this will be a significant disruptor in the Group Risk base. The Group Risk market has been pretty much dormant from a product development perspective for a couple of decades. So this will definitely be a step change and then BrightRock has the ambition to become a multi-product financial services business. So, we’re looking forward to that next step in our near future.

Schalk Malan, it’s been an absolute pleasure talking to you today. Thank you very much for giving us an update on your business and some of the latest products that you guys are launching.

Thank you very much, Gareth.