By James Anyanzwa

South Africa's Liberty Holdings is set to exercise its supremacy in the local insurance industry through a new pricing model for its short-term business.

The company is also expecting to shore up its market share in an industry hit by low penetration by maintaining a firm focus on consumer education and financial literacy on insurance products.

South Africa’s third largest life insurer is also preparing to float its shares on the Nairobi Stock Exchange (NSE) with a view of helping local investors evaluate the value for their investment.

The latest revelations come after the South African conglomerate acquired a 56 per cent majority shareholding in CfC Insurance Holdings Ltd (CfCIH), the insurance division of Kenya’s CFC Stanbic Holdings (CSH).

Under the proposed pricing arrangement, the insurer expects to compute premiums for short-term general insurance business based on the policyholders’ behavioural risk-profile.

This means persons the company considers high-risk will fork out relatively higher premiums on insurance covers.

For instance, the insurer considers 25-year-old persons very risky when it comes to motor-vehicle insurance and says these people will pay more on premiums than those in the upper age bracket.

"We have an opportunity to look at the pricing model in the short term-business to grant benefits to people with lower risks and price highly those whom we perceive to be high risk," says Mike du Toit, the company’s regional managing director.

"It is important to consider the individual behaviours of policyholders in order to price insurance businesses differently. This is because if you misprice, then you make something more expensive than it actually needs to be."

Liberty’s proposed pricing methodology seeks to ease financial burden on lower risk policyholders while deterring sloppy behaviours that have led to escalating insurance claims.

A number of insurers and particularly Public Service Vehicle (PSV) underwriters in the country have in the past collapsed after failing to settle huge claims.

These include among others, the Kenya National Assurance, Stallion, United, Lakestar, Access and Standard Assurance.

ethical behaviour

Liberty Holdings believes lower risk policyholders need to be compensated through discounted premiums to encourage ethical behaviour among consumers of insurance products.

Insurance penetration in Kenya still remains low with general insurance averaging 1.7 per cent while combined general and life insurance have penetration of 2.63 per cent. Recent studies have singled out the need for low cost insurance products as a possible driver of insurance services growth in the country.

"The purpose of Liberty Holdings in East Africa is to consolidate the regulatory and management structures of the company. We think that we are going to be much close to understanding the market place," says Du Toit.

"We have an opportunity to grow not from the Kenyan perspective but from a regional perspective. We shall have different target markets for life, short term and health insurance," says Du Toit, who also oversees the operations of Uganda’s Liberty Life Assurance and Tanzania’s Heritage Insurance, Alliance and Strategies.

Liberty Holdings, which has over 50 years of insurance experience in Africa, is a broad-based wealth management group.

The group specialises in life insurance, asset management, retirement, investment, property management and development, health schemes and administration.

Liberty Holdings is majority owned by the South African-based Standard Bank Group (SBG), the largest financial services group in Africa, which in turn is 20 per cent owned by ICBC (Iindustrial and Commercial Bank of China).

Records show that as of July this year, Liberty had total assets under management worth Sh3.73 trillion with business interests in 12 African countries and over 9,000 shareholders

The group’s earnings skyrocketed to over Sh10 billion in the first six months of this year. CfC Insurance Holdings is the product of realignment of the insurance businesses of CfC Stanbic Holdings (CSH) by SBG and Liberty Group.

Heritage Insurance Company Ltd (Heritage) and CfC Life Assurance Ltd (CfC Life) make up the insurance businesses of the CfC Stanbic Group.

focused approach

The separation of these insurance businesses from the banking business in CfC Stanbic Holdings (CSH) is meant to facilitate a more focussed approach to the management of SGB’s wealth enterprises — insurance, property and investment business.

The transaction is also expected to enable SBG have better access to clear strategic focus and management in order to propel the two businesses into accelerated growth and allow proper valuation of the businesses for the shareholders.