As of October 2010
BSSP/GFS
Due to the high claim ratio observed in the portfolio from 2005 to 2008, an aggressive clean-up process was undertaken towards the end of 2008, where rates were increased for groups with higher claims ratios, resulting in a contraction of the portfolio in 2009 (from more than 100 000 principal members in 2007 to 60 000 at the end of 2009). While this was a material loss of business for OM, it improved the overall quality of the remaining client portfolio, and the claims experience improved accordingly. A further adjustment was made in February 2009 to eliminate a provision in the policy that allowed for a principal member to “replace” an insured Adult Dependent with another person upon the death of the original insured dependent and yet continue to pay the same premium. This provision had meant that the insurance was providing coverage for more people than anticipated when the premium rates were developed. Elimination of this provision also improved the claims experience. Recent claims ratios have been in the range of 63 per cent to 68 per cent, which is reasonable given the target ratio of 68 per cent used in pricing assumptions.
The GFS product was launched in 2008, mainly to address competition and provide younger groups with more attractive pricing. However, a 2010 internal analysis of the performance of BSSP and GFS in the market indicated that these products were not yet competitive, and rates were revised based on the 2009 mortality study, as well as adjustments to the age bands for GFS, and new expense assumptions. The age bands were reduced from six to four, consistent with competitor product offerings.
A new incentive model was implemented in early 2010 to motivate the agents to increase sales, reduce lapses and register less risky schemes. Agents receive bonuses only if they are “viable”, meaning that the premium received exceeds their salary, after which bonuses are calculated based on new sales, lapses and claim ratio level.
PWYC and Provider Plan
The individual products, Provider Plan and Pay When You Can (PWYC) products are nearing their final stage of development and approval. They will be rolled out in the fourth quarter of 2010 or first quarter of 2011. ShopRite retail locations have been identified as a distribution partner for the PWYC product.
In Imbizo, challenges were encountered with the group collaboration approach among the three companies of Old Mutual, Nedbank and Mutual & Federal, especially as partners had competing products to offer. The over-riding principle was that competing products would be allowed between the partners, but that in presenting a united front such as during village meetings or blitzes, each partner would only present their core product. The other products remain available for sale in each organization’s sales office within the Imbizo site.
Impact Study
The financial education impact study was approved, research partners assigned, initial proposal tabled and funding secured. Delivery will commence in February 2011, with the preceding months focused on design and planning.
As of July 2011
BSSP/GFS
In 2011, Old Mutual introduced a special promotion where the waiting period was reduced to two months, or waived for large groups with evidence of prior coverage. This has provided a significant boost to sales, but the net impact has yet to be measured.
As of this period the growth rate is 48 per cent, with the book growing from 64 000 principal member in June 2010 to 94 000 in June 2011.
PWYC
PWYC was re-launched in January 2011, and 55 000 starter packs were distributed in 20 Shoprite Stores.
The re-launched product is similar in design and benefits to the original product, with considerable enhancements made to simplify the registration and top up process. The original product could be purchased at the till, but required the policyholder to queue at a Money Market counter (in all Shoprite stores) in order to complete the application and registration process, which was time-consuming and lengthy. The process was redesigned to enable the policyholder to register or top up with a simple SMS. The re-launch has also focused on strengthening the partnership between OM and Shoprite. A significant challenge during the product development process was to coordinate IT requirements between Shoprite and Old Mutual to ensure the process was completely functional and integrated with both of their administration systems.
Sales have been much slower than anticipated so far, and registration rates are not convincing yet.
Above the line marketing campaign, as well as in store promotion has been completed, are showing significant impact but sales still remain low (an average of 30 sales a week without specific promotion, 150 with a marketing campaign).
Provider Plan
The new Provider Plan product was developed as an individual “Tick-A-Box” insurance and savings policy to be made available to clients through Imbizo sites, as well as associations or affinity groups. It was developed in mid-2010, pilot tested in December 2010, and launched in May 2011 through accredited advisors. Old Mutual has also received sign off on its “runner” model for distribution, and has already recruited several “runners” for the Centane Imbizo area. It is a “no-advice” product: the product brochure and application are given to prospective clients along with a stamped, self-addressed envelope, and if they are interested they can complete the application form and post it to Old Mutual.
In December 2010, Old Mutual conducted a test of the Provider Plan product with a closed group. The audience was a group of women shareholders in a women-owned coal mine whose, Wiphold (Old Mutual’s partner in Imbizo), who were meeting to receive the first dividends from the company. Old Mutual used the opportunity to distribute a “goodie bag” to each of the women, all of whom are in the target foundation market of LSM 1-5. The bag contained a letter explaining the contents of the bag, as well as a brochure, application form and stamped self-addressed envelope. The objective of the test was to see how many people would respond, as well as to measure different responses by category. Out of 2500, however, only four responses were received. This suggests that passive marketing may not work with this product, and that more client interaction is required. The runner model is likely to provide more direct interaction with clients, so this will need to be monitored and evaluated against sales from licensed advisors.
Impact Study
The baseline survey for the financial education module was finalized and the first questionnaire was administered in June 2011.