Many expert forecasters have guessed correctly that as a result of the current situation of the COVID 19 outbreak, many economic sectors are being able to grow, such as e-commerce, remote jobs, e-learning, among many others.
Far from this, however, it is the car insurance industry in South Africa.
The car insurance industry, as well as other insurances, suffered a very large downfall during April, although it is a falling that has been suffering for several years.
According to Global Choices, the car accident rate in South Africa decreased by around 75% in April, since people stayed home. This demonstrates that South Africans have respected the call to stay home during the lockdown and that they only use their cars to drive for essential needs, as required by lockdown regulations.
It is estimated that the cause of this fall is the result of the economic uncertainty caused by the crisis of COVID 19 pandemic in which South Africans are rather saving and spending only on what they need.
Ernest North, the co-founder of Naked Insurance, an artificial intelligence-powered car insurance provider, says: “It supports our decision to reduce premiums so that clients pay just roughly 10% of the normal comprehensive premium when they enable CoverPause.”
Cover Pause is an option offered to those users who plan not to use their car for a certain period. This option enables users to pause the accident element of their coverage for a certain time and to downgrade it to a stationary cover. This option that Naked Insurance beneficiaries have was not created with the current pandemic situation in mind, but it could benefit many of the South Africans who have already spent almost a month without driving their car because of the lockdown.
Although the number of car accidents, as well as car usage, has dropped during the lockdown, the benefit to pause the accident element was not available to a large part of the car-owning population.
According to TransUnion’s, a credit consuming reporting agency, the effect is even greater, in the view of the fact that many people delayed car purchases. “We are expecting work-from-home to be a reality for many people for at least a year, meaning traffic won’t be back to usual levels for a while,” says Kriben Reddy, head of auto information solutions at TransUnion. “Another trend that we’ll see is vehicle purchases moving online as people continue to follow physical distancing protocols.”
Many companies have invested in infrastructure for their employees to work from home and they expect to see some benefits reflected as a result.
This does not bode well for the car insurance industry. The fact that there are fewer cars on the South African routes means that there will be fewer traffic accidents and therefore, there will be fewer claims.
According to North, after the pandemic, people will get used to comfort, spending only on what is necessary for them and keeping control thanks to digital tools that make their lives easier to manage. Which is why it is hard to believe they are going to return to the old ways. This is what is going to force the industries to update quickly in digital matters.
Expert forecasters estimate that a good public to target at this time is the youth since they are the ones who cope better with technology and they could rapidly research for car insurance for under 25 and succeed in making an online purchase effectively.
There is still another positive change that is expected for the car insurance industry after the pandemic. In order to avoid the spread of coronavirus, people are going to use public transport less than normal, which would result in people using their own vehicles more for their commuting. This can be a good opportunity for the increment of car usage on South African routes.