Vodacom takes insurance market bull by the horns

Business Day

BY GILLIAN JONES

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VODACOM’s insurance unit aims to grow at 30%-40%, adding another revenue stream as the growth rate in voice revenue slows down.

In just under three years Vodacom has signed up about 400,000 insurance policies and is adding about 13,000 new customers a month, said Andrew Culbert, managing executive of Telcosurance.

The unit offers short-term insurance for cellphones, laptops and modems connected to the network, and tablets. It recently started selling life insurance and funeral policies.

Nontraditional insurers, such as telecommunications companies, are starting to take some market share from traditional insurers.

PwC’s Africa insurance trends report released in October last year found that more respondents compared with in 2013 singled out nontraditional insurers — such as Vodacom and retailers — as a significant competitive threat. The survey included most of the players in the South African insurance market.

In the first half of the 2015 financial year Vodacom had 375,000 handset insurance policies, an increase from 338,000 in the first half of 2014.

Revenue from the insurance unit grew 35% year on year.

PwC said the digital revolution was "creating opportunities in previously underserved communities".

This is where Vodacom is targeting its insurance offerings, said Mr Culbert.

The Financial Services Board granted Vodacom short-and long-term insurance licences in 2012. The insurance unit was fully capitalised, had an independent nonexecutive board, its own audit committee and ran as a standalone insurance company, said Mr Culbert.

MTN and Cell C did not respond to requests for information on their insurance initiatives. According to the two providers’ websites, they offer insurance on handsets.

Mr Culbert said cellphone insurance was "fairly expensive" due to high claims. Insurance premiums on a basic phone start at R20 a month, while a top-end device is about R240 a month.

Vodacom spends R1m a day on replacing phones, as they are easily lost, stolen and broken. Nevertheless, it still makes a margin.

"We make a bit of money," said Mr Culbert.

Margins were threadbare on iphones, as Vodacom’s policy was to replace them, while the insurer might make a 15% margin on a Samsung device, he said.

Mr Culbert said he expected the biggest growth to come from life insurance — a new product for Vodacom.

Just under 10,000 customers have signed up for life insurance.

The funeral plan products have been on the market for three months. Vodacom is signing up 2,000-3,000 funeral policies a month, Mr Culbert said. The insurer is only targeting Vodacom’s South African customer base for now, which stands at about 31-million.

The use of mobile devices to market and distribute the products and acquire new customers, helps to lower Vodacom’s costs.