MiWay hunting life insurance market

It's taken a while, but direct insurer MiWay has begun chugging out profits for listed parent Santam: R170-million in the latest financial year. I

It's now eyeing the life insurance market, which will pit it against its indirect parent, Sanlam, one of South Africa's big three. Why go there? CEO René Otto explains.

South Africa's low-growth, high unemployment economy is home to a fiercely contested life insurance sector. What's the appeal?

The general move towards direct insurance, whether it's short term or life or any form of financial services where the product is fairly simple, has been proved worldwide, and South Africa is lagging a bit on the life insurance front.

Our approach in the group [is that] we must give the consumer choice. And there are clearly consumers who prefer to deal directly with insurance companies, especially where they know exactly what they want. There's [also] a new generation ... they like to do things online, they grew up in that environment, they shop online, so there is a market already. The guesstimate is that about 5% of life insurance is being sold online and we want to get a slice of that cake.

You must have had the go-ahead from owners Santam and Sanlam. What if you cannibalise their business?

We think the cannibalisation risk is very small. Less than 3% of the business MiWay writes comes from clients who were previously insured through brokers with Santam.

Are you using Sanlam's systems and models for your life insurance venture?

We're using Sanlam's licence and their capital, and we're using the MiWay brand and the MiWay management. We don't have to reinvent the wheel.

It's nice having Sanlam behind you, but what about the market itself? It's vigorously contested.

Today it might be 1LifeDirect and OUTsurance, next year it might be someone we don't even know about. Since MiWay was launched seven years ago, we've had King Price coming into the market, Discovery launching an insurance business, iWyze from Old Mutual, Absa's idirect ... It would've been naive to think it was just going to be us, OUTsurance and the Telesure group in the personal lines space forever.

If we can capture 1% of the market over five or seven years, we'll have a thriving little business. The market is there. We're not going to threaten one of the top three in the next 10 years. We can eke out a niche that is profitable.

What is 1% in clients and likely revenue?

We think about 100000 clients is a critical mass and will be nice and profitable, and if you can double that, it'd be a nice contributor to the group.

When did you first make a profit?

In our sixth year. We did our business plan early in 2007, launched in 2008 and then the credit crunch hit...People stopped buying cars and car sales is a big driver of insurance sales. If we'd had a crystal ball we would not have expected to breakeven in four years.

Talevi is a BDTV presenter