Black professionals set out to establish a new mutual insurance operation

16 Jul 2018

Ujuh Reporter

KCB, the outfit driven by black professionals towards establishment of a cooperative bank, has also set its eye on a mutual insurance venture in a move that promises to shake up South Africa’s financial services market.

The KCB Life venture is mapped out to start swooping through the funeral insurance market and then expand into pure life insurance and other subsectors of the market. The operation will enjoy a head start in leveraging from an established financial cooperative rhythm founded on the back of an ambition to establish a cooperative banking operation. KCB is en-route to become Khanya Cooperative Bank.

“We have established a functioning network of more than 200 people in and around the financial cooperative,” says KCB’s steering committee member, Moeketsi Nchoba. “We will be using that growing network to launch the mutual insurance operation, titled KCB Life. Simply put, our members will be our agents of launch and growth.”

Policy holders are owners

Nchoba explains that the main attraction of KCB Life is that it is set to operate on a model where members are essentially ‘owners’ of the insurance scheme. This is allowed by the mutual insurance model which is big across the globe.

“When you’re a member of a mutual insurance operation, you essentially own a portion of the operation based on the collection of your premiums without disturbing the insurance product,” says Nchoba.

“This becomes possible when you remove the corporate monster from the equation and replace it with the member interest.”

Nchoba further explains that the funeral insurance schemes which dominate the South African market are ruled by the corporate model. You have the premium payers who contribute into a pot of funds managed by a private entity.

“Our research tells us that the premiums are utilized as follows: About 30% goes towards settling claims/benefits, 20% to administration costs and reserves, 25% incentives and another 25% is claimed by private shareholders as profit.

“The 25% of premiums that is claimed by profits in private operations is typically distributed back to members as surplus in the mutual insurance model,” says Nchoba. “And the member’s surplus can surpass the typical profit percentage (25%) because mutual insurance operations are unlikely to have bloated operational costs and incentives inflated by greedy executives who claim ludicrously high remuneration packages.”

Consumers who seek to escape the corporate greed should consider the mutual insurance model, says Nchoba. “KCB Life is set to serve them with a worthy alternative.”

A global feature

The mutual insurance model is a big global feature. The latest Global Mutual Market Share stated that the mutual and cooperative insurance sector account for 27% of the global insurance market by premiums.

The report further notes that cooperative and mutual insurers have consistently increased their policyholder numbers. The total number of policyholders in this space is currently seating close to 1 billion (990 million). The sector has consistently increased employee numbers to boast an employee base of over 1.13 million people.

The 27% global market share has the following continental representation: North America 37%; Europe 31%, Asia and Oceania 15%, Latin America 12% and Africa 3%.

There is clearly a gap to be filled on the African continent. “We are setting out to fill this gap starting in South Africa,” says Nchoba. “We see this initiative as part of a broader movement to reclaim Africa’s economic control. We want to own and control as far as possible, a significant portion of the economic value chain.”

KCB Life is going for low to middle income earners first and initially via the funeral insurance market. “It sets out to deliver a global insurance novelty for the under-banked segment of the market,” says Nchoba.

Insurance as investment

“We are going to the funeral insurance market with a totally different fundamental. Our model seeks to transform this market by putting into the mix an investment angle. We do believe that this market is ruled by ridiculously expensive products informed by the predatory instincts of most operators.

“Our numbers are telling us that a significant portion of what goes into funeral cover should be reallocated into social assistance investment. We will do this without interfering with the anxiety factor that drives the funeral insurance market.

“We understand what drives people into expensive funeral covers. They seek comfort. We will bring to the market a product that takes care of the anxiety factor while doing something else, building an investment base. We will be killing two birds with a single stone with a funeral cover product that yields investment benefits.

Nchoba notes that South Africa has had a fair share of mutual insurance operations. “In fact most of the major insurance operations of today started out as mutual insurers and were demutualised or privatized if you wish.

“For KCB this is a continuation of the ground-up black economic empowerment (BEE) path we have chosen,” says Nchoba. “We have carefully considered the dominant BEE paths carved over the past 24 years or so and concluded that they are grossly inefficient as mainly defined by the top down approach. And so we are carving a new path where we start, operate and own our economic concerns.”

Nchoba said people who are interested to become pioneers of this venture can submit their names and contact numbers at the following email address:

Alternatively they can contact:

Moeketsi Nchoba: 0829408575

Sibonelo Radebe: 0823391121

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