Willem Roos and Howard Aron
Joint chief executive officers
OUTsurance is a direct personal lines and small business short-term insurer. In addition, its South African direct life insurance business continues to gain traction.
Youi, the group’s direct personal lines initiative in Australia, has achieved scale and is trading profitably. Youi New Zealand was launched in July 2014 and provides personal lines insurance cover directly to the New Zealand public.
OUTsurance’s business model is built on a philosophy of scientific underwriting and pricing, innovative product design, a robust and efficient information technology platform and a high performance culture driven by great people.
The client-centric business strategy to provide value for money insurance and exceptional client service continues to drive consistent shareholder returns. OUTsurance evaluates its performance against the following strategic imperatives:
- Pricing discipline. OUTsurance abides by a sound insurance principle of only underwriting insurance risk that it can accurately price for. This approach has resulted in achieving claims ratios which are more stable and profitable compared to its peers and is supported by a sophisticated systems infrastructure and a culture of data analytics. OUTsurance’s reinsurance strategy is calibrated to manage its low appetite for earnings volatility and to protect it against infrequent large scale natural events. The success of this approach is evidenced by the relatively small net impact of record hail storm exposures over the last two years on the OUTsurance bottom line. Although Youi benefitted from relatively benign weather conditions in the second half of the year, the claims ratio continues to show a positive trend in line with the maturing in-force book. Youi’s claims ratio continues to track well below the market average, testament to the sophistication of the pricing and underwriting model.
- Client service. OUTsurance operates in a highly competitive and commoditised market place with limited opportunity for distinction. The value of “awesome service” is deeply embedded in OUTsurance’s service culture and a key differentiator. Client service performance is tracked by measuring the success of client interactions through various innovative feedback mechanisms such as client and service provider surveys and the “wall” on its websites which provide clients with a public forum to compliment or criticise OUTsurance’s performance. This year, OUTsurance and Youi achieved a 95% and 85% client satisfaction ratio respectively as measured on the “wall”.
- Brand strength and reputation. OUTsurance views its responsibility to pay legitimate claims promptly and fairly as its most important function. Its management team is highly incentivised to ensure that OUTsurance abides by its equitable claims settlement philosophy. A valuable independent source for validating its claims philosophy is the annual industry statistics published by the Ombudsman for short-term insurance (South Africa). OUTsurance has again achieved comparatively better complaints experience than the industry. OUTsurance clients submitted two out of every 1 000 claims processed to the Ombudsman compared to the industry’s three out of every 1 000. Of these claims, the Ombudsman only overturned 14% of the OUTsurance claims whereas the experience for the industry was 33%.
- Excellent operational execution is key to achieving OUTsurance’s underwriting and client service goals. Operating efficiently is also critical in meeting its objective of providing value for money insurance products. Innovation is often centred on smarter execution. OUTsurance continuously invests in its dedicated and passionate people, systems and processes to ensure world-class and economical business processes. This strategy has allowed OUTsurance to consistently provide clients with below industry premium increases. This year, Youi realised further scale benefits on the back of the fast growing in-force book. In an effort to extend the operating hours of Youi and gain client service efficiencies, Youi opened a call centre in New Zealand. The Australian client base is now serviced from Australia, South Africa and New Zealand, a strategy which has been highly successful in enhancing customer experience and positively impacting on the bottom line.
OUTsurance is committed to sustainable relationships with all its stakeholders.
Examples of OUTsurance’s involvement in the community include the pointsmen project where 156 pointsmen help to alleviate traffic congestion at high-traffic intersections, and the staff helping South Africa OUT project where hundreds of OUTsurance employees volunteer their time and efforts in order to make a difference in the lives of less fortunate South Africans through various projects.
OUTsurance delivered another strong financial and operational performance for the year under review. The group achieved 20% growth in headline earnings to R1 448 million and a return on equity of 38.4%. The significant driver behind the growth in OUTsurance’s earnings is attributed to the profitability of Youi, which generated R231 million in headline earnings.
OUTsurance achieved 35% growth in the annualised new business written.
- Youi delivered excellent new business growth as the business continues to gain traction and solidify its presence in the Australian market.
- The South African business delivered an encouraging increase in new business written in an environment where premium inflation continues to track below consumer inflation.
The strong new business volume growth translated into 25% growth in the group’s gross written premium income to R10.4 billion.
Since its launch in 2008, Youi has through good operational execution, the creation of a powerful brand and management focus, grown to be a notable and profitable player in the Australian market. Youi now contributes 39% of the group’s turnover and 15% of the group’s profits.
RMI Holdings included R1 219 million of OUTsurance’s earnings in its normalised earnings (2013: R1 031 million).
For an in-depth review of OUTsurance’s performance, RMI Holdings’ shareholders are referred to www.outsurance.co.za.