S TA N G E N
STANGEN
Stangen Operating
As A Start-Up After Painful Past PRODUCTION: David Napier
One of South Africa’s leading insurers, Stangen, is enjoying a new life as a “startup” organisation. After separating from African Bank, and at the same time losing its sole physical distribution channel, Stangen is now carving out a niche for itself and pursuing a growth strategy as direct life insurer in a competitive market. CEO, Marius Botha tells Enterprise Africa more about the Stangen of the future. 2 / www.enterprise-africa.net
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INDUSTRY FOCUS: INSURANCE
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In August 2014, African Bank was placed into curatorship by the South African Reserve Bank. “This case stands out as one of South Africa’s most high profile corporate failures,” says UCT Graduate School of Business Associate Professor, Dr Stephanie Giamporcaro. The bank severely underestimated its bad debts, and it paid the price. But this period of pain was the beginning of something exciting, although it could not have felt positive for those involved at the time. Its insurance sister company, The Standard General Insurance Company Ltd., was separated and subsequently re-branded “Stangen”. The company had mainly been selling credit life insurance products and funeral cover to African Bank customers. But when the bank went, Stangen’s link to its customers was severed and without a supply of clients, Stangen was left in limbo. “It was painful,” admits CEO, Marius Botha. “It was a significant period of uncertainty, requiring sudden adjustments and change. We went from around 80 back-office and sales call centre staff down to only 15 as the impact of systemic risks in the group emerged and resulted in the collapse of the other subsidiaries and the business rescue of the holding company. We had great difficulty – staff retention was our biggest challenge.” Although Stangen was formed in 1948 (making 2018 its 70th anniversary year), Botha is keen to
// STRATEGICALLY, WE ARE TRYING TO POSITION OURSELVES AS BEING RELEVANT TO A BLACK EMERGING MIDDLE-CLASS IN TERMS OF BRAND, PRODUCT, PRICING ETC // point out that the business is now viewed and managed as a “start-up” as it begins a brand new journey since its African Bank divorce. “We haven’t focussed on the 70-year landmark as a company simply because we’ve been trying to build a new brand from scratch,” he says. “I intentionally wanted to build a new brand to reinforce the new journey that we are on, especially at junior levels in the organisation. The separation process from African Bank took time from a regulatory perspective and was operationally very disruptive. We had to move off African Bank’s premises and sold the credit life portfolio under that brand, and moving to our independent operations where we are today. It has been tough for people that have stayed with us and I have been reluctant to focus too much on history as it takes people back to a painful period. “We are much more focussed on installing a ‘start-up’ mind-set and culture. The external shocks required innovation through necessity. We now need innovation by design. We are building a new brand, with new products, through new distribution channels and that is a culture change that I want to drive. We are a start-up and we need to act like one with a
24hr payout or double your cover* STANGEN FUNERAL PLAN
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* Terms and conditions apply. Standard SMS and call rates apply. Policy underwritten by The Standard General Insurance Company Limited “Stangen”, an authorised long-term insurer licensed in terms of the Long-term Insurance Act, 1998. Registration Number 1948/029011/06 (Authorised FSP: No 47235)
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team that realises you can never restassured and who have the right energy to drive change.” CHANGE = OPPORTUNITY As African Bank faltered, African Phoenix Investments Ltd rose from the ashes. Stangen is a 100% owned subsidiary of African Phoenix Investments and the new entity, which resumed trading Abil shares on the Johannesburg Stock Exchange in Feb 2017 following a period of suspension, is firmly focussed on the creation of sustainable, long-term economic value. Stangen, as the only operating subsidiary of the group, was forced to quickly change and reinvent itself whist paying enough dividends to get African Phoenix Investments out of business rescue. “Strategically, we are trying to position ourselves as being relevant to a black emerging middle-class in terms of brand, product, pricing etc,” explains Botha. “And we need to maintain a strong financial soundness position to instil confidence in our customer base. “We’ve built back up to around 60 people and we are actively looking to grow and appoint more qualified sales staff as we reduce dependence on outsourced sales engagements.”
STANGEN
Stangen is targeting ‘responsible insurance for responsible people’. Its products are not aimed at the top end of the market and the company has been designed to deliver a service proposition that speaks to the needs of low-and middle income consumers. “We are trying to push back on certain industry practices that have developed and get back to fairer value for customers. We are cutting back on value-added products that aren’t utilised and ‘bells and whistles’ that don’t fundamentally put consumers in
a better financial position. We started this journey by saying we believe there is an opportunity to disrupt in the direct distribution space by specifically disrupting distribution costs. If we can get that lower and still make a reasonable margin then the outcome for customers will be a lower premium product with much better value for money,” says Botha. For most South Africans, disposable income at the end of each month remains a challenge. Cheaper, but still good-quality life insurance, will go
a long way in assisting customers to restructure their finances. PRODUCT INNOVATION One of the recent additions to the Stangen product stable is a unique and innovative Crime Injury Cover, designed to protect against the financial impact of violent crimes. The Crime Injury Cover pays out a cash benefit if assured lives are lost or assured people are seriously injured through specified violent crime related incidents.
// WE ARE MUCH MORE FOCUSSED ON INSTALLING A ‘START-UP’ MINDSET. WE ARE BUILDING A NEW BRAND, WITH NEW PRODUCTS, THROUGH NEW DISTRIBUTION CHANNELS AND THAT IS A CULTURE CHANGE THAT I WANT TO DRIVE // www.silverbridge.co.za | info@silverbridge.co.za Tel: +27 12 360 0100 With 34 clients in 14 African countries, we have world-class business solutions for the financial services industry.
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INDUSTRY FOCUS: INSURANCE
STANGEN CEO, MARIUS BOTHA
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STANGEN
// WE’RE LOOKING AT PRODUCT INNOVATIONS THAT ARE RELEVANT TO THE EMERGING BLACK MIDDLE CLASS IN SOUTH AFRICA // “Crime Injury is an example of what we’re trying to do with product innovation. South Africa has a high crime rate and a large part of our customer-base uses public transport. They are exposed from a crime perspective whilst commuting. People can be attacked while walking from home to a taxi-rank or bus stop. In the winter, when it’s dark, people have to walk from a transport hub to their home and it can be dangerous. People are continuously exposed to crime-related activity. Our product is specifically designed to give a cash payment in the event of a violent crime related incident that results in death or physical injury of a particular threshold. An example is a stab wound or gunshot wound that results in hospitalisation. “Broadly speaking, the policy covers murder, culpable homicide, attempted murder, assault with grievous bodily harm, sexual assault and rape. We have designed it in-line with South Africa’s Criminal Procedures Act and we have included steps to ensure that it’s not only physical injury evidence that is taken into account,” details Botha. While there are many players in the life and health insurance space, this product is unique to Stangen. The country’s crime statistics for 2016/17 paint an uninviting picture. 19,016 murders, 18,205 attempted murders, 49,660 sexual offences, 39,828 rapes, 156,450 common assaults, 170,616 assaults with the intent to inflict grievous bodily harm, and 140,956 robberies with aggravating circumstances were recorded by SAPS during the period. In a recent World Bank report, South Africa was listed as the world’s most unequal country, and in April an Australian travel advisory warned citizens visiting SA to exercise a ‘high degree of caution’ because of the
threat of serious crime. “There are personal accident policies in the market but there aren’t any that are specifically linked to a criminal act by definition. Most other products on the market would also offer a counselling benefit as part of another life policy in the event of rape. So as far as we know the product positioning is unique. It’s specifically aimed at female customers, as rape is a real issue in a South African context. “It allows people to get private healthcare if they are reliant on public healthcare systems, and get lawyers involved if required. Our principle is to pay a cash benefit and empower
customers to choose the best way to use that money,” says Botha. While this product is new to the market, it is not new to Stangen. The company had previously trialled Crime Injury Cover when it still had access to African Bank’s customer base, piloting it across 40 branches but being halted by the bank’s demise. Relaunched on a direct model basis at the end of last year, the product is starting to gain traction in the market. “We have rebranded in a postAfrican Bank world but there are still customers who say ‘who is Stangen’ because we were trading as Standard General with white labelled African
PROUD PARTNERS WITH STANGEN Tel: +27 11 291 5000 Fax: +27 11 884 7949 Website: www.twb.co.za 20th Floor, Sandton City Office Towers, 5th Street, Sandown 2196 South Africa PO Box 786728 Sandton 2146
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INDUSTRY FOCUS: INSURANCE
Bank products. People hadn’t seen a product like this before so there was a little distrust in the beginning but our call centre agents are now working hard to market it the right way and we are starting to see an uptick in sales.” Stangen’s other core products include family funeral cover, life cover, critical illness, salary protection and personal accident policies. And Botha is keen to see the product portfolio grow as the company’s name and reputation develops. “We’re looking at product and process innovations that are relevant to the emerging black middle class in South Africa. A lot of our products are similar to the rest of the market, but in which process innovation can still play a role by, for example, cutting out medical underwriting. So we try and keep it simple during an individually underwritten product sale where we differentiate by risk class; or charging competitive flat premium rates for all customers as part of a speedy non-underwritten product sale. The crime injury product falls into our non-underwritten product range so it’s low premium, low sums assured, mass marketed, and charged at the same rate, irrespective of personal circumstances.” Currently, other new products remain closely guarded. Botha is not keen to give away any competitive advantage. “Most of them are still in the research and development stages simply because of capacity constraints,” he suggests. “We are on a new journey and so we have a lot of improvements to
make. We’ve added a commuter cover product, and we are always looking for feedback from customers so that we can improve. There are new products in the pipeline but they are still very much in the development stages,” he adds. TAKING MARKET SHARE In the future, Stangen’s growth strategy will revolve around delivering quality service and taking market share from rivals. The company has a wealth of experience and a big target to aim at. But Botha will ensure the company only targets identified segments. “We are definitely not trying to compete with the large established players in the high-income market, broker space. We are also reluctant to compare ourselves to some of the mass-market players in the low-income space,” he says. “We rather want to look at ourselves as a new entrant in terms of digital disruption. We don’t have legacy constraints in systems and we have an opportunity to come in as a new entrant, with brand new systems using cloud based technology and open source software to manage our operations on a much lower cost scale. I’d rather want to compete in the fintech space rather than calling ourselves a traditional insurer. We are continuously trying to build capability that makes us a modern, digital insurer. We’re not there yet but we are far along that journey.” Stangen is poised for growth having built most of the core capabilities to deliver bespoke
life insurance through different channels. Its revenue, staff count and product portfolio is growing and Botha is hoping that a turnaround in national business confidence and economic activity could further catalyse positivity. At the recent Commonwealth Heads of Government Meeting in London, President Ramaphosa said that the country was on the road to economic recovery and continues to create a thriving space for FDI. But consumers are still financially under pressure and that could hamper Stangen’s progress. “We have had decent growth but that comes off the back of a low base. There is more optimism in terms of potential growth in the economy. But I still hold the view that the South African customer is under pressure in terms of disposable income. Our growth in the short-term is still premised on disrupting and taking market share from other established players. We want to convince customers to join us and ride the cycle until we see a genuine turnaround in the economy,” explains Botha. A driver of Stangen’s growth will without doubt be tech. Technology has kickstarted the industry globally and is allowing providers to operate more efficiently, passing savings to clients. Tech is also allowing distribution to become far more widespread. In South Africa, the smartphone revolution is extensive with 21 million internet connected users registered in 2017, mostly through smartphones. However, the cost and availability of
No more premiums after you retire* STANGEN FUNERAL PLAN
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*Terms and conditions apply. Standard SMS and call rates apply. Policy underwritten by The Standard General Insurance Company Limited “Stangen”, an authorised long-term insurer licensed in terms of the Long-term Insurance Act, 1998. Registration Number 1948/029011/06 (Authorised FSP: No 47235)
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The Standard and General Insurance Company Limited “Stangen”, is an authorised long-term insurer licensed in terms of the Long-term Insurance Act,1998. Registration Number 1948/029011/06 (Authorised FSP: No 47235)
data is a sticking point and this is why Stangen will maintain its traditional communication infrastructure while building strong digital capabilities. “You still have to rely on traditional intermediation models to engage with customers,” admits Botha. “My view of the SA market is that, for short-term insurance, customers move to direct online a lot faster than in the life space. In the life space, the lag is due to the complexity of the product including the medical underwriting process. It’s a more difficult sales process and a less tangible one. There has been a much slower adoption of life risk sales in the digital space and so we need to build digital for the future but at the same time allow for traditional modes of communication with customers,” he says. START OF THE JOURNEY Although Stangen’s history dates back across eight decades, the company is now in the early stages of its new journey. Building distribution, embracing digital transformation, innovating the product mix and building its presence in a saturated
market are all activities that a start-up must get right, and so far Stangen has been successful. “There is certainly evidence that customers appreciate the value of life insurance. We have a combination of first and third world economies, with mass unemployment. People are consciously aware of threats like the loss of a bread-winner in a broader family construct and that is why a traditional funeral or life cover policy in the SA market is not so much of a hard sell. Disability cover may still be a hard sell but there are pockets in that space where things are quickly changing,” explains the CEO. Now is a challenging time for Stangen. The South African insurance sector is the most advanced in Africa, and one of the most sophisticated in the world, and this means that competition is fierce in almost all categories. For a business starting afresh, with the remanence of economic sloth plaguing growth figures, installation of a positive mindset is vital, and that is exactly what Botha and the management team are doing.
“We are thinly spread and forced to deal with a wide range of issues but you need to make sure you prioritise correctly and continuously adapt. You need resilience and that is one of our biggest assets as a management team. “Ours is a journey of a company that has survived for many years through many different shapes, sizes and strategies, says Botha. “Some of it has been by design and some of it has been because of external threats and disruption that we have had to respond to. The most recent one is of course the split from African Bank, which was never anticipated. We had to respond to that unexpected event and we have done well in terms of repositioning the company over the past three years,” he concludes. The African Bank saga is now behind Stangen, and this is a business looking forward to a bright future where customers can be confident that Stangen lives by its mantra of “Insurance. For Life.”
WWW.STANGEN.CO.ZA
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