Sanlam Banks on Low-Income Segment for Growth

September 28, 2018

Sanlam is one of the largest insurance groups in South Africa. The group recently reported an 18% decline in headline earnings for the 6 months ended June 2017.

Ian Kirk, is the CEO at Sanlam. He said a lack of growth in formal employment and inflation dampened demand in the middle-income market in South Africa. He said that they expect the economic environment to remain challenging, but were confident with Sanlam’s performance.

Sanlam was now looking at expansion to more African countries. First they entered Egypt and Ethiopia to look at future markets. And this year Sanlam is busy acquiring Moroccan insurer Saham Finances.

A Need to Understand the Low-Income Market

Sanlam remains upbeat despite recording drops in headline earnings and a challenging economic environment. Just as challenging for them is doing business with low-income consumers.

There have been conferences to try and understand this  particular market. It has challenges as well as the unique needs of these consumers. Companies are customising their business models and Sanlamprocesses to grow their brand with the low income segment.

Sanlam Sky, which provides life cover and funeral policies to low-income earners, has witnessed an 8% improvement in net operating profit. This growth in the low-income market is encouraging with Sanlam and Old Mutual.

Celebrating 100 years in business, Sanlam Emerging Markets (SEM) has also seen  new business growth of 19% and now everything is being offered to Africa – life insurance, retirement products, healthcare and asset management.

Promoting Financial access to Low Income Segments

Sanlam has always been an insurer geared towards the middle- and high income groups, but with the acquisition of Channel Life and Safrican Insurance, it re-entered the low-income market in 2005 and 2006. It ended its business with these low income earners in 1993.

Since returning to the market, Sanlam Sky has seen the value of new business increase, contributing a third of the retail business’s profits. Jurie Strydom, Sanlam’s CEO,  has said that the entry-level market volume has grown so significantly that is has outpaced those of middle- and high income markets.

He added that the company had also launched underwritten cover and the chance for a more diversified retirement offering. Personal finance is important to Sanlam, contributing more than 50% of the groups earnings.

Sanlam is introducing investment products designed for the lower end of the market. Low income consumers haven’t been properly served, but insurers like Metropolitan and Sanlam now offer underwritten life cover.

Sanlam’s CEO, Ian Kirk, says they have been doing a lot of work to understand this market and to bring change. He added that the industry needs to look for ways to drive down the cost of delivering financial services. The reason for this is that incomes in this market are too low to cater for the cost of delivering the products required.

These value-added products have always essentially been for the middle-and high-income earners. With Sanlam now low income earners can rely on simple underwritten insurance which is designed to not only insure but to also create wealth.

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All info was correct at time of publishing