LONDON — In a world where salaried executives and their spin doctors boast when they post growth in single digits, it’s refreshing to find those for whom those numbers don’t cut it. So after another strong year, this time of 43% growth, I tapped insurance company BrightRock’s CEO Schalk Malan for an update. We’ve been privileged to have BrightRock as a partner virtually since the creation of Biznews, so not surprisingly have followed their progress more closely than most. The tall, strapping and super-bright Malan reminds me both physically and intellectually of the late Simon Marais, whom I also watched closely over the years as he built Allan Gray into South Africa’s leading money manager. Might we be witnessing something similar with BrightRock? – Alec Hogg
When you started Brightrock in 2011, did you target any particular area of the market?
Alec, our product was designed without any minimum premiums, you know it was designed with the intent to actually being able to cover people’s deeds irrespective of their income level, irrespective of their occupation as an example, their area, so the intent was to deliver a product that can apply to everybody’s various needs. I think, what we have seen is in the independent intermediated market there’s clearly a certain premium size and income that does result from that distribution side. So, our average premiums are in the upper income segment is seeing that the results from the clients that you are also seeing there, their average incomes so, I would say the product is designed to cover the full spectrum of the market, but we’ve definitely seen it being very attractive in that higher LSM market space.
You got two million people on your books now.
So, I think one has got to understand then the whole portfolio of products that BrightRock is offering. We’ve got the individual product that we sell predominantly through the independent intermediaries. And then we have also launched a funeral parlour product were we basically assist funeral parlours in their funeral products that they are selling to their clients and in that segment, we’ve also seen a significant growth. And then we have launched our group offering towards the middle of May last year that’s also started to see some nice traction, although that is very much still in the early phases. So, I would say, if you want to unpack and see the full picture our growth, it was attributed across those three product lines. We are now seeing a significant uptake in, firstly on the individual side on brokers understanding and adopting the product technology because they see the value. We see the claims starting to get paid where clients are receiving benefit payments that exceeds or close to doubles what they had before for the same premium. And those claims examples are really starting to show the advisers that the product has significant value, and they are making it part of the portfolio, or their offering to their clients.
So, you almost need a bit of time before you start paying the claims before people start realising the return on investment that is available.
You know BrightRock came to market about seven years ago. We also launched just following the credit crunch, so consumers were looking for value. They were looking for providers that offer them certainty, that offers them transparency. We saw a significant interest and adoption from day one, to be quite frank, but I think where we now are really starting to see that trip action is first, you get an adoption, you start to see the proof in the pudding. The results are starting to come through, and we’ve also launched quite a number of improvements over the last number of years. And our approach to that has always been, we listen to our intermediaries, we listen to our clients, we try to understand their exact needs and we adopt, and we have the privilege of also being quite nimble. We started from a piece of paper, so we were able to not have all the legacy challenges that sometimes does limit innovation and the result has really been a business where we could innovate and deliver solutions to our clients and I think that’s really started to see the results coming through. I think the other last point to make Alec was just how we talk about the product and really, we have a concept around BrightRock, around co-creation, around adviser and the client where BrightRock really wants to perform the role of enabling that discussion and enabling advise, and that requires a very careful level of attention of the way that you word, that you describe benefits and that you explain yourself. I do believe that that’s now starting to come through. We are seeing it in our excellent Ombudsman records. We are seeing it with just how we are engaging with our clients where I believe we are seeing people understanding what they bought much better. That really manifests what we talk about when we say: “Needs matched life insurance”.
Is that the disruptive part of it? That you looked at an industry which perhaps you weren’t too sure what they were buying when they were buying life insurance and you simplified it.
I think there’s an element of that. I do think that consumers do see in BrightRock a value of that, that we take a great level of effort, that we are clear on what we say. I’ll give you one simple example where if, you buy a critical illness product Alec and you would probably expect that that product does cover you when you contract cancer stage four. Now by simply saying – yes, the answer to that yes, it’s not so easy in practice what’s happening today. What we are seeing, a lot of cases, there’s a lot of requirements for clients for example that they’ll only be paid out if they are terminally ill. They’ll only be paid out if they’ve gone through a number of chemotherapy cycles etc., were we said to ourselves, can we pay when the client is diagnosed with that level of condition and that severe condition, and we came up with those innovations just to make it clearer, try and match the expectation that a client has and I think that’s the key. I think coupled with that, the product is really delivering fantastic value, I mean we are seeing clients coming into BrightRock, and let’s say spending a thousand rand per month for R4m worth of cover and that same thousand rand can get the client close to R7m worth of cover. So that’s it a significant tick-up in value and how we got that is by simply saying, lets strip out waste, lets strip out anything that’s excess that you don’t need, that’s not matching your needs and also not just from day one but also the time allowing you to have those, your product adjust to your changing needs and we’re seeing that as a significant driver in seeing the uptake and penetration in the market.
So, 43% growth year on year there are many companies who would wish to be able to be in your shoes but as a disruptive entity and there are lots of them around, not everybody wants to be disruptive, not everybody gets it right. You’ve managed to get it right. You are growing at exponential rates. Now what’s happening inside the business that’s making that possible? That other people who also want to be disruptive and grow exponentially can learn from?
We as a group of like-minded individuals that came together, wanting to change the industry for the better, question things. We are curious about what we are doing and with that same type of excitement around, you know being curious, being creative is disseminated throughout the business, and if I say you know that everybody is excited about the business within the organisation, you know people look forward to coming to work because they know things are moving, things are changing and I think it also speaks to, why did we start the business, what was our point of wanting to come into the life insurance market. A lot of people say, there’s a lot of players, it’s an extremely competitive market in South Africa and we believe that what we had as a product and what we wanted to do was very different, and I can sum it up for you in quite a simple statement where we saw ourselves as being able to deliver a product and services that’s there to help people navigate changes in their lives. Sometimes those changes are good changes and other times it’s not so great when it comes to those not so good things. Every single person inside BrightRock understands that and is excited about it and feels a bigger responsibility to our clients to make sure that we deliver on that purpose. So, I do believe that BrightRock is a business, that we are committed, you know people are here that are driving and are keen to change. We are not scared of change, we are not scared of improving. We’re self-critical. So, these are all key attributes I think that has really led to this significant growth story.
So, what’s the why? You know Simon Sinek talks about – every successful business having a why. We know BizNews for instance, our why is to help create a prosperous and peaceful South Africa. What’s your why?
So, Alec, our why is very clear in my mind, we are here to help people navigate changes in their lives. We want to help you be able to adapt your financial plan when you buy that new house, when you have that new job, when you marry, a new baby gets born. Those are exciting changes in people’s lives and we want to have our products and services, being able to help you navigate that and to help protect you against those changes. So very much a purpose statement that says we are here to help you navigate change to the products and services that we deliver.
So, you’ve paid out more than R900m.
Over the last seven years, so from 2011 to today.
Alec, we find a range across the age spectrum, you know the average age of those claimants are around 48, so if you compare that to the average age of our in-force portfolios around 43, so it’s a slightly older age profile. We’ve had some extraordinary examples where a client diagnosed with multiple myeloma cancer stage 3, where he qualified for a pay out of around R28m and his previous insurer, he was, for the same premium only able to cover himself and his family for around R13m. Now, those examples showcase and explain the value that BrightRock has delivered to those families and their loved ones. We’ve seen a number of trauma related claims. BrightRock has got a unique benefit within our additional expense benefit that covers specifically those trauma-related events that’s quite hard to define and they include and range all the way from children that got run over by a lawn mower, all the way to people that were in car accidents or fell off their mountain bikes and broke their shoulders and the product then is there to help them, for those individuals to cover those additional costs.
What kind of market share do you have? Now clearly, when you started in 2011 you had zero.
What share of the market do you have now?
So, if I look at the intermediated affluent market space and that statistic that’s relatively easy to track because we’ve got surveys like the Swiss Re survey and our market share comes from that recent Swiss Re survey based on the 2017 financial year. So, Alec in that space we are sitting with a market share of around 12% which is quite exciting to us as a business having come from zero. It also sends to us a very clear message of significant growth potential. BrightRock has also now stated that we are embarking on entering the direct channel from an advisory perspective, so we’ve started to build our own advisory force, so we see significant growth opportunities not just in growing, continue to grow our intermediated market but also embarking on a new advisory channel to really, I see, capitalise on the success we have seen through our individual product.
So, with 12% where does that put you in the picking order? If you had a list of the top ten where would you come in?
Alec, if you look at that specific market segment and we have to see it in context, the market is quite sizeable, we as I said don’t play in the direct advisor tide agent space at all. So, in that intermediated upper market segment we’re sitting then with that market share around fourth, of all the providers in that space. You know the South African market is especially renowned worldwide for its innovation and it’s a highly competitive space. So, we’re very happy with that result.
So now you’re starting direct channels, the obvious question there is, are you not concerned that it’s going to affect the brokers or the intermediaries that you have been working through on the one hand and the second question which is probably more interesting given that you are such a different company is, what are you looking for and what do you find in people who will actually fit in with your culture, your different way of looking at things?
Alec on the first one, we don’t have any concerns on that front, our independent intermediary market, has continued to grow. We now have over four thousand two hundred contacted advisors. It is a sizeable market in South Africa. Constitutes around 56% of all sales independent intermediated market, so we see very much that there’s space for both those channels being focused on. On the advisory side, when Brightrock started this year on that channel, we definitely see significant interest from a whole range of individuals, we’ve seen interest from individuals that are advisors at other providers, we see a whole range of people looking at BrightRock as a product of choice. We are seeing that people see that there’s that value that they can bring to their client base from our product, you can imagine if you have a product that can deliver up to 40/50% additional cover for the same premium that is quite an exciting prospect for an advisor to join BrightRock.
So, they are knocking on your door in other words, you’re not having to go out there looking for people?
I think it is a combination of both, I mean we are actively recruiting advisors but we are seeing a significant interest in the BrightRock product and also the BrightRock organisation from that perspective.
And what about Sanlam’s involvement, they did acquire a chunk of your equity, injected a lot of cash, how’s that working out?
Sanlam has been fantastic shareholders Alec, so that relationship is really going very well. I mean you would have seen in their results that BrightRock has made a material contribution to their new business results. So, they are very pleased with our performance and yes, they have been good partners in enabling a lot of our growth aspirations.
Last time I visited your offices, a couple of months ago you were sitting at over four hundred people. Now that you’re going to have a direct client or direct sales force, what are you likely to be sitting at in a years’ time or indeed five years’ time?
So, Alec, we’ve got internal projections, we’re keeping a close watch and obviously making sure that we’re running optimally within the organisation, but I think it will be aligned to what our growth in premium revenue is and we’ll see how it pans out.
But if you are growing at 43% a year how do you manage that kind of growth, from your situation, from your chair? How do you make sure this thing does not get out of control, or that you somehow have taken on a wrong path?
So, Alec I think BrightRock is a very considered organisation. We’ve grown significantly, we’ve seen fantastic innovation from our product perspective but we’re very careful and considered in the processes that we’ve put in place and then that makes, when you’ve got those robust systems, you’ve got robust processes in place, if you then grow your team from an administrative development perspective, finance perspective, those people come into a space where they know very quickly what is expected of them, they understand the principals, there’s consistency that’s being delivered, through those procedures and systems and then it’s also important, we’ve had significant stability in terms of the core team that started BrightRock, that’s really developed a lot of these components and if you look at that there is a very strong leadership and significant experience inside the senior executive team with Brightrock and I think that’s also played a significant part in being able to handle and manage this significant growth.
So, discipline and systems and leadership as well. Just too close with, 43% growth last year, what are you targeting in the year ahead?
We do see us growing market share in addition to what we have now, but yes, we see that we can continue to grow at a very good pace for the year to come, but we do see that there’s still significant growth in what we can do from a market share perspective Alec, I mean, our group risk covering our employers and their employees, just launched the middle of last year, so just simply looking at that product line, a lot of growth potential.