Investec intends to enter the long-term insurance market, with tailored products set to be launched later this year.
Investec Life will offer personalised products to existing private clients through its One Place digital platform or via specialist advisors, private bankers and a support centre, the specialist bank and asset manager said.
The launch of Investec Life will mark the bank’s first foray into long-term insurance, after receiving a licence almost two decades ago. Investec’s insurance licence dates back to its acquisition of the now defunct Fedsure’s insurance and financial services business in a R5.75 billion deal in 2000/2001.
A number of analysts told Moneyweb the move appears to be defensive and a likely response to Discovery’s plans to take on banking.
“This is in response to our clients’ needs. It has got nothing to do with what our competitors are doing,” said Richard Wainwright, chief executive of Investec Bank.
He said Investec clients have indicated a desire for life protection products linked to the bank’s existing offerings, adding that it presents an opportunity to leverage off its One Place platform.
Rahima Cassim, a fund manager at Ashburton Investments also said the move may be opportunistic and a growth driver to leverage off One Place.
“Their strategy to grow market share in this saturated industry – as well as the rate at which they can grow – in terms of the targeted client base, would be the eventual answer to this question,” she said in response to a question around increased competition from Discovery.
Discovery’s retail bank, expected to be operational in 2018, will round out its financial services offerings which include medical aid, investments, short-term insurance and life insurance products.
“Discovery already has a credit card offering, so its foray into banking isn’t brand new, thus the integration should be more seamless, given their history of cross-sell between their credit card and insurance clients,” she said.
There is likely to be a large overlap between Investec and Discovery’s clients as both cater to the affluent segments of the market.
Vestact’s Bright Khumalo said the data Investec generates from its professional client base puts it in a good position to offer tailor-made life insurance solutions and assess risk. However, Discovery’s Vitality rewards scheme will provide stiff competition.
“Discovery benefits from incentivising its clients to lead healthy active lifestyles and live longer, which helps to delay payouts. If you can grow your book fast enough while delaying payouts, that’s how you win in insurance.
“The key question is ‘what is Investec going to do to incentivise clients?’. If it’s just another vanilla offering, it’s not going to be exciting,” he said.
Cassim said Investec Life’s bespoke client solutions, as an extension of One Place, should be well received by its clients.
She added that innovation in products and diversity of distribution, which includes the ability to leverage cross-selling across banking and insurance, will drive the profitability of companies in the saturated domestic insurance sector.
Investec, together with a partner, offered short-term insurance products under the name Pinion some 10-years ago. Wainwright said it withdrew from the partnership after 18 months, partly as the move didn’t fit in with its strategy at the time.
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