Alan

Every industry has its myths, and the short-term insurance environment is no exception: leading industry players plan their growth strategies around perceptions of a limited pool of customers, focusing mostly on pricing strategies to attract new business, and finding ways to avoid consumers perceived as too risky.

The best way to confirm or ‘bust’ industry myths is to test them through experiments and data analysis to reveal the truth – and that’s exactly what TransUnion South Africa did with data it holds in the short-term insurance sector.

“South African consumers remain under pressure despite recent interest rate cuts, making this an opportune moment for insurers to rethink their customer acquisition and retention strategies – and to challenge the truisms they’ve relied on in recent years,” said Schalk Fischer, insurance lead at TransUnion South Africa. “To drive better outcomes, insurers must evolve and adapt their strategies to respond to changing market conditions, drawing on risk-management solutions that feature unique data and advanced analytics.”

Myth 1: With stagnant total policy volumes, the only way for an insurer to grow is to win customers from other insurers.

In assessing all new short-term insurance policies taken out between April 2024 and March 2025, TransUnion found that only 17% of new policies were opened by consumers moving to another insurer. Another 37% involved ‘policy splitting’, where consumers moved cover of one of their assets to a new provider, but did not move their whole portfolio.

This means that roughly 54% of new policies are opened due to churn – a significant portion, but certainly not the overwhelming portion that many insurers believe it to be.

“This data shows key growth opportunities for insurers lie among consumers who are new to insurance. In fact, 33% of new policies opened during the time of the study were taken out by consumers who had not had an insurance premium in the previous 24 months,” Fischer said. “While the short-term industry will always be very competitive, there are growth opportunities outside of working aggressively to attract customers from other insurers.”

Myth 2: Loyalty in short-term insurance is dead. Price is the primary variable.

With many consumers scrambling for cost savings, price is perceived to be the most important differentiator between insurers, along with being seen as the main reason that consumers leave one insurer for another.

TransUnion’s analysis showed that 13% of insured consumers who cancel their insurance eventually return to their original insurance provider over time, without switching to another insurer in the interim.

This brand loyalty is fairly consistent between different distribution channels: 9% for banks’ insurance offerings, 11% for brokers, and 14% for direct insurers.

“These findings highlight that, while insurance pricing is certainly a leading consideration among consumers, it is evident that brand loyalty is still a driving factor,” Fischer said. “Marketing and acquisition strategies clearly focus on price, but there’s a greater than expected opportunity to build loyalty that will either retain customers or encourage them to return to brands they have trusted before.”

Myth 3: The new-to-insurance segment is small and only includes risky younger consumers.

TransUnion’s analysis revealed that one in three (33%) consumers who took out policies between April 2024 and March 2025 were new to insurance – they did not have short-term insurance payments linked to their identity number in the previous 24 months.

However, this doesn’t necessarily mean that all newly insured consumers were uninsured before. Some may have previously been covered under their partner or spouse, and later separated their insurance portfolios, or they could have been young adults who sought their own cover after being included in their parents’ policies.

“These findings show that insurers need to expand the scope of how they segment their target audiences, as new-to-insurance consumers are not always who they’re perceived to be,” Fischer adds.

The analysis revealed additional insights into consumers taking out a policy for the first time. Only 6% were aged 18 to 24 years – perceived to be the riskiest consumers – while the greatest portion of these consumers (36%) were aged 25 to 35 years, followed by 36 to 45 year olds, who took out 25% of new policies. It’s clear, then, that consumers aged 25 to 45 present the greatest opportunity for insurers.

In overlaying loyalty data with these findings, it emerged that only 1% of 18 to 24 year olds shopped around for a better deal once they were granted cover, while less than a quarter (24%) of 25 to 35 year olds shopped around. However, consumers aged 36 to 45 showed the greatest propensity to shop around for a better deal, with 29% taking on that challenge.

The myth is officially busted: opportunities for growth lie well beyond young consumers who have only just reached eligibility to apply for their own short-term insurance policies.

“While the short-term insurance market is perhaps not growing at the rate that many insurers would like, our analysis shows that it’s far from stagnant. Clear segmentation along with careful risk management and profitability assessments can help providers acquire lower-risk, higher-value customers across diverse groups of potential customers,” Fischer said. “While price remains a significant driver among consumers, other variables continue to play a meaningful role in building customer loyalty.”