BrightRock: from zero to R2.1bn in premiums

Posted on 9 Sep, 21 by BrightRock

It’s taken 10 years, but the BrightRock team has turned its plan to shake up the life insurance industry into action. Today, the company is the third-largest insurer in new business in SA.

venture of their own, based on a new model for life assurance. Armed with a mantra about living and loving change, Schalk Malan, Sean Hanlon, Suzanne Stevens and Leopold Malan planned to use tech to offer needs matched products that would allow individuals to shift their financial solutions as their lives change. With that, BrightRock was born.

A decade on, the Sandton-based company employs 700 people, insures 2.8-million and has laid claim to nearly 15% of the total life assurance market in SA. It’s the third-biggest life insurer in new business written by independent brokers, behind only Momentum and Discovery – and then “just by a short little nick”, company CEO Schalk Malan tells the FM.

Despite the economic downturn brought on by Covid, new business grew 10.8% last year, with total annualised premium income up 12.5%, to R2.1bn. It’s a vote of confidence in an idea that was born when Malan, then divisional product manager at Discovery Life, started chatting to Hanlon(Discovery Life sales manager) and Stevens(head of marketing)about starting something new. At the time, life products were inefficiently priced, says Malan. Irrespective of how a client’s needs shifted and changed over time, their cover would grow largely in a block, matching inflation.

The team saw room for improvement. Working after hours – from 8 pm, often into the early hours of the morning – they started exploring their options. Satisfied that their products and numbers could work, they set out to overhaul the infrastructure of life insurance, the way the product was delivered to clients and the consumer experience as a whole.

That meant moving away from the traditional one-size-fits-all approach to life insurance, where an individual’s needs are lumped into a single policy. Instead, they wanted to design life insurance tailored to customers’ individual requirements, with flexibility that would allow them to change their cover if their circumstances changed. It’s made for a system that’s more cost-effective and sustainable as there’s no waste, says Malan, who believes BrightRock customers save between 30% and 40% on their premiums.

Because of the individualised nature of the product, there’s a much greater role for advisers. This was informed, in part at least, by Hanlon’s experience building distribution lines for Discovery Life in the UK when the subprime lending crisis hit. “Just to see the devastation of the UK consumer was a Damascus moment for me. You saw this changein [the]consumer and compression of mistrust of big organisations. In my mind, from an advice-giving point of view everyone was talking about ‘disintermediation’ and moving from advice into artificial intelligence,” he tells the FM.

“But if you look at where it was going, the more sophisticated a person’s portfolio was, the more they were fighting to hire advice, and you’ve seen that trend continue at an exponential rate – especially now … in this Covid period.” The problem, he says, is that advisers tended to present clients with “a one-dimensional block of cover with a payback of some sort … There was a total disconnect between the relevance of the Cover being bought[and]the efficiency of the cover.”

As a result, Hanlon saw “a big flight to high-advice sales, as opposed to designing products that are sexy to sell but really are quite irrelevant to a client’s needs”. Says Malan: “We came in with a product that could speak to efficiency and flexibility. Our growth is driven, I believe, by a significant fresh and agile distribution; it’s really taking brokers along and explaining the advice journey, and enhancing their service offering and embracing technology.” The product itself is built around client needs for the short, medium or long term, between a death. “You get far better bang for your buck. When you outlive the financial need you bought cover for, you have an asset in the premium you pay, which you can then use to buy more cover. If you haven’t claimed on your policy, you can buy more, say, dread disease cover,” says Malan.

On a more practical level, the company has leveraged technological advancements to create completely customised insurance policies for clients, including in the group risk and funeral insurance markets. A tele-underwriting service has put paid to paper-based questionnaires, there’s an online quoting platform and paperless application process, and personalised, interactive policy documents. The application platform is driven by technology that performs 1.5-million calculations in a fraction of a second to deliver a needs-matched product and premium to a prospective client.

After hitting on their idea, the team needed backing from like-minded reinsurers and investors. To that end, they spent a year building their systems, working closely with their first shareholder, Lombard Insurance Company.

Five years in, Sanlam bought a 53% stake of the company for just over R700m, putting the value of the group at nearly R1.5bn. (Sanlam now holds 58% of BrightRock’s equity, while Lombard remains a minority shareholder.) “[Sanlam]saw BrightRockwas having a significant impact on the market it was operating in,” says Malan. “It felt the product offered something different to what it sells in the broker space. We developed our own brand and distribution force; it was more agile and [Sanlam] felt we could maybe get into segments of the market it would not be able to access.” There’s an irony in having ditched a corporate only to end up with one of SA’s largest financial institutions as a major shareholder.

Does that mean BrightRock is headed back to the corporate mindset? Not at all, says Malan, adding that the team is very clear on BrightRock’s independence. “We have our own life licence; we don’t operate on any of [Sanlam’s] regulatory licences. BrightRock, if anything, is becoming stronger by the day,” he says. In Hanlon’s view, there’s something of the best of both worlds in the tie-up. “I think right now we have quite a nice blend,” he explains.

“We’re a standalone business and Sanlam really values us as a team. It’s a fabulously exciting time, especially when your business is working and you don’t have this gripping pressure around your throat that you have as a start-up.” There are advantages, too, in maintaining the entrepreneurial edge. “As a founder-run business, the big difference is you just move so much faster, you’re so much more flexible,” says Malan. “The difference between a corporate and

Entrepreneurship is that fleet-footedness[that] makes you take on the establishment.”

In his view, BrightRock’s agility has given it a particular edge during the pandemic. At a time\ when more people than ever before were thinking about mortality and morbidity, the business could respond quickly. With its products easily available in the digital space, BrightRock was able to capitalise on an uptick in the use of technology. And the flexibility of its product line meant clients could buy up more cover free of underwriting.

“Awareness among consumers is at a record high now, in terms of protecting their families’ balance sheets. It’s been a horrible period, but it’s come with opportunities,” says Malan. But the pandemic has made for a particularly complex environment in which to operate, says Stevens. And unexpected, too, with the company paying out 30%-40% more in claims than it had anticipated – about R88Om.

What has been extraordinary for me is bringing different people together. We’ve had lots of great and heated debates as to how to approach some of the challenges,” says Stevens. It’s that level of engagement that makes her “confident that we can navigate whatever comes our way”.

So has the entrepreneurial journey been worth it? Hanlon says he’s always had a burning desire to make a change and do something different. “I didn’t want to die not having tried to make that difference …We didn’t go out to start a little niche player; we wanted a fundamental change to the life assurance business and that was a big ask,” he says.

“There’s something amazing about the people who’ve built these amazing businesses because it’s the toughest thing you can ever do. You see your salary bill climbing with more than 700 people, then [there’s] Covid, and you get depressions in the market and all those things that go with being an entrepreneur. You can intellectualise it all you want, but until you’ve been there nothing can prepare you for it.”

So, given the chance, would he do it all again? “It’s all a little bit like being a parent. The kids drive you mad and you want to run away, but you wouldn’t give it up for the world and I’m really proud of what we’ve done when I see our claims paying out.

“We changed the way products are constructed and we also changed the way policies are sold.”

This article was originally published on Financial Mail on 9 September 2021 and is attributed to BrightRock. Click here to read the original online version.