Challenging Conventional Wisdom: Three Short-Term Insurance Myths Busted!

An analysis by TransUnion South Africa indicates significant growth potential in the short-term insurance market by revealing that a substantial one-third of new policies come from customers who haven't had insurance in the past two years.

The study also challenges the notion that brand loyalty is dead, showing that 13% of customers who cancel their policies will eventually return to their original insurer.

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Every industry operates on accepted wisdom, and the short-term insurance sector is no different. Many leading insurers have traditionally focused their growth strategies on a perceived limited pool of customers, aggressively pursuing new business through pricing wars and avoiding consumers deemed too risky. However, TransUnion South Africa set out to challenge these long-held beliefs, using its rich data to confirm or "bust" three key industry myths.

In a challenging economic climate where South African consumers are under financial pressure, TransUnion South Africa's insurance lead, Schalk Fischer, suggests this is the opportune moment for insurers to innovate. "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," he stated.

Myth 1: Growth Only Comes from Stealing Competitors' Customers

The conventional view is that with stagnant total policy volumes, an insurer's only path to growth is winning customers away from rivals.

TransUnion’s analysis of all new short-term policies opened between April 2024 and March 2025 painted a different picture:

• Only 17% of new policies were opened by consumers completely moving to another insurer.

• Another 37% involved 'policy splitting,' where a consumer only moved cover for one asset.

This means that while churn-related activities (54%) are significant, they are not the overwhelming portion many insurers believe them to be. "This data shows key growth opportunities for insurers lie among consumers who are new to insurance," Fischer explained. In fact, a significant 33% of new policies opened during the study were taken out by consumers who had not had an insurance premium in the previous 24 months, highlighting a substantial, often-overlooked source of new business.

Myth 2: Loyalty in Short-Term Insurance is Dead; Price is Everything

In a cost-conscious market, price is widely perceived as the main differentiator and the primary reason customers switch providers.

TransUnion's data offers a counter-narrative, revealing a surprising degree of brand loyalty. The analysis showed that 13% of insured consumers who cancel their policy eventually return to their original insurer over time, without switching to another provider in the interim. This loyalty is consistent across various distribution channels: 9% for banks' insurance offerings, 11% for brokers, and 14% for direct insurers.

Fischer noted, "While insurance pricing is certainly a leading consideration among consumers, it is evident that brand loyalty is still a driving factor." The findings suggest an opportunity for insurers to build loyalty that can either retain customers or encourage them to return to a brand they previously trusted.

Myth 3: The New-to-Insurance Segment is Small and Only Includes Risky Young Consumers

This myth assumes that the pool of consumers newly acquiring insurance is small and predominantly consists of high-risk younger adults.

The data unequivocally busts this myth. As previously noted, one in three (33%) new policyholders between April 2024 and March 2025 were new to insurance.

Furthermore, the analysis revealed the demographic breakdown of this segment is much broader than commonly believed:

• Only 6% were aged 18 to 24 years (the perceived riskiest group).

• The greatest portion (36%) was aged 25 to 35 years.

• This was followed by 36 to 45 year olds, who accounted for 25% of new policies.

The consumers aged 25 to 45 years clearly present the greatest opportunity for insurers. Interestingly, while the oldest group (36–45) showed the greatest propensity to shop around for a better deal (29%), only 1% of the youngest group (18–24) did so once granted cover.

“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," concluded Fischer. By embracing clear segmentation and advanced risk management, providers can acquire lower-risk, higher-value customers across diverse groups, proving that while price remains a factor, other variables continue to play a meaningful role in building customer loyalty.

What implications do you think these findings have for how insurers should allocate their marketing budgets?

Read the full analysis at TransUnion South Africa newsroom.transunion.co.za/transunion-south-africa-busts-three-short-term-insurance-industry-myths/