How insurance should evolve to keep up with new risks

How insurance should evolve to keep up with new risks

The youth of today live in a very different world, with its own unique risks, which now require a very different approach to insurance. The emergence of new trends in wearable technology and the rapid acceleration of digitalisation have heralded an entirely new array of insurable risks – particularly amongst the South African youth, who are the main drivers of the digital and technology movements in the country. Given the dynamic nature of the risk landscape, parents should view educating their young adult children about insurance and how it works as an important life skill.

Given the speed at which the digital economy and technology landscape is developing, young people need to be educated on how to mitigate associated risks by incorporating insurance into their financial planning as early as possible. This is an important part of building financial literacy and preparing the youth for nurturing a sense of responsibility that will set them in good stead for a financially secure future.

The eSports industry, which has seen the professionalisation of online and console gaming, has been gaining immense popularity in South Africa over the past few years. Several schools and universities across the country have responded to this trend with a call for curriculums to be amended to incorporate eSports education and training. Developments such as these point to the fact that the eSports industry is here to stay and will play a central role in how the adults of the future will live, work, and play online. However, those who compete and play in the eSports arena at a professional level will need to bear in mind that any goods used to derive an income cannot be insured on a personal policy.

The rise of digitalisation has been accompanied by a dramatic rise in cybercrime, with South Africa now ranking as the third-highest cybercrime destination in the world. The most common cyber-attacks involve ransomware, identity fraud, and the theft and sale of data. The rise of digital industries such as eSports and virtual reality (VR), as well as their associated risks, has highlighted the need to educate young people about how to mitigate their unique risks with a combination of cyber insurance and risk management practices.

These sentiments can also be applied to the online shopping sector, which in South Africa, has experienced an exponential boom in the wake of the Covid-19 pandemic. According to PayFast, South Africans between the ages of 18 and 24 are the fastest growing group of online shoppers, with a 100% increase in traffic, according to the latest reports. The rise in ecommerce has necessitated a high volume of important data such as payment details and personal information being shared via online platforms. This exposes online shoppers to several different kinds of fraud and data theft risks.

Cyber insurance is a key component of effective risk management and provides individuals with a way to protect data and ensure that the integrity of digital and computing assets is maintained. ‘Cyber hygiene’ is the term that most accurately represents the practices and principles young people will become more reliant on as their lives become ever more digital.

But it’s not only cyber risks that have become increasingly prominent in the insurance landscape today. Parents also need to consider educating their children about insuring assets like wearable technology. Smartwatches, fitness trackers and portable technology like iPads and tablets are now commonplace assets amongst young adults, and the cost of replacing these items should they be lost or stolen, can be substantial.

A good place to start as a parent wanting to educate young adults about the role of short-term insurance is to ensure they have their own facts straight first, and this can be done by contacting an adviser to assist in any insurance processes. Thereafter, it is key for parents to help their children understand what a risk profile is. A risk profile is unique to each individual. A number of factors such as age, claims behaviour, daily travel habits, where they live and how they store their valuables, are taken into account to determine their level of risk, and ultimately their insurance premium.

It’s important for young people to understand that their behaviour and the level of responsibility they demonstrate in taking care of their assets will affect their risk profile in the future. They need to be aware of the fact that their behaviour, specifically around their financial decisions, will form a record that will make a difference to how they are perceived by insurers in the future.

This provides valuable lessons that form an important part of teaching children how to be financially responsible and make informed decisions around their valuable belongings and, ultimately, their financial wellbeing.