fia insight april 2011
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FIA Insight April 2011TRANSCRIPT
Website: www.fia.org.za
S A’s PREMIER INTERMEDIARY MAGAZINE
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1st Quarter Edition 2008R19.95 (incl)
1st Quarter Edition 2011R19.95 (incl)
INSIGHTUnder Scrutiny: Conflict of Interests
I n d u s t r y A w a r d s
9 June 2011
The FIA's Awards Evening has become a prestigious, much anticipated annual occasion
on the Insurance Industry's Calendar, to be held this year at the Sandton Convention Centre
The Awards this year are in the following categories:
• Long Term Insurer of the Year – Risk Products
• Long Term Insurer of the Year – Recurring Savings Products
• Investment Product Supplier of the Year
• Health Care Product Supplier of the Year – open schemes only
• Short-term Personal Lines Insurer of the Year
• Short-Term Commercial Insurer of the Year
• Short-Term Corporate Insurer of the Year
• Employee Benefits Supplier of the Year
• Underwriting Managers of the Year
The Highlight of the banquet will be the presentation of the Prestigiuos FIA Awards to Financial
Service Providers judged by the members of the FIA for providing exceptional quality of products and
service levels to FIA Members, and are highly regarded by the industry as a whole and set a
benchmark of service excellence all strive to achieve.
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FIA Insight
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Association of Southern Africa
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Website: www.fia.org.za
Publisher
Financial Intermediaries Association of Southern Africa
Chief Executive Officer
Manie Booysen
Chief Operating Officer
Justus van Pletzen
President
Seamus Casserly
Editor & Media Manager
Clive Franks
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Editorial Contributors
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FIA national office has the name of an independent
practitioner near you. The views expressed in this magazine
are not necessarily those of the FIA. Readers following any
advice contained in the magazine, do so at their own risk
The FIA does not endorse any product supplier or any
advertisers products.
Seamus Casserly, Manie Booysen, Justus van Pletzen,
Mike Stoker, Gareth Stokes Chris Busschau,
Linza van Aswegen, Marco Passero, Prof Tobias Doyer,
Pieter Erasmus, Lance Moroney, Gari Dombo, Tim Rutherford,
Craig Harding, Tracy de Kok, Mandy Barrett, Carel Nolte,
Terry Booysen, Dr Lerato Motshudi,Craig Pheiffer,
Barry Taylor, Jonjon Smit, Lourens Joubert
Editor’s Soapbox 2
Presidents Message 4
From the Desk of the CEO 6
Financial Planning 7
Company Profile - Riaan Geldenhuys 10
Dangers of Facebook 14
The Floods in Perspective 16
Short - Term Exco 18
SAM 22
Pitfalls involved when Changing Insurers 24
Life Insurance Confidence Levels 25
Conflict of Interests 26
Inseta & Wits Partnership 28
Life, Critical Illness & Disability Cover 30
Managing Political Risk 31
Toll Roads 32
Focus on Brokers 33
Peter Todd New M&F MD 34
Appointments 35
Budget 2011 36
Pledge towards Good Governance 37
Organisational Wellness 38
Time to Adjust Potfolios 40
Regulations & the Intermediaries 41
Snippets 42
Women in Healthcare 43
The Stalking Black Swan 45
Insurance Confidence Outlook 46
Concessions for CO2 Emissions Tax 47
Humour 48
E D I T O R ’ S S O A P B O X
by Clive Franks
2011 has arrived and there are very challenging times ahead for the FIA insurance premiums in the foreseeable future. A highly sensitive situation
and the Industry. First and foremost on everybody’s minds will be the will be faced by those farmers that have underinsured their farms and
regulatory exams, the FIA’s Joe Kotze has been preparing and keeping property. The fact that government will not be bailing out the farmers
members up-to-date with the latest developments and requirements and exacerbates the impact on them and on the economy as a whole.
visiting some of the branches with road shows that will conclude at the end of
April. Seamus Casserly President of the FIA & Justus Van Pletzen COO
represented South Africa and Africa at the recent WFII (World Federation
The Insurance Industry Conference will be held once again at Sun City of Insurance Intermediaries) Executive CSE Committee and the WFII
from 24-27 July 2011 which will once again see close collaboration World Council meetings on 27-28 March 2011 in Rome.
between the FIA, IISA and SAIA the theme being ‘Promoting Sustainable
Development’. The main topics that were under discussion at the meetings were global
regulatory developments for insurance intermediaries and the
The Prestigious FIA Awards the benchmark for the Insurance Industry complications surrounding multinational placements. In this respect, the
will take place Thursday 9th June 2011 at Sandton Convention Centre in World Council were addressed by speakers from the IAIS (International
Johannesburg. Association of Insurance Supervisors), the IMF (International Monetary
Fund) and from the TMF-Group on a global ITP database.
The first quarter got off to a turbulent start with all the rain and floods not
only nationally but internationally as well, resulting in huge claims that There will be feedback from this conference in the following edition of the
will have to be settled not a good start at all for our industry. FIA INSIGHT.
A highly important factor that will influence the industry this year will also Thursday 9th June is set for the prestigious FIA Awards to be held at the
be Treating Customers Fairly. The principal behind TCF is the fair and Sandton Convention Centre in Johannesburg.
ethical treatment of customers. To quote Justus van Pletzen COO of the
FIA “It is an organisation’s senior management that is ultimately The Awards this year are in the following categories:
responsible for the implementation of a TCF culture, as top leadership • Long Term Insurer of the Year – Risk Products
buy-in is key to ensuring that it becomes an entrenched component of • Long Term Insurer of the Year – Recurring Savings Products
the company’s value system.” • Investment Product Supplier of the Year
• Health Care Product Supplier of the Year – open schemes only
The year will also see the implementation of Conflict of Interests • Short-term Personal Lines Insurer of the Year
legislation. This will entail vigorous debate with legislators and scrutiny • Short-Term Commercial Insurer of the Year
of contracts between service providers and intermediaries and careful • Short-Term Corporate Insurer of the Year
definition as to what is considered as conflict of interests. • Employee Benefits Supplier of the Year
• Underwriting Managers of the Year
Legislation will also be coming into effect over The Solvency Assessment
and Management (SAM) to ensure the local insurance industry is in line Members will be contacted by Bluestream Consulting in order to conduct the
with international standards. It must be formally implemented by January FIA’s members needs research. We request that members please give up a
2014, but considerable work has to be completed before then. The FIA will few moments of their valuable time in order to respond to their research in
have a huge influence on the input with regard to the proposed legislation order to understand exactly what is of utmost importance to you.
due to our interaction with the FSB.
The first two Anton Swanepoel workshops on the regulatory exams have
The floods and natural disasters that have occurred over the last few been completed. It was attended by more than 550 delegates in Pretoria
months have not only created havoc to the farming community and and Johannesburg and immediate feedback about the value that the
infrastructure, but will also have a knock-on effect on insurance and workshops bring was extremely positive.
2
Editor’s Soapbox
F I A P R E S I D E N T
Dear Colleagues
Direct Insurance Offerings
These are rapidly changing times for the insurance industry and, while As many of you are no doubt aware, the direct insurance market has
some of these changes will require much hard work, there are many become an increasingly crowded and competitive space, with new product
benefits and we can expect the insurance industry to emerge stronger offerings frequently cropping up. The latest, Frank.net, was recently
and more focused this year. launched by Liberty in the Life assurance sector and follows the news last
year that Sanlam sold its majority stake in MiWay the Short Term Direct
A trend that was set in 2010 and that will be continued in 2011 is the Insurer to Santam.
number of regulations expected to be promulgated including the Insurance
Laws Amendment Act, The Consumer Protection Act and the Treating While we echo the concern that broker members may have about the
Customers Fairly initiative. emergence of new direct players, particularly those launched or managed
by partners with whom we conduct our business, direct competitors are a
For us the intermediaries, the Insurance Laws Amendment Act regulations reality and a separate distinct distribution channel. It is also pretty certain
will mean a change in our business models. However, we do expect these that this channel is permanent and will remain a competitor to
changes to be a positive development as they should actually assist intermediation.
advisers in earning fees rather than restricting this practice.
Despite protests from Brokers and traditional distribution channels, product
The Consumer Protection Act, which was delayed from its original October providers are creating these channels to broaden their business base and if
implementation date, will also be introduced during the first half of this year. one wants to protest against a product provider launching a direct
This will have far-reaching consequences for our industry and while we competitor then as brokers you need to do so with your feet by switching
expect a relatively limited impact on intermediaries it is likely to put insurers your allegiance to other providers. The bottom line is however that we
under pressure. cannot dictate to suppliers how to run their business other than by shifting
our allegiance which is the ultimate protest.
For us as the FIA, one of the more interesting developments for 2011 will be
the “Treating Customers Fairly” guidelines. This initiative is expected to If consumers too are also choosing to go direct then we must be mindful of
have a serious impact on direct insurers who continue to make exotic the fact that they value price over value or service, and that is their choice. It
claims of savings, performance and efficiency without any challenge. This is up to Brokers to prove their value as no one else will. Having said that, my
new initiative will completely change the insurance landscape and opinion is that the more crowded the direct space becomes, the more
hopefully put direct competitors under the spotlight. confusion among consumers and the greater the need for intermediary
advice to differentiate between the various options.
The automatic exchange of Short-Term insurance policy data between
brokers, who are binder-holders, and insurers, is set to become a reality for For example, the UK motor sector has such a proliferation of direct insurers
personal and commercial business. This is a watershed moment for the that in the end it has resulted in brokers beginning to offer a service to
industry and, while there is still some work to do, we foresee this resulting clients to assist them in choosing which direct insurer is correct for their
in improved accuracy, with cost savings both for insurers and brokers. As needs. Talk about unintended consequences!
part of the second phase of this project in 2011, we will also be including
claims processes. While we can’t promise that the future will see us negotiating the various
direct offerings on our client’s behalf, we need to accept that direct
The biggest development this year is the introduction of the new regulatory insurance is a part of our industry. Providing our clients with the best
examinations by the FSB, a reality that all FSP’s will be required to complete service possible is the best tool an adviser has at their disposal against the
successfully. Whether or not the FSB will relax their December deadline threat of direct competitors.
remains to be seen, but it is essential that intermediaries and all parties
affected aim to complete these examinations as early as possible, as the Regards
consequence of non-completion is extremely serious Seamus.
4
Message from the President of the FIA
C E O
Natural disasters have been a major focal point across the world so far instance, small actions like not printing email unless essential or by
this year with devastating flash floods having hit Australia and Sri Lanka, replacing incandescent light bulbs at home and at the office, with low
and closer to home we also saw the impact of severe flooding as many of energy bulbs. Cumulatively, such actions by a carbon footprint aware
our rivers burst their banks. nation become significant.
While the debate about the validity of climate change continues to rumble Intermediaries are also in a position to help spread the message to their
on there is very little doubt that we are seeing the effects of a changing clients and we can play our part in making sure that our clients are as
climate. In fact, the Department of Environmental Affairs recently informed as possible, as to how they can effectively manage the
announced a massive climate awareness programme would be rolled associated risks, in order to mitigate any damage.
out to educate South Africans on climate change. This can only be a
good thing. The more we educate ourselves about this threat, the more For instance, given the increasing severity of thunderstorms, for those
seriously it can be dealt with. operating in the personal lines market it may be advisable to remind
clients prior to the rainy season, to clear their gutters in the event of heavy
At the FIA we are also concerned about the impact of climate change not rains or to attend to maintenance problems when they first arise rather
only on the people of our country but also on our than leaving them to build up. This can have a
business. Our industry relies on accurate forecasts of significant impact by reducing the number of claims
how likely such disasters may be in order to properly submitted and may also prevent problems at claims
price for the risk, yet the effect of climate change is stage, in cases where the insurers may allege that
throwing some of these forecasts out of the window. the insured has not taken reasonable care to prevent
losses.
In Australia, the government warned that it would
need to make budget cuts after a cyclone exacerbated Intermediaries will also have a role to play in
the damage caused by the flooding with economists educating the consumer with regard to the
predicting it could reach as much as $20bn. In South anticipated shift towards a more granular
Africa, we have also seen the cost of flooding impact underwriting approach by insurers, which is likely to
massively on our industries with AgriSA estimating have a pricing effect on affected risks. Higher levels
that R2bn will have been wiped out of the agricultural of excesses can also be expected and in severe
and farming industry. cases, risk improvements such as the construction
of retaining walls, culverts and other flood
With such damage having occurred already this year, prevention measures, may be a requirement before
it is crucial we focus our combined efforts with cover can be obtained.
industry partners and stakeholders to work together
to combat the effects of climate change. Ultimately the impact on the For those operating in the corporate and commercial insurance market,
insurance and reinsurance industry is likely to be huge and this will have advice becomes even more paramount. There are multiple options
a knock-on effect on the intermediary industry. available to clients whether it be insurance against traditional disasters
such as floods and heavy rain, or insurance against issues such as
As a consequence, the FIA has been invited to attend a regional business interruption caused by natural events like the Volcano in
consultation meeting for Africa, hosted by Santam and SAIA, as part of Iceland last year.
the United Nations Environment Programme Finance Initiative (UNEP FI),
a strategic partnership that aims to establish a United Nations-backed There are many factors that intermediaries need to take into account
global initiative of insurance companies who are proactively addressing when assessing the risk profile of their clients and with an ever evolving
environmental, social and governance risks. issue such as climate change it is vital that we all work together to ensure
the sustainability and affordability of cover for clients.
Each and every one of us can play a role in mitigating the impact of
climate change by becoming more aware of our carbon footprints. For
6
From the Desk of the CEO- Manie Booysen
7
F I N A N C I A L P L A N N I N G
I have been in the long term industry since 1972. I was initially in an employee benefits – all of this needs a
administration role, but entered the sales side at the beginning of 1974. The “big brother” to provide opportunities to
37 years since then have been filled with change, excitement, at times co-ordinate the insights, new developments
confusion, and sometimes even a little fear! And that is still the way that it is! and future direction of product houses, and the FIA
Divisional and Branch structure is the most effective way for this to be done
One of the things that I learned during the 1970’s was that it was far better to for the 15 000 intermediaries who are either members or employees of
have the support of other people and to have a forum in which I could air my members of the FIA.
concerns. I joined LUASA and my employer was a member of SAIBA, and
both provided me with the community, camaraderie and support that
enabled me to survive and flourish. Excitement over the freeing up of our economy in 1994, the relaxation of
foreign exchange and offshore investment rules that started in 1997, the
As time went by, SAIBA became SAFSIA, and SAFSIA merged with the IBC emergence of South Africa as a world player rather than a world pariah, the
and also with LUASA to form the FIA. The FIA brings all of the strengths and recent invitation to become the new add-on to BRIC that would lead to a new
resources of those other two bodies together into a support structure that BRICSA centre of influence in the world. All of these provide opportunities
enables every intermediary to perform better without having to spend their for us to do more and more sophisticated financial planning and advising to
time l0ooking over their shoulders. The FIA removes the loneliness of the our clients. Research, communications and road-shows from the FIA all
life of an intermediary, and replaces it with the strength of support, keep us informed of how we can capitalise on these opportunities.
professional advice, muscle power in dealing with the authorities and the
product houses, and a community of other people who also put their ego’s
on the line every day when they set out to earn a living by selling financial All of the above have often seen intermediaries confused. I sometimes find
security. myself wondering whether we are dealing with investment matters, risk
management, or a medical scheme only to find that it is in reality an
I’d like to look at the key things I mentioned in the first paragraph, and how employee benefits issue! The forum provided by the FIA and the expert
the FIA addresses them. resources available to members, and most importantly the accessibility of
the senior people in the FIA secretariat and on the various FIA Executive
Committee provides the most valuable resource for resolving this
Market place: 37 years ago we dealt with about 25 different life offices confusion.
– now we have a mere handful. However, our clients still expect us to
provide them with good advice, the best deal and excellent service. The FIA
interacts with the product houses through the ASISA Distribution Affairs My experience over a long working life has been that fear is almost always
committee and is able to influence them. caused by the unknown. The network of FIA Branches, Division, Executive
Economy: The socio / economic environment has changed more than Committees and the professional in the secretariat go a long way to
any of us could have foreseen. The FIA Branch Structure affords every neutralising the unknown.
member the opportunity to interact with other intermediaries and to pool
experience. Could the FIA do things better? I’m sure it could. Does any other
Regulations and Laws: Probably the biggest impact on intermediaries organisation come close to providing intermediaries with the support that
in the last few years has been the promulgation of FAIS, FICA and the host of we need? Not a chance.
other regulatory changes. The FIA conducts careful research into all such
changes and distribute thorough information on how to cope with these. The long term industry has always been populated with independent-
Even more important, the FIA has developed real status with the Financial minded, highly driven people. Some would even call us “mavericks”. We
Services Board, National Treasury and Parliament and has frequently don’t like to be told what to do, and we love nothing better than a gripe
intervened to ensure that the interests of intermediaries and their clients are session about poor service from product houses, other intermediaries who
protected. In fact, the FSB always consults with the FIA as a matter of churn the business we have written, unreasonable education requirements
course on all proposed new developments. coming out of the FSB, lousy investment returns, banks that return debit
Products: The emergence of LISPS, off-shore players, “buy term and orders, clients who avoid us. But we do deliver the goods, we have done for
invest the rest”, the impact of HIV / AIDS, the blurring of boundaries a hundred years, and I’m sure we’ll go on doing so for the next hundred.
between long term products, short term insurance, medical packages and We’ll just do it better and with a lot less stress as members of the FIA!
2. EXCITEMENT
3. CONFUSION
1. CHANGE
4. FEAR
The Financial Planning/Long Term Industry and the Financial Intermediaries– by Chris Busschau Chairperson Financial Planning Exco of the FIA.
P R O F I L E
Preamble: With the desire of finding out more about what the FIA members keep the FSB happy by complying
do besides devoting their valuable time to the FIA; FIA INSGHT will be with FIAS, there are not a lot of
conducting interviews with them in each quarter. Our ninth interview is with current issues.
Riaan Geldenhuys Vice- chairperson of the Western Cape Division and CEO
of Charis Brokers.
The whole idea of the Insurance Boot camps was never to be a qualification
I think first of all that time is currently one of our most precious school. The idea was to create something where our members and their
commodities. personnel can get trained in a very relaxed environment for practical day to
day activities and issues and to understand and interpret policy wording.
I am currently also the Boland Branch chairperson, and from a branch point of There are many people in our industry do not understand the policy wording
view we try to make the FIA a recognized organization in the communities that and what the original intent of the wording was meant to be.
we as a branch operate in. We use our annual golf day to raise funds for
different NPO organizations, such as child care and rape crises centres. We When you are working for a corporate company you get in-house training. In
also contributed towards a school in need last year. a way, Insurance Boot camp is a FIA initiative as in-house training for our
members. Fortunately Risk SA and Insurance Institute of Cape of Good Hope
I believe that in the Western Cape division, we have a unique structure. We joined the party which gave us more exposure.
get the all of our branch committees included on divisional level. Because
our chairperson operates in the life- and investment side and I specialise with The course material is very practical and will definitely help those who need to
short-term, I look after the short-term on divisional level, this includes the sharpen their skills. What is interesting is that some of the underwriting
short-term Technical personal lines. managers, insurance companies and every independent assessor's are all
attending. That is a clear indication for us that we are on the right track. Yes,
Together with 3 other members from our division, I was also involved in the we are experiencing some teething problems as with any venture. This is a
establishment of the Insurance Boot camp. work-in-progress and therefore we will endeavour to roll out something on
similar lines for our life- and investment members and ultimately for the rest
of the country.
On a quarterly basis we meet with Santam on an ad hoc basis, we also meet
with Mutual & Federal and Auto & General to discuss member issues with
them and what we generally pickup on in the market. The purpose of the
meetings is to sort out difficulties and problems experienced by our As I am not an economist, it will be difficult to for me to predict if we have, but I
members. This is not always reactive; some of the meetings are very pro- certainly hope so. What I can tell you is that 2011 definitely started off better
active. We do not deal with individual problems, but if one picks up on the than 2010.
same individual problem in 5 different areas, it becomes an issue that we
need to address. That said, I still see the after affects and a lot of people are struggling
financially. They cut back on what they think is unnecessary expenses. I think
In the Western Cape, strategic planning and intermediary enhancements are that the interest rate cuts that we had helped a lot of people to hold on to their
very high up on the agenda. As the rest of the country most probably knows properties, if it was not for that, we would have had a major disaster. I only
by now, the people in the Cape are very vocal and make a strong case for what hope that there is no increase in the foreseeable future.
they believe in. We have had a few meetings in this regard to keep our
members happy and to get an input of new ideas that can be escalated to With the promise that 2011 has brought us, increase in car sales, some
National Office. estate agents are smiling again, yes I think we have turned the corner, but the
recovery will not be a fast one, it will take a while before we see a major
Apart from always keeping your mind fresh and thinking of ideas on how to improvement.
work smarter rather than harder with new working procedures and still to
FIA: How do you think The
Insurance Boot Camp is helping
FIA: In what way do you feel that you are making the most contribution members?
to the FIA?
FIA: What issues are you currently involved in?
FIA: Do you think that we have reached the turnaround in the financial
crisis in South Africa?
10
Company Profile: Interview with Riaan Geldenhuys Vice-chairperson of the Western Cape Division and CEO of Charis Brokers. By Clive Franks
Continued on page 12
P R O F I L E
FIA: What incentives are there for young people to join our industry and how do you think we will be able to attract them?
FIA: Are you willing to share a brief CV and a glimpse in to the private life of Riaan Geldenhuys when you are not involved with the business of the FIA
FIA: What is the most important message that you have for the members?
FIA: What is your feeling with regards to the RE1 & RE2 Level Examinations?
FIA: How do you feel about the FIA’s interaction with the regulators such as the FSB?
FIA: What words of advice do you have for the consumer particularly in light of the recent global economic downturn?
in its field to do the job. Why does a consumer want to “self medicate” his own insurance if there are fully trained specialist financial advisors? It is a totally wrong conception that by dealing with a direct insurer, you save
I am a firm believer that you rather keep someone happy than to get him money. It will cost you in the long-run! We all know what John Ruskin wrote happy. The whole industry has changed so much over the past 5 years or so. before 1900.The traditional intermediary driven insures are changing their strategy, the direct insurers become more prominent, even on the life side. ‘Even in this tough economical time, it is better to speak to your broker to help
you manage your finances and assets.’We see more and more legislation being written that the intermediary has to cope with. New demands that we are constantly being required to deal with.
The only certainty we can bet our life on is change.
How we can keep our members happy with additional enhancements as I was born and grew up in the Helderberg, 50 km from Cape Town and member’s benefits is so important, we have to change with our industry. matriculated in 1983. I am married and have with two kids, a son 23 and Even if this means that we have to employ more permanent staff on a daughter 20. divisional level. I was employed by Santam for a period of 10 years before starting up Charis
Brokers in the Strand in October 1995.Keep our members happy! I have a National certificate in architectural drafting.
A National certificate in short term insurance.Charis Brokers is currently one of the largest short term intermediaries in the Helderberg area with a large client base.
Get involved with your branch. You do not have to be on a committee to support them. We hear of so many intermediaries who just feel that they can I love sport and am a regular visitor at Newlands rugby stadium. You can resign from the FIA. This is not an option. Get involved, stay focused and let guess where my support lies.our mutual voice be heard where it matters most. I play golf, cycle to keep fit (doing my 15th Argus after a 5 year sabbatical),
have to, but hate the gym and just love to do water skiing whenever I get the Somebody once said “we cannot determine or change the direction of the time. The nice thing about skiing is that I can enjoy it with the family.wind, but we can adjust our sails so that we reach our destination”.
I am also interested in the building industry, and together with my brother have built 10 houses. We are planning 3 more this year.
I personally think that the RE1 examination is a good thing; it will force the entire industry to learn and understand the intention of the law. The way it was steam rolled, the timeframe and the negative implication if the exams is not passed is a total different story. I reckon the cut off date should have been extended seeing that there were delays before implementation.
RE2 should seriously be reconsidered; some people have been in this industry for years. We all had to write the UNISA exams. RE2 is not a tool for, but a way to test your knowledge of the product you are dealing with for years. Yes, I am against the RE2 if it is going to be in the form of another exam. If we allow the RE2 to go on, are we going to write another exam in 5 years time to test our product knowledge again?RE2 should be scraped and replaced with a continuous development program. I am all for that.
It is good to know that the FIA have a good relationship with the FSB. That said, sometimes the diplomatic way is not always the correct way to deal with certain issues. I therefore believe in a more head on approach, because it is sometime the best way to deal with issues, as long as you deal with it in a dignified manner.
The one thing that distinguishes us as the FIA from a normal corporate company is that we are entirely a member’s driven organization and our member’s needs and wishes should always be considered above anything else and should also be reflected in any negotiations.
Use a FIA intermediary, speak to your intermediary and follow their advice!
The average person does not self-medicate, they consult the specialist
Continued from page 10
S O C I A L N E T W O R K I N G
South Africans don’t ever need to be reminded about being mindful of address, it wouldn’t take a master criminal
security. Electric fences are activated, security companies patrol our streets, or a dubious friend-of-a-friend long to work
our houses are sealed up tightly with burglar bars and security gates and we out the necessary details.
are constantly alert. If we go away we of course remember to cancel the
newspaper deliveries and activate light timer switches. But what if you or Research for the report found that four out
your chatty teenagers are unwittingly alerting all and sundry, including of ten users admit to posting details about
burglars and criminals, to where you live, what you got for a birthday and their holidays and one in seven have their
when you’ll be away or at a party. home addresses listed. Most alarming
was the amount of strangers that were
Insurers in the UK have pinpointed information available and activities posted on being allowed access. In an experiment
social networking sites such as Facebook or Twitter as potentially dangerous, as 100 friend requests were sent to randomly selected strangers – on Twitter
criminals hack in to find out all they need about potential victims. Some 92% and on Facebook 13% accepted a complete stranger as a friend,
insurance experts are even predicting that users of social websites could face enabling them full access to their information and updates. Teenagers have
higher insurance premiums, as their risk exposure is increased. been pinpointed as the worst culprits in sharing information indiscriminately.
These warnings follow a report called “The Digital Criminal”, commissioned Even if you don’t give out personal particulars or allow access to strangers,
by a top UK insurance company and compiled by a reformed thief, Michael joining an online group, event or social cause, or responding to an online
Fraser. party invitation gives anyone in that group information about what you’re
going to be doing at a particular time and where.
Say Pieter Erasmus, head of Marketing, Sales and Distribution Momentum
Short-term Insurance, “In the South African environment, it’s highly unlikely Another popular application is the uploading of photographs. Besides
that your internet usage can be used to influence your premiums, but it presenting a ‘shopping catalogue’ of what you own, photographs can show
certainly bears keeping in mind what information you are giving out and to security systems, external spotlights, house layout and access points and if
whom. Car-jacking syndicates are known to be sophisticated and organised the family pooch is likely to be a nuisance. More than 2 billion photos are
and to boast about your new Porsche, with pictures or inviting friends over for uploaded onto Facebook every month
the rugby because you have the biggest flat-screen plasma TV is just
irresponsible.” The insurance company that commissioned the report is considering
questioning customers on whether they or any family members belong to any
Fraser says: 'There is no doubt in my mind that burglars are using social social networking site.
networks to identify likely targets. 'They gain confidence by learning more
about them, what they are likely to own and when they are likely to be out of “We don’t foresee that happening here, as there is no way to determine if
the house. I call it "internet shopping for burglars". Facebook or Twitter details actually cause burglaries or car-jackings.
Irrespective of overseas trends, I think the most important point is, to make
Users unwittingly post details about where they live and what they do and give people aware of the possible dangers and to be more careful with the sharing
countless clues via photographs and personal details. Particularly helpful of online information. As in SA, UK statistics indicate that there is a rise in
are status updates - “only one more day until our weekend in Cape Town” or house-break-ins, so it makes sense to be more careful with the information
real-time Twitters – “Beaches in Mauritius great – can’t believe we’re here for you give out, either knowingly, or unwittingly”, concludes Erasmus.
two whole weeks”. With your date of birth, where you work or even a home
14
Don’t get caught out on FaceBook By Pieter Erasmus Head of Marketing,
Sales and Distribution:
Momentum Short-Term Insurance.
General Growth Applications Twitter Info
• More than 300 million active users (logged in • More than 2 billion photos uploaded to the site • Twitter does not release the number of active
within the last month) each month accounts.
• 50% of our active users log on to Facebook in • More than 14 million videos uploaded each • In November 2008, it was estimated that there
any given day month are between 4–5 million regular users and over
• The fastest growing demographic is those 35 • More than 3 million events created each month 6 million unique users.
years old and older • More than 45 million active user-groups exist on • In February 2009 Twitter had a monthly growth
the site of 1382%.
User Engagement International Growth
• Average user has 130 friends on the site • More than 65 translations available on the site
• More than 6 billion minutes are spent on • About 70% of Facebook users are outside the
Facebook each day (worldwide) United States
• More than 40 million status updates each day
Additional Info about Facebook
A G R I C U LT U R A L I N S U R A N C E
Every year in agriculture has its challenges and 2011 has proved no on food prices, Doyer doesn’t anticipate that the recent floods will have
different thus far. The year kicked off with farmers having to clean up after an impact on food prices.
the heavy rainfall and calculating the costs of flood damage to crops and
infrastructure. He points out that the floods should be seen in context. “We must
remember that the floods occurred in what is a very good year for
agriculture, in production terms,” he explains.
Everyone is talking about how farmers will be compensated for losses Furthermore, the area impacted by flooding was also relatively small, in
and whether farmers are adequately insured. Tobias Doyer, head of comparison with the total number of hectares planted in South Africa.
Santam Agriculture says underinsurance is a concern in Agriculture and However, he says if the country were in the grip of a drought, the effects
can be unintentional or deliberate. would have been much greater. “This would make the situation entirely
different. Unlike the limited impact of the flood, a drought would cause
Sometimes, farmers only realise at the point of claim that they are food prices to increase significantly as a larger section of the total
underinsured. This usually happens when assets have not been valued hectares planted would be affected,” he explains. It is also important to
properly, or not insured altogether. “The solution is to make a list of all consider how much hectares of grain is planted under dryland or
assets and value them accurately,” Doyer says. Ideally, clients should irrigation.
also increase the value of insured assets by 6% - 7% every year.
He says farmers can avoid under insurance through proper
administration of assets, particularly in tough financial times. “Recent The question that remains is how farmers will be compensated.
trends show that farmers are reducing their cover or cancelling their Government says it will assist with damage to infrastructure, but for
policies to reduce their insurance costs as part of cost management flood-damaged crops, farmers have to claim from their insurers.
initiatives in their businesses,” he says. Usually, insurance is an effective pooling instrument where farmers
jointly carry risk for the unexpected. The difficulty comes in with
Farmers do this as a result of declining farm income, lower profits and occurrences such as the recent floods.
difficulty to make ends meet. However, he warns that such actions are
short sighted and can be highly detrimental to the farmer. “The biggest “Farmers can only get cover for insurable risks from insurance
problem with this practice is that farmers are reducing their cover in companies,” he says. Certain risks, such theft of sheep, are either too
times when their margins are lower. Their capacity to recover from an small or too widespread to be insured and these have to be managed by
adverse event is compromised due to lower cash flow,” he says. the farmer. On the other hand, the impacts of large-scale natural
Farmers should rather review their excess structure to save costs. disasters are typically too large for insurers and reinsurers to underwrite.
This is where government intervention is necessary. A World Bank report
on government support for agricultural insurance points out that
governments tend to alleviate the effects of crop failures or other
Doyer explains that, although flooding caused many farmers to suffer disasters by providing post disaster direct compensation as a relief
substantial losses, it is unlikely that the floods will have a major effect on measure. However, this creates a “Samaritan’s dilemma,” whereby post
insurance premiums. “We are aware that these types of risks are disaster aid discourages programs such as insurance, which provide
expected in the areas where the flooding occurred and for this reason, more efficient financial solutions and reduce the magnitude of losses
insurers have already priced this risk into the premium,” he explains. from future events.
However, he adds that there will be an impact on underwriting rules and The floods have again put the spotlight on Government’s approach to
insurers will become more cautious of which risks to accept. “In future disaster aid and the Department of Agriculture, Forestry and Fisheries’
we will, for example, tell farmers that the risk of building close to a river is National Disaster Management Act. Doyer says the Department has
guaranteed to lead to a claim at some stage and is therefore not made some progress in implementing the Act, but what
unexpected,” he says. is needed now is a clearer framework of how this kind of
support will work, and clarity about government’s
participation thresholds. This would help the industry in
terms of products, insurance and reinsurance capacity
He says that the floods again highlighted the important role that weather to adequately protect farmers.
plays in the economy. When it comes to flooding and the possible effect
The issue of underinsurance
Compensation for farmers
Will insurance premiums go up?
Food prices
16
The Floods in Perspective By Prof Tobias Doyer Head of Santam Agriculture
S H O RT- T E R M
We are heading for times that will cause Product
Providers and Service Providers to think differently Looking forward to 1 April 2011, which is when the Consumer Protection
in several ways. Take, for example, the Act (CPA) comes into effect, one perhaps needs to ask “What are the
interpretation of Reasonable Precautions, implications of this act on the General Conditions and Exclusions of a
typically found in the policy wording under Personal Lines policy?”
General Conditions, which may read “The Although we have the Short-Term Insurance Act, Providers will still have
Insured shall take all reasonable steps to ensure that their products meet the requirements of the CPA, in
and precautions to prevent accident or particular the consumer protection measures which include things like
losses”. contracts will have to be ‘reader – focused’ to ensure that the reader has
complete understanding of the terms and conditions of the contract or
With tougher trading conditions and Motor Books not operating policy in plain and understandable language.
favorably, we have seen Insurers increasingly looking to use the General
Conditions for the repudiation of claims. The section of the CPA that is titled ‘Plain and Understandable Language’
does not restrict itself merely to grammar and wording. General
Recently an Insurer repudiated a claim where the insured had a bag Conditions and Exclusions will have to be more definite in insurance
containing car keys and towel taken while swimming and surfing and, as policies. The CPA makes it mandatory for a contract to set out any notice
a result, the motor vehicle was stolen. The Insurer used General or provision of an agreement entered into with a consumer, that aims to
Condition item 5 – reasonable precaution to repudiate although, later limit the risk or liability of the supplier / provider must be written in plain
agreed to settle once case evidence was argued. language and must be drawn to the attention of the consumer in a
conspicuous manner.
Whilst most policies require the insured to take “reasonable precautions
to prevent loss” it is well established that the clause does not mean that For us as Brokers and Intermediaries, the FAIS Act makes it our duty to
when the insured is negligent no cover is provided. explain, explain and explain. For the product providers and the industry
A ruling of The Cape Provincial Division in Santam Ltd v/s CC Designing as a whole, will we see a start of changes to policy wordings and the
CC, 1999(4) SA 199(CPA) which has been widely published and quoted move to easier to read and laid out policies or will we see the path
found that:
• The reasonable precaution clause had to be interpreted in the light
of the policy as a whole;
• The policy cover was widely stated and included any loss or
damage to the insured vehicle;
• The cover was wide enough to include loss or damage caused by
negligence of the insured or someone acting on his behalf;
• The important purpose of motor insurance is to procure cover in
respect of the insured’s own negligence;
• To construe the condition as an exclusion of liability for negligence
of an insured would take away a significant part of the cover
afforded by the definition of the risk.
The court correctly pointed out that the “taking of reasonable
precautions” is not necessarily the same thing for both insured and
insurer. For the insurer to have been successful it had to show that the
insured acted recklessly, must have recognized the dangers to which he
was exposed and then deliberately continued by taking measures which
he himself knew were inadequate to avert the loss, or he simply did not
care about the adequacy of the measures.
18
Challenge of Change By Marco Passero FIA Short-Term Exco Rep KZN and Director RSW Risk Managers
Looking forward to 1 April 2011, which
is when the Consumer Protection Act
(CPA) comes into effect, one perhaps
needs to ask “What are the
implications of this act on the General
Conditions and Exclusions of a
Personal Lines policy?”
A D V E RT O R I A L
Now 12 years old, and despite a significant change of shareholding, and
a ‘minor’ change in name, Emerald Risk Transfer (Emerald) is still
fundamentally dealing with the same product in the same manner. With 45 people based in our
Emerald underwrites Corporate Property and Engineering business office in Fourways, we
throughout the African continent on behalf of Santam. believe we offer the best
technical support structure,
Originally established in 1999 in a small office in Sandton, Emerald and the most innovative
currently offers solutions to over 500 clients in the African Continent, all o p p o r t u n i t i e s t o a n y
through intermediaries, and 75 of them are within South Africa’s top 100 intermediary looking for
Companies. Corporate Proper ty and
Eng inee r ing Insu rance
s o l u t i o n s w i t h i n o u r
Continent.
Looking forward to 1 April 2011, which is when the Consumer Protection
Act (CPA) comes into effect, one perhaps needs to ask “What are the Our Senior Team has considerable experience, and we would like to think
implications of this act on the General Conditions and Exclusions of a that between us we have seen most risks in South Africa in one form or
Personal Lines policy?”We consider our broker relationships to be one of another. Certainly the rest of Continental Africa presents other
our core strengths, and we continue to promote these as a channel of challenges, in terms of regulations, access to information, exchange
choice to our clients. controls, etc, but we are certainly motivated to become the Insurer /
We are looking to deal with new intermediaries, and the members of FIA Reinsurer of choice in other countries in Africa, whether via current
can be assured that we are keen to expand upon our current base of Santam shareholding interests, or other distribution channels.
“preferred business partners”. This might mean new individuals in new
broking houses, or, it might mean new individuals that work within
intermediaries that already have business with us.
‘To create sustainable Corporate Property and Engineering Insurance
solutions throughout Africa for our preferred business partners.’
With assets in excess of R17 billion, 91 years in the industry, a thriving
intermediary network and more than 650 000 policy holders, Santam is
South Africa's leading short-term insurer. Santam also holds business ‘To be the insurer of choice in our chosen areas of business by offering
interests in Zimbabwe, Malawi, Uganda, Tanzania and Zambia, and hold innovative solutions and quality capacity, while
strategic investments in various companies within the insurance maximizing returns to all stakeholders, and providing an enriching and
industry, including the subsidiary Santam Namibia Ltd. rewarding environment for all employees.’
With a South African market share exceeding 22%, Santam focuses on
corporate, commercial and personal markets, and was voted the Best
Corporate Insurer by the FIA in 2009 and 2010.
‘Correct understanding and measurement of risk, appropriate
Global Credit Rating (GCR) gave Santam a AAA claims paying ability reinsurance placement and accounting and effective claims
rating, which is the highest that can be attained by an insurance management are all key to our underwriting approach.’
company, and in the Markinor Top Brands survey, Santam was named
the number one brand for business insurance.
Our Aim at Emerald is not to be the cheapest by cutting corners, but to be
the best by offering expertise and skill. ‘Every Emerald employee must be motivated, enthusiastic, professional
and effective. They must understand their goals, be empowered and be
www.emeraldsa.co.za encouraged to utilize their initiative and intellect.’
www.santam.com
OUR PEOPLE
NEW DISTRIBUTION CHANNELS
OUR PURPOSE
OUR SECURITY AND BRAND
OUR MISSION STATEMENT
UNDERWRITING ETHOS
OPERATIONAL ETHOS
An Introduction to Emerald from Gary Corke
A D V E RT O R I A L
THE MARKET
CORPORATE PROPERTY AND ENGINEERING BUSINESS DEFINED
WHAT INFORMATION DO WE NEED TO QUOTE ON?
AND FINALLY
The major challenges for Insurers, Reinsurers and Intermediaries
within our market include:
i. Quality of information, or sometimes, the lack thereof.
ii. Risk management expertise and risk management budget
constraints.
iii. Variable exchange rates.
iv. Variable mineral prices.
v. Power supply concerns.
vi. The ‘role’ of the major reinsurers on the continent is not always
aligned to our own.
vii. Access to capacity in mining and rolling stock accounts.
viii. Naïve capacity and security offered by some competitors.
• Multi National Companies
• Petrochemical Risk
• Mining Risk
• Municipalities with Power Generation plants
• Metro Councils
• Risk with a combined MD/BI TSI above R1 bn and/or MPL above
R250m in South Africa and TSI above $100m and/or MPL above
$20m in Continental Africa.
• List of premises and individual values
• Detailed information regarding business and process
• Risk Management surveys / programmes / applications
(NB. Quality of information drives our capacity!)
• Detailed 3 to 5 year claims experience
• Letter of Appointment if existing Santam client
• Letter of authority if client to another Insurer
I have tried to give a ‘snapshot’ of the niche within which we operate.
Ours is not the kind of model where we ‘cold call’ intermediaries to see
who controls what, but rather to facilitate intermediaries clients that fall
within our product definition.
If you require our assistance, we can be accessed via our website, e-
mails, telephone or fax, and in this regard, providing you already have
any agency with Emerald or Santam, you may contact Hans
Schollenberger ([email protected]).
Alternatively, if you do not have an agency, you may apply for one with
our Paula do Roque ([email protected]). Either way, we are
ready to try to assist you with Corporate Property and Engineering
client needs.
S . A . M .
South Africa’s insurers must ensure that they fully participate in upcoming
quantitative impact studies (QIS) regarding the implementation of the FSB’s He says, however, that the approach taken by each insurer will vary
new risk-based regulatory regime, Solvency Assessment and depending on the company’s resources. “In practice it is difficult for smaller
Management (SAM), as this new framework will have far reaching insurers to allocate resources to the numerous SAM project committees
consequences for their businesses and the wider industry. that exist. Most of the Pillar 1 task groups have mainly actuarial
representation and some insurers will not have sufficient internal actuarial
According to Lance Moroney, Non-Life consulting actuary at Aon South resources to be able to participate.”
Africa, it is essential for insurers to take part in the process in order to fully
understand what impact SAM may have on their business. “It is important “As a result many insurers may rely on their consultants to keep them
that insurers understand what preparations are required in order to comply updated, carry out any assessments and to present each insurer’s views in
with SAM and these quantitative impact studies provide the perfect the task groups.”
opportunity. However, perhaps even more importantly, these forums might
raise the need to voice any concerns over the new regime within the FSB’s The FSB has announced that SAM will be implemented in 2014. However,
SAM project.” interim measures for Non-Life insurers are to be implemented much earlier
in 2012.
Moroney says that given the likely similarities between SAM and Europe’s
Solvency II model, South African insurance companies should start Moroney says short-term insurers must therefore ensure that they are fully
familiarizing themselves with the structure of the European QIS5 standard prepared for these interim requirements from next year. “It is anticipated
model now to adequately prepare themselves. “We would recommend that that these requirements will not impact the overall capital requirement of the
insurers start investigating the Solvency II QIS5 standard model, as this industry. However, the impact on an individual insurer could be more
implies a recalculation of liabilities and capital requirements. pronounced.”
“Insurers who perform a Solvency II QIS5 study will gain insight into how He says, however, that transition mechanisms are likely to be put in place
they will be required to calculate solvency capital under SAM. They will also for insurers that are significantly impacted by the new measures.
be better prepared to influence, within the SAM project task groups, the
content of the South African study to be launched later this year.”
The FSB announced in November 2010, following the launch of its SAM
Roadmap, that it intends to launch the first South African Quantitative
Impact Study (SA QIS1) in July 2011, which will be based on the initial
proposals of the various SAM task groups.
Moroney says that while much about SAM is yet to be finalised, it is
expected to be based on the Solvency II approach. SAM will be based on an
economic balance sheet and the same three pillar structure of capital
adequacy (Pillar 1), systems of governance (Pillar 2), and reporting
requirements (Pillar 3).
He says there are some key areas that insurers should start working on now
with regards to the requirements involved. “Firstly insurers must aim to
raise awareness and understanding of the requirements of the SAM regime
among their own organisations, particularly with regards to the
responsibilities of directors and senior managers. However, it is also
important to filter this down through the company including arranging
internal presentations, attending workshops hosted by the FSB and
allocating internal resources to develop awareness of the changes.”
22
SA insurers Urged to Prepare for New Solvency Requirements Lance Moroney, Non-Life consulting actuary at Aon South Africa
“Insurers who perform a Solvency II
QIS5 study will gain insight into how
they will be required to calculate
solvency capital under SAM. They will
also be better prepared to influence,
within the SAM project task groups, the
content of the South African study to be
launched later this year.”
A D V I C E
24
Beware of Traps when changing Insurance CoverBy Gari Dombo Managing Director of Alexander Forbes Insurance a member of the FIA
If you are not happy with the service and cover you are getting from your when will cover terminate.
insurer, shop around for a policy that best meets your needs.
• How long the new cover will take to activate, and when the first debit
Consumers should, however, be aware of the pitfalls involved in will take place.
changing insurers warns Gari Dombo, Managing Director of Alexander
Forbes Insurance. Many insurers will do their utmost to prevent clients • What is covered by the new cover that wasn’t covered by the old cover,
from terminating their monthly payments and moving to a competing or visa versa? This is found in the small print. “The exclusion detail is
insurer. very important to read as policies can vary greatly” warns Dombo.
For example, “many insurers offer cheaper premiums for a specific • Who is covered? Is this stated clearly in the policy? Some policies only
period, often attracting new clients, only to return premiums to their cover the owner-driver, others nominate other parties, some specifically
standard rating model a few months later” warns Dombo. exclude other parties.
Some insurers even continue to debit a clients’ account after they have • What the excess is? Some excesses are expressed as a percentage of
changed insurers. To protect yourself against this practice, personally value, while others as a percentage of loss. Some will be a flat monetary
provide written instructions to cancel, as some insurers will ignore amount while others will be a percentage of value. In many cases you
instructions from a new broker or insurer. can buy the excess, a concept called excess buy-back.
Most consumers change insurers because they have been offered a • What the vehicle is insured for? Retail value, market value, trade in
cheaper premium elsewhere. Yet it makes far more sense to change your value, or a combination? “These all have very different cost and payout
insurer for better quality of cover and service. implications and purchasers of insurance should understand what they
are buying” says Dombo.
As such, policy holders need to understand the detail of the cover
differences before they decide to move. “Merely paying a cheaper • What the insurers’ repair philosophy is? Does the insurer believe in
premium does not mean you’re getting a better deal” says Dombo. repairing vehicles with new parts or second hand parts? Will the insurer
insist that repairs are done by manufacturer- approved repairers to avoid
So, before changing insurers it is essential that consumers establish: loss of manufacturers’ warranty?
• The new insurance provider’s reputation for service excellence. Check • To what extent will you be personally liable? For example, “what are
especially the claims paying history of your prospective insurer. you not covered for? What are the exclusions? What are the limits of
Sometimes friends or other clients refer you and are able to provide first- cover? Regarding liability cover look out especially for; firearms
hand experience of a company’s track record in this regard. It is exclusion, wrongful arrest extension, and security company liability
important to find out. extension” explains Dombo.
• The termination procedure of their Once you have established that the cover suits your needs, only then
current cover, how long it will take, should you look at price - and only then decide if you still want to change
when will debits cease and insurers.
“Failing to understand and engage with the details of cover before
changing insurers is how most people fall prey to the common traps
involved in changing insurers” concludes Dombo.
an study to be launched later this year.”
25
L I F E I N S U R A N C E
Life Insurance confidence slipped again in the 4th quarter, despite a strong household income, coupled with declining employment levels have probably positive turnaround in investment income. Despite stronger overall income resulted in the much reduced growth in risk profitability through 2010. levels, life insurers reported contracting profits, after a largely strong profit performance through most of 2010. This trading environment is not dissimilar to that of the banking market. Retail
banks have been hard pressed to grow revenue streams and earnings in an In a quarterly survey, the results of which were released today, Ernst & Young environment where household debt-to-disposable income ratios remain reports that life insurance confidence fell from 91 index points in the 2nd high, albeit gradually improving. quarter to 83 in the 3rd quar ter, and 78 currently. This means that just less than eight out of ten life insurers were satisfied with business conditions in Despite the stronger income growth, supported by strong investment income the 4th quarter of 2010. and surging investment premiums, growth in outflows proved to be even
higher. In large part this was caused by considerably higher benefit Tim Rutherford, Life Insurance spokesperson at Ernst & Young comments payments, but in addition, costs continue to pressure bottom-line earnings’. that these levels are still stronger than the position of one year ago, when seven out of ten life insurers were satisfied. Once again, similar to other financial services sectors, and in line with
growing regulatory pressures across the globe, life insurers continue to This is the 30th quarterly survey measuring confidence in the life insurance absorb the costs of mounting regulations. Solvency II is due to be industry. The research is conducted by the Bureau for Economic Research in implemented in South Africa within the next two years, and planning to ensure Stellenbosch. compliance and readiness with this accord is going to be costly. As a result, it
has proved difficult for life insurers to reduce their administration ratio, and Tim Rutherford continues, ‘The 4th quarter of 2010 was a bit of an anomaly in any improvements have proved to be short-lived.’ that life insurer earnings and hence confidence levels, are strongly correlated with stock markets. The 4th quarter of 2010 saw a strong turnaround in stock exchange ‘We expect cost pressures to become even more pertinent into 2011, as life earnings, which resulted in strong gains in investment income earnings. However, insurers need to maintain and grow their market share, and at the same time, this did not feed through to the bottom-line earnings of life insurers. ensure their readiness for Solvency II and the myriad of other global
regulatory requirements which they are likely going to need to comply with.’ Rutherford points out that declining risk profitability are at least partly to blame for the weaker profits. In contrast to the previous two years, 2010 saw Rutherford concludes, ‘Provided equity markets remain strong, there should continual declines in risk profitability, and in the fourth quarter of 2010, the be continued strong upside in investment income growth. This in turn is likely profitability actually contracted sharply. He notes that ‘Risk profits have to support higher confidence, particularly if premium and new business become more important to life insurers, especially because investment volumes remain relatively buoyant, as they have recently (albeit with a product related premiums have increasingly become subject to more and change in business mix from business to investment business). Although more competitors across various financial services providers.’ confidence is weaker, it is not far below its long-term average readings, and
provided the weaker profits prove to be temporary in nature, the prospects for He adds, ‘Even through the severe global liquidity crisis, which had its greatest life companies remain reasonable, given the current ‘fragile economic impact in the middle of 2008, risk profitability largely held stable, and in 2009, recovery.’ actually grew quite noticeably. The delayed impact of continually squeezed
Life Insurance confidence slows to just below pre-crisis levels By Tim Rutherford,
Life Insurance spokesperson at Ernst & Young
Life Insurance confidence slows again to just below pre-crisis levels
C O N F L I C T O F I N T E R E S T
26
COO of the FIA, Justus van Conflict of Interest legislation, which was first introduced by the FSB last year, • When you sell a financial product or service to a client are you in a
was established in order to address concerns regarding conflicts of interest situation where any commission or incentive motivates you to present biased
between financial services providers, representatives and clients. and unfair product recommendations, or hide certain facts that would
otherwise negatively influence that client’s decision?
The regulator was concerned that there was not a level playing field in the sale
of financial services products, with the result that some consumers were If such an incident arises, then there is a conflict of interest, and in the spirit of
being bullied into purchasing certain products that may not be in their best the law, this must be appropriately managed and disclosed.
interest. It was suggested that these products were actually in the interest of
the financial intermediary, rather than the client, due to non-regulated One of the key definitions is: “Immaterial financial interests” which means
advantages that they might benefit from in the process such as inducements, any interest with a determinable monetary value, the aggregate of which does
enticements, kick-backs, hand-backs, overseas trips, free benefits, free not exceed R1000 in any calendar year from that same third party in that
compliance, free practice management, additional remuneration or anything calendar year.
else of this ilk.
The following increased disclosure requirements must be strictly adhered to:
The well known and respected editor of Personal • Any conflict in respect of that client (remember
Finance, Bruce Cameron, describes conflicts of “conflict” always includes potential conflict)
interests as: • Measures taken to avoid or mitigate that conflict, that
conflict , per your conflicts policy
“Abhorrent practice of financial service • Any ownership interest or financial interest (unless
companies incentivising so called financial immaterial) that you may be or become eligible for
advisors” • Any relationship/arrangement with any third party
that gives rise to a conflict, in sufficient detail to
However, in order to understand the reasoning of understand the nature of the relationship and the
the act one needs to review the history of how the conflict
conflict of interest evolved. • The existence of and where to access your conflicts
policy
The intention of BN58 of 2010 was to ensure better
management of conflicts of interest due to the
inherent non-compliance culture in South Africa, This is defined as any cash, cash equivalent, voucher, in addition to highlighting management gift, service, advantage, benefit, and discount, domestic responsibility in managing conflict of interests by or foreign travel.prohibiting certain financial interests. The intermediary must always keep the following in
mind: Every FSP must adopt, implement and maintain a The broad view in the financial services industry is Conflict of Interest Policy that complies with the that with the introduction of these amendments to provisions required. This policy must be easily the General Code of Conduct (GCC), South Africa accessible for public inspectionis not only following international best practice, but is also seeking to
eliminate certain practices, such as the awarding of undue preference to It must also manage conflicts of interest by adopting the following principles:certain product suppliers or products created by a particular product • Ensure mechanisms are in place for identifying conflicts of interest.supplier. FSPs need to know that limitations will be placed in respect of what
they will receive from third parties and also in respect of that which they may • Build procedures and business rules that ensure avoidance of conflicts themselves provide to third parties by providing suitable documentation to clients that make the disclosure.
• Adopt controls that will identify reasons for non-compliance and The new rules stipulate that companies must ensure they seek to avoid any prescribe mitigating actions.conflict of interest as provided for in section 3 of the GCC act in the best • Implement suitable risk management processes to that will facilitate interest of their client with due care and diligence. With this in mind, the compliance with the policy through adequate monitoring review and following points must be kept uppermost in the intermediaries mind: reporting.
• Awareness and understanding by all Representatives of the The definition of “conflict of interest" means you should always ask yourself consequences of non-compliance, e.g. suspension of licence, and to the following: provide relevant training as required.
• Contain a list of all associates of the FSP
What is “a financial interest”?
27
C O N F L I C T O F I N T E R E S T
Types of financial interest
Looking ahead
Points to note
• Commission authorised under the Long-term Insurance, Short-term
Insurance and Medical Schemes Acts.The type of financial interest, or recompense, that a provider or its • Fees authorised under these Acts, if those fees are reasonably representatives may receive or offer, is limited to:
commensurate to a service being rendered.
• If the above fees are not paid, then fees that have specifically been agreed • Financial interest which a FSP may receive from or pay to a third party to by a client in writing and which may be stopped at the discretion of that A new section is introduced into the Code, , entitled financial client are allowed.interest and conflict of interest management policy. (1)(a), which
• Fees or remuneration for the rendering of a service to a third party, which takes effect on 19 October 2010, sets out the financial interest which a FSP can be considered reasonably appropriate to the service being rendered may receive from or pay to a third party, restricting it principally to or reasonably proportionate to the value of the financial interest.commissions and fees authorized under the Long Term Insurance Act, the
• An immaterial financial interest that is subject to any other law. However, a Short Term Insurance Act and the Medical Schemes Act. Provision is made provider may not offer any financial interest to Representativesfor fees earned or paid in terms of any other legislation.
• For giving preference to a specific product supplier or product (if that Rep • No financial interest to a representative for giving preference is able to recommend other products or suppliers)(1)(b), which takes effect on 19 April 2011, prohibits a FSP from
• For bringing in high volumes of sales without any consideration to the offering a financial interest to a representative for giving preference to the quality of that service.quantity of business secured to the exclusion of quality, or for giving
preference to a specific product supplier, where the client has a choice of
more than one product provider, or for giving preference to a specific product
of a supplier, where more than one product from the same provider is Under the definition of a financial interest we find, among others, such terms
available to the client. Section 3A(1)(c), which takes effect on 19 October as advantage, benefit, sponsorship, other incentive and valuable
2010, applies to entities which are both product providers and financial consideration. Providers are therefore being urged to take the broadest
services providers. possible interpretation of such terms to frame their policies to avoid any
• Conflict of interest management policy conflict of interest to ensure that the Code is not inadvertently infringed.
(2), which takes effect on 19 April 2011, requires all FSP’s to
adopt, maintain and implement a conflict of interest management policy that The definition of third party is also broad and encompasses product
complies with the provisions of the Act. Section 3A(2)(b) details the contents suppliers, other providers, associates of a product supplier or a provider, a
of such a policy, whilst section 3A(2)(c) to (f) provide for measures of distribution channel or any person who, in terms of an agreement or
adoption, employee and representative education on the policy, monitoring arrangement with a person referred to, provides a financial interest to a
procedures and the appropriate publishing of such a policy. The stated aim is provider or its representatives.
to have it accessible for public inspection at all reasonable times.
• Anti-avoidance The mere task of establishing who is related to who, or has relationships with
(3), which takes effect on 19 October 2010, prohibits any FSP or a third party to identify potential conflict(s) of interest before entering into any
representative from attempting to collude with any associate in an attempt to relationship poses a daunting challenge to a FSP.
avoid, limit or circumvent compliance with Section 3 of the Code.
• Reporting duty The conflict of interest is firstly a living document with obvious unintended
(4), which takes effect on 19 July 2010, requires the compliance consequences that have to be shared and thrashed out with the regulator as
officer of a FSP (or the FSP, if a compliance officer is not required by law) to some of these unintended consequences could potentially lead to onerous
report on the provider’s conflict of interest management policy, to the policing, with costly administrative processes.
Registrar. The aspects which should be reported on include implementation,
monitoring, compliance with and accessibility of the conflict of interest These all result in costs that will ultimately be borne by the consumer,
management policy. including minor issues such as drinking a coffee with a broker. Surely the
• The changing landscape for incentives intention was not to police minor issues but rather the major problems with
It can be anticipated that many of the incentives provided by suppliers to FSPs regards to conflicts of interest?
will fall away as a result of the implementation of the amendments to the Code
and that relationships between product suppliers and providers and their The FIA has made a number of suggestions that have been incorporated into
intermediaries will change. The question is whether those changes will be for the Act and while we realise there are some ongoing concerns, it is important
the better and whether clients of FSPs stand to benefit from the changes. that the industry is not seen as endorsing any bad practices by members. We
are all striving for a level playing fields and an environment where good advice
can survive.
The ultimate goal is for the consumer to be in a situation where they are able to
make an informed decision. The FIA will constantly be seeking clarity where This debate is likely to continue for some time. In the interim, all financial there are complications in interpretations and will challenge the regulator to services providers need to begin work on their financial interest and conflict ascertain the true intention of wordings when necessary. of interest management policies and should take due note of the following
points:
section 3A
Section 3A
Section 3A
Section 3A
Section 3A
Section 3A
Pletzen on Conflict of Interests
L E A D E R S H I P D E V E L O P M E N T
28
INSETA and Wits partner to develop SMME leadersWits Business School and the Insurance SETA (INSETA) have partnered to sector from being driven by talented individuals, to one that is led by cohesive
design and launch a new programme aimed at advancing business and teams of professional strategic leaders who are not only strong individually,
leadership skills in insurance sector small, medium and micro-sized but can also work exceptionally well with their staff and create successful
enterprises (SMMEs). businesses,” said Cairns.
The Certified Programme in Leadership Development (CLPD) is a first of its Sandra Dunn, Chief Executive Officer at INSETA, echoed these sentiments
kind programme for the sector and will give SMME leaders the important and explained that the programme is an important new training initiative for
skills to deal with the many challenges they face. The overall objectives are to the SETA.
give managers a broad exposure to the fundamental nature and process of
management and human behaviour within organisations, and to facilitate the “INSETA is excited about this initiative. There is a great need for training of this
transition from management to leadership. nature in the insurance sector; small businesses and entrepreneurial ability
are key ingredients for growth and development in South Africa and with this
The programme is designed for people in leadership positions in SMMEs in programme we aim to develop leaders who can put their organisations on the
the sector and for high-potential employees who have been identified by the path of sustainable success, who can innovate and create new products and
organisation as potential leaders. Previous tertiary level academic services, and who can create jobs,” she said.
qualifications are preferable although not essential to apply; the programme
thus opens doors to many people who many not yet have the qualifications, Programme participants all
but do have experience and leadership potential. It is also run on a part-time receive a bursary from
basis. INSETA covering all
tuition and material
Doug Cairns, the programme’s director at Wits Business School, says that c o s t s . V i s i t
the programme is designed to develop management and leadership skills www.inseta.org.za/
across a broad range of disciplines required in SMMEs. for details or call
0861 130 013.
“We looked at three particular objectives when outlining the skills to teach in
this course. Firstly, these leaders should be able to systematically explore
opportunities and threats, appraise strengths and weaknesses and evaluate
alternative courses of action. In this regard, they need to develop an
increased awareness of the economic, political and social factors which
affect business management in South Africa.
“Secondly, we impart the importance of the ability to innovate, which is a
fundamental element for success in highly competitive environments, such
as the insurance industry. And thirdly, we position leaders in a larger context;
leaders need to be more than just effective individuals, they should also
demonstrate a superior ability when interacting with team members and in
getting the best out of people,” explained Cairns.
The programme content is ultimately designed to show leaders and
managers in SMME environments how they can run their own small
businesses more effectively and efficiently.
“The overall aim driving the programme is to develop the insurance industry
as a whole. Part of achieving this will come from transitioning the SMME
L I F E C O V E R
30
Life, Critical Illness and Disability Cover Should be a Financial Planning - Priority for Younger ClientsBy Craig Harding Managing Director of Altrisk
I’m young and healthy so do I really need all this life and critical illness Wally Bodin, an independent financial advisor and planner adds to the
insurance cover? It’s a question that many younger individuals often debate. “Critical illness or dread disease cover has evolved since the 90s
grapple with, and for the most part, many leave getting their finances in to a modern day ‘must have’ in financial planning. Planners no longer wait
order too late. for their clients to reach a ‘mature’ age to put critical illness cover in place.
The fact that a client in their early thirties is healthy is no reason to not
This is according to Craig Harding, Managing Director of Altrisk. This cover them for critical illness. This wasn’t always common practice,
view is further highlighted in the 2010 Life and Disability but when one looks at statistics for cancer claims, people
Insurance Gap Study which shows that South Africans are being diagnosed at far younger ages than they were
remain seriously underinsured. The 2010 study 20 years ago, due to medical advances and greater
commissioned by the Association of Savings and awareness. Recent industry claims statistics
Investments South Africa (ASISA) and reveal that cancer is responsible for 50% of all
conducted by True South Actuaries & dread disease claims. Sadly, cancer knows no
Consultants warns that South Africa's income age. Women are the most neglected market,
earners aged 16 to 35 would not be able to and ironically, they have almost double the
sustain their standard of living even remotely number of claims than men,” explains Wally.
based on their current insurance cover.
In terms of the type of cover and how much
"There’s a tendency to think that life, disability cover is needed, Wally offers the following
and critical illness cover is something you worry advice: “An ideal structure would be a level
about when you’re older - not when you’re in your 20s premium pattern. This means that the premiums do
and bolstered by superhero bravado. The reality is, the not change for the duration of the policy. You might pay
sooner you consider life cover the better as the costs of more per month when you are younger but you pay a lot less
insurance products increase as you get older. If you’re unlucky and as you get older. By taking level cover your insurance premium will stay
suffer poor health the cost of your cover will be even more expensive. the same, so in your later years when you need the cover the most, you will
There’s every reason for single people to have a life policy in place if they still be able to afford it.
want to be certain that their parents or any dependents are looked after,”
says Craig. “Should your budget allow, take the longest guarantee term available.
Long-term planning is essential as this is the last bit of life assurance you
“Equally important, if not more so, is cover for critical illness and disability. are still going to have well into your 70s. Having no cover means you’ll
Few individuals enjoy contemplating the emotional and financial have to find the cash shortfall to supplement your loss of income. In terms
consequences for themselves and their family if they were to contract a of how much cover, I believe a good starting point for any cover is a
serious illness or become permanently disabled. What is often overlooked thorough financial needs analysis,” explains Wally.
is the repercussions of an impairment or disability. Will you and your family
be in a position to financially provide for ongoing healthcare, therapy and Still not convinced? Based on actual experiences in 2010, True South
other necessary lifestyle changes? The case for cover for anyone who is estimates there’ll be 159 034 deaths in South Africa this year and 52 481
self-employed is even more crucial. How will a person's death or illness disability events. That’s 435 deaths and 144 disabilities every day. “The
affect his business? Is the business dependent upon him financially? A bottom line is most people believe in insurance — some are just not happy
business owner's death, illness or disability can have far-reaching to pay for it. Sadly, their families end up paying for it by suffering financially
consequences for many other people,” says Craig. after the death of their loved one, or from the repercussions of the onerous
care requirements and costs after an accident, illness or disability,”
concludes Craig Harding, Altrisk.
31
P O L I T I C A L R I S K
With the South African construction Cup plant and machinery being moved to various opportunities in Africa. If
industry having hit a wall following this is stolen, nationalised or destroyed in war or political unrest the owners
2 0 1 0 a n d g o v e r n m e n t ’ s still need to pay it off “making political risk cover key to delivering returns on
nationalisation debate steering new 2010 plant and machinery - and surviving the recession in South Africa”
mining investment abroad, political explains de Kock.
risk experts report a rush of South
African businesses into Africa, seen The important thing is to have the right political risk cover in place before
as offering greater returns on anything goes wrong. It is too late to try and get cover after the event. “Even
investment with comparatively if you think a country is safe, things can go wrong very quickly in
manageable risk. developing economies” warns de Kock.
For example, “the current iron ore In Africa, the most risky investment destination remains the Democratic
rush in Liberia, Sierra Leone and Republic of Congo where many South African businesses have
Guinea is seeing South African nonetheless been investing successfully for a while. This “demonstrates
companies pouring idle plant and the effectiveness of political risk cover in making investment possible even
machinery into the region” says Tracy in volatile situations” says de Kock. This year’s somewhat unexpected
de Kock, Manager – New Business, political riots in Mozambique also emphasised its fragility despite, and
Credit and Political Risks, Alexander perhaps because of, good investment and growth rates. As such “many
Forbes. Yet with elections underway South African tourism, freight and agricultural businesses in Mozambique
in two of these countries and just having been cancelled for fear of violence have this year, somewhat belatedly, recognised the importance of political
in a third, the possibility of political instability or even war remains very real. risk cover” adds de Kock. Madagascar too has recently run in to electoral
difficulties and violence “causing the many South African businesses
Since competition for resources in developing economies is intense and involved in titanium mining ventures there to clamor for political risk cover”
civil institutions and the rule of law weak, power contests provide reports de Kock.
opportunities for unrest and violence. In these conditions contract and
property rights are easily violated, abrogated, confiscated or stolen. And even in Zimbabwe which continues to buck the more investment-
friendly African trend, political risk cover remains the only cover that you
Political risk cover makes business possible in unstable or unpredictable can still secure “with, ironically, the London market more willing to write
countries and is critical in helping investment reach parts of the world that it Zimbabwe risk than the South African” concludes de Kock.
would normally avoid. As South African business’ appetite for African
investment grows de Kock and her team are seeing a noticeable expansion
in their African political risk book.
Yet it remains a hard story to tell as “businesses can’t really talk about
political risk. It’s a bit like telling people you have kidnap and ransom cover”
warns de Kock. If host government’s find out that an investor’s plant and
machinery is covered for political risk the temptation to take back,
nationalise or cancel the concession can become overwhelming.
While this is becoming less of a problem in Africa it is certainly the case in
countries like Venezuela as well as a number of central Asian republics
where political risk cover has become increasingly expensive.
Much of the risk faced by South African businesses in Africa, especially in
construction and mining, involves redundant and as yet unpaid for World
Managing Political Risk Key to Investment in Africa By Tracy de Kock Manager - New Business, Credit and Political Risks, Alexander Forbes a member of the FIA.
Political risk cover makes
business possible in unstable or
unpredictable countries and is
critical in helping investment
reach parts of the world that it
would normally avoid.
I N S U R A N C E N I G H T M A R E
32
“NIGHTMARISH” Insurance Risk posed by Toll Road Inspired Lift Clubs By Mandy Barrett, Glenrand M.I.B’s Manager Marketing and Sales Personal Product Solutions.
Insurance brokers Glenrand M.I.B. have issued an advisory that lift clubs, “Looking at the Gauteng scenario in particular, the implications of the toll
sparked off by rising motoring costs and the shock toll road tariffs roads for motoring costs are clearly significant with various organisations
proposals, are a potential insurance nightmare. warning that the toll fees proposed by the SA National Roads Agency
Limited (Sanral) would be crippling.
Among the reasons for a likely increase in lift club numbers, the company
cites two recent petrol prices adjustments and the expectation that, with oil “The further expansion of the Gautrain rapid rail service between
prices on the rise, possibly accompanied by a further weakening of the Johannesburg and Tshwane, when it opens, will no doubt help matters,
Rand exchange rate, there could be further increases, while motoring although at a cost, but there’s speculation that lift clubs will nonetheless
costs including insurance rates are on the increase as insurance policy mushroom as commuters look for cheaper transport alternatives.
renewal season arrives.
“The key risk aspect in this scenario is whether the driver of a vehicle in
Moreover, with dozens of toll gates planned across Gauteng's freeways such a club is driving for reward, i.e. charging passengers and we urge the
from June, motoring costs in the province in particular are under pressure motoring public to exercise caution, as in this case, passenger liability
and the temptation to join a lift club to commute to work and schools is cover may be excluded under their personal motor insurance policies.
seductive the company points out in a statement.
“The driver in this scenario needs to register under Chapter 6 of the Road
And therein lies major insurance risk says Mandy Barrett, Glenrand M.I.B’s Traffic Act as a taxi operator, subject to all the rules and regulations of that
Manager Marketing and Sales Personal Product Solutions. legislation, including holding a professional driving permit and with
commercial passenger liability cover in place.
“As the driver in a lift scenario without such cover in place, you could be
open to crippling claims if your passengers were to be injured due to your
negligence. It’s all to do with the purpose of providing the transportation
and if that purpose is for profit, even indirectly.
“Take a worst case scenario where, say, half a dozen people are injured in
an accident while you were transporting them. You could be faced with
multiple claims running into millions of Rands for everything from pain and
suffering to loss of future earnings and the claimants could sue you in your
personal capacity.
“It would also be advisable not to breach other legislation. For example,
have a Professional Driving Permit in addition to a taxi licence where this is
required.
“On the other hand, just as drivers should be clear on where they stand in
terms of insurance cover for transporting passengers, passengers in lift
clubs should establish whether the driver to whom they entrust
themselves, is indeed properly covered to avoid a potentially scenario
where they are injured or worse and there is no insurance cover in place,
possibly resulting in long drawn out legal battles with no certainty about
the outcome.”
B R O K E R - C E N T R I C
Etana’s broker-only dedication with localised quick decision-making and client. It can and does happen. Who wants your
no direct selling of any kind are three keys to Etana’s success. insurer to be your biggest competitor?
Carel Nolte, head of People and Brand at Etana explains: “You can’t divide “We appreciate that Etana has made a stand
yourself and give equal loyalty to two diametrically opposing distribution loyal to brokers as well as against centralising –
channels … and still retain the trust of your brokers. a techno phenomenon that means you don’t
know, or speak, to decision makers anymore.
“We deliver vital competitiveness and specialist products including many You get hold of a stranger who says ‘the
unique benefits. This is backed by cutting edge electronic risk management computer says it’s not covered’. I believe to
that virtually eliminates human error through our matchless Advanced Risk serve our clients a broker has to fight, especially
Questionnaire (ARQ). when a claim is borderline.
“Etana has done what brokers asked and not gone direct in any way. Our “But now you have to write to frustrating combinations of people. Then
goal is to set brokers apart in the business insurance arena and not go into invariably when you finally reach the decision maker you’re told that person
business against them. They are Etana’s sales force and our job is to is on leave! It was great in the old days when a rep came along, with
empower them as they deliver priceless personal guidance to our mutual understanding and power, to make on-the-spot decisions.
clients nationwide.”
“That’s what we’ve got with Etana’s Local is Lekker branch here in East
East London’s Paul Reeves of Reeves Insurance Brokers says “Etana’s London. We visit back and forth and in seconds I can be chatting to the right
stand against direct selling is brilliant. It’s uncomfortable and person. The decision making power is local and around the corner and it
embarrassing to be undercut by the same insurer you include in a quote to a streamlines underwriting and claims in a big way,” say Reeves.
100% Focus on Brokers and Local Eye-to-Eye Contact is Key By Carel Nolte, Head of Etana People and Brand
C E L E B R AT I N G 1 8 0 Y E A R S
34
M&F New Managing Director, Peter ToddMutual & Federal has that day, in 1831, the first indigenous South African insurance company was
a n n o u n c e d t h e established in Cape Town. The driving force behind its formation was British-
appointment of its new born Thomas Le Breton, who convinced prominent Cape Town citizens to
Managing Director, Peter invest in a new company, the South African Fire & Life Assurance Company.
Todd, who took over the
reins leadership of one of The South African Fire & Life Assurance Company is one of the companies
South Africa’s leading which forms part of the lineage of Mutual & Federal. March 14, 2011, thus
short-term insurers from marks the 180th year of continuous involvement from Mutual & Federal in the
o u t g o i n g M a n a g i n g South African insurance market.
Director Keith Kennedy on
1 February 2011. As Mutual & Federal celebrates its history and birthday, the company is also
celebrating its latest financial results, announced recently. 2010 was a good
“I am delighted with the year for the company, with profits up 27% and a strong underwriting
appointment of a new MD performance.
of Peter’s calibre,” says
Kennedy. “I have absolute confidence that he has the right credentials to lead Professor Vivian outlines the history of Mutual & Federal as follows:
Mutual & Federal to new heights. He also has the support of an experienced
and capable executive team.” • The life operation of the SA Fire & Life was placed into run-off in 1881, but
the company continued to trade with pride as South Africa’s first short-term
Todd, 41, has an extensive industry network and strong working relationships insurer.
with the brokerages, a distinct advantage considering that broker
relationships account for over 95% of business at Mutual & Federal. • The SA Fire & Life company was acquired in April 1894 by one of the
great Victorian insurers, the London & Lancashire Fire Company, but
He also boasts over 15 years of solid financial services industry experience, continued to trade under its own name.
both in South Africa and abroad, having held a variety of top positions, most
recently as Distribution head for ABSA Financial Services and Managing • At the time of the takeover, Robert Brydone was a member of the South
Director for ABSA Insurance and Financial Advisers, where he led a sales African Board of Directors of the London & Lancashire. He left shortly
team of over 2,600 people and was instrumental in launching a training and thereafter to form another South African insurance company, this time in the
development academy. Transvaal, the Federal Insurance Corporation. In 1911, Brydone returned to
the fold and sold the Federal to London & Lancashire, with the Federal
With a BCom in Accounting and a Law degree (LLB), both from the University continuing to trade under its own name into the late 1960s. The London &
of Cape Town, Todd has also worked at Alexander Forbes, PSG Investment Lancashire was eventually taken over by the Royal Insurance Group in the
Bank and AIG. UK, becoming part of the Royal Group.
“I believe the greatest contribution I bring to this role is my enthusiasm and • In the 1960s South Africa had become a republic and the government
passion for the short-term insurance industry, and my belief in the vital role made it clear it was unhappy with foreign insurance companies operating in
Mutual & Federal has to play in a sector that is so important to the South South Africa via branches. It indicated that all branches should be registered
African economy,” says Todd. as South African companies and trade on the Johannesburg Stock Exchange.
This conversion became known as the ‘domestication of foreign companies’.
“My first-hand experience of the different strategies being adopted by
insurers will enable me to contribute significantly to the implementation of the • As a result, the Royal’s many companies in South Africa therefore
growth strategy at Mutual & Federal.” merged with Old Mutual’s short-term company, the SA Mutual Fire & General
Insurance company, in 1970.
During the breakfast hosted by Todd and Mutual & Federal at the Grace hotel
in Rosebank, he emphasized the importance of the FIA to Mutual and Federal • However, in order to be known as an overtly South African insurance
and the intermediary and the Industry in general. Obviously M & F would not company, a suitable name was needed. The Mutual part was easy, reflecting
be able to deal with the intermediaries on a one to one basis, but rather with a the Old Mutual’s involvement (The Old Mutual was established in South Africa
representative body like the FIA. in 1845). As the names ‘Royal’ or ‘London’ would reflect a British heritage, it
was then decided to use the name ‘Federal’, from the Federal Insurance
The Financial Intermediaries Association of Southern Africa (FIA), as an Corporation. And so the Mutual & Federal Insurance Company was born and
intermediary organisation, plays a key role in positioning the value of the rest they say –is history.
intermediation. He was of the opinion that the FIA had a hugely important role
to play in the educating the consumer in that the intermediary adds a value “Poised to improve performance even further in 2011, Mutual & Federal can
added service that needs to be paid for. The consumer will always have the look back on a proud history, being part of the start of the local South African
choice of going direct or using an intermediary. insurance market,” says Peter Todd, Managing Director of Mutual & Federal.
“We will continue to lead the short-term insurance sector, embracing
March 14 is an important day in the history of Mutual & Federal, a member of innovation and providing value to all our customers. We are certainly looking
the Old Mutual Group, and for the entire South African insurance industry. On forward to another 180 years.”
35
A P P O I N T M E N T S
GlacierMarcel Bradshaw (1) appointed to Glacier by Sanlam's executive committee
Marcel Bradshaw, head of Glacier International (a division of Glacier by Sanlam), has
been appointed to the Glacier executive committee with effect from January 2011.
Bradshaw is a qualified attorney with over 10 years’ experience in international
investments.
Glacier International was launched in 2010 as part of Glacier’s strategy to
continuously expand its solution set to meet the needs of its client base.
AUM AppointmentsDrew Schnehage has been appointed as Managing Director. Frans van Niekerk (3),
who currently fills the role of Financial Manager and is a shareholder, will be joining the
Board of Directors. Pieter Bezuidenhout (4) also joins the board in a non-executive
capacity. Pieter is currently Chief Financial Officer of Zurich South Africa, and has a
wealth of industry knowledge, having previously worked for Mutual & Federal as Chief
Financial Officer for 10 years. Steven Rimmer (5), our UK shareholder and non-
executive director in the last 3 years, will take up the position of non-executive
Chairman.
Lion of Africa Lion of Africa Insurance has strengthened their senior management team by
appointing Mashudu Mamathuba (6) as Senior Manager: Planning and Strategy to
enhance the organisation's operating strategy.
Mashudu joins the company from ABSA Insurance Company (AIC) where he took up
the position as Process Custodian. With more than five years experience in the short-
term insurance industry, Mashudu began his career as Assistant Manager in the
Claims Innovations department at Mutual & Federal (M&F).
Centriq InsuranceNischal Ramcharan (7)
Client Accountant
Nischal, a BCom student at Unisa, worked for eight years at a retail company in Durban
before joining Constantia Insurance Co Ltd and moving to Johannesburg in 2009,
where he gained twelve years experience in the insurance sector before joining Centriq
Insurance as a client service accountant this year.
Lebohang Mokoena (8)
Client Servicing & Operations
Lebo, a BCom Accounting student at the University of Johannesburg, worked part
time at Tile Africa as a sales consultant. Lebo gained experience as a vac student at
PWC & Ernest & Young. In 2009, she began work at ABSA Capital as a settlement
agent in Money market shares where after she joined Centriq in December 2010.
RENASAHarry Coetzer (9)– Regional Manager Mpumalanga
Harry started his insurance career with Sentrakas as a motor underwriter in 1964. In
May 1988 he joined S A Eagle in Nelspruit as Claims Manager after which he held
various positions with Zurich until 2010 when he was Zurich’s Nelspruit Branch
manager. Harry joined Renasa as Regional Manager Mpumalanga in December 2010.
Frank Jordaan (10) – Regional Manager Free State
Frank started his career in the industry in 1975 at Santam. In 1982 he joined SA Eagle
as claims manager East Rand. In 2003 he became Area Sales Manager Free State and
Northern Cape where he managed all classes of business underwritten by Zurich. After 28 years with Zurich, in 2010, Frank
joined the Renasa team where he remains committed to high service levels and strong relationships.
RENASA’S SPECIALIST CONSULTANT
Nick Beyer (11) ACII A.M.P (Harvard) Development Manager
Nick began his career with Royal Insurance Company (now M & F) in 1969. In 1971 Nick moved to SA Eagle as claims
superintendant from where he was promoted through the ranks to become a branch manager in 1967, a regional manager in
1991, the General Manager Operations in 1995 and CEO in 1998 which post he held until he retired in 2009. Nick has a
wealth of experience, is well known throughout the industry and above all is liked and trusted by the broker fraternity.
(2)
B U D G E T 2 0 11 / 1 2
36
No surprises here… Budget 2011/12 hardly makes a splash as Gordhan holds back the NHI bomb
Will he or wont he? The big (R195 652) of your retirement-funding employment income to a provident
debate in the run up to fund and you contribute 7.5% (R97 826) to a pension fund. The taxable
Finance Minister Pravin income under the proposed legislation is significantly higher than that under
Gordhan’s 2011/12 Budget the current legislation and although a total contribution of 22.5% of
Speech was whether he earnings is made, you cannot “claim” the full R285 326 contributed as a
would make public how deduction! Taxable income would come to R1.3 million (under the new
much taxpayers would legislation) versus R1.206 million under the old, or R37 600 more tax at the
contribute to government’s top marginal rate! Anyone earning more than R888 000 per annum could be
National Health Insurance worse off thane before.
(NHI) funding. He chose to
defer the announcement Gordhan made other tweaks to the retirement and savings environment.
until next year… The tax-free lump sum benefit upon retirement increases from R300 000 to
R315 000. And the interest and foreign dividend exemption lifts from R22
Budget 2011/12 was a 300 to R22 800 (under 65s) and from R32 000 to R33 000 (over 65s).
rather pedestrian affair. Deductions for contributions to medical schemes were largely unchanged.
Gordhan announced the usual changes to sin taxes, fuel levies and income An individual (under 65) can deduct R720 per month for the first two
tax brackets. He made small adjustments to primary rebates and interest beneficiaries and R440 per month for additional dependants. Other medical
rate and retirement annuity deductions too. But the feeling after scrutinising schemes payments and qualifying medical expenses can be deducted
the minister’s 48-page speech is that significant changes will only take once they exceed 7.5% of the taxpayer’s taxable income.
place next year. That’s when the minister will announce changes to the tax
laws to fund NHI, most likely by way of an additional payroll tax, an increase Other “big” announcements include the changes to transfer duties (houses
in Value Added Tax (VAT) or a combination of the two. up to R600 000 will be zero rated and a new 8% rate applies to transfers
exceeding R1.5 million) and an effective date for the replacement of
Financial intermediaries can breathe a sigh of relief this year, because aside secondary tax on companies with a withholding tax on dividends was set at
from your duties as individual and corporate taxpayer there wasn’t much of 1 April 2012.
concern in the latest budget. The biggest change – something which will
have an impact on your high income clients – relates to deductions from
income for retirement contributions!
From March 2012 employer contributions towards an employee’s
retirement funding will be treated as a taxable fringe benefit. While
employees will still be able to “deduct” up to 22.5% of their taxable income
for contributions to pension, provident and retirement annuity funds, the
deduction limit is set to a maximum of R200 000 per year. This change
could force a rethink of the popular employee benefit structure where the
employer contributes 15% to a non-contributory provident fund and the
employee contributes 7.5% to a pension fund, to take up the full 22.5%
limit.
If you earn R1.5 million per annum then the limit is going to make a
difference to your take-home pay. Let’s say your employer contributes 15%
By Gareth Stokes online editor for FA News
Financial intermediaries can breathe a
sigh of relief this year, because aside from
your duties as individual and corporate
taxpayer there wasn’t much of concern in
the latest budget. The biggest change –
something which will have an impact on
your high income clients – relates to
deductions from income for retirement
contributions!
37
G O V E R N A N C E
Good Governance Pledge
Increasingly, individuals hear so much about the values of good governance, yet most often never know what this really means and the manner in which to
achieve good governance. Simply put, good governance is about upholding the principles of self discipline and ethical behaviour. Sadly, many individuals
are 'ignorant' of this simple truth and have possibly believed that the term 'corporate governance' is only attached to the functions and behaviour of a board
and its directors.
Of course this belief is quite misguided. There is a distinctive role that each of us can fulfil to ensure that the businesses in which we work -- and spend so
much of our time in -- become positively influenced by our individual attitudes and behaviour. Therefore, it goes without saying that good governance is not
singularly dependent upon a board and its directors, but indeed is greatly enhanced by the support each company employee contributes towards the
company becoming a better, disciplined and sustainable organisation.
It is in this regard that CGF Research Institute believes each small change in positive behaviour found within concerned and responsible individuals - who
support this notion - can have a radical influence upon not only their fellow colleagues, but also the entire organisation.
Accordingly, CGF Research Institute has embarked upon the necessary actions which would be required to assist individuals to cause "change for good".
We also believe that the chain is only as strong as its weakest link. By equipping individuals to visibly show their commitment to good governance, so too will
others become motivated to follow similar behaviour which ultimately affects the society in which we live.
Through this initiative, CGF Research Institute would like to encourage and motivate tens of thousands of individual employees -- locally and internationally -
- to show their individual support for good governance practices by visibly displaying their CGF Pledge Certificate for Good Governance and acting on
their commitment to positive change. We believe, together with all our constituents, that the employees who become
members of CGF Research Institute's drive for good governance will influence the change necessary within
business, its supply chain and overall customer satisfaction.
Start the change by committing to good governance practice in your daily routines; at home, work
and among friends. Show your support by taking the CGF Research Institute's Good
Governance Pledge.
Individuals Pledge towards Good Governance By Terry Booysen CEO of CFG
There is a distinctive role that each of us
can fulfil to ensure that the businesses
in which we work - and spend so
much of our time in - become
positively influenced by our
individual attitudes
and behaviour.
A B S E N T E E I S M
38
Organisational Wellness should Contribute a Healthy Bottom Line
Most South African organisations have a host of separate employee mental and social aspects of health. For example, “structures can be put
wellness initiatives, all meaning well but very seldom amounting to a in place to support employees who are going through divorce, legal
coherent wellness programme supporting the business. battles, drug and alcohol addiction and so forth. These same facilities
can also lend support to managers needing guidance in handling
Dr Lerato Motshudi, Medical Advisor at Health Management Solutions, subordinates or coping with change” explains Motshudi.
Alexander Forbes Health says “most companies have employee
wellness programmes which include employee assistance Key to rolling out programmes of this nature is communication –
programmes (EAP), HIV management programmes and wellness days - employees should know what programs are available to them as well as
all generally administered as stand-alone initiatives on separate budgets how they can access them while being confident of impartiality and
with different reports and reporting structures.” confidentiality.
Since there is seldom one person who receives and co-ordinates all Getting all this right, however, needs to start with a single person or team
reports, organisations do not develop an overall view of wellness, collating all wellness data – and developing a holistic view of health
making it impossible to develop a holistic wellness strategy. The result is management across the organisation.
that companies struggle to improve overall employee health and
wellness with absenteeism remaining high. As such Motshudi strongly recommends that “organisations develop a
wellness coordinator role - to review all data from a wellness
The first step in turning this around is to conduct a survey of those areas perspective, get a clear picture of what’s going on or what’s missing, and
of the business affected by poor employee health. This will provide a then address needs wi th pract ica l
good picture of where wellness in the organisation is and where it needs programmes.”
to be. The next step is to identify goals and then design and implement a
wellness programme with clear steps, precise allocation of If organisations feel they lack this
responsibilities and measurable deliverables directly supporting expertise or would be unsure of how to
business goals. hire for the role, the function can be
outsourced to wellness specialists.
“Absenteeism costs companies a lot of money each year. Investing in a These provide not just an organisational
well-managed employee wellness programme has been proven to overview, but are able to advise on how
reduce absenteeism, improve staff morale and increase productivity. internal wellness practices benchmark
Employees also tend to be more positive when they have employers who against similar organisations within the
respond to their needs making them more likely to stay with a company industry.
for longer” says Motshudi.
While most organisations medical aids already provide employees with
support for their physical illnesses, there is also a need to address the
By Dr Lerato Motshudi, Medical Advisor at Health Management Solutions, Alexander Forbes Health a member of the FIA.
I N V E S T M E N T S
40
Time to Adjust Portfolios for Rising Rates Best guesses from economists about the expected uptick in interest (municipal fees and power) are negating rental growth. The category
rates have one thing in common – they are moving closer in rather than offers steady income and warrants a place in a balanced portfolio,
further out. This should tell investors that portfolio alignment for a rising though profit-taking after 30% growth is understandable. A spread of
interest rate climate can’t be put off much longer. listed property counters is always recommended to diversify risk across
geographies and property sectors.
The tip comes from Absa Investments, Absa banking group’s investment
arm and a long-term advocate of timely asset allocation adjustments. 4. fixing your money market investments for very long periods
of time. Rates for different deposit periods do include the expectation of
Craig Pheiffer, GM, Investments, comments: “Inflation expectations are future interest rate movements, but consider these rates against
rising and the Reserve Bank’s recent upward revision to its inflation investments in shorter-dated deposits which are more flexible and
forecast is a strong hint that the next move in rates will be up. potentially allow you to optimise each successive rate hike.
“GDP forecasts have been rising and the recent 4.4% GDP growth rate in 5. offshore: If you have little or no international exposure, review
the fourth quarter beat market expectations. Food, fuel, utility costs and your strategy. A faster pace of inflation domestically relative to our
road tolls will push up the CPI. A softer rand will also encourage a rate trading partners would tend to weaken the rand. That would make the
rise.” investment opportunities in some developed equity markets even more
attractive for a balanced portfolio.
How should investors react?
6. up exposure to rand-hedge stocks: Opportunities can still be
“Fine tune your portfolio” is the advice from Absa Investments. Pheiffer found in domestic equities, with rand-hedge counters becoming a focus
believes at least six responses are appropriate … area. Some resource companies look promising as do Richemont, BAT
and SABMiller. Retailers like Shoprite are not traditional rand-hedge
1. diversified: don’t simply dump all holdings in asset classes stocks, but they and others have increased cross-border earnings on the
that could be impacted by rising rates. back of into-Africa growth. They could attract increasing attention.
2. long-dated bond exposure: rising yields at the long end of “Those belonging to the Rip van Winkle school of
the yield curve are softening prices and suggest rising inflation long-term investing might ride things out
expectations. Bonds do deliver steady income, however, and investors as rates change through the cycle,”
may be better served in shorter dated issues where capital volatility is notes Pheiffer. “Most, however,
lower. Tradable corporate and parastatal paper can add a yield- see value in timely asset
sweetener. allocation changes. The time
to look at those changes
3. some listed property exposure: this class was up nearly would be about now.”
30% last year, but shed 6,2% in the first two months of 2011. Like bonds,
listed property is vulnerable to forward expectations of higher rates.
Some property company distributions have been disappointing as costs
AVOID
MOVE
BEEF
STAY
REDUCE
RETAIN
By Craig Pheiffer,
GM, Investments at ABSA a member of the FIA
41
R E G U L AT I O N S
Regulatory developments will remain a key focus for intermediaries in is done.
2011, as ongoing legislative changes within the insurance space are set
to further define the changing role of the insurance intermediary. Aside from regulation, a further challenge that is certainly being faced
by the intermediary industry is the need for skilled practitioners. The
This follows an eventful 2010 for insurance intermediaries, who industry is crying out for new talent and the time has come for a real and
participated in the processes involved with the draft regulations of the concerted effort into designing an education and development
Insurance Laws Amendment Act (ILAA), the set up of the Data Sharing programme to elevate the all-round skills of our members.
project (STRIDE) and Treating Customers Fairly (TCF) initiatives.
In particular with the imminent RE1 examinations that are being
With the promulgation of the ILAA Binder regulations as well as the full introduced for all financial services representatives, the FIA is in the
implementation of the FAIS General Code of Conduct, Conflict of Interest process of negotiating an advantageous learning package for our
regulations and the Consumer Protection Act going live, 2011 is set to members to assist them in this process.
be another eventful and defining year for insurance intermediaries.
The role of the intermediary is challenging, with new direct insurers as
It is important not to underestimate the time, effort and cost that the well as retailers now venturing into insurance. However, there is a place
implementation of such issues will have on the industry. Management for the intermediary in a market that has become saturated with “other”
and all responsible staff will need to apply themselves to ensuring that players which can only lead to confusion amongst consumers who are
sound and good practice, as well as a common sense approach, no longer receiving advice and are instead buying a commoditised
continues to be adopted as the various regulations come into force. product without knowing whether it is right for them.
The new Treating Customers Fairly (TCF) guidelines, which are currently Intermediaries need to continue honing their skills, understand their
being thrashed out by the FSB and other related industry bodies, will be client’s needs and offer a range of innovative and cost effective
a milestone not only for insurance intermediary sector but for the products backed up by good service. There is nothing new in this but it
Insurance Industry as a whole. This is an important piece of legislation is these basics that underline the value of the insurance intermediary.
that aims to ensure the fair treatment of customers, primarily by product
providers.
It also seeks to promote consumer confidence in service providers by
ensuring they, the consumer, are provided with clear information before
and after a transaction; that all advice is appropriate to their
circumstances; and that they do not face unreasonable barriers when it
comes to the changing of products.
There is a clear trend for greater consumer protection and
intermediaries will need to adapt to this changing face of regulation.
There needs to be a far more professional approach regarding how
business is transacted. This will involve not only a closer look at
education and skills development but also greater scrutiny on how this
Regulations Shape the Changing Role of Intermediaries in 2011By Barry Taylor Chairman of the Short Term Exco and Director at the Financial Intermediaries Association of Southern Africa
There is a clear trend for greater
consumer protection and intermediaries
will need to adapt to this changing face of
regulation. There needs to be a far more
professional approach regarding how
business is transacted.
S N I P P E T S
42
Peninsula BranchThe FIA Peninsula hosted their first member
meeting of 2011 on Friday, 11 February. It was
once again held at The Hussar Grill in Camps
Bay and was extremely well attended. A
reason for the excellent turn-out probably had
to do with the special guest speaker the
chairman invited, i.e. Jonathan Kaplan, local
and international rugby referee. Jonathan
brought a referee’s jersey which was raffled
and the winner was Larry Marcus. The money
for the raffle was once again donated towards
the Ruyterwacht Preparatory School, where
500 children gets fed on a daily basis.
Hatchling CornerThe FIA would like to congratulate Priscilla Moagi of National Office Empire Road on the birth of her baby Thando.
We also offer heartiest congratulations to Trudie van Vuuren of Free State Division on the birth of her son Matthys Willem van Vuuren born 02/03/2011.
We would also like to express our thanks to Eskom and the cold winter experienced in the birth of these bundles of joy.
Platinum BranchThe FIA Platinum Branch held a very well attended meeting by member on 25 February 2011. The meeting was addressed by among others Eugene Kemp
renowned physcologist with a program on RSG on Saturday mornings and the MD of Innovations Maven.
Mid-Free State Branch
continued on page 47
43
H E A LT H C A R E
FIA: As one of South Africa’s small minority of expert female cosmetic Association of Plastic and Reconstructive Surgeons SA. How valuable is
surgeons, what would your personal opinion be on the role of women it for any profession to have an organisation whereby one should join as a
within the healthcare profession and therefore the industry? member?
FIA:Being an extremely successful career woman,
what would the contribution towards future financial
success be without having a financial advisor within
your personal life as well as advising you regarding
your practice finances?
FIA: Was entering the healthcare industry what you
had expected after you had completed 12 years of
rigorous training?
FIA: You are also a member of various associations including amongst
others, the General Medical Council United Kingdom as well as the
I believe that the need for woman doctors today is recognised and can be I think it is crucial for any professional person to be part of a professional
seen by the fact that woman comprise a large portion of entrants into organisation. In the plastic surgery field the mission of the Association is to
medical schools in a large range of countries, including USA (Harvard, Yale) support the members in their efforts to provide the highest quality patient
to South Africa. care and to attain/ maintain professional and ethical standards.
For many years specialists training has been dominated by male doctors due To qualify for membership, plastic surgeons must undergo certifying
to the simple fact that personal and family life does encroach upon a woman’ examinations and be committed to highest standards of ethics and patient
s professional career. Most of the times, specialist training and childbearing safety.
usually coincide. I personally believe that by being a member of a specific Association
However, an increasing number of female doctors have encourages me as a member to maintain the highest
been able to juggle these responsibilities with a level in training, expertise and ethics.
resultant visible increase in the number of female
specialists.
It is clear that women physicians often have a practice
style that differs from that of men with longer visits,
more patient-physician communication/ inspiration
rather than a more controlling/ commanding style from
men. I am a successful career woman in the medical and
As a female cosmetic surgeon, I am also able to aesthetics field. My interests are to improve my
understand my female patient’s insecurities and medical skills and knowledge. I would therefore need
develop a closer understanding of what their to admit to having limited interest and knowledge of
expectations of cosmetic surgery may be. financial investments. I therefore value input from my
financial advisors in considering my resources, risk
profile and helping me determine a balanced and
realistic plan to meet my projected future financial
goals.
The health care industry as a whole can be seen as a I would definitely not allow my financial advisor to
large corporation consisting of many smaller individually run companies. As perform surgery on
a cosmetic surgeon, I have entered a very small, exclusive part of this
corporation. In the first few years of qualifying, I trained future plastic
surgeons in the government sector.
Due to minimal funding and resources this was challenging and trying at
times.
I now practice from a very exclusive private cosmetic surgery clinic where I
do not need to deal with the stressors that are experienced by other
colleagues working at large private and state hospitals. So for me entering
the health care industry has been what I expected and I am privileged to be
working under the best conditions.
me, in the same light I personally do not attempt to invest
without financial advice.
As a medical professional I strive to treat my patients with the highest
standard of patient care and innovative technology and up to date
techniques. Conversely, I would expect my financial advisor to be aware of
any new changes and movements in the financial field and to advise me of
the best, but also safest financial investments.
FIA: Compassionate care and a thorough knowledge of procedures and
products are inclusive to the service offered to your patients. Would you
regard this as a priority within a service that you would wish to receive
from your financial advisor?
Linza van Aswegen talks to Prominent Women in Healthcare - Dr Nerina Wilkinson
H E A LT H C A R E
FIA: Despite the ever-changing technology with its financial
implications, procedures and legislation including CPD points, do
you foresee yourself continually adapting to all of these and if so,
why?
FIA: In which way does your family contribute towards your
successful career?
FIA: Where do you see Health Care in SA in 5 years time? Are we on
the right track or do you think that there are specific priorities at this
stage? What is Health Care South Africa’s biggest challenge in the
short and long terms?
In contrast, I think that we can be proud of our private health care
facilities that we have created, where we receive letters from patients
abroad complementing us on the professional services and experience
that they have received in our medical facility.
The biggest challenge that we have today is not to allow these centres to
The medical field is a living science with new scientific evidence being be eroded by poor governance and not to accept staff that have not been
discovered daily and new technology entering the market at alarming adequately trained. The challenge would therefore be to continuously
rates. I do however think that it is of utmost importance for any strive to improve the public sector health care as this is the feeding
specialist to keep abreast of new technology and to change with the ground for the private sector.
times. This does not mean that as a professional we should embrace
every new technique/ technology, as some may be short lived, but we
should, once the technology has been proven by peers to be beneficial,
that after thorough research the individual surgeon should be open to
gain knowledge and experience in the new technology to provide their The biggest challenge many of us face is how to balance the demands
patients with the best possible treatment. of family, friends and career. Most medical professionals want happy
and fulfilling lives outside work, but we have to make personal sacrifices
in order to achieve our aspirations.
I am blessed to have a very close supporting group of family and
friends, who understand the demands my career has on my life and my
dedication to my patients.
I believe that restructuring of the public health care sector has achieved I would therefore say that their continued support in the small things that
substantial improvements in terms of access to the general public. count (like making me a nutritious fruit smoothie in the morning, or
However, the public system is suffering by the weak health system helping me find a special dress for an occasion, massaging my sore
management and low staff morals. This would need to be addressed to back at night). All the above help to make my personal life more
maintain an acceptable public health care sector. pleasurable, so that I am able to give that little bit extra to my patients.
45
L E G I S L AT I O N
Futurists would have it that one should seek out “Black Swan” events as they Shifting market dynamics
represent both threats and opportunities. I would put it to you that instead of Already there has been a
seeking this one out, there is a Black Swan stalking the financial services major shif t in market
industry. dynamics. The Conflict of
Interest Regulations have
Black Swan events are characterized by the extreme impact they have and impacted on some of the
the Black Swan that I have in mind, is not a single event, but rather the largest financial services
convergence of general and industry specific legislation and codes of companies in the country,
conduct, that have either come into effect recently, or will come into effect right down to the very core of
this year and within the next two to three years. their business model.
Much has been written about the individual pieces of legislation and codes, We have seen mergers and acquisitions and re-alignment of principals in the
so I don’t intend to do that here, but one needs to step back and take a underwriting management environment, a mega merger in the long term
helicopter view of all this, to get the bigger picture. Looked at in bullet form, it sector and predictions of further insurer mergers, which will be brought
should be clear that the impact of the recent and looming changes, will be about by the onset of SAM.As an intermediary, how do these changing
nothing short of seismic. relationships affect your product supply chain?
Last year saw the introduction of the: The dichotomy
Now, last year and in the first month of this year, approaching 20% of FSP’s
• King III Code and Report on Corporate Governance - 1 March 2010 licenses were withdrawn due to a failure on the part of the provider to submit
• Codes for Responsible Investing in SA - draft release Sept 2010 compliance reports, or financial statements, or to pay the annual levies. I
• Revised Association Codes of Conduct e.g. FIA; SAIA; CFA Institute can’t help wonder however, how many of them intended the license to lapse,
but were unaware that there is a specific procedure to cancel an FSP license.
This year sees the introduction of: Folks that is, who have reached the point where they have decided the
regulatory burden does not justify the return. Are we facing the same
• The new Companies Act – 1 April 2011 situation as in the UK and Australia, where a regulatory big bang caused a
• The Consumer Protection Act – 1 April 2011 huge decline in the number of intermediaries?
• FAIS
- The final phase of the Conflict of Interest Regulations – 1 April 2011 Whilst it is appreciated that the law is an evolving, living thing, regulatory
- The commencement in earnest of the Regulatory Exams - Jan 2011 certainty is a pre-requisite for business sustainability and the dichotomy is,
• The Insurance Laws Amendment Act–anticipated during 2011 the more that the regulatory burden causes experienced intermediaries to
leave the industry, the less choice there is for consumers. Sadly, in many
The medium term will see the introduction of: instance the loss of such talent to the industry, is irreplaceable. Is this simply
collateral damage, or just an unintended consequence?
• Specific micro-insurance legislation
• Solvency Assessment and Management Impact on risk profile
• Treating Customers Fairly It is vital, to consider the impact of all this legislation on your company’s risk
• National Health Insurance profile, as brought together virtually simultaneously, the introduction of strict
• Social Security and Pension Fund Reform liability, greater awareness of the piercing of the corporate veil in terms
personal liability attributable to directors and officers of companies, coupled
This list isn’t intended to be exhaustive, but is more than enough to with increased expectations in terms of corporate governance and
demonstrate how wide ranging and far reaching the changes are, to the responsible investing, these issues come together to create a perfect storm
extent that in the next five years the insurance and financial services for the risk manager and never before has the role of the compliance officer
landscape in South Africa will be barely discernable, from that of today. been more important than it is now.
The stalking Black SwanBy Michael E. Stoker
Insurance Gateway® a division of Stoker Risk and ICT (Pty) Ltd www.insurancegateway.co.za
L E G I S L AT I O N
C O N F I D E N C E
46
Jettisoning decades old case law And, as Justus van Pletzen, the COO of the Financial Intermediaries
One little anticipated aspect on the impact of Consumer Protection Act, is the Association of Southern Africa points out, the bulk of the industry specific
need for contracts to be in plain language. The rush by insurers to launch legislation which has a direct impact on intermediaries and financial planners
plain language insurance policies stands to jettison decades, if not centuries of has already been enabled, with virtually just the Regulatory Exams to go.
case law, based on established wordings. Personally, I can’t wait to see the plain
language war and nuclear exclusion clauses contained in short-term policies. When looked at positively, even the RE’s are an opportunity. Have you for
instance thought of telling your clients about the exams? About how the
On a serious note though, what are the implications for intermediaries of a authorities wish to ensure that financial services providers are competent?
spate of new plain language policy wordings? What is their responsibility About what your company is doing about it and the investment it has taken?
when a client’s cover is switched to a new plain language wording? Will they
have to do a word for word comparison, a legal analysis even, and advise the The industry has rolled out workshops and training material for RE 1 on an
client on whether to go with the new wording or not? unprecedented scale and the best thing one can do with regard to RE 1 is get
it behind you. Then, while those who are caught in action paralysis suffer the
Granular underwriting negative consequences, you can use this as a marketing tool to re-enforce
New IT systems, which are also in part being driven by legislation such as the confidence of customers and prospects, in your business.
ILAA and SAM, are giving rise to a more “granular” approach to underwriting
as systems gain the ability to process disparate data. Telematics and the One should also be mindful not to throw the baby out with the bath water. For
internet are playing an increasing role and alternate distribution channels instance there was a rash of negativity widely publicized in the media about
continue to evolve. the nitty gritty of the Conflict of Interest regulations. Without denigrating from
these concerns, it should be borne in mind conflict of interest is only one
Opportunities aspect of business ethics, of which sustainability has become an important
As with any Black Swan (if you are willing to call a series of events a Black driver, within the risk management fraternity.
Swan), the convergence of all this regulation over such a short period brings
threats and opportunities. For those who seek, it is often in times of upheaval that the greatest
opportunities arise, however those intent on thriving in the new normal, will
New products are emerging or in some instances a heightened awareness of need to be sharply focused on the regulatory environment and those who
the need for cover, such as directors and officers liability insurance, has persevere and get through it, will certainly emerge with robust businesses
occurred. Moreover, as the apps are customized and costs come down, the and will most certainly earn the right to call themselves, new age financial
new distribution channels should not be seen as precluding the intermediary. services providers.
A recent survey amongst insurance brokers in South Africa has revealed that According to those surveyed, the biggest challenge facing brokers over the
they are slowly gaining confidence in the South African economy once again. next 12 months will be complying with new legislation and regulations. Smit
These levels are slightly more positive than the confidence levels recorded says that this is understandable as the Consumer Protection Act, which come
last year January. into effect on 1 April 2011, and the Financial Services Board (FSB) regulatory
exams are on everyone’s minds.
According to the CIB Broker Confidence Index Survey, which measures the
confidence levels of insurance brokers on a number of issues, the results for the “It is of the utmost importance that brokers familiarise themselves with their
last quarter of 2010 showed that brokers have confidence levels of 66% for the obligations in terms of these exams. They have been put into place to ensure
economy in the next 12 months. According to Jonjon Smit, sales director of CIB that those operating in the financial services industry, including brokers, are
Insurance Solutions, this is a very encouraging outlook for 2011. both competent and knowledgeable.”
The survey did however reveal that brokers are continuing to lose confidence The survey also showed that the confidence levels amongst brokers with
in their prospects of attracting new business over the next 12 months, an regards to business conditions for the
indication that South African consumers are still not out of trouble financially. local insurance industry over the next 12
The survey recorded confidence levels of 76%, down from the 79% recorded months fell marginally to 67% in the last
in January 2010. quarter of 2010 in comparison with last
year’s 68%.
While brokers may be less confident of attaining new business this year, the
survey revealed that they are more confident of maintaining their current “The outlook for 2011 seems very
customer book, with 78% expressing confidence in their ability to retain positive amongst all respondents, which
existing clients. Smit says that this is because brokers realise how valuable is a very encouraging sign for the South
current clients are and make a more concerted effort to retain the business. African economy and the growth of the
insurance sector” concludes Smit.
Survey Reveals New Confidence in 2011By Jonjon Smit, Sales Director of CIB Insurance Solutions
47
E M I S S I O N S TA X
S N I P P E T S
Following the introduction of the CO emissions tax this year, South Africa’s “The insurance concession by Santam is designed to ease the burden on the 2
insured by including the tax value for vehicles bought prior to September leading short-term insurer Santam has announced it will make special 2010 as many insureds may be underinsured for the tax component which concession for insured vehicles bought prior to 1 September 2010. In cases was not added to the value of a vehicle prior to implementation of this tax,” where a vehicle qualifies for total replacement, the insured will not be says Joubert.penalised for any shortfall on insured value due to the introduction of the CO 2
Vehicles bought after the introduction of the tax do not qualify for the tax component.concession as the purchase price will include the CO emissions tax Emissions tax is aimed at encouraging vehicle owners to purchase more fuel 2
component and policy holders should insure for this value. At inception, the efficient cars to lower CO emissions. The tax is calculated at R75 per g/km 2
tax will only be applicable to sedan vehicles but will apply to LDV (Light Duty of CO emissions for every g/km above 120g/km. The tax translates roughly 2
Vehicle) models at a later stage. This incentive will be valid for both personal to between R5 000 and R10 000 increase on the overall price of a new and for commercial vehicle owners.vehicle. While the manufacturer is responsible for paying the tax to SARS the “Brokers are advised to verify with the concerned insurer the exact terms consumer ultimately carries the burden of the tax as it’s included in the cost adopted after the introduction of CO tax, as most insurers may not 2of the vehicle.compensate for the tax if it’s not included in the value of the vehicle. The Lourens Joubert, Head: Commercial Underwriting says: “CO emissions tax 2
broker is obliged to advise the client that, in case of total loss, not all insurers has been introduced to combat and decrease the ever-increasing levels of will be willing to fully compensate the insured unless the policy is adjusted greenhouse emissions across the globe by incentivising motorists to accordingly,” explains Joubertpurchase vehicles that are more environmentally friendly. The increasing Government is yet to announce the possible impact on pricing of second-level of CO emissions is a big problem. Globally, there is an estimated 600 2
hand vehicles. As standard procedure, Santam uses the Trans Union Auto million vehicles that emit over 900 million metric tons of CO each year. 2
Dealers Guide to determine the market value of vehicles. The impact of the Vehicles account for 15% of fossil fuel emissions and this figure is expected tax on second-hand vehicles will therefore be correctly reflected in the Trans to triple by 2020.”Union guide.
Santam creates Concession for Vehicles bought Prior to Introduction of CO Emissions Tax 2- Lourens Joubert, Head: Commercial Underwriting
The first two Anton Swanepoel workshops on the captive for the entire course and was quite disappointed onderneming en dit sal verder bydrae tot die selfvertroue
regulatory exams have been completed. It was attended when it was over. I have already visited the secret website van elkeen wat dit slaag in sy/haar werk omgewing.
by more than 550 delegates in Pretoria and and the shortened study material will be very useful as Ek het self gesê hierdie eksamens sal nie van my n beter
Johannesburg and immediate feedback about the value time is of the essence for everybody. Please extend my adviseur maak nie, maar na ANTON se aanbieding en die
that the workshops bring was extremely positive. Above sincere thanks to Anton.” - Karen van Aswegen. voorbereiding en slaag van die eksamens is ek oortuig
see photo’s from the workshop in Pretoria.Some of the “Soos jy weet is daar baie bekommernis in die dat dit van ons baie beter adviseurs gaan maak wat baie
comments from members were as follows: makelaarsbedryf oor bogemelde eksamens en die vir ons kliente gaan beteken en gevolglik ook baie meer
“I would just like to say that I found the presentation and moontlike gevolge indien van ons dit moontlik nie tydig vir die adviseurs se inkomste gaan beteken. Ons kan net
content to be absolutely fantastic. It was well worthwhile slaag nie. Ek is ook baie bekommerd oor die moontlike beter toegerus wees om ons rol en verantwoordelikheid
and at the same time very entertaining. I will recommend gevolge as die eksamens nie geslaag word,want dit kan in die bedryf te vervul. Hierdie is n wen wen situasie.
to everyone that they attend the presentation” - Stuart katastrofiese gevolge vir van ons hê. Verder is ek oortuig Ek wil graag die FIA bedank vir hulle insette en rol wat
Riley.“I would like to take this opportunity to thank the FIA dat dit nooit die Wetgewer se gedagte was om van die hulle vertolk,ons moet positief en daadwerklik ons lede
for arranging the RE 1 course presented by Anton eerbare adviseurs doelbewus uit die bedryf te weer nie, tal vergroot om ons liggaam, die FIA te versterk met
Swanepoel. Anton took all fear of the exams and the en ek is verder oortuig dat hierdie aspek aangespreek kan groter verteenwoordiging uit die bedryf om nog beter
preparation thereof away from me. He made seemingly word deur die FIA in onderhandelinge met die FSB. namens ons lede en die bedryf te kan onderhandel . Ons
uninteresting topics such as Code of Conduct, FAIS and Die kursus deur Anton Swanepoel aangebied, was so moet daarteen waak om nie soos die Afrikaner politiek te
FICA so exciting and clear that you want to utilise it daily positief ontvang deur alle kursusgangers waarmee ek versplinter en dan op te eindig met minderwaardige
and, as he said, run your business based on these gepraat het, en ek dink dit was die regte motivering op die inspraak nie.-Groete.”,- Dolf Nel.
principles because that is what we would expect if we regte tyd,dit sal so goed wees as meeste van die wat die
were the clients. eksamen moet skryf so aanbieding kan bywoon.Hierdie Anton Swanepoel's seminar/lecture yesterday at the
The presentation was one of the best that I’ve ever is nie eenvoudige eksamens wat sonder die nodige Roodepoor t Count r y C lub was abso lu te ly
attended, well presented, focused, knowledgeable and insette geslaag gaan word nie.Die positiwiteit wat hieruit brilliant...thanks to the FIA ! – Cyril Rabinowitz.
extremely entertaining at the same time. I was held verkry kan word sal net waarde toevoeg tot enigeen se
Anton Swanepoel Workshop Pretoria 15-03-2011 & Johannesburg 16-03-2011.
Continued from page 42
S N I P P E T S
H U M O U R
48
Jakaranda BranchThe Jacaranda Branch Members meeting took place on 04 March 2011.
Manie Booysen – FIA CEO sharing
information with the members at the
Jacaranda Members’ Branch Meeting.
Santam in full gloryJakaranda Branch Sponsors Willie Greyling (Magalies Division
Chair) en Johan Ceronio
(Jakaranda Branch – chair)
Lowveld BranchThe “ 2010 FIA LOWVELD LOYALTY AWARD “ trophy was awarded by the outgoing chairperson Louie
Amorim to Jenny Ferreira ( Dressed in Blue ) and Pippa Schaeffer ( In Orange )
Previous recipients of the award were. Louie Amorim 2006, Joppie Lombard 2007, and Denis Paiva
2009. No award in 2008 due to merger. The award is presented by the Chairperson to an FIA member
who has walked the extra mile during the year.
Algoa BranchAt the end of last year, the Algoa branch got involved in the
could pick a name and sponsor a perfect Christmas box. Santa Shoebox Project and sponsored parties to two of So many of the kids received what they wanted or needed. the children homes, namely, Khayalethu Boys Home in
North End and the Lelethu Baby Shelter in Westering. At Lelethu, the babies were not older than a year and were
either abandoned or removed from abusive homes. These It was definitely an eye opener to see how these boys at kids touched our hearts. They too received beautiful gift Khayalethu appreciated the shoebox they received and boxes and party packs.also the party pack which contains juice, chips and some
sweets. It was also amazing how a complete stranger
I n d u s t r y A w a r d s
9 June 2011
The FIA's Awards Evening has become a prestigious, much anticipated annual occasion
on the Insurance Industry's Calendar, to be held this year at the Sandton Convention Centre
The Awards this year are in the following categories:
• Long Term Insurer of the Year – Risk Products
• Long Term Insurer of the Year – Recurring Savings Products
• Investment Product Supplier of the Year
• Health Care Product Supplier of the Year – open schemes only
• Short-term Personal Lines Insurer of the Year
• Short-Term Commercial Insurer of the Year
• Short-Term Corporate Insurer of the Year
• Employee Benefits Supplier of the Year
• Underwriting Managers of the Year
The Highlight of the banquet will be the presentation of the Prestigiuos FIA Awards to Financial
Service Providers judged by the members of the FIA for providing exceptional quality of products and
service levels to FIA Members, and are highly regarded by the industry as a whole and set a
benchmark of service excellence all strive to achieve.
Reservation form available on FIA website: www.fia.org.za
For more information, email [email protected]
Website: www.fia.org.za
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