insight quarter 1 2010
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Insight Quarter 1 2010TRANSCRIPT
Website: www.fia.org.za
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INSIGHT
Insuring2010
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FIA Insight
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Association of Southern Africa
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Financial Intermediaries Association of Southern Africa
Chief Operating Officer
Justus van Pletzen
President
Seamus Casserly
Editor & Media Manager
Clive Franks
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Cell: 083 447 2010
Editorial Contributors
Seamus Casserly, Manie Booysen, Justus van Pletzen,
Mike Stoker, Adv. Paul Sieberhagen, Gareth Stokes,
Dr Tobias Doyer, Pravin Pather, Riette Fern, Abdul Dangor,
Ian Kilbride, CFG Research Institute, David Price,
Gari Dombo, Simangele Tshabalala, Terry Booysen,
Johan Nagel, Craig Burton-Durham, Chris Busschau,
Quinten Matthew, Dimitri Balios, Johan Gouws,
Shantha Padayachee, Dr Nolwandle Mbalo, Charles Pillai,
Jan Hattingh, Ulrich Hoffmann, Brian Martin, Adrian Hofman.
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Editor’s Soapbox 2
Presidents Message 4
From the Desk of the CEO 6
Agricultural Insurance 8
Company Profile -Brian van Flymen 10
Wise words from our Legal Eagle 14
Teachers to Rest Insured 14
Advice from the Health Care Administrator 16
Advanced Driver Training 17
Chemical Liability 18
Vehicle Insurance rates 20
Kidnappings 21
Spouse in the Estate Plan 22
Rhythm of Life 24
Outlook for 2010 26
Scientific Underwriting 27
Re-emergence of Service led Brokers 30
Mike Stoker 32
Epidemics & 2010 Cancellations 33
Appointments 34
Providing on the Job Skills & Training 35
Gareth Stokes 36
Snippets 38
Financial Maturity 39
Selling Tax Breaks 40
Funeral Cover 43
Building Replacement Costs 45
FAIS Ombud 46
Short-Term Ombud 48
Pensions Sector Alignments 48
Long-Term Ombud 50
Humour 50
WFII Report 51
E D I T O R ’ S S O A P B O X
by Clive Franks
We are heading into a very event filled 2010. The kick off was the Special recognise those product providers that they deem leaders in the industry
General Meeting held 19 February held at the Rand Park Golf Club in from their perspective. Also included in this year's awards are two new
Johannesburg to ratify the merging of the Association of Black Brokers categories the Under Writing Manager Award and Employees Benefits
(ABIB) and the Financial Intermediaries Association of Southern Africa Product supplier.
(FIA).
World Cup 2010
Special General Meeting Everything is all hyped up for the Soccer World Cup and the insurance th19 February a special general meeting was held at the Randpark Ridge industry also needs to gear up for this event and to prepare South
Golf club in order to ratify the merging of the Association of Black African, hotel, bed and breakfast (B&B) and home owners looking to
Insurance Brokers (ABIB) with the Financial Insurance Association of provide accommodation to the estimated 500 000 visitors during the
Southern Africa (FIA). The motion was ratified by the FIA and we are now FIFA 2010 World Cup. They are opening themselves up to huge potential
waiting for the decision from ABIB. risks by failing to take out appropriate insurance cover and sufficient
public liability cover. The same goes as well for the entire hospitality
industry that should cover themselves for the rowdiness of fans in bars WFIIth and restaurants and who are often overly robust and destructive and at In March from the13 – 16 Seamus Casserly the President of the FIA and
times their behaviour can get out of hand and they commit acts of assault Justus van Pletzen COO of the FIA, who is the official representative for
on patrons.Africa at the World Federation of Insurance Intermediaries (WFII) were in
Buenos Aires, Argentina for the annual WFII Conference. Seamus and
Hot TopicsJustus engaged with the various representatives from all the countries
The hot topics during 2010 will be National Health Insurance (NHI) which that attended and engaged with them on worldwide trends and
seems to be advancing at a snail's pace; others are the retirement fund developments in the industry, once again emphasizing the major
and the continued debate surrounding commissions. These are issues influence and input that the FIA has worldwide in the industry.
that are being closely monitored by the FIA who will always make sure
that our members are well represented at all levels of the decisions to be Insurance Conferencetaken.The Insurance Conference incorporating the FIA/IISA/SAIA takes place
from the 23 – 26 May at Sun City which will be jam packed with both
EducationNational and International Speakers of note addressing the conference
Very importantly and of huge significance is the issue of regulatory on various topical issues related to the insurance industry and how we
exams RE1 and RE2 on which Joe Kotzé has provided all our members will cope with them. The Advisory Council meeting is to be held on the 24
with very comprehensive interpretations for all aspects of what is & 25 May at the same venue being chaired for the first time by Steven
required by them in countless FIA Expresses sent over the past period. In Akakios.
March Road Shows involving FIA, Inseta, Moonstone and the FSB have
commenced which have been well attended. All intermediaries are able The FIA Awardsto get their ducks in a row by attending these before taking part in the June sees the prestigious FIA Awards taking place at Emperors' Palace
exams. This exercise once again demonstrating the wide cooperation on 3 June the Awards will once more be a glittering affair with all the
taking place on industry issues.major industry players being represented as the intermediaries will
2
Editor’s Soapbox
www.renasa.co.za
F I A P R E S I D E N T
Having dealt with almost all of the Merger issues and now with Manie to remain vigilant in view of the
Booysen settled in as CEO, our association is well positioned to focus on impact of NHI on the brokers
our key role of developing the profile of the intermediary in South Africa. I specialising in this field.
am delighted that we have reached this point early in 2010 as there is likely
to be an exciting year ahead. Similarly the issue of climate change and its possible impact on insurance
cover that is available to our clients is a very real. A certain insurer is
This position has only been achieved by the hard work of the membership, currently specifically limiting cover for storm risks in a defined coastal area.
the executive and all the volunteers who give unstintingly of their time and This type of action may fundamentally change the policies we sell and the
expertise. May I thank all of you for the effort that makes the FIA such a advice we give to our clients. The proposed National Savings scheme will
positive contributor to the intermediary cause in all sectors of our society. certainly affect our EB colleagues and brokers advising on investment
products. Not all of this is bad news but it will certainly demand that we
I am honoured to have been asked to lead the organisation for the next remain vigilant and adaptable.
period and wish to thank you and the Board of the FIA for your confidence. It
is clichéd to refer to the task as being daunting but given the state of flux that I am confident that we will be flexible enough to deal with all that comes at
we are likely to experience during 2010 as an industry, as a country and in us both as business people and as the FIA. Intermediaries are by their
global financial markets, there are considerable challenges which we as a nature capable of adapting quickly to different clients, trends and
collective and as an organisation will have to overcome. It is these macro circumstances. That is who we are.
issues that are likely to present real obstacles and will require conscious
effort to resolve. I have no doubt that we will succeed if we collaborate 2010 is also the first year in which we as intermediaries are obliged to be
effectively with one another. fully compliant with the educational requirements of the FAIS Act. We are
now having to write entry level exams and, at some stage in the future, will
Arnold van der Linde, my predecessor and past president, deserves huge be required to build up educational points for continuous professional
credit for his positive leadership of the organisation over the past two years. development (CPD). This all indicates to me that we are getting closer to
His unwavering commitment to the improvement and development of the being recognised as a profession and this would be fulfilment of a strategic
intermediary industry, the brokers and the FIA as the representative body is objective of the FIA. Let’s hope for an easy process for their requirements
legendary and I have significant shoes to fill. I am deeply grateful for his
enthusiasm, leadership and counsel over the years and am comforted by I also ask that members seriously consider involving themselves in the FIA
the fact that he remains part of the executive committee and the Board. at which ever level suits them personally - branch, division, specialist
Thank you Arnold for all your time and effort over the years and for agreeing committees, etc. This will ensure that a wide base of our members will be
to remain committed in the years ahead. well informed about our industry and activity.
If there is a single theme that will overarch most matters affecting brokers in Finally 2010 will be a milestone year in our country’s history when we host
2010, I am guessing that it will be regulation. Too much has happened over the FIFA Soccer world cup.
the last few years and it all points to our regulators implementing some new May I wish Bafana Bafana a successful tournament, may all our visitors and
ideas that will require change in the way we operate and manage our all the spectators have a real South African experience and may all the
businesses. Consumerism, public perceptions and conflict of interest are images of our beautiful country and people be positive.
the main drivers of this initiative and the FIA will be challenged to represent
our membership appropriately. Let’s make 2010 the year to remember for all of us. Good luck for all the
challenges that lie ahead and thank you for your support.
There are likely to be a few other challenges to be addressed in addition. For
example whilst the recent budget did not allocate funds to the mooted
National Health Scheme – I refer to NHI as a scheme rather than as Regards Seamus
insurance – this does not mean that it is off Government’s radar. We need
4
Message From the President of the FIA to our Members
C E O
When we review the last quarter, one realizes that several adjustments will The Insurance Conference that is to take place from 24 to 26 June 2010, in
take place in the financial and insurance industries to ensure future Sun City will be jointly presented by the FIA, SAIA and IISA and promises to
sustainability. be a huge success. The conference covers the entire industry, not just
Short-term insurance as in the past. For maximum synergy the FIA has
Firstly, world leaders held intense, in-depth discussions to ensure that the decided to make use of this opportunity by holding its Advisory Council
inputs of developed countries’ to economic recovery will effectively meeting during this event.
contribute to the overall recovery of all the developing economies. Lessons
learned from this international crisis will ensure that the discussions The FIA is currently in a process of reviewing its Code of Conduct to be in
currently underway between the Financial and Insurance supervisors of the line with King 3 requirements. This process will allow the FIA to build the
major powers will continue and new policies will image of the financial intermediary in the
see the light. We will see that the Solvency 2 consumer arena. The Department of Trade and
project that was developed in the EU will extend to Industry is currently in the process of finalising
smaller powers that are forced to comply with the regulations regarding the Consumer
policies. Protection Act and an industry code may be used
to finalise the position the financial intermediaries.
Secondly, the current global weather and climatic
conditions experienced, is unprecedented in the There has been a lot of speculation about the
history of man. These phenomena have led to advent of National Health Insurance and recently
tremendous pressure on the insurance industry during an ANC rally in Kimberley; the ANC leader
worldwide and will surely add a new dimension in indicated in his speech that such a system would
risk management and insurance in general. be in place by the end of 2010. During the recent
Floods, drought conditions and hailstorms have BUSA Council meeting it was decided that the
already led to great pressure on the insurance matter would not be addressed by BUSA before it
industry in South Africa. becomes Government policy. It is also important
to note that no funding has been budgeted for NHI
The WFII (World Federation of the Insurance for 2010/2011. The FIA, through its Health Sub-
Intermediaries will, at its upcoming conference in committee, will continuously monitor this issue to
Argentina, surely review these aspects ensure that members' interests are served.
thoroughly, and debate this at the various working
group discussions that will take place. Seamus The rumours about the Conflict of Interest are
Casserly, FIA president, and Justus van Pletzen equally interesting, and we soon expect more
COO, wi l l a t tend the conference as finality regarding this issue that surely will affect
representatives from Southern Africa and they will participate in the the playing field. The FIA Exco has had a chance to respond to the draft
organized discussion groups. document as presented by the FSB
On the local front, the Road shows introducing the new competency exams The year 2010 will definitely be exciting in many respects, and not just
(RE1 and RE2) to the industry have already commenced. These briefings because of the giant football event but also by the implementation of rules
are jointly handled by FIA, FSB, INSETA and Moonstone and are well that will inter alia regulate binder agreements. The implementation of the
supported by all stakeholders in the industry. These discussions are also regulations could definitely be a change in the business practice of insurers
seen as a great opportunity to make contact with non-FIA members. and intermediaries.
6
From the desk of the Chief Executive Officer
A G R I C U LT U R A L I N S U R A N C E
The South African agricultural sector has an important role in the country’s was covered by the
economy. But being in this industry requires good risk management to deal insurance pol icy.
with unique vulnerabilities such as the harsh and often unpredictable Therefore it makes
climate. Farmers need a tailored insurance product that can cater for such g o o d s e n s e f o r
risks. farmers to enjoy the
longest period of
Crop insurance is unlike other types of insurance such as commercial and cover by insuring their crops as soon as possible after planting.
personal insurance. Not only are you selling insurance to an informed
producer with an acute knowledge of growing crops, but you are also The difficulty for the farmer, however, is determining at what value the crop
dealing with a highly specialised form of insurance. It requires specialist should be insured. “The reality is that when a crop is planted, the farmer
knowledge, continued research into the science of crop damage, as well doesn’t know what the actual yield will be as the weather is a major
as knowledgeable brokers to sell the product. determining factor,” he says. For this reason, crop insurance enables the
farmer to adjust the cover upwards as the yield potential or price/ton
In South Africa, approximately 40% - 45% of all crops harvested are increases.
insured, and of this percentage, approximately 55% is insured with
Santam. This makes Santam Agriculture the leader in crop insurance in Unlike asset cover, crop insurance cover is not determined by replacement
South Africa. value, but rather by a realistic value chosen by the insurer at the time of
In terms of crops insured, grains are most often insured, followed by fruit insurance. Apart from the fact that the client can determine the cost of his
and, to a lesser extent, vegetables. According to Schalk Schultz, Santam insurance through price and yield, he also has the choice of how much risk
Agriculture crop business development he wants to carry himself.
manager, farmers who decide not to
insure their crops usually believe they Accurate crop cover requires a multifaceted approach. It involves
have the financial means to cover any determining what the effect of damage such as hail is on the plant’s
damage. However, there are indications specific growth stage, as well as the potential yield.
that farmers are becoming more serious This is why continuous research into how different crops react to damage
about taking out insurance. Schultz at different growth stages is so important to Santam.
attributes this shift to a recent increase in Schultz explains that farmers always ask two questions: how will damage
unpredictable weather activities in the and losses be assessed, and how much will the insurance cost? It is
summer rainfall areas of South Africa. important to have answers to these questions, backed by solid evidence
and research.
Schultz explains that crop insurance is a
seasonal product and cover for the The research conducted at the Santam experimental farm near
chosen risks are only granted for a Bloemfontein has over the years proved invaluable in this regard. Santam
specific growth cycle. Unlike asset insurance, the premium payable for is the only short-term insurer in South Africa with an experimental farm
crop insurance is not determined by applying the insurance rate to the dedicated to scientific research on the effects of various insurable crop
insured amount and the cover period. Instead, the rate is applied only to the perils. This means that its brokers have the scientific support of the best
insured amount, regardless of the number of days that the specific crop technical team in the business.
8
Understanding
Crop Insurance by Dr Tobias Doyer
Continued on page 44
C O M PA N Y P R O F I L E
by Clive Franks
FIA : As a director of the FIA and the
huge responsibility and amount of In order to survive in adverse market conditions, the Intermediary must
time it consumes, especially with remain relevant to his client who should perceive that the intermediary has
all the involved and delicate and 'added value'. I believe this simply means utilising our knowledge to assist
often complicated recent mergers our clients and constantly remember that our client's interests' are
paramount.and your passion to see the success
of the FIA , and with your
FIA: How do you think the 2010 Soccer World Cup is going to impact on us?involvement as the newly elected
vice-president of the FIA do you find
As I am by nature optimistic, I think the impact on the economy will be that this has had an adverse on the
positive and the morale in the country be much improved. Hopefully this time you are able to devote to Van
will lead to an increase in expenditure and a knock on effect of additional Flymen & Associates.
insurances/investment services being purchased.
I am most fortunate to be part of a On the negative side, I would advise short term Intermediaries who act for well-established business. The homeowners providing accommodation during the event, to make full directors and management have disclosure to the Insurance Companies.many years experience and share my
passion for the industry. As a result FIA: What incentives are there for young people to join our industry and any adverse effects have been minimal and more than compensated for by
how do you think we will be able to attract them?the benefits of my involvement.
This is an area of much concern as we are not attracting people to the FIA: In what way do you feel that you are making the most contribution
industry. In fact there are few people under the age of forty who have expert to the FIA?
knowledge of the industry and how it functions. We have to introduce and
promote insurance at grassroots level as a career and possibly as a subject Hopefully my experience of over 20 years as a representative of to school children and university students in a meaningful, vibrant way.intermediaries associations will be of value. I am passionate about our
industry in general and Intermediaries in particular, and as a result of the Unfortunately the Insurance Institute for many years has been moribund experience gained and contacts I have made over the years feel competent and is only now beginning to raise public awareness of insurance as a very to engage with various Product Suppliers so as to ensure that we rewarding vocation and I believe they require the suppor t of us all in both Intermediaries obtain a fair deal.their educational and promotional activities as this is a long term project.
The consumer spend on short-term insurance is in excess of R 50 billion As past chairman of the Membership Committee, I am gaining a more per annum which makes us a huge player in the South African economy and comprehensive understanding of the requirements of the smaller broker if properly marketed an exciting attractive option for young people.which combined with my knowledge of larger intermediaries, will hopefully
equip me to better represent the collective interest of our members. FIA: What do you think are the main challenges facing the FIA and its
members?FIA: What does being elected as vice-president of the FIA mean to you?
To remain relevant by embracing the change in our working environment – it A large degree of personal satisfaction and the hope that I can make a
will be of great benefit in the long term. The FIA has to maintain our core difference by entrenching the Intermediary as the preferred distribution
values and insist our member's act with integrity at all times. channel of the product providers.
If we follow this mantra we will always remain relevant.
FIA: Do you think that there has been a turn-around yet in the recession
I do think our members are beginning to appreciate what we do on their and what will intermediaries have to do to survive the adverse effects behalf but as always our biggest challenge is the apathy of most members. of such glitches in the future?This is a perennial problem, which can be alleviated by good
communications. We are doing an excellent job but must further refine our I am guardedly optimistic that we have turned the corner. The Insurance communications so that members receive only what is of relevance to Industry does lag other business activities such as retail and therefore the them.effects of the upturn tend to filter through at a later stage.
10
Profile of Brian van Flymen CEO of van Flymen & Associates and Vice-President of the FIA
C O M PA N Y P R O F I L E
FIA: What is the most important message that you have for the specialised areas of liabilities, marine, engineering and construction. We
members? do have a fairly substantial personal lines department catering primarily to
our commercial clients.
Look after your clients – always place their interests first.
Naturally my advice to consumers is to use the services of a competent FIA
FIA: What is your take on the RE1 and RE2 level exams and do you think intermediary.
we are losing members as a result of them having to take these exams?
FIA: Are you willing to share a brief CV and glimpse in to the private life
of Brian van Flymen when you are not involved with the business of the I would like to encourage members to embrace these exams willingly. In
the long run it will benefit not only the Industry but empower our members. FIA and Van Flymen & Associates?
Should the number of intermediaries reduce, the amount of business
written will not shrink but on the contrary will result in more business for I was educated at Potchefstroom Boys High where I matriculated in 1968.
those Intermediaries who are qualified. After a short stint at University, I began work for a Trade Finance company.
A few years later in 1975 I began trading for my own account in a very small
Whilst there may be a small loss of participants who are fearful of not brokerage where initially I sold marine, motor, personal insurance and life
passing the exams, I would encourage them to not leave the industry but to assurance. Over the past 34 years the brokerage has grown steadily with
resit the exams. In this regard our road shows are very useful in informing offices in Johannesburg and Pretoria and a staff complement of over 35.
members of requirements.
I have been happily married for over 25 years and am fortunate to have two
FIA: What is Van Flymen & Associates mission statement? healthy sons both of whom are in their early twenties.
Van Flymen's mission statement is to provide appropriate and relevant My leisure time is taken with golf, travel and generally watching sports on
solutions for the risk management requirements of our clients. TV particularly rugby.
FIA: Who is Van Flymen & Associates main target market and what is In conclusion I would state that I am a proud Intermediary and hope that I
will be of benefit to my fellow intermediaries as Vice-President of FIA.the most valuable advice you can offer to the consumer?
Our main target market is the commercial insurance arena together with the
FIA members have access to the following services in the For breakdowns more than 100km from home and the event of a roadside emergency (limited up to R500 per member’s vehicle has been towed by FIA AA roadside incident): assistance, FIA members may request:
•` Flat battery (jump start or replacement of battery for the Overnight accommodation for the driver and four member's account) passengers (covered up to R500) or 24-hour, Group-B car
• Flat tyre (help with change of tyre) rental (covered up to R500). The car rental option is subject • Keys locked in vehicle (unlocking only) to availability and the driver must be in possession of a valid • Fuel assistance (cost of fuel for member's account) driver's license and credit card.• Minor roadside–running repairs
When opting for the car-rental option, FIA AA roadside FIA members also have access to a first tow-in service per assistance will also pay up to R500 for 24-hour, Group-B incident to the nearest approved dealership (if under car rental or a flight ticket to collect the vehicle after repairs.warranty), repair centre or panelbeater in the event of:
For assistance, please call 0861 115 834. In the unlikely • A mechanical / electrical breakdown (covered up to event of Telkom's lines being down, call 083 791 0125.
R500 per incident) Visit www.oneloyalty.co.za/fia for more information.• Accident damage (cost covered to the nearest approved
panelbeater within a 40km radius starting from the point of dispatch)
REGISTER NOW FOR THE ULTIMATE SHOPPING AND LIFESTYLE EXPERIENCE
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C L I E N T R E L AT I O N S H I P S
Paul Sieberhagen Advocate of the High Court of RSA
The notion of FSP’s running the extra mile for their clients has probably service providers may already be busy assisting other stricken motorists.
constituted an integral part of service delivery since the birth of the financial Also, it is common practice for FSP’s to attend the funerals of their clients
services industry in South Africa. and provide additional comfort to the bereaved family members, but there
are more ways in which a little assistance can endear the FSP to clients and
The Manner in which it occurs in practice varies widely, and although it their relatives and friends. When people fly in from other parts of the
mainly centres round business issues and situations, such as negotiating country two issues inevitably arise – (1) they either forgot an item they
special rates in out of the ordinary investment plans, or meeting with clients need, i.e. cufflinks, earrings, etc., or (2) their bags were rifled by the airport/
urgently after business hours, etc., running that extra mile can be a airways staff and stolen items that need to be replaced.
powerful boost to both the business and the personal relationship between
the parties. It is suggested that FSP’s compile a list of (a) the likely items that funeral
attendees and other clients may require in certain situations, as well as the
An ideal example is the situation wherein either the client’s or his /her details of shops where these can be obtained, and (b) offer transport to out
spouse’s vehicle breaks down and roadside assistance is necessary, as of town funeral attendees, should it be required.
well as the presence of another person for the safety and comfort of the
stranded motorist. In such situations people inevitably run through their In fact, the author hereof speculates that most FSP’s already have such
lists of reliable persons to contact, especially as the roadside assistance lists. CONTACT No.: Cell: 073 000 5028
14
The Extra Mile – Little Things that mean a Lot
E D U C AT O R S P E A C E O F M I N D
January 2010: The Department of Basic Education (DoBE) recently additional information for their learners. The teachers who qualify for the
launched the Teacher Laptop Initiative aimed at assisting every teacher to initiative are entitled to a R130 subsidy per month from the Department of
own and use a laptop. The initiative will provide the more than 350 000 Education which will include insurance from Santam.
teachers throughout the country with a monthly allowance which will cover
the purchase costs as well as the costs of connectivity. The main objective The initiative presents Santam with an opportunity to provide access to
is to improve the use of Information and Communications Technology (ICT) insurance in the non-traditional market segments. Whilst the life and long
in teaching and learning. term insurance markets have made significant inroads into this market,
short-term insurance players have encountered additional challenges in
Against this background, South Africa’s leading short-term insurer, penetrating this market. The success of this initiative will ultimately provide
Santam, has offered to provide comprehensive all risk cover - at increased market share and visibility in the public sector market.
competitive monthly premiums - for any loss
and damage to the laptops purchased through Purchases by teachers of laptops will be phased in from February 2010
this initiative. with the primary aim of making laptops available to all teachers in the public
education sector. This will improve the quality of teaching as teachers will
Dr. Nolwandle Mbalo, Head: Network Solutions have access to additional resources that can enhance learning and
at Santam says: “We applaud the DoBE for teaching in the classroom. All laptops will have Internet access and will be
acknowledging the importance of Internet loaded with school administration and national curriculum software.
access for teachers in order to obtain
Teachers to rest insured with Santam
H E A LT H C A R E
by Craig Burton-Durham Acting Registrar & CE of Medical Schemes
16
Regulator advises brokers on Bonitas
Healthcare intermediaries will have heard by now that the acting
Registrar of Medical Schemes Mr Craig Burton-Durham has filed an
application with the South Gauteng High Court on 26 January 2010 to
urgently place medical scheme Bonitas Medical Fund under curatorship.
The scheme has since decided to oppose the application and the matter
is expected to be heard before a judge on 9 March 2010.
Mr Burton-Durham would again like to reiterate what this Office has been
saying to brokers – as well as members of Bonitas, healthcare providers, Curatorship merely means that an independent and suitably qualified
and the media fraternity – since the story broke: “There are no reasons to party is appointed by the courts to take over the affairs of the scheme and
worry about the financial soundness of Bonitas or its ability to pay manage them until a new Board of Trustees is established. The existing
claims.” Board steps aside and the curator takes its place with all the powers that
vest in the Board while the beneficiaries continue to enjoy cover as The Council for Medical Schemes (CMS) would like to emphasise once
normal and the scheme continues to function as a going concern. The again that Bonitas remains one of the biggest, strongest, and healthiest
curator can command further investigations into the affairs of the schemes in the country. Its solvency ratio stands at well above the 25%
scheme.required by the Medical Schemes Act (Act 131 of 1998). Its membership
continues to grow; it currently stands at over 600 000 beneficiaries. The Curators report to the Registrar of
scheme has sufficient reserves to discharge its obligation to cover the Medical Schemes as well as
healthcare needs of all its beneficiaries.the High Cour t which
appointed them. They “Do not panic,” advises Mr Burton-Durham. “And remember that, as
receive guidance from brokers, any advice you give must be based on a proper assessment of
t he O f f i c e o f t he the situation.”
Registrar in addressing
t h e p r o b l e m s Brokers are again asked to act with restraint. And to always remember
experienced by the the principles of best advice when advising both potential and existing
scheme.members of the scheme. The only reasons why the acting Registrar has
applied for curatorship have to do with certain governance problems at The CMS court papers
the scheme. They have nothing to do with its financial soundness. The can be obtained from
scheme is perfectly viable going forward.the court. The case
n u m b e r i s Brokers should also distinguish between curatorship and liquidation.
2010/02947.They are two very different things.
“Do not panic,” advises Mr Burton-Durham.
“And remember that, as brokers, any
advice you give must be based on a
proper assessment of the situation.”
17
D R I V E R E D U C AT I O N
South African Financial Service providers continue to fail to recognise the • Prevalence of
importance of the level of driver education clients have when evaluating the corruption in
risk of new clients. This is set to change within the next few years as the the issuing of
realisation dawns that road fatalities is the biggest threat to our productive driver permits;
workforce is facing. This will prompt Vehicle, Health and Life insurance • There is a lack
companies to place a greater emphasis on the level of driver education of revision of
amongst it client base. current driver
permit assess-
BMW Driver Training is leading the charge of setting new benchmarks in the ment;
advanced driver training sector and working on shifting the mindset of SA • Poor driver mindset and
companies to place a greater emphasis on this form of training. In 2010 attitudes; and
BMW Driver Training aim to implement a Unit Standard for Defensive, • Hijackings.
Collision Avoidance & Skid Control training modules and implementing a
Young Driver Program for newly qualified drivers. Although the programs Globally, driver training has for some time witnessed growing importance
offered are already on par with programs offered in developed countries, and most European and US companies provide recognition to clients with
attaining local accreditation will facilitate a greater level of confidence from this training. Companies that place a high emphasis on employee safety are
government and private sector. also adopting this training as policy and employees are obliged to
undertake this training as part of their induction into the business. BMW
Innovative companies in the financial service industry should start Driver Training currently services several South African and Multi National
recognising the role of driver training in managing their companies’ risk by companies locally.
developing products that rewards individuals with advance driving skills or
encourage clients to take up the training. Getting behind the wheel of a car is Statistical data indicate that 1.2 million people die annually in car crashes
the greatest risk situation a person faces daily. South Africa however has for worldwide. In South Africa, estimates are that there are around 800,000
a long time fallen behind in the implementation of this generic training road accidents each year with 15,000 fatalities. Gauteng alone averages
requirement and will face the consequences as the number of road users around 330 accidents each day. In 2006 estimates suggest that the cost to
increase. The impact of inadequate driver education and level of skill may government as a result of road accidents totalled R 581 billion between
have a detrimental impact on the financial services sector which can be 1996 and 2006. This is an alarming figure. Although the government
negated through proactive education campaigns. authorities are doing their share through improved traffic policing, much
responsibility lies with the private sector to beef-up skills of by incentivising
The factors underpinning the necessity for Financial Service providers to clients through inclusion of advance driver training as part of their offering
reconsider their viewpoint on driver training in the development of products and/or rewarding clients with accredited driver training certification.
and services include:
In South Africa, it is found that 95 % of casualties on our roads are as a
• The upgrading of major arterial roads in the metropolitan areas of major result of poor driver behaviour (DOT National Road Safety Strategy) making
cities have resulted in travelling speeds increasing and accidents driver training an essential component to lower the death rates on our
becoming more serious; roads.
• The improvement of our public transport system will result in easing
traffic congestion but this will also allow people to travel much faster, BMW Driver Training challenges key stakeholders in the Insurance, Health
resulting in bumper bashings becoming more serious due to higher and Life insurance service providers to embrace our aim of making our
speeds; roads safer through improved skill and education levels among drivers.
• Changes in weather conditions due to climate change resulting in
severe weather conditions may result in wetter roads in certain regions
and resultant road deterioration;
BMW setting the benchmark in Advanced Driver Trainingby Abdul Dangor
DRIVER TRAINING TAKES ON A NEW MEANING WHEN ONE MEASURES THE RISK IN DRIVING PROMPTING FINANCIAL SERVICE PROVIDERS TO RETHINK STRATEGIES TO NEGATE RISK.
Jan Hattingh, Senior Manager Client Services,Alexander Forbes Risk Services a Member of the FIA
18
The Highs and Lows of Chemical LiabilityHowever you look at chemicals they are risky business. Volatile chemicals The complexity of chemicals cover is exacerbated by the fact that chemical
present a huge explosion and fire risk while even the more stable chemicals liability usually results in more than one policy being triggered. For example
can incur spillage, pollution and poisoning liability. in a recent case, a client spilt 800 litres of hydrochloric acid on a third
parties’ property - polluting several adjacent properties, corroding fences,
Hence, says Hattingh, Senior Manager Client Services, Alexander Forbes floors, computer and electrical cabling, cars (from several other business)
Risk Services “the golden rules with insuring chemicals are, firstly, to buy and office equipment. This accident triggered a series of third party claims
as much as you can afford and, secondly, to accept as little risk as possible causing millions in damage to a host of other parties - even though 800
- by passing on as much as possible.” litres of hydrochloric acid costs relatively little.
To get this right you need to make sure that the contracts you enter into are And, says Hattingh, “legislation is very clear in taking a ‘polluters beware’
guided by professionals who understand the risks that you are accepting line. In short, full responsibility for the safe handling and transit of
and can ensure that you are covered for the full liability that you have chemicals rests with the supplier.”
assumed. The Act also stipulates that, “a supplier should not provide chemicals to a
client unless the client has met the requirements for the safe collection,
Extra caution with chemicals is, however, required as liability can be transport and housing of the chemicals” says Hattingh.
extreme. Hattingh quotes the 1984 Bhopal gas disaster where over 15,000
Indians died and 500,000 were injured. The problem is not so much with the large suppliers and the big transport
companies that they use. These all have the correct equipment, vehicles
“Neither Union Carbide and Dow Chemicals (who took over Union Carbide) and procedures to move chemicals safely between official storage areas in
nor the Indian government had even remotely enough cover to compensate the major centres. Moreover, they all have professionally advised and
the victims. The scale of the liability saw decades-long legal battles in both placed cover. “Problems usually develop, however, when smaller amounts
India and the U.S. and compromised the investment prospects of American of chemical are purchased by smaller users and moved in, say, a bakkie on
companies in India for over twenty years,” says Hattingh. a dirt road to be stored in an unsecured shed on someone’s farm” says
Hattingh.
The point is there is no formula for calculating
chemical risk. Each case needs to be A supplier would have no control over how these chemicals were being
assessed by professionals able to identify packaged, transported, stored and housed. Yet if something did go wrong,
the full extent of possible liability. For according to the Act, the supplier would be held liable if the farmer caused
example, “if arsenic got into domestic injury to his workers or the environment.
pool chlorine and the producers were
faced with liability arising from 100 This is why when you buy something as simple as chlorine for your pool the
000 poisoned swimming pools - packaging comes with strict and detailed instructions on how to store and
what would this cost?” handle it. If these instructions are disregarded by the purchaser and
damage is caused the supplier is able to distance itself from liability.
Compensation costs aside,
a team of expensive Finally, when people think chemical damage they usually think hazardous
assessors, exper ts, chemicals. But this is not always the case. For example, “in a recent
engineers, officials and incident a truck dropped its load of flour on Van Reenen’s pass during a rain
i n t e res ted pa r t i es storm. While this did nothing to the environment as flour is entirely
would need to work out biodegradable, when wet if becomes like glue or cement” explains Hatting.
the matrix of risks and The cost of clearing the pass of this otherwise harmless substance was
covers involved. substantial – and the supplier was entirely liable.
“Do not panic,” advises Mr Burton-Durham.
“And remember that, as brokers, any
advice you give must be based on a
proper assessment of the situation.”
C H E M I C A L L I A B I L I T Y
by Gari Dombo, Managing Director, Alexander Forbes Insurance a Member of the FIA
20
Loyalty and Honesty to one’s Insurer does PayRecent innovations in selling insurance as a price-driven commodity offer “Very clearly, the longer a client has been honest with the insurer, the more
consumers the ease of comparing the price of various insurance products trust is built up. So, again, loyalty and honesty do pay” says Dombo.
online. However well-intentioned these practices have resulted in a number
of claims that border on irresponsibility. Thirdly, supported motor premiums are often lower than unsupported
motor premiums. In other words, if you have your vehicle, buildings,
One such claim is that loyalty to a particular short-term insurer counts for contents or any other insurance covered by the same provider, substantial
nothing. This implies that the individual has nothing to lose if he or she premium discounts can be achieved.
switches to a different insurer.
“This is yet another instance where loyalty, this time to a particular
This could not be further from the truth. insurance supplier, does indeed pay” adds Dombo.
“The relationship that one has with one’s insurer is definitely taken into The ease with which insurance buyers can now access the internet to
consideration when it comes to paying claims. In fact, over the years, obtain instant cost-based comparisons has had two major effects. Firstly,
insurers build up detailed risk profiles of clients, particularly regarding the consumers are able to compare costs like never before and, secondly, a
veracity of their claims” says Gari Dombo, Managing Director, Alexander whole range of new providers and intermediaries have been attracted to the
Forbes Insurance. personal insurance sector.
For example, in a recent case where a policyholder’s car keys were stolen, While these developments are potentially beneficial since they empower
the insurer was able to arrange the immediate replacement of the keys and the consumer with the ability to compare and choose, they also threaten the
re-setting of the vehicles’ security system without delay or inconvenience basic nature of the insurance contract which is, ultimately, one based on
to the owner. Central to this settlement was the trust established with the trust developed over time.
client over 29 years.
More specifically, pure price comparisons, without a detailed
Dombo goes on to cite three instances illustrating the importance of a good understanding of the variable contents of often very different covers, can
and long-standing insurer-insured relationship when it comes to pricing also be misleading since the “conditions, exclusions, limits and warrantees
insurance products. of each contract are material considerations in any comparison of value”
explains Dombo.
Firstly, client loss ratios are measured over time. So, the longer one is with
an insurer and the better one’s claims record, the lower one’s premium is In short, a one-on-one relationship with a provider helps consumers gain a
rated. “So, yes, when it comes to premium discounts, proven honesty and more comprehensive understanding of insurance and its underlying
loyalty to a single provider does pay” explains Dombo. contractual obligations. After all, price should only be one of the many
factors taken into consideration when purchasing cover that actually works
Secondly, ex gratia payments (when an insurer decides to pay out even if, in the event of accident, loss or injury.
strictly, a policy may not have covered a particular incident) are
commercial decisions made on a case-by-case basis. Though very rarely As such “the notion that developing a relationship based on loyalty and trust
awarded, the big consideration in deciding whether to allow an ex gratia is not central to the concept of insurance is a false one which buyers of
payment is trust, established by consistent honesty over time. insurance ignore at their peril” concludes Dombo.
T R U S T
21
C R I M E
There is no doubt that there is a direct correlation between the manner in
which technology has changed our world; and the manner in which the
acts of crime are perpetrated by the many modern-day thugs who use
anything from high tech surveillance equipment, recording devices and
cell phones to execute their crime. Sure, we will continue to have the
common-day petty criminals who in most cases, have to steal a cell
phone, or stealthfully lift a wallet in order to survive. These criminals are
not our source for major concern, whilst they are frankly speaking ‘light
weight opportunists’ as compared to those who are linked with
international syndicates. Most particularly, those criminals who
specialise in high-net worth kidnapping of key executives for ransom
have become a nightmare for employers, especially for those employees
who travel to kidnapping hotspot countries.
Make no mistake, the perpetrators involved in this type of kidnapping
know what they are doing, and they also know the high stakes involved.
The planning of a kidnap for ransom will in all cases involve many hours -
- even weeks or months -- to meticulously survey and calculate with
military precision, every detail of the target kidnap victim. Of course the
more valuable the ‘prize’, the greater the reward. In this vein, corporate
executives have become ‘fair game’ to professional kidnappers, who
understand not only the intimate detail of their target, but also their worth
to organisations either materially, financially or their strategic
importance to the success of the organisation by which they are And as the operations of sophisticated internationally based kidnap
employed. syndicates expand into more vulnerable countries such as South Africa
(now considered a medium to high risk kidnapping country), so the risks
Although executive or high-net worth kidnapping is known to be a attached to a high-net worth individuals being kidnapped increases. The
common occurrence in countries such as Iraq, Mexico, Pakistan, incident itself is usually very traumatic and the shock in itself can have
Venezuela, Brazil and the Philippines, countries such as South Africa, the devastating impacts on the health of the victim, as well as the victim’s
DRC and Tanzania are quickly becoming the new danger zones. There family and business associates. Bear in mind that there can also be dire
are many reasons for this phenomenon, however the most common implications on the business and its morale, not least the severe
reasons which increase the risk of a corporate executive being interruptions in the operations and its financial impacts. Clearly when a
kidnapped may be linked to countries which have a history of political kidnap incident occurs, particularly if it is drawn out for a long period of
and social instability, the presence of extremist groups, high crime rates, time, huge strain is placed on the business, giving the hostage takers
large disparities between the affluent and the poor, topped by greater power to extort higher ransoms and more demands.
governments which are notorious for either inefficient or corrupt
practices. Clearly, an executive sporting a Breitling wrist watch and While there are certain laws that protect the basic rights of an individual,
driving a Bentley for example is a statement made all on its own -- be these found within various international treaties, international
particularly in countries known to be kidnapping hotspots -- and this type conventions or even those criminal laws found within our own country
of attention will most certainly increase the chances of an attack. (e.g. Prevention of Organised Crime); kidnappers simply don’t care! The
price tags attached to high-net worth executives runs into millions and
While accurate figures for kidnapping are sketchy, according to experts, the perpetrators have become quite brazen about their business.
kidnapping for ransom is on the rise in an increasingly globalised market.
Kidnapped: Protecting Your Key Assetsby CGF Research Institute (Pty) Ltd
Most particularly, those criminals
who specialise in high-net worth
kidnapping of key executives for
ransom have become a
nightmare for employers,
especially for those employees
who travel to kidnapping
hotspot countries.
go to
w w w . i t r a n s a c t . c o . z a for more information
South Africa’s first Independent
Exchange Traded Fund Investment Platform
for Financial Advisors
by Ulrich Hoffmann of Sentinel International Trust Company
22
The Influence of the Spouse in the Estate PlanIn the translation of Max Kaser's book “Romisches Privatrecht”, Rolf reflected in the estate duty addendum Dannenbring translates on the topic of legal capacity based on sex : of the second dying.“With the Romans, as with the Greeks, Teutons and other peoples of the 2) The trustees can be given the past, women did not enjoy equal rights. Just as women were excluded from discretion to allocate income to the the activities of state, so they had no paternal power due to the patriarchal spouse. In such a trust there is no structure of the Roman family; only man could be paterfamilias” vested right to income, so there will
also be no add-back in the estate of Those were the days ……???……….not really…since then the role of the second dying.woman in society has improved and become more important in everyday life to such an extent that I read an article in a local paper the other day that in the So, the saving, besides the pegging of the growth of the trust assets in both foreseeable future most of the economy would be women-driven. cases, is an example 1 in the estate of the first dying because of the section
4(q) deduction, but in example 2 in the estate of the second dying because An estate plan should have two legs…a plan during the lifetime and a plan there is no ceasing income right that is added into her dutiable estate.following the death of the planner and here Meyerowitz has given the following definition of an estate plan: “The arrangement, management and Both of these are subject to the provisos set out in the section, but these will securement and disposition of a person's estate so that he, his family and not be discussed now.other beneficiaries may enjoy and continue to enjoy the maximum from his estate and his assets during his lifetime and after his death, no matter when Section 4(m):the death occurs” Section 4(m) allows a deduction for a usufructuary or like interest held by the
deceased immediately before death where the property formed part of the So with this in mind, let us look at certain aspects of estate planning where dutiable estate of the predeceased spouse, and no deduction in respect of the woman and moreover, the spouse plays an important role……but also bear surviving spouse's interest was allowable under section 4(q) in that estate. in mind that various acts affecting an estate plan have different definitions of Effectively thus it will only apply to usufructs or like interests created before 1 the word “spouse” November 1984 when section 4(q) became operative.
Whilst it should only be one of the objectives of an estate plan, the saving of The Roll-Overtaxes is always an important issue when it comes to planning and there are a There are two types of roll-overs where the spouse plays a roll. The first is couple of sections of the Estate Duty Act 45/1955 that play a role here insofar as Capital Gains Tax is concerned and the second insofar as the
primary abatement under section 4A of the Estate Duty Act is concerned.Section 4 (e): 1) The Capital Gains Tax Roll-Over: Here the effective liability for capital Section 4 (e) currently allows as deduction for duty purposes property gains tax can be dealt with by the executor in two ways. If he transfers outside South Africa acquired by the deceased before he became ordinarily the assets to a spouse in terms of the provisions of the will, then capital resident in South Africa for the first time or, if so resident, donated to him by a gains tax is postponed until the death of the survivor, or her prior donor non-resident at the time of donation, or by inheritance from a person disposal of those assets acquisition. Should those same assets be non-resident in South Africa at his death, or out of the profits or proceeds of sold during the administration of the estate, the gain arises within the the aforementioned property. So, what planners need to bear in mind here is estate itself and becomes the burden of all the residuary heirs that although the first dying (usually the husband…shame…..wonder why (surviving spouse included)…does he want to?), if resident in S.A. at the time of his death, may avail of 2) The second form of roll-over is that of the unutilised portion of the the section 4(e) deduction, his spouse will not be able to claim the same primary abatement set out in section 4A of the Estate Duty Act deduction in her estate, as she would have inherited from a resident. (currently R3.5 million). Effectively it means that whatever is not
utilised by way of abatement to reduce the dutiable estate of the first Section 4 (q): dying's estate may be carried over to the estate of the second – dying Probably the most used deduction is section 4(q), which allows a deduction …effectively in an estate of R7 million no duty need be paid by utilising for so much of the value of any property included in the estate which has not section 4(q) in the first dying's estate and the roll-over of section 4A in been allowed as a deduction under the foregoing provisions of this section, the second dying's estate (obviously capital growth may result in some as accrues to the surviving spouse. duty being due in the second dying's estate unless she makes use of
some other planning method)Besides the obvious direct bequest or inheritance to the spouse to allow the deduction, most planners make use of a trust and besides the other benefits Then, without going into it, the ex-spouse also plays a role in planning in that that a trust holds, it contributes a major share of estate duty savings. The two provision should be made for any claim to be received against the estate by most common forms are when the spouse is linked as an income beneficiary her for maintenance ;….oh and don't think you can disinherit the old to the trust. This operates again in two ways dear….The Maintenance of Surviving Spouses Act has you covered there!
1) The spouse can be given a vested right to the income in a trust created …but that's another story.in the estate of the first dying. Effectively this allows for the value of the income right to be calculated according to a formula and claimed as a In short Mr. Male Chauvinist…..if you think your wife contributes nothing deduction in terms of section 4(q) in the estate of the first dying The …..think again! …she plays a major role in saving you, or your heirs money drawback here is that in the estate of the second dying, there will be a through using her to set up an effective estate plan!vested right to income that passes to the bare dominium holder (owner) and the value of the right passing would need to be calculated and
E S TAT E P L A N N I N G
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w w w . i t r a n s a c t . c o . z a for more information
South Africa’s �rst IndependentExchange Traded Fund Investment Platform
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F I N A N C I A L P L A N N I N G
by Chris Busschau Chair FIA Financial Planning Committee
24
The Rhythm of LifeWilliam Shakespeare identified a series of stages in life. His great insight medical cover – these are the burning
into humanity gave him a clear understanding of the differences in issues! Of course, this is also the time
behaviour, attitude, response, needs and even in emotions during those to prepare a will for the first time.
different phases in the journey that we all undertake.
3. Expansion: As career expands
This wisdom is no less true for financial planning. and income increases, old dreams
from the teenage years begin to come
The truly professional, insightful and sensitive financial planning back into focus! A holiday house, a
salesperson will develop a sixth sense that will facilitate an interaction with boat, overseas travel, and lifestyle
a potential client that takes this continuum into consideration. I am choices begin to dominate. The risk issues from the previous stage are still
convinced that many “lost” sales could have been closed if the sales there, but are becoming muted. However, this is also a stage of increased
person only realised that the client has reached a particular point in the aspirational spending, some huge life-style related debts often evolve, and
journey of life, and the awareness that the client may very well be at a totally for the first time issues such as estate duty begin to emerge from the
different stage from the point that the sales person has reached. environment. Life cover, but at a totally different level, becomes an issue.
But, even more so, this stage is the prelude to the next stage, Accumulating.
There are a number of ways of classifying the stages of life, but I have found People begin to become very aware of tax efficiency as a basis for
the following spectrum a convenient way to visualise the different phases remuneration packages, and begin to think about salting some of their
(the ages are, of course, very approximate and will vary from person to income away. Retirement annuities, Deferred Compensation, Unit Trusts
person): and Endowments become more interesting. Also this is the time when
those with an entrepreneurial bent begin to start businesses, go into
partnerships, begin employing other people. Buy and sell agreements, key
person cover, retirement funds, medical schemes, debt redemption plans,
sinking funds, contingent liability management. These are critical issues for
Let’s look at each of these blocks of time! the business owner at this time.
1. Start up: This is when we first begin to earn an income. This could be 4. Accumulating: The children are grown, school fees are a memory, and
straight out of school, or somewhat later after tertiary education, gap years, varsity fees are a lot cheaper than private schools! So this is when the
and the like. At this stage, it is very difficult for most people to think beyond opportunity arrives to begin to invest in earnest. The retirement annuities,
the immediate. The famous saying carpe diem (seize the day!) could have unit trusts and endowments, the tax effective structures, the maturity of
been invented by this grouping! Concepts like retirement planning, risk being a bit older – all these come together and provide the impetus for a
management (i.e. life assurance) and asset creation are easily swept away serious investment plan.
by the thought of a new car, an evening out, a holiday, a new i-pod, or a sexy
new wardrobe! So, financial services sales people tend to stay away from 5. Drawing down: At retirement, the earning capability disappears and
these folk. How wrong could they be! If there is one thing that can cause a the typical person has to begin to rely on the assets accumulated in earlier
Start-up person to go cold, it is the thought of disablement. Accident prone, years. Careful, prudent and selective investment structures are needed to
they know that a serious physical disability could spell the end of their maximise the income available from those assets and to solidify the assets
dreams. So, don’t try to sell the other, long term, sensible things that you in a way that can hedge against inflation. Careful budgeting, re-investment
would buy – meet this person on their own turf and provide disability cover! of any surplus income, a regular review of the person’s will – these are the
focus.
2. Expenditure and debt: Sometime around these ages, marriage, family,
house purchase (and mortgage bonds!), school fees, grocery and medical 6. Distribution: Of course, the final stage of life is – death. And this is as
bills, transport costs and family vacations become the dominating important as any of the others. Sensitive advice, a sure and steady mind in
thoughts. The prevailing fear at this stage in life is not having enough to pay an emotional time, a calm, listening ear – this is the role of the sales person.
all the bills. This is when the risk management mind-set needs to be
emphasised. Don’t talk about long term investments to someone who is Is it the end of the road? Of course not – a surviving spouse will continue to
worried about meeting the next mortgage bond payment – talk about a need the skills of the professional, and the next generation will be moving
family who are dependent on the income of the breadwinner (or, more through its own phases of life. The professional financial sales person’s job
commonly, both breadwinners), and about the debt that has to be settled if is never done – it simply adapts to the rhythm of the lives of the clients!
the bond-payer is no longer earning. Life cover, disability cover, and
Expenditure and debt25 to 35
Start-up18 to 25
Expansion35 to 50
Accumulating50 to 65
Drawing-down65 to ?
DistributingAfter death
S E L F A S S E S S M E N T
by David Price, Managing Director, Liberty Corporate
26
Outlook for 2010 It’s no secret that 2009 was a particularly difficult year for financial that we recognise the vital role that Advisers play in our industry and
institutions. Some fared better than others, but the industry as a whole has understand their needs and challenges, without them, there is simply no
had to weather an extended period of very tough trading conditions. business.
With the proliferation of communication and information sharing platforms, One of main needs highlighted by Advisers is to have increased “face time”
consumers – and therefore employees – have a much better understanding with decision makers within the business. Employee Benefits is typically
of the insurance industry as a whole. They have also begun to take a much more complex than Life business and another need that is highlighted time
greater interest in how their money is being managed. Accountability, and again is for less experienced Advisers to have access to detailed
transparency, consumer empowerment and customer centricity have all corporate training.
become buzz words in an industry that has recognised the subtle shift in
power resulting from far better informed customers who have more choice
and power than ever before.
In the past, insurance companies across the board have probably been
Compounding this challenge, and driven by the sheer volume of media guilty of focusing more on looking for new business than on retaining
coverage on all things financial, the industry has also had the very difficult existing Clients. Losing Clients is a massive risk to the future sustainability
task of trying to earn back the public’s trust. of any business and in our space we also understand that this has a
significant impact on the respective Advisers as well.
Tough times can however present opportunities because they force you to
review your business. It is a chance to focus on areas that will make it To counter this, time and resources need to go in to investigating the
easier for your clients to do business with you. Some areas to look at are reasons behind any fund being terminated to ensure that the business can
outlined below. recognise any fund that is at risk
significantly more quickly than in the
past. Any lessons learnt must be
shared within the business to
It’s a common saying that “the Devil is in the detail”. However in our make su re re ten t ion i s
industry the real Devil is very often just the sheer volume of detail we layer continually improved.
into our business. To address this, one of the first things to do is look at your
processes. I should point out that as an industry we do carry a heavy
administration burden and it is important to get the balance right between
necessary controls and processes which protect our clients – and stripping For most companies, 2009
our unnecessary complexity. necessitated postponing some
expenditure and cutting some
Take this chance to identify processes that have become overly costs that perhaps in other
cumbersome and reengineer these to improve efficiencies. An example of years would not have been
this is that we have started using a single consolidated “Fact Finding” considered. One runs into a
document which replaces 6 of our old new business forms and which has danger of becoming “Penny
reduced the number of pages that needed to be completed from 25 to 7. wise, pound foolish” when this
This dramatically improves both the Adviser’s and the Client’s experience. happens. A long term view is
essential and care must be
taken no to cut cost for short
term profitability - at the
The industry is an intermediated business and we are privileged to have expense of the business’
such a dedicated country wide network of Adviser partners. It is imperative long term potential.
Retention of existing business
Look for the Devil in the detail
Cost management.
Adviser partnerships
27
U N D E RW R I T I N G
In recent years along with the advent of direct insurance plays in the South Viewing the population of risks as a whole without differentiation, some
African market, has come the introduction of scientific underwriting at the condone cross-subsidisation. Cross-subsidisation in this context means
point of sale and at renewal. Whilst direct operators that relatively good risks pay the same premium as
have tended to systematise their underwriting via relatively poor risks.
computerised quoting engines, brokers have
embraced the notion that there is a fair amount of art Cross-subsidisation is a dangerous strategy as it
mixed in with the science of underwriting and this opens the door to price competition. If one’s book is
should not be left to a computer system alone. heavily cross-subsidised, it exposes the book to
competition from a carrier who does differentiate.
There are arguments both for and against the The result will be that risks that are subsidized
scientific approach, but it cannot be denied that, (typically the poorer risks) will tend to “stick around”,
when the volumes involved are large and the time and the risks that are subsidizing others (typically the
available to underwrite is limited, a scientific better risks) will come under pressure to move due to
approach as a basis for underwriting run-of-the-mill lower premiums being offered by differentiating
risks is necessary. competitors.
There are a variety of actuarial approaches to the The net result of this activity on the book is that there
method of scientific underwriting, the most will be fewer better risks to subsidise the poorer risks
desirable of which is the approach that determines a and the effect will be felt in the loss ratios. Pressure
required premium based upon the peril to which then comes from the carrier either to lift the rate for
each risk is exposed. This entails establishing the book or, if the situation is irredeemable, to cancel.
probabilities for each element of the risk and
converting their product to a rate to be charged for The objective of the broker, as the agent of the
each peril. insured, is to secure the best deal for his client. One
The premiums for each peril are then aggregated might say that brokers should therefore seek out
and a loading for commission, insurer overhead carriers who do not differentiate in their pricing.
and margin are then added yielding the premium for However, this strategy is bound to be short-lived for
the risk. All of these calculations are typically the reasons mentioned above and can only lead to an
embodied in a computerised “rating engine”. undesirable situation.
As the risk profile for each individual risk is different, Brokers pride themselves on the relationship they
so will the probability of the various peril exposures hold with their clients, and they need to leverage upon
differ for each individual risk, hence differentiated this relationship. Brokers should use their unique
premiums between risks. position not only to promote differentiation between
their clients’ risk profiles, but they should strive to use
This brings one to the question: “why would one their unique knowledge of their clients to seek out
want to differentiate between insureds?” further rating factors not known or asked for by the
carrier when underwriting their clients. The effect of
Why, if, as a group, the premium collected from all this unique knowledge can typically be made
the insurer’s risks is sufficient to pay the claims, manifest by the use of a discretionary loading or
pay commission and expenses, and leave sufficient discount wielded by the broker. This approach can be
profit remaining for the carrier, would one want to differentiate the premium used to great benefit when thwarting the onslaught by direct carriers who
between risks? do not have the intimate knowledge of their clients that brokers do.
Scientific Underwriting and the Broker by Dimitri Balios
B R O K E R S C O M E B A C K
by Johan Nagel, chief executive officer of First National Bank Insurance Brokers
(FNBIB),and member of the FIA
30
Hard-pressed consumers can look for help from at least one champion in services will secure competitive advantage. The proviso is that bigger has
2010 – the insurance broker committed to the classic, service-led to mean better service as well as better pricing.
intermediary model.
“Service-led brokers able to play in the affinity-solution space are
The forecast comes from Johan Nagel, chief executive officer of First positioned for growth.”
National Bank Insurance Brokers (FNBIB), short-term insurance arm of the
First National Bank Group. He predicts that the underwriting of blocks of business will increasingly be
replaced by individual rating and pricing; a welcome trend for cash-
Nagel sees a comeback by brokers that use personal service and strapped consumers.
customised risk profiling as key differentiators in an increasingly
challenging market. Consumers with good claims records can also expect to benefit as brokers
and insurance once again ‘get personal’.
He says “a return to the classic broker model is overdue” and adds:
“Personal service through a single point of contact will replace impersonal Nagel adds: “Only well-resourced brokers with superior systems will be
processes. able to meet these demands. This helps to explain our urgent
implementation of state-of-the-art systems in the first quarter of the year.”
“Credible and personal relationships will underpin growth at broker
businesses with the confidence, talent and systems needed to drive a The emphasis on service will encourage brokers to “stop playing the direct
return to broker basics.” insurers at their own game”.
Nagel believes the year will be characterised by Nagel notes: “Direct insurers play a single-minded pricing game. Brokers
smart, price-efficient solutions, though price have to up their own game by using risk management and customised risk
will not be the sole determinant of success profiling to deliver price efficiency plus personalised service. Price-
as “personal service will be the key sensitive consumers with a superior claims record will expect to be
differentiator”. rewarded.
Brokers able to unlock synergies and “Fundamental affordability challenges can only be met by business models
economies of scale are particularly well that deliver a compelling combination of competitive pricing and superior,
positioned. highly personal service – a pro-consumer scenario if ever there was one.”
Nagel explains: “Consumers
u n d e r s t a n d i s s u e s l i k e
economies of scale and the
benefits that accrue through
synergies across a broader
por t fo l io o f f inanc ia l
products.
“Brokers able to offer
affinity-based solutions
across a bigger basket of
financial products and
Re-emergence of Service-led Brokers Good news for Consumers
“Credible and personal relationships
will underpin growth at broker
businesses with the confidence,
talent and systems needed to
drive a return to broker basics.”
P R O F E S S I O N A L S TA N D A R D S
By Michael E. Stoker FIISA; FCII Insurance Gateway® a division of Stoker Risk and ICT (Pty) Ltd. www.insurancegateway.co.za
32
The Aldermanbury Declaration: Towards Professionalism UK Insurance leaders call for common framework for professional standards
33
R I S K M A N A G E M E N T
Global epidemics like bird flu and now more recently swine flu, along with an For example, “if an expensive Italian soccer star falls ill or dies in your bush
increase in the incidence and spread of a host of other conditions, has forced camp would your standard liability cover meet the cost of a European claim?”
insurers to take a more inclusive view of risk and liability – especially as South explains Fern.
Africa approaches 2010.
Similarly, “if an employee falls ill while travelling abroad would their South
This year’s World Cup will see South Africa receiving visitors from tropical African medical aid cover them for a three week sojourn in an intensive care
countries. Meningitis, Congo fever, Rift Valley fever, yellow fever and hepatitis unit in a London hospital?”
are endemic to many tropical countries and large portions of their
populations’ are carriers of these diseases. To meet the liability challenges facing South African government
departments, international businesses and leisure establishments, Fern
As such “businesses, governments and especially the leisure industry need recommends two types of cover to deal with epidemic risk and infection:
risk management plans that address the consequences of pandemics or even
normal disease spread” says Riette Fern, Executive Leader: Strategic • A general business interruption cover providing compensation in the event
Accounts Alexander Forbes Risk Services. of mass cancelation due to events that have happened elsewhere,
If your company has people placed around the world, or regularly receives and,
foreign travellers, you face a real risk of suffering loss or litigation as a result
of disease outbreaks – regardless of whether you are directly involved. • A cover for individuals in the employ of global businesses, government
departments or leisure establishments, covering costs that may arise from
Most existing cover, however, only insures against incidents happening on or individual employees travelling abroad or
near their immediate premises. foreign visitors to local establishments.
For example, if “500 Americans cancel a conference in your hotel in This combination will ensure that
Johannesburg because of an epidemic in New York you will most likely not be “businesses and their personnel
covered, especially if they cancel because of fear of flue rather than being are sufficiently covered to deal
prevented from travelling by law” explains Fern. with the consequences of global
epidemics or even localised
As such, global epidemics, or even standard cases of infection, makes infections especially as
cancellation the biggest risk for the South African leisure industry in 2010. these impact mass
cancellation or
And “if you end up with an empty hotel during the world’s biggest sports o t h e r c l a i m s
event you have no recourse against FIFA” adds Fern. associated with
2010” concludes
So if illness breaks out at a few hotels in Johannesburg causing people to Fern.
cancel their trip “even though nothing happened at your hotel, SASRIA will not
compensate you for any cancellations” explains Fern. Also, most leisure
establishments in South Africa are insufficiently covered for the cost of
disease-related claims from foreign visitors or the costs associated with
caring for sick staff abroad.
by Riette Fern, Executive Leader: Strategic Accounts Alexander Forbes Risk Services a Member of the FIA
Epidemics and 2010 Cancellations
It is revealing that, in his highly influential book, The Loyalty Effect, Frederick wider public interest, and give a tangible commercial return”.Reichheld selects insurance brokerage as one of his central case studies to demonstrate the impact of customer loyalty and retention on a firm's Back home, here in South Africa, intermediaries who are faced with the FAIS profitability. In the first chapter, he analyses the relationship between these Regulatory Exams, can take heart that their colleagues overseas are embarking variables over a five year period among six of the leading brokerage firms in the on a similar exercise, on a voluntary basis. It is also notable that the Declaration United States, concluding that “the firm with the best retention rate has the was crafted across disciplines in the general insurance sector and the move highest relative profits…Improving retention by five percentage points doubles locally by industry to engage across disciplines, as evidenced by the combined the profit margin.” He proceeds to quantify the economics of customer loyalty, FIA/IISA/SAIA conference this year, can only be welcomed.once marketing costs, cross-selling, referrals and lifetime cost savings are taken into account. You can find out more about the Aldermanbury Declaration from the CII's
website at http://www.cii.co.uk/If our focus groups are representative of the wider population, it is clear that professionals will attract corporates and retail customers, especially those with For more on this year's Insurance Conference visit a moderate to high disposable income, and will serve those customers for http://www.theinsuranceconference.co.za/many years. High standards among broking firms are therefore both in the
A P P O I N T M E N T S
34
AON
CIB
Gem & Jewel
New CEO for Institute of Internal Auditors South Africa
Medscheme
New Board Appointments at Astute
Cannon Asset Managers
Mutual & Federal Appoints New Chief Risk Officer
Sanlam
Blue Ink Investments
Old Mutual
STANLIB
the company has confirmed Stewart Rider Sandra Hutchison (1) has been appointed to (10) as its Chief Investment Officer.the Executive Committee of Aon South Africa as Human Resources Director of Sub Saharan Africa Lisa Teixeira (11) has been appointed general
manager of Personal Lines Underwriting at CIB Insurance Solutions. Teixeira has been in the
The South African insurance landscape is insurance industry for the past 19 years, 15 of constantly changing and Gem & Jewel is no which have been in management positions. exception. Underwriting leaders for retail jewellery businesses, they recently announced Natasha Maroun (2) has stepped into the role of Managing Director, with Gary Cross (3)
Dr Claudelle von Eck (12) takes over the reins coming on board as the new Technical Director.
from outgoing CEO Veronica du Preez at the Institute of Internal Auditors South Africa (IIA SA). Von Eck is well placed to assume this
Modjadji Tati (4) has been appointed: Bonitas position, having worked with the organisation
General Manager at Medscheme. The following for over three years in the capacity of Chief
new appointments have been made:Operating Officer (COO).
Sipho Fokazi (5) has been appointed: Bonitas Fund Manager at Medscheme.Medscheme would like to announce the Astute, the financial services exchange used by appointment of Dr. Lungi Nyathi (6) as Key advisers to integrate data from product Accounts Manager: GEMS Clinical at providers when undertaking financial planning Medscheme. for clients, has announced the appointment of
Riaan Dreyer (13) as non-executive director and Gustav Jenkins (14) as alternative non-
Jason Spilkin (7) joins Cannon Asset executive director. Managers from Stark Investments in London where he was an equity analyst on their IemasEuropean Long Short team. Prior to that, Jason Iemas (Co-operative) Limited has appointed a worked at Kerzner International in Fort new Chief Executive Officer as Dries van Lauderdale, but he has chosen to return to Rooyen, after 17 years with the Co-operative, South Africa. will be leaving Iemas at the end of March 2010
due to his retirement. Johan Nel (15) will assume the role of Chief Executive Officer of Iemas effective 1 April
Mutual & Federal, one of South Africa's leading 2010.
short-term insurers appointed Paul Hancock (8), B.Com. B.Compt (Hons.), C.A. (S.A.),C.I.A., to the position of general
Sanlam Life Insurance Limited has appointed manager: Risk - with effect from 1 January
Sagie Nadasen (16) as its chief legal advisor. 2010. He formerly held the position of group
Nadasen joined Sanlam in 2001 as a legal manager: Risk Finance.
advisor, and he took up his current position in January 2010. He is responsible for tending to legal and compliance related issues affecting
Aloysius Jacobs (9) has been appointed as a the business of Sanlam Personal Finance
non-executive director on the Board of (SPF).
Directors of Blue Ink Investments - the Sanlam-owned leading manager of fund of hedge funds in South Africa. Jacobs, who has also been
Craig Aitchison (17) has been appointed as nominated to par ticipate in Blue Ink's
Managing Director of Old Mutual Actuaries and Investment Committee, is currently the
Consultants (OMAC), effective from February Financial Manager of Ubuntu-Botho Investment
2010. Aitchison was previously responsible for Holdings (UBIH).
the operational management and client service side of the OMAC business.
Following on from Liberty Holdings' recent appointment of Thabo Dloti as CEO of STANLIB,
Recent Appointments1 2 3
4 5 6
7 8 9
10 11 12
13 14 15
16 17
35
T R A I N I N G
With all the hype, disappointment and anger greeting recent matric results After the Internship participants often go directly on to Alexander Forbes’
focus has fallen on our failed schools system. Central to the discussion is the Stars Programme, specific to Risk Services, where individuals who have
quality of classroom teaching. As such a discussion with Simangele shone in the Learnership and Internship phases are groomed for specific
Tshabalala, HR Head at Alexander Forbes Risk and Insurance Services roles or identified for succession planning.
provides a refreshing alternative to formal, classroom-based, instruction.
Alternately, following an Internship, the two year Graduate Programme
Tshabalala argues that many of the rare skills and highly technical knowledge provides more shadowing of seasoned professionals or business leaders,
required in the insurance industry cannot be taught in a formal classroom with participants eventually advancing to managing their own big clients.
situation.
“These skills, and the lifetime of accumulated knowledge and networks that Insurance is integral to every industry and sector of the economy. Providing
makes their delivery possible, need to be learned on the job through close hundreds of businesses, government departments, municipalities and other
association with people who have been delivering effectively for years” says organisations with relevant advice and support requires an intimate
Tshabalala. knowledge of every industry and sector in our economy. That said, certain
disciplines, like Marine and Aviation, for example, are so highly specialist
To this end Tshabalala has been instrumental in developing a combination of that, even after a Graduate programme, they require a further five years or
Learnerships and Internships leading to Graduate and even Stars more working closely with in-house specialists.
programmes that allows Alexander Forbes to pass on and grow the vast
repository of constantly evolving knowledge in its business. These skills can’t be acquired theoretically in a classroom and, in fact, only
exist in a few individuals in the country. As such “our continuous learning
Learners are indentified and selected from schools across the country philosophy allows Alexander Forbes to develop, retain and pass on rare skills
through an open public invitation process conducted through the media. The that can’t be acquired elsewhere” adds Tshabalala.
34 learners in the current Learnership Programme will experience six months
of classroom teaching combined with six months of on-the-job mentorship, Alexander Forbes’ unique combination of Learnerships, Internships and
leading to a NQ4 level qualification. Graduate and Star programmes offer a flexible and continuous learning
stream providing par ticipants with individual grooming, network
“With all participants from previously disadvantaged backgrounds, and more development and experiential learning - all before they engage with clients.
than half women, our Learnerships also provide an opportunity to make the
industry more representative while meeting our own transformation targets” “Jurie Erwee, Chief Executive Officer for Alexander Forbes
adds Tshabalala. Risk and Insurance Services, participated in a
Learnership programme more than twenty years ago -
At the end of the one year Learnership programme approximately 20 of the demonstrating the history and proven track record of
learners will proceed to Internships at Alexander Forbes, 10 will go to a process that has the capacity to take learners from
university on a bursary and support scheme while four will leave Alexander the classroom to the boardroom” says Tshabalala.
Forbes.
The hands-on, mentored process ensures that
Tshabalala ads that “even those that leave find the Learnership year hugely participants are not set up for failure. Instead, they
empowering since Alexander Forbes’ reputation as the ‘university of gain practical knowledge along with genuine
insurance’ makes all our learners highly sought after in the market. Most are capacity - enabling participants, within a few
usually snapped up by our competitors, or even other industries. In this way shor t years, to deal credibly and
our training programme makes a broader contribution to the industry and competently with even the most
economy by spreading skills and creating opportunities beyond the sophisticated industries and
business." businesses in South Africa.
The 12 month Internship Programme which follows the Learnership “This on-the-job and closely
Programme, involves about 40 individuals, roughly 20 from the Learnership mentored skills development
Programme and 20 from university in full time on-the-job technical training process allows Alexander Forbes to
under the close supervision of a highly experienced and well-connected maintain and improve the quality
mentor. and professionalism of our brand
as an industry leader while
“Since so much of insurance is about relationships, the industry is transferring rare skil ls and
impossible to penetrate unless you are introduced to knowledge networks by networks” concludes Tshabalala.
experienced, trusted and well connected practitioners” adds Tshabalala.
On the Job training Provides Skills, Networks and Experienceby Simangele Tshabalala, HR Head at Alexander Forbes Risk and Insurance Services a member of the FIA
2 0 1 0 O P P O RT U N I T I E S
by Gareth Stokes online editor for FA News
36
The 2010 FIFA World Cup™ is an opportunity to know your client
In less than 80 days the 2010 FIFA World Cup ™ kicks off at the 89 000 seat household contents
Soccer City Stadium in Johannesburg. Although the tournament offers few policy is not sufficient
direct opportunities to financial services intermediaries, you can generate for a budding Bed &
new business by targeting ‘soccer’ entrepreneurs and the predicted 450 Breakfast (B&B) operator.
000 foreign visitors... To accommodate this customer
Santam offers limited cover for small
Financial intermediaries should be asking their clients what they will be B&B owners who previously did not qualify for
doing through the World Cup. The answers they receive will guide them on insurance due to the size of their business. Cover is available for B&B’s with
possible avenues to secure business. Short-term insurance intermediaries three or fewer bedrooms where the policyholder remains in the residence
are probably best positioned to write new business as the event draws near. on a permanent basis.
They can target the thousands of South African homeowners who hope to
strike it rich by renting their homes to foreign visitors during June and July Entrepreneurs hoping to offer transport in their private vehicles have many
this year. The covers under short-term personal lines policies will have to obstacles to contend with. Apart from securing the necessary permits and
be ‘change’ to reflect the risk. licenses they will have to consider shor t-term insurance cover to provide
death and disability covers in the event of accidents, whether on the road or
“The insured risk of your property and its contents changes if you open it to elsewhere.
visitors who may not show due care to avoid damages,” says Mary
Mlambo, Glenrand MIB’s national marketing manager for personal product Whether you specialise in shor t-term, life, healthcare or investment, your
solutions. Policyholders must therefore update their short-term insurance business thrives when you have frequent interaction with your clients. The
cover before concluding rental agreements. Short-term insurance brokers World Cup is a fantastic talking point and provides a great opportunity to
will have to accurately scope the risks involved and adjust premiums touch bases with your clients. In the worst case you simply confirm that
appropriately. your client’s financial services portfolio is up to date. In the best case you
identify shortfalls in your client’s cover and write additional business to
Insurance giant Santam has some interesting ideas for pre-World Cup everyone’s benefit.
marketing. Based on how policyholders view the event they categorise
them as entrepreneurs, escapists or enthusiasts. “Each category of
policyholder presents brokers with an opportunity to add value and meet
clients’ changing requirements during this once-in-a-lifetime sporting
event,” says Edward Gibbens, executive head of broker distribution at
Santam. Once the broker has identified the ‘type’ of client, selling product
becomes much easier.
Escapists (those who hope to avoid the event by taking offshore holidays)
and enthusiasts (clients who want to follow the event locally) must make
their house and assets as secure as possible. Opportunities exist to sell
additional covers relevant to their respective travel pursuits. But the greatest
opportunity comes from the so-called entrepreneur.
Individuals who have decided to rent rooms in their primary residence for
the duration of the will need additional (and specialised) insurance cover for
them and their guests, particularly public liability cover. A general
The 2010 FIFA World Cup™
household contents
policy is not sufficient
for a budding Bed &
Breakfast (B&B) operator.
To accommodate this customer
Santam offers limited cover for small
Policyholders must therefore
update their short-term insurance
cover before concluding rental
agreements. Short-term
insurance brokers will have to
accurately scope the risks involved
and adjust premiums appropriately.
S N I P P E T S
38
Newly Appointed Chair of FIA Employee Benefits (EB) Exco
Pieter heads up the Technical Department of Absa Consultants and Actuaries. He holds a BCom degree from the
University of Potchefstroom, an Honours degree in Economics from Unisa and a LLB degree from the University of
Pretoria. He also obtained his CFP and the Advanced Diploma in Financial Planning (specialising in retirement funds).
Pieter spent some years at the Financial Services Board in the Pensions Department and has more than 20 years’
experience in the retirement fund industry. As a legal and technical adviser he is able to constantly keep abreast of the
developments in the industry.
Pieter is a member of various industry bodies and is actively involved in the industry for the last 10 years. He has also
done various publications and assisted with publications regarding employer benefits. He is also a long time member of
the Employee Benefit Exco and was elected as chairman in February 2010.
FIA Road Show Durban:A second very highly successful Road Show was held in Durban on
Wednesday 17 March 2010 with an audience participation of over 250 people.
FIA Road Show: Golden DivisionThe FIA initiated road shows on the regulatory exams are being finalised. These
road shows will be presented in 20 cities and towns throughout South Africa.
The FSB, INSETA and Moonstone, an authorized examination body, will inform
attendees of their respective roles in the whole process and will ensure that all are
fully informed on the matter.
There is keen interest in these events and many of the venues are almost booked
to capacity. Non-members will also be attending and we therefore urge members
to book their seats early. Contact your divisional or branch secretary for more
information.
The first of these kicked off in Johannesburg at the Mosaiek Life Style Centre, and
was very successfully hosted by the FIA Golden Division. This was a very
informative exercise that our members benefited from with more than180
attendees.
The audience were addressed by Charene Nortier of the FSB and Manager of
FAIS, Hjalmar Bekker of Moonstone Examination Body and Jane Appasamy
representing INSETA.
Continued on page 42
39
B U D G E T I N G
I was recently listening to the radio, while on the way to dropping off my general election, the UK’s woes may last years, especially if all cabinet
young water polo player Liam at school. It was Gareth Cliff on 5FM and he decisions after the election are then made on the “playing fields of Eton!”
was busy interviewing Lindsay Williams, a good friend of mine and a great
character in the financial broadcasting world, ex of Summit TV and now on On a lighter note it’s great to see that our new road systems coming on
Warwick Market Report (6:30pm on FMR 101.3 and www.bizcast.co.za). stream around all our cities. The World Cup has had a great impact on
They discussed the recent budget and just what a “non” budget it was, but public work schemes and we should benefit from this spending for many
what was really funny was the chat about just how fat our average MP’s years to come.
now are!
As a nation we can only be immensely proud of all these projects,
We must be the only country where a successful budget is to do absolutely especially the Gautrain, even if as South African’s we mainly supplied the
nothing and our fat cats really are fat! French / Swiss / Germans and Brits with the labour to assist them on the
easier hits. But that does not matter; they are now our rails, tunnels and
So what about the budget, yes I agree, what budget? The information as to trains, because we bought them! I am reminded of an elderly chap years
what is going into a budget is actually available months in advance, via the ago who when asked if that magnificent head of hair was his own? He
minutes of the committees and the financial institutions are more than replied, “of course it is, it took me years to pay it off!”
aware of this, or at least I hope they are? Days before we generally have a
sense of its overall final shape and these days there are seldom any We may be paying off for our stadiums, roads, tunnels and bridges for
surprises, which given the current economic climate is probably a good longer than that wig but you know what, it all looks great and it beats
thing. supplying another 1000 Mercedes S500’s for our socialist MP’s, just so
that they can fit it at Conference with their youth league and communist
Over the coming year budgeting will become even more important to all mates! Actually that’s an idea, let’s give all MP’s a bus, taxi and rail pass
South African’s and as we see other economies emerging from recession and scrap the swanky cars, it will save us a for tune in fuel and insurance
we may have to wait a little longer before we emerge. As with all economic and they may get to see how their constituents actually live!
cycles the first country in is often the first country out, and in the case of this
global financial crisis, South Africa went in very late and may be the last
train out of the tunnel. Our troubles may not appear to be as deep and
damaging, but they may well last longer.
What is also interesting to note is that the industries affected most by a
particular crisis are obviously going to take longer to recover.
Consequently, if a country is more dependent on the particular industry in
collapse mode, than say their neighbour, then they are clearly going to be
more deeply affected and take longer to recover.
A clear example of this is the UK. With a vastly diminished manufacturing
sector and a heavy reliance on financial services, some say as much as
40% of GDP, they were bound to be badly hur t by a banking and financial
crisis.
Germany and France, on the other hand, with only about half of the UK’s
reliance on financial services, were always going to be less deeply affected
and therefore able to get out of the official recessionary figures quicker.
The obvious has consequently happened and, with less capital capability
that the US and the prospect of a hung parliament after the fast approaching
Financial Maturity by Ian Kilbride
On a lighter note it’s great to see
that our new road systems coming
on stream around all our cities.
The World Cup has had a great
impact on public work schemes
and we should benefit from this
spending for many years to come.
R A’s
by Johan Gouws, an executive director at Absa Investments a member of the FIA
40
Selling tax-breaks no longer enough in RA market – Absa Investments
‘Selling tax-breaks’ is no longer enough in a retirement annuity (RA) market The platform allows both lump sum payments and regular contributions.
that is increasingly driven by a new generation of smart investors who The size of monthly contributions can be varied or even halted for a period
demand more from their financial advisers. without penalty.
RA tax efficiency is a powerful “attention-getter”, but generic product Asset allocations can be periodically re-aligned to meet changing
features can’t guarantee a growing book of business in a competitive field, objectives and investment horizons. Changes in risk appetite are easy to
says Johan Gouws, an executive director at Absa Investments. accommodate.
Absa Investments regards RAs and products to encourage timely The AIMS platform allows for a transition approach to retirement planning.
retirement provision as an important growth market now that early This capability enables clients to move from pre-retirement to actual
withdrawal or transfer from traditional products is less onerous on retirement without the steep costs that sometimes faced retirees who exited
consumers. an old-style pension fund and re-committed funds to an annuity.
Gouws adds: “Tax-breaks have become a ‘given’ for pre-retirees who also Investors also avoid the need to make significant adjustments to their
expect cost savings, flexibility, broad choice and the ability to control their investments strategies as they move into retirement and can better manage
own destiny at all stages of pre- and post-retirement.” the risks relating to timing the market.
The good news for advisers, says Gouws, is that legislative change to cap “Pre-planned transition means zero transaction fees and other cost
penalties has prompted a review by potential investors. New business savings,” says Gouws. “It’s just one of
opportunities for linked RAs could therefore proliferate. the smart solutions offered by
Absa Investments.
He notes: “We don’t foresee a sudden boom as the norm is unfortunately
still no or low savings towards retirement. Retirement provision often starts “The advantage of a more
too late, but legislative change encourages a new generation of pre-retirees compelling retirement solution
to take full advantage of increased scope for smart, flexible and cost- for advisers is that it encourages
efficient planning. relationship-building, increased
trust and a more satisfied client.
“Tax savings are crucial, but are common to all RAs. Further product
benefits are needed to clinch the deal. “We believe these developments
contribute to a major area of
“Linked product providers such as Absa Investment Management Services opportunity for the adviser.”
(AIMS) have already detected the new mood and have tracked an increase
in transfers into its new-generation solutions.”
AIMS anticipates continuing growth on the back of increasing consumer
awareness. Broad choice is already proving a key product benefit.
Those investing in retirement and living annuities on the AIMS platform can
pick from the full range of funds offered by local asset managers. There is
no initial administration fee. Ongoing admin fees are on a sliding scale
governed by investment size.
S N I P P E T S
42
PROTEA Golf Day
thFIA Protea Branch Golf Day took place on the 13 October
2009 at CMR Golf Club.
All members in the branch were invited, as well as guests
from the Industry, Service providers and Management
from FIA Head Office. PG Glass was the main Sponsor.
All went well and every player contributed to the success of
the day. During the dinner that was served, the Chairman,
Phil Cooper, thanked everybody present and prizes were
given to the winners of the day, which was Santam who
walked away with the trophy.
Lydia Cook from PG Glass thanked everybody for their
participation and mentioned that it is a privilege to be the
main sponsor of Protea Branch.
Tygerberg Year End Function.
1.Elise Hauptfleisch served on the Tygerberg committee for 8 years and has
in the past few years done a lot of work on the Community Involvement
portfolio, with Alwyn Bamberger looking on and Juanita Malherbe handing
over the flowers.
2. Alwyn Bamberger & Tim Timmerman
3. Alwyn Bamberger & Salomi Steenkamp.
Boland
The Boland year end function which was held on 7 and 8 November
2009 on a wine farm, Wederom in the Robertson valley.
Photo 1: In the photo are from left to right Rachelle and Marius
Potgieter, Riaan and Elna Geldenhuys and Surita and Drikus
Hanekom.
Photo 2: In this photo are Riaan Geldenhuys, Boland chairman and
special guest Marius Potgieter. Marius served as Boland chairman
on more than one occasion and left the industry in 2009. The
branch wanted to honour his time with the IBC and FIA and
presented a special gift of thanks to him at the year-end function.
Continued from page 38
1
2
3
1 2
43
S N I P P E T S
North Coast Year End Function
11 Dec 2009
Photo 1: Varsilla and Sagie Govender
Photo 2: Candice & Mark Price and
Mark and Tracey Louch
Photo 3: North Coast first breakfast
meeting on Wednesday 10th Feb 2010,
sponsored by One Loyalty - Lifestyle
and Assist Program, Anthony Kotton
and Ryan Grill.
North West
Hannes van Wyk (Chairperson of FIA
NW) won the International Tennis
Federation Men’s Singles title for Super
Seniors held at Rondebosch Cape
Town from 6 – 10 March 2010. Beating
the World Ranked Player Oscar Marino
in the finals in 3 gruelling sets.
Hannes is now the number one ranked
men’s singles player in South Africa in
his Age group and must be considered
a sure choice for the National Team
going to Turkey later this year.
Hannes is also currently SA Men’s
Single Badminton Champion of the
Golden Eagles Division.
FIA West Rand Inaugural Meeting
F U N E R A L C O V E R
Funeral Cover vs. Life CoverThe question of whether Funeral Cover is necessary if one has Life venue away from your home, your spouse/family will be presented with
Insurance Cover is often asked. It has “almost” become generally accepted firstly fees from the mortuary as well as fees for the transport of your body -
that as one becomes more “affluent” one progresses from “Funeral Cover” and you have not yet been buried!
to taking out “Life Cover”. Although this may generally occur, this is indeed
not necessarily correct – nor is it probably good advice. Funeral Cover, as a rule, will pay out benefits within 48hrs – quick enough to
assist most families in arranging a funeral. The only possible restriction
Those brokers who are “Life” brokers are aware of how long it may take a regarding this type of cover is that a “Funeral” policy is restricted to a
Life Assurer to actually pay out policy benefits - not because they are maximum of R18 000 (for an adult) and for some clients this level of cover
delaying , but rather because of the Policy requirements necessary before may not be adequate.
any benefits are payable. Generally no benefits will be payable within the 7
days of death of the Insured. This period of 7 days is probably the maximum One also has to remember that it is not the person who
period acceptable from the death of the Insured until their proposed burial dies who has, or needs the cash available for the
(assuming no delays due to police investigations). funeral costs, but rather the spouse, or family of the
deceased/insured. When a death occurs, generally,
Therefore, regardless of who you are, it is hoped that your spouse, or the bank will ”freeze” the deceased bank account
family, have immediate access to R10 000/R20 000 in order to pay for your therefore blocking any possible funds available for
funeral/cremation/burial (or possibly body repatriation from your place of the spouse or family - as such it is the spouse or
death to your normal home town). Remember a medical aid looks after one family which needs the immediate funds.
until death occurs – thereafter mortuary fees are for your estates account Funeral Cover provides this!
(or in most cases your spouse/family). Therefore if you happen to die at a
by Adrian Hofman
A G R I C U LT U R A L I N S U R A N C E
In the past, insurance companies used assessment procedures developed because with disaster relief there is no way of knowing how extensive the
in Europe or the United States to assess hail damage to crops. But Santam damage will be and how it will happen,” he explains.
identified a need for assessment procedures based on South Africa’s
unique climate, soil and cultivars. Another big question is whether crop insurance products are accessible
for the emerging farmer. Tobias Doyer, head of Santam Agriculture,
Crop insurance covers the quantitative and qualitative loss to crops. This explains the products are no different from those aimed at the commercial
becomes important for crops such as fruit destined for the export market. farmer. “Emerging farmers face the same risks as commercial farmers
As a result of hail damage, the fruit could have exterior blemishes and and therefore the products are the same. The big challenge is to support
although it can still be sold at a lower price on local markets, it might no these farmers in partnership with agribusiness and other institutions to
longer be suitable for the export market. ensure that their management practices are in line with the requirements of
the insurance policy,” Doyer says.
New trends are also emerging in the crop insurance market. Due to the
rising cost of production in the agriculture sector and the diminishing In crop insurance, the broker plays a crucial role in advising farmers on
securities of producers, the need for Multi Peril Crop Insurance (MPCI) in their risk management programmes. Doyer foresees that their role will
South Africa has grown significantly. This product is designed for the become even more important, given the increasing complexity of the
farmer and offers the growing crop as collateral when applying for a loan. agricultural production environment. Santam Agriculture, which was
Cover is essentially based on the producer’s long-term average yield formed when ARS merged with Santam about two years ago, is a
(LAY) on his total farming unit, of which a certain percentage is then dedicated business unit focussed exclusively on the needs of farmers and
guaranteed. the broker network supporting these farmers.
Schultz notes that South Africa is one of few countries in the world where Brokers selling crop insurance have to receive mandatory training and
multi-peril insurance is available without government support. In Europe accreditation on an annual basis, and Santam brokers regularly visit the
and USA, premiums are subsidised, and farmers only pay a portion of the experimental farm to gain a holistic understanding of how crop insurance
full premium. Santam is initiating talks between insurers and government works. Santam also has the biggest agricultural support team of any
to see if this is also possible in South Africa. “It will be more cost effective insurer in South Africa. At the end of the day, it is all about providing
for government to subsidise insurance, than to give disaster relief, certainty to the South African farmer.
Continued from page 8
45
B U I L D I N G I N S U R A N C E
If an unforeseen disaster such as a fire or flood were to damage or completely
destroy your property, you would have to deal with the stress of rebuilding
aside from the trauma the loss. If the building was bonded, you would also
have to continue paying the instalments on an asset that no longer exists.
“Owning a building, whether a home or commercial property, is one of the
largest investments that can be made, which is why it is important that your
building insurance adequately covers you in the event of the building being
destroyed or damaged by fire, earthquake, flood and/or other insured
events,” says Pravin Pather, technical and risk specialist at Centriq Insurance.
Building insurance is required by law on any property that has been financed,
although property owners can elect with whom the building is insured. Pather
explains that building insurance covers damage or replacements to the actual
building and all the fixtures and fittings therein and does not include contents
within the building or business risks etc.
“The importance of adequate building insurance,” says Pather, “is that there One factor that many property owners don’t take into account when it comes is a difference between the market value of the property, which includes the to their building insurance is building cost inflation. A recent report by stand, its location, as well as the age and condition of the property, and the Industry Insight, a company that provides relative information to the actual replacement cost of the building.” construction industry, states that with an 8% average increase in the cost of
labour (as per CPI expectations), commodity price inflation of between 10% It generally covers the immovable structures on your property such as walls, and 15%, diesel price inflation of between 20% and 30%, and mitigated by roofs, satellite dishes, aerials, your swimming pool, gates and gate motors, softer domestically produced material price increases, the overall input cost underground pipes and cables). inflation - a measurement of material and labour costs in the building industry Buildings insurance usually provides cover for: – is expected to increase by between 8% and 12% in 2010. • fire, explosion and earthquake
• acts of nature such as wind, thunder, lightning, storm, hail, flood and snow Remember too that any improvements you have made to the property need to • bursting and overflowing of geysers and water pipes be accounted for in the building insurance, no matter whether it is a sectional • theft title or full title property. Pather says your broker should be kept up-to-date • lightning and thunderbolt impact with any renovations or additions or any items that increase the replacement • accidental damage to glass and sanitary ware value of your building.• alterations and additions
• fire brigade charges Pather also advises that if you are shopping around for building insurance • subsidence, heave and land slip quotes, an accurate valuation of the replacement cost of your building is vital. • temporary accommodation “The valuation serves as a basis from which future cost escalations, among • liability to other people including domestic employees others, are determined.”
In addition, Pather says that if insurance companies are quoting on different With today’s cost cutting measures featuring strongly in most businesses valuation figures, premiums are bound to vary and you won’t be able to and households, every monthly payment and premium is being carefully compare apples with apples, so to speak.scrutinised. But think again if you are considering cutting out or reducing your
building insurance premiums. Pather notes that building insurance is one of Pather also advises that in some cases, additional items such as air-the cheapest types of insurance around, costing approximately R20 per conditioning units or solar heating panels may be best insured on an all-risk R100 000. Therefore Pather advises that property be insured for its true basis. Thatched roofs or wooden structures need individual attention, while a replacement value. This is because being over-insured means that you get commercial or business insurance policy will be required for residential the same benefit as you would for a lower premium. “It’s also not worth properties that operate as bed-and-breakfast establishments, or if a business risking any shortfall to save on the monthly premium,” he says, “because if is operated from the home. you are underinsured, the insurance payout will be less than the cost of
rebuilding should disaster strike.” Pather also advises that homeowners “Rather be safe than sorry,” says Pather. “If you are in doubt, check with your remember to increase the value insured to cater for costs such as demolition broker or insurance company if you should increase your cover,” he and professional fees. concludes.
The Cost of Replacementby Pravin Pather, Technical and Risk Specialist at Centriq Insurance
FA I S
Maintaining his trademark no-nonsense approach, the FAIS Ombud has "If schemes such as bridging finance and once again ordered a broker who claimed the Ombud had no jurisdiction to so-called investment clubs were to be hear the case to make good on a complainant's claim. allowed to be marketed by financial
services providers (FSPs) on the basis that The broker Willie Jordaan has had his fourth encounter with Charles Pillai the they fell outside of the FAIS Act, then it Ombud for Financial Services Providers, arising out of dubious investments would frustrate the very purpose for which made on his advice. the FAIS Act was designed.
Jordaan, a former employee of insurance giant Sanlam, had recommended "Unscrupulous financial advisors will continue to ensnare unwary investors to several clients that they invest in the now collapsed Fidentia Holdings and, who may then have no recourse against the provider concerned. as in this case, a bridging finance scheme.
"It may be tempting for the FSP to market products that do not fall within the In the latest determination, Jordaan (whose Financial Services Provider definition in the Act in the knowledge that they may not be called to account by licence has been withdrawn by the FSB) recommended to his client of 20 this Office or the Financial Services Board for the financial service rendered in years that he should invest in a bridging finance scheme. that regard.
The client, Wilhelm Julius Malan of East London, who had wanted to invest in "In the matter before me, the product bears all the hallmarks of a financial either retail bonds or a two-year fixed deposit plan at Nedbank, was advised product, that is, an instrument marketed to the public as worthy of investing rather to invest in a bridging finance scheme. in to earn a profit or some benefit.
The scheme was managed by Auctum Capital (Pty) Ltd, the sole director of "To put it colloquially, if it looks like a duck, walks like a duck and squawks like which was one Hermann Heydenrych who, according to the Ombud, was a duck, then it must be a duck," the Ombud said."the same individual who recruited investments for the now spectacularly failed Fidentia Group". He said his Office had been seized with several cases where intermediaries
hid behind the fact that "this is not a financial product". An amount of R110 000 was invested in the scheme which subsequently collapsed causing Malan's total investment, including interest which was Quoting extensively from a previous case in the matter of Nebbe vs apparently reinvested, to be lost. Oosthuizen wherein a broker had invested her client in her own property
company, the Ombud said: "As I said in the Nebbe determination, the In response to the complaint, Jordaan did not dispute that Malan was advised Respondent in that matter was by the very nature of her work entrusted with by him to invest in Auctum Capital. Instead he relied on the fact that because the financial well-being of those who consult her. bridging finance was not a listed financial product as defined in the FAIS Act, he did not need to comply with the FAIS Act. Thus, so his defence went, the "In rendering financial services to her clients, Respondent would at all times Ombud had no jurisdiction to hear the complaint. have to ensure that complainant as a consumer of financial services is
assured of the protection of his investment. The bridging finance was ostensibly to be provided to estate agents who were owed commission by sellers of property. The commission would only be "Thus any advice that she offers would have to be in the interests of the client paid to the agents on registration of transfer of the property by the and the integrity of the financial services industry. To do otherwise would conveyancing attorneys. immediately defeat the objectives of the FAIS Act.”
As property transfers usually take some time to be registered in the Deeds The Ombud said in his ruling that Section 8(1) (c) of the Code provided that Registry Office and estate agents want immediate access to their after seeking information about a client's financial position and conducting an commission, bridging finance is a means by which the agents are paid their analysis thereof, the adviser must "identify the financial product or products commission (minus a discount) immediately. that will be appropriate (emphasis added) . . .".
The discounted amount accrued to the benefit of the person or entity "In other words the adviser is not to give advice on a product that is not a providing the bridging finance, usually a bridging finance company. defined financial product.
Dealing with the crisp issue of whether or not he had jurisdiction to deal with "If he or she does, they are clearly acting in contravention of the FAIS Act and the case given that bridging finance is strictly speaking not one of the financial this Office is, in my view, duty bound to determine such a matter not on the products as defined, the Ombud said the matter did not simply end there. basis whether it does or does not have jurisdiction but on the basis that the
FSP is falling foul of the FAIS Act in recommending a product not defined in In finding that Jordaan's conduct indeed fell within his remit, the Ombud said: the Act." "One may also look at general principles of interpretation where one of the issues one looks at in interpreting legislation is what mischief the particular The Ombud said on the basis of facts before him, Jordaan must be held liable piece of legislation was designed to prevent. for complainant's loss of R110 000.
by Charles Pillai
46
The Adviser must Identify the Financial product or products that will be Appropriate
Contact Miekie at the FIA on 012 665 0085 to book your table.
The Awards this year are in the following categories:
1. Long Term Insurer of the Year – Risk Products
2. Long Term Insurer of the Year – Recurring Savings Products
3. Investment Product Supplier of the Year
4. Health Care Product Supplier of the Year – open schemes only
5. Short-term Personal Lines Insurer of the Year
6. Short-Term Commercial Insurer of the Year
7. Short-Term Corporate Insurer of the Year
8. Employee Benefits Supplier of the Year (New Category)
9. Underwriting Managers of the Year (New Category).
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 Emperors Palace.
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.
S H O RT- T E R M O M B U D
The Ombudsman for Short-Term Insurance urges consumers to familiarise was not suffering from breast cancer and could not themselves with the terms and conditions of any travel insurance policy they be seen to have a pre-existing condition. “Our may purchase before they travel and warns of the common pitfalls of travel opinion was that the insured was entitled to be insurance. “If you are being treated medically whilst overseas and think that indemnified as provided for by the policy and the your ailment could be seen as a pre-existing medical condition by your insurer subsequently agreed to settle the insured’s insurer, remember to obtain a full report from the doctor who has treated you claim. It is absolutely imperative that consumers before you leave the medical facility”, says Brian Martin, The Ombudsman for scrutinise the wording of their policy in particular to the Short-Term Insurance. The Office recently dealt with a complaint where the sections relating to pre-existing conditions, says Brian.”insured had consulted a specialist in 2006 after she noticed a lump in one of her breasts. A mammogram and biopsy were carried out. The insured was Should your personal effects be stolen whilst you are on holiday, remember to advised that there was no evidence of cancer. In the early half of 2007 the report the incident to the nearest or local police station wherever you are insured took out a travel policy for a planned trip to Malawi. However shortly staying. A common complaint received by the Office is that once the insured before her proposed departure the insured was diagnosed as suffering from has returned home, they have filed a claim for their stolen personal effects, breast cancer and her trip was cancelled. only to have their claim rejected as they did not report the matter to the local
police overseas.The insured filed a claim in terms of the travel policy but liability for the claim was declined by the insurer on the grounds that the insured suffered from a If you are taking out travel insurance check the age limitations stipulated in the pre-existing condition which was excluded in terms of the policy. After policy to ensure that you qualify. Some insurers allow for additional top up appealing to the Ombudsman for assistance, the complaint was reviewed cover to be purchased.and the Ombudsman ruled that at the time the insured took out the policy, she
by Brian Martin
48
The Ombudsman for Short-Term Insurance Warns consumers about the Pitfalls of Travel Insurance
P E N S I O N S
African pension fund leaders gather in SA in April to explore a broad, joint One of the early priorities would be the agenda of co-operation and possible alignments on mutual challenges facing establishment of platforms for information private pensions sectors. exchange and the formalisation of contact
mechanisms.
The African delegation, representing the Committee of Insurance, Securities and Non banking financial Authorities (CISNA), will meet, among others, the This groundswell on the pensions front is very much secretariat of the Financial Services Board (FSB) and will hold extensive talks in keeping with the generalised continental with the Institute of Retirement Funds (IRF). integration which has seen South Africa playing a growing and significant role
in sub-Saharan Africa in recent years and where alignments are evolving on many fronts she said.Some of the issues under the pensions sector spotlight in Africa right now
include possible harmonising of legislation, fostering liaison, facilitating the development of a cadre of professional regulators, the emergence of well “It’s also in keeping with the emergence of an economic development agenda informed investors and consumers in new, free market economies and for Africa as a whole, including the Millennium Development Goals for the adherence to sound corporate governance practices based on international continent, the increasingly important role of Southern African Development best practice. Community (SADEC) and the African Union’s call for an integration agenda
for the continent, comprising the four pillars of political, economic, social and cultural integration.”IRF President Shantha Padayachee says this interaction with African
pensions sector leaders follows the attendance of leading protagonists of the African pensions funds sector at last year’s IRF congress in Durban. CISNA forms part of the trade, industry, finance and investment directorate of
SADEC. The organisation consists of non banking financial institution authorities and providers of intermediary services in SADEC.“Contacts between Africa’s private pensions funds sector have been
sporadic in the past. Also, other than in South Africa, the pensions sector is Government dominated, so that social security systems fall far short of Adds Padayachee: “Broadly, what we seek are better checks and balances, needs for various, frequently controversial reasons” adds Padayachee. more interactions and greater consultation to further the evolution of the
private pensions sector in Africa.
“However the private pensions sector in Africa is growing and will become a force to be reckoned with in future years. South Africa, on the other hand, has “In this context, the Institute of Retirement Funds in South Africa, which a long standing, robust, private pensions sector and arising out of the mutual represents numerous private pension funds, could play an important role in challenges we face, the scene is now set for greater, formalised co-operation the evolution of a new, Pan African Pension Funds organisation but of course and alignment on pensions fund issues.” it’s early days.”
by Shantha Padayachee
Talks on Pension Sector Alignments in Africa
L O N G - T E R M O M B U D
A quarter of a century ago, on 3 January 1985, the Ombudsman for Life • there was no monetary limit on the complaints that fell within the
Assurance scheme was launched. jurisdiction.
It was the first financial services ombudsman scheme to be founded in South The institution of an ombudsman scheme as an out-of-court dispute
Africa. Judge PJJ Wessels, a retired judge from the Appellate Division (now resolution mechanism is now firmly established but was ground breaking at
the Supreme Court of Appeal), took office as the first Ombudsman. the time. Almost all financial services in South Africa now have an alternative
dispute resolution scheme such as an ombudsman or adjudicator whether
The establishment of the scheme arose out of the realisation that consumers voluntary or statutory. The concept of an ombudsman has also spread to
and the industry needed a method – outside the court system – to resolve other industries as diverse as the motor industries and dental services.
disputes that they could not resolve between themselves. In the first year 31 Worldwide the ombudsman concept is a growing trend.
insurers agreed to be bound by the rules of the scheme.
Our own scheme has grown and developed over the years (with a slight
The key elements of the scheme were: change of name). In the first year of operation 55 written complaints were
received; in comparison, last year our office received 9 087 complaints. In
• the ombudsman would be independent and would not take instruction line with schemes both locally and internationally our scheme is constantly
from anyone regarding the exercise of this authority; improving and adapting to the needs of complainants and the industry. What
• the service would be free to complainants, and the industry would bear has not changed is the emphasis on mediation and conciliation to settle
the costs of the scheme; disputes, although rulings (binding on insurers) can be made as a last resort.
• the ombudsman could take considerations of equity into account; The tradition of appointing a retired judge as an ombudsman has also
• the process would be confidential; continued to the present.
• complainants would not lose their right to follow the court process if
they were dissatisfied with the resolution;
50
Ombudsman sees in Twenty Five years of Service to Consumers
H U M O U R
Insurance"Do you know the present value of your husband's
policy?" the life-insurance salesman asked his client.
"What do you mean?" countered the woman.
"If you should lose your husband, what would you
get?"
The woman thought a minute then brightened up and
said, "A poodle!"
Wake Up CallBernard, who is noted for his gracious manners, was awakened one
morning at four forty four a.m. by his ringing telephone. .
"Your dog's barking, and it's keeping me awake," said an
angry voice.
Bernard thanked the caller and politely asked his name
and number before hanging up.
The next morning at precisely four forty four a.m.,
Bernard called his neighbor back.
"Good morning, Mr. Williams.... Just called to say that I don't have a
dog.”
The Know it AllA small town prosecuting attorney called his first witness to the
stand in a trial--a grandmotherly, elderly woman. He approached
her and asked, "Mrs. Jones, do you know me?"
She responded, "Why, yes, I do know you Mr. Williams. I've
known you since you were a young boy. And frankly, you've been
a big disappointment to me. You lie, you cheat on your wife, you
manipulate people and talk about them behind their backs. You think you're a rising big
shot when you haven't the brains to realise you never will amount to anything more than a
two-bit paper pusher. Yes, I know you."
The lawyer was stunned. Not knowing what else to do he pointed across the room and
asked, "Mrs. Williams, do you know the defence attorney?"
She again replied, "Why, yes I do. I've known Mr. Bradley since he was a youngster, too. I
used to baby-sit him for his parents. And he, too, has been a real disappointment to me. He's
lazy, bigoted, he has a drinking problem. The man can't build a normal relationship with
anyone and his law practice is one of the shoddiest in the entire state. Yes, I know him."
At this point, the judge rapped the courtroom to silence and called both counsellors to the
bench. In a very quiet voice, he said with menace, "If either of you asks her if she knows
me, you'll be in jail for contempt within 5 minutes!"
Laugh and the World Laughs with You
51
W F I I
THE WFII STRUCTURE The chair of WFII is appointed yearly on a rotating basis (among the
chapters). In 2009/2010 Ms. Elizabeth Francy Demaret (US- CIAB) Chaired
WFII was established in 1999. Ten years after its creation, WFII is now WFII. Mr Luis Ros (Copaprose) was appointed Chairman for 2010/2011.
recognized by all world leading and influential international bodies (OECD, Alessandro De Besi (BIPAR, Europe) was appointed incoming Chairman.
IAIS, WTO, UN, World Bank, IMF) as the single voice of intermediaries in
international Public Affairs. WFII has observer status in the OECD and the IAIS
and is regularly consulted on current issues in the market. THE WFII EXECUTIVE CSE MEETING (14 MARCH 2010)
WFII works on the basis of principles and positions and, in its recent history,
the structure has proven to be efficient and effective in the promotion and The Executive CSE meeting was the first meeting which took place on Sunday
defence of our sector’s interests at an international institution level. The 14/03/2010. The meeting was attended by some representatives from each
principles and positions of WFII are defined at the World Council meetings. In of the five continents, Northern America, Copaprose (Latin America), Europe,
terms of regulatory standards and liberalization WFII has achieved a number Asia and Africa.
of impressive structural results over the last years. Over the last 12 months
WFII has again shown its solidity. The main purpose of the Executive CSE meeting is to prepare WFII policies,
The main objectives of the World Council and Executive CSE Committee deal with membership issues and to determine the priorities and agenda for
meeting are: the year. The following two priorities were identified for 2010.
1. To detect international trends in intermediary-related Public Affairs
issues (by exchanging information on national issues). 1. Interaction with the IAIS (International Association of Insurers
Supervisors). The WFII is an observer member of the IAIS which gives the
2. To give policy direction to WFII on current and future issues on the opportunity to attend their annual meetings. Seamus Casserly President of
international Public Affairs agenda. the FIA attended the meeting in October 2009 in Rio de Janeiro. This gives the
intermediaries the opportunity to proactively respond to the regulatory
3. To exchange information between participants. discussions which have the potential of influencing intermediation globally.
The World Council and Executive CSE Committee are thus the policymakers It is clear that the IAIS relies on the WFII on guidance with regard to
of WFII and consequently the guide for many national associations around intermediation in the insurance industry. This also applies to the South
the world in structural Public Affairs issues. WFII allows also the exchange of African environment. The next IAIS conference will take place in Dubai in
information and the analysis of issues which are potential future drivers of October 2010. The WFII will again be represented at this meeting.
change in the industry. Members of the WFII World Council and Executive
CSE Committee come from all corners of the world and represent 5 2. Multinational Placements. (See feedback at WFII)
continents. WFII has its permanent Secretariat in Brussels which coordinates
the activities. Seamus Casserly (President of the FIA) and Justin McGregor (President of
IBAC Canada) were appointed as members of the Audit Committee.
WFII (World Federation of International Intermediaries)
Annual Meeting – 14 – 19 MARCH 2010 Feedback Justus Van Pletzen & Seamus Casserly
W F I I
52
THE WORLD COUNCIL MEETING (14 TO 15 MARCH 2010) • Liberalisation of the Industry
The 2010 annual WFII World Council and Executive CSE Committee meetings • Multinational placements. In many markets, it is observed that there are took place in Buenos Aires on 14 and 15 March 2010. The meeting issues which create doubts when placing business on a cross-border coincided with the Copaprose Convention. (Intermediaries association for basis. The Chair of WFII’s multinational working party, Elizabeth Francy Latin American Countries). Demaret, presented the work plan of WFII. The working group will over the
coming year continue to study issues related to multinational placements. The World Council meeting gathered participants from WFII members around For example, the tax aspects of a multinational placement. the globe and provided an excellent forum for exchanging views and experiences, especially following the financial crisis. Guest speaker was Dr. COPAPROSE CONGRESS (16 TO 18 MARCH 2010)Adel Mounir Rabeh deputy chairman of the Egyptian Financial Supervisory Authority, IAIS Executive Committee member and deputy Chairman of the At the Copaprose congress a panel of 5 continents were given the IAIS Market Conduct Committee. opportunity to present views to the 1200 delegates on the following topics:
During the meetings, issues of common interest were identified and Insurance Brokerage – General Contextdiscussed (Education of the Public, Multinational placements, Market Conduct, Liberalisation). At a “tour de table” the following issues were • Presentation of the new WFII Chairman.identified as being on the public affairs agenda of many associations: • Invited lecturer – Mr. Nic De Maesschalck (WFII Director)
• Panel: Current overview of the global insurance brokerage activity.• The Financial Crisis and its effect on the insurance market. • Panellists:
• LATIN AMERICA: Mr. Luis Ros (WFII President)• New regulatory initiatives following the financial crisis such as: • NORTH AMERICA: Ms. Elizabeth Demaret (Outgoing WFII President)
supervisory authority, that would work on conduct issues for • EUROPA: Mr. Jaap Meijers (BIPAR Chairman)intermediaries. • ASIA: Mr. Anthony Lim (CIBA President)
• AFRICA: Mr. Justus Van Pletzen (FIA COO)• Market Conduct issues. The IAIS had set up a market conduct
subcommittee, Chaired by Diane Colton from the Guernsey In the following edition of the FIA Insight, there will be a detailed feedback from all the various continents pertaining to the following questions:
It was agreed that in 2010-2011 WFII was to focus on the IAIS insurance core principle (ICP) review and particular the one of intermediaries which lays 1. In the country or region that you represent, how is market competition down market conduct rules for intermediaries. It had already been evolving or changing (insurers, brokers, agents, banks, other operators) and announced at the IAIS annual conference of 2008 that the ICP review would what special challenges are agents and brokers facing? How are these be a priority for the IAIS in the coming few years. challenges affecting the way intermediaries operate and is it creating a
positive or negative tendency in their market-share? Have there been shifts Nic De Maesschalck Director of BIPAR (Europe) and of WFII represented WFII in terms of added value services or business models? Are these changes on this IAIS subcommittee. The draft document ICP 24 on Insurance affecting in different ways intermediary participation in private or commercial Intermediaries was discussed. The main concern was as to whether these lines, or in Life and Non-life insurance? Do intermediaries in your region should be referred to as principles or standards. Nic will take this up at the consider the Internet an opportunity or a threat?next meeting. Dr. Adel Mounir also undertook to take the matter up with the Conduct subcommittee. In his presentation at the Copaprose meeting Dr. 2. The three biggest threats for intermediaries in the life insurance space Adel mentioned that he is willing to adopt the WFII document. He also pointed are:out his appreciation for the support and guidance the IAIS enjoys from WFII. 3. How has the World financial crisis of 2009 affected your market, and the
business of intermediaries, and what is the outlook for 2010 and going The IAIS ICP Draft Principle 25 Code of Business was also discussed. forward?
• The World Council also identified the OECD’s work on financial education 4. What are the three main issues in the agenda of the trade organization of the public and intermediaries as one of WFII’s key dossiers. that you represent and how are these issues affecting, or could be affecting,
the daily business of intermediaries?• Microinsurance. It was emphasized that the growing importance of
Microinsurance in many markets should be addressed by WFII on its 5. What are, in your opinion, the three main drivers that would positively agenda. Luis Ros presented the WFII position paper on Microinsurance influence the future success of intermediaries?which was accepted and adopted.
