RiskSA Magazine January 2014 by COSA Media

RISKSA Magazine

2013

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JANUARY 2014

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5 PICA AWARDS WINNER

MAGA ZINE OF THE YEAR

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Copyright RISKSA (Pty) Ltd 2014. All rights reserved. Opinions expressed in this publication are those of the authors and do not necessarily reflect those of the Publisher, Cosa Communications (Pty) Ltd, COSA Media, and or RiskSa (Pty) Ltd. The mention of specific products in articles or advertisements does not imply that they are endorsed or recommended by this journal or its publishers in preference to others of a similar nature, which are not mentioned or advertised. While every effort is made to ensure accuracy of editorial content, the publishers do not accept responsibility for omissions, errors or any consequences that may arise therefrom. Reliance on any information contained in this publication is at your own risk. The publishers make no representations or warranties, express or implied, as to the correctness or suitability of the information contained and/or the products advertised in this publication. The publishers shall not be liable for any damages or loss, howsoever arising, incurred by readers of this publication or any other person/s. The publishers disclaim all responsibility and liability for any damages, including pure economic loss and any consequential damages, resulting from the use of any service or product advertised in this publication. Readers of this publication indemnify and hold harmless the publishers of this magazine, its officers, employees and servants for any demand, action, application or other proceedings made by any third party and arising out of or in connection with the use of any services and/or pro-ducts or the reliance of any information contained in this publication.

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contents JANUARY 2014

20 The power of associations

Financial services associations and institutes in South Africa are ready for another bustling year in 2014, as they prepare to champion causes on behalf of members and safeguard their interests. It is clear that the biggest challenges and opportunities will emanate from the same place – changing legislation.

10 Gazing forward, gearing up

A new year brings with it new challenges and opportunity. RISKSA caught up with short-term insurance industry leaders at the end of 2013, to find out what their predictions are for the year ahead. Here’s what they had to say about problem areas and compelling prospects.

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short term

32 / Constructing our future 40 / MEDUPI: an industry left reeling

44 / Risking the Antarctic winter 50 / VAPs encourage client retention 60 / Capital, cost and CATs: reinsurance in 2014

64 |

medical

64 / Healthcare funding: the year ahead 70 / Bridging the gap

Mandela, a South African icon

Freedom fighter, father of the nation, grandfather figure to millions, a statesman, peacemaker, a symbol of hope, an inspiration – Nelson Mandela, affectionately known as Madiba or Tata, has come to be all these things and many more over time.

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long term

74 / 2014: Life assurers weigh in

82 / The ham in the sandwich generation

Like us on FACEBOOK / RISKSA

86 | managing risk

86 /Safe as houses 90 /PCI DSS v3.0: What you need to know

92 |

career

92 /Investments are a trick advice area 94 /New risks new opportunities 96 /Surviving the first years: advice for new advisers 100 /New Products 104 /Brokers abroad 106 /Building a brand

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ASSETS

138 | 134 / Is the smart money on smartwatches?

126 /In the lap of luxury â&#x20AC;&#x201C; fractional yacht ownership 130 / A SUV for all seasons 2014 Range Rover Sport

travel

138 /Flying High 144 /Conference hotels reviewed

Renasaâ&#x20AC;&#x2122;s highly personal service is underpinned by advanced claims and underwriting technology. We give our brokers state of the art tools that provide a sustainable competitive advantage without inter-

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fering with their existing processes and systems, or compromising their independence. Want the best of both worlds? Contact Renasa today on 0860-RENASA or visit www.renasa.co.za.

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Dearreader With 2013 firmly entrenched in our hearts as the year Madiba completed his journey, we look ahead to what 2014 might bring. With an election around the corner it is going to be interesting, no doubt about that. Our feature writers have spoken to the movers and shakers across many financial services niches and we bring you their predictions for the year ahead. You will also find new sections inside your 2014 RISKSA. These stories are aimed squarely at our successful financial services readers and will delight with clever ways to further your career and to invest your cash when you hit the big time. From career skills, travel tips and tricks for buying that company car or finding that secret venue for your deal-breaking business lunches, RISKSA might just have become the only magazine you'll ever need. Or read. This does not mean we’re going to be skinny on the hard content; not at all. With five PICA awards under our belt – three of them for generating the best original content in the business – we know we have to deliver the goods if we are to be in the running again this year. Some readers will notice with dismay that their free or sponsored subscriptions might have come to an end in 2014. POPI, CPD hours and the rising costs of bringing you the best content in the business have all played a role in our revised distribution strategy.

While we will jealously guard your personal information, keeping it safe behind our firewall, we now need to know exactly who you are, and you need to let us know that it is okay to bring our content to you. Without this, you will be unable to claim your CPD hours and points and enjoy discounts on our events and seminars. If you would like to subscribe to RISKSA, please pop along to RISKSA.com and follow the links you will find there. RISKSA is available in whichever format you choose, from print to all-platform digital to web; we make it easier for you to be the smartest folk in the room. We welcome ex-Etanan, Carel Nolte, as a regular columnist to RISKSA in 2014. Be sure not to miss the sometimes irreverent Kuier with Carel on page 146. And finally, it is with some sadness that we bid farewell to our online editor, Hanna Barry, who leaves us this month. We wish you all good things in your chosen career path Hanna, we miss you already. We hope you enjoy the new-look RISKSA as much as we enjoyed creating it for you. As always, we’re keen to hear your feedback on editor@risksa.com.

Gazing forward Hanna Barry

A new year brings with it new challenges and opportunity. RISKSA caught up with short-term insurance industry leaders at the end of 2013, to find out what their predictions are for the year ahead. Hereâ&#x20AC;&#x2122;s what they had to say about problem areas and compelling prospects. 10 2

gearing up Ian Kirk,

CEO of Santam Industry conditions are currently very difficult. Underwriting results, particularly for the intermediated insurers, are under significant pressure. Insurers need to consider strategic options, including corporate action and restructuring, to stay in the game. The introduction of Solvency Assessment and Management (SAM) in January 2016 may also force a degree of corporate action in the insurance sector, given the results from the Quantitative Impact Study (QIS) 2 exercise. I am confident that Santam will be able to comply with the requirements at that date. We are currently undertaking an approval process of our internal financial model, which we have used for many years, with the Financial Services Board (FSB). We support the regulatorâ&#x20AC;&#x2122;s push to have the legislation in place by the 2016

deadline. Risk-based capital requirements and improved governance, risk management and reporting arrangements, in line with international standards, will be an improvement on the current arrangements. Challenges for insurers include low GDP growth in South Africa, a weak exchange rate, interest rates that are at 40-year lows and increased systemic risk within the general insurance environment, which leads to increased risk exposure and higher claims experience. Over and above that, we experience considerable regulatory pressure and a shortage of skills in certain of the technical areas which, along with the transformation requirements, poses some difficulties. Of course, these challenging conditions continue to create opportunities for insurers that can cope with the difficult decisions on pricing and operating approaches in a very

competitive market. Technology is an imperative and a differentiator. To be successful, insurers need to focus on servicing policyholders and intermediaries at the highest possible level in terms of product development and customer service. At the end of the day, it all comes down to having the best people on the ground focused on serving customers and intermediaries.

Warren Bolttler, CEO of PFP Insurance Brokers

As we move into 2014, small commercial brokers will continue to find it difficult to cope with the costs associated with the current compliance and regulatory environment. In the short term, markets will remain soft and rates highly competitive, as a result of good treaty capacity in the market and a growing appetite for international investors to move their money out of traditional investments into the insurance markets in the UK and Europe. The implication for brokers is strong competition on price because of the soft market conditions and a need to differentiate from competitors. Clients will become more demanding about the quality of service they receive with a stronger

requirement for accurate invoicing, efficient delivery of policy documentation and, most importantly, claims handling efficiency. In order to deliver on these service requirements, there will be growing pressure on commercial brokers to run sophisticated IT systems and to take the IT service in-house. Brokers who can offer clients a bespoke service and give their clients access to specialists with in-depth understanding of their businesses will attract a greater portion of business in 2014. This year will remain a challenging year to land large South African clients, but Africa will be an exciting market for business growth for those brokers who have spent 2013 cementing African partnerships and key alliances. We have spent the majority of our first year of trading building a team of service professionals and service capabilities in order to to create a competitive offering in the South African market. Our commercial team has built strong product and system capabilities to handle both the corporate and commercial business. Having designed our own commercial policy wordings, we can support aspects of client requirements often not supported by standard offerings. We may look to increase our footprint across the country in 2014 with key new appointments in Gauteng and possibly the Western Cape in the near future.

Nic Kohler, CEO of Hollard 2014 needs to see the industryâ&#x20AC;&#x2122;s lead insurers, Santam and now Hollard, providing stability and consistency in underwriting standards, especially when it comes to risk management requirements. We also need to witness a

12 4

greater level of collaboration between insurers and brokers to secure the sustainability of this channel. This collaboration needs to encompass data sharing, claims supply chain management and risk management standards, to name but three areas.

That is why we have renewed our focus on the broker channel and revised our entire broker distribution strategy. Last but certainly not least, we’ll be starting 2014 on a high with our MUA partnership, which allows us to gain access to a previously unexplored market segment.

Regulatory change will remain pervasive. With the outcomes of the credit insurance and third-party cell captive reviews due soon; ongoing evolution of the regulatory approach to binder fees expected; and with Treating Customer Fairly (TCF) and SAM very much in focus, industry players will need to continue to invest, adapt and potentially adjust positioning strategically in order to stay relevant. We are very confident that we will comply with the requirements of SAM by the January 2016 deadline.

Herman Schoeman,

We support the local drive to improve the industry’s quality of governance, transparency and risk management and we see the current timelines for SAM as a positive and realistic objective. I believe the biggest threat to successful implementation is the continued uncertainty relating to the reporting and disclosure requirements underlying Pillar III. The regulator and supporting SAM task groups still need to make significant progress in order to clarify the reporting requirements for both solo entities and insurance groups. Delays in the finalisation of these requirements will put pressure on insurers in ensuring that their processes, systems and staff can deliver on the new requirements. It promises to be a very interesting year.

Leon Vermaak,

CEO of Auto & General Tough macro-economic conditions point to another tough year for the insurance industry. Crime, inequality, insufficient job creation and a dent in investor confidence caused by election propaganda, equals continued social unrest. Affordability remains a huge problem as evidenced by the decrease in credit health, the number of South Africans using revolving credit facilities, weakened household cash flow and stagnant car sales. What this means for our industry is that firstly, there will be a limited number of new entrants and, secondly, our existing customers will not be buying insurable assets and will continue to battle to meet their insurance payments.

CEO of Guardrisk

Unsurprisingly, new legislation will remain one of the biggest challenges for the shortterm insurance industry in 2014. The TCF initiative will continue to claim its fair share of time and resources and the Protection of Personal Information (POPI) Act will also require significant investment in terms of resources and systems. As with TCF, POPI will materially change the way insurance business is conducted in South Africa. SAM and Solvency II developments have certainly placed the spotlight on effective balance sheet management. With the industry awaiting the outcome of the FSB’s economic impact study, individual insurers, including Guardrisk, will start to focus on the reorganisation of their balance sheets to optimise cost and mobility of capital. But new legislation will also provide opportunities. The FSB’s discussion document on third-party cell captive insurance and similar arrangements, the forerunner of a legislative framework that takes cognisance of the unique structure of cell captives, is an important development in the local alternative risk transfer space. Not least, because it will put an end to so-called similar arrangements which pose a significant risk to the integrity and sustainability of this industry. For Guardrisk, one of the most pressing challenges in 2014 will be finding the capacity to implement and manage changes in the regulatory landscape and rolling these out to our cell owners. Managing costs against the background of ever-increasing regulation also remains a major challenge. Significant opportunities are expected to arise by unlocking synergies with Guardrisk’s new owners, MMI Holdings, once the relevant authorities approve the transaction. 

Greater cost efficiencies and improved underwriting is the order of the year. We’ll also be focusing on transformation, skills development and compliance demands. At Auto & General, we believe that the best way to predict the future is to invent it.

13 5

changing needs of brokers and customers. Ultimately, it’s about partnering with brokers to deliver to customers, ensuring ongoing aftersales service that sustains the relationship. It is imperative for future industry leaders to shape their business around partnering with a network of brokers that share the vision of providing insurance solutions to valued customers. Accordingly, the same level of service to broker partners needs to be provided, thereby making their journey as seamless as possible.

Following the government’s recent acknowledgment that health insurance products have a pertinent and specific role to play in the health sector, gap products are expected to be revitalised and have been targeted by Guardrisk as an area in which some exciting product development can be expected. That we employ many of the best people in the business is not something we take for granted and next year we will be ramping up our staff engagement programmes, with specific attention on retention initiatives.

Edwyn O’Neill, CEO of Zurich

Our world is changing, our customer is changing and we must adapt or risk falling by the wayside. Given the ongoing changes in the industry landscape, companies that can implement cost-effective business models and flexible portfolios, while distributing innovative and value-adding products, are likely to emerge at the forefront of the industry. Successful insurers need to adapt to the

A new type of customer demands access to more information than ever before, which makes digital innovation a key component of any successful organisation’s offering and another challenge that the industry faces. Insurers are being confronted with a growing need to offer services to brokers and consumers through mobile devices and apps. For financial services professionals, convenience, ease of use, technological capabilities and a mind-boggling array of apps will be pivotal in realising sales and efficiency targets, cutting overheads and enhancing broker-customer engagements. Convenience is key for any service-delivery driven business. Regulatory reform, while delivering long-term benefits to the industry, may be more costly than some companies expected. Zurich’s global expertise and capabilities serve as an advantage for the company because experience coming from an already highly regulated global environment is shared. These best practice principles will stand us in good stead with SAM implementation. Alongside regulation, skills are an everpresent concern for our industry and there is a significant deficit in young, skilled, insurance professionals across the board. We must invest in training new workforce entrants and

attracting people who will move our sector forward with entrepreneurial innovation and thinking.

Tom Healy,

unit manager of the Knowledge Centre at Marsh Africa Reverting to 2012 and 2013, major catastrophes such as Hurricane Sandy, the Oklahoma tornado, European floods and Australian wildfires have been countered by ongoing capital investments into the market, abundant reinsurance capacity, intense competition between insurers for premiums and the launches of relatively new product lines such as cyber insurance. The result has been stable quarterly markets over 2012 and 2013 to date. The major international insurer and reinsurer conferences in Monte Carlo (September) and Baden-Baden (October) concluded that the market would remain stable-soft for early 2014 because of convergence capital (additional financial-market capital) now freely available to reinsurers; abundant direct and reinsurance capacity available to insurers; strong competition between insurers for customer retention and increased market share; and the absence, at the time of writing, of any major catastrophes producing extensive insured losses. This means that stable insurance market conditions should prevail again in this key quarter. Stable-soft markets essentially mean that insurers and reinsurers should continue to make good underwriting and corporate profits, expanding reserves and maintaining strong solvency margins. Reinsurance capacity will remain quite abundant, while insurer retentions for their own accounts may increase to further maximise their profits. Policy cover limits may be negotiable upward and policy deductibles negotiable downwards, with policy wordings

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margins will all have an impact on the shortterm insurance industry in 2014. One also has to factor in legislation such as TCF, POPI, the Consumer Protection Act, the Financial Advisory and Intermediary Services (FAIS) Act and the Road Accident Fund Benefit Scheme. Indwe will apply itself equally to both challenges and opportunities, knowing when challenges are simultaneously a threat and an opportunity. Furthermore, we will focus on our advisory service, which gives us a competitive edge in the market. Clients want advice and guidance when it comes to insurance and that’s what we pride ourselves in providing.

Raimund Snyders,

CEO of Mutual & Federal

including more extensions and fewer exclusions. On the insurance claims front, much depends on individual insurer experience. Some will take a liberal approach to claims in line with the stable-soft market conditions, while some may take a more conservative look, if the market conditions are too soft in places. Finally, virtually all insurers, reinsurers and brokers will continue to be subject to ever-increasing international and regional regulatory controls and requirements. The costs of such compliance continue to escalate and could intensify the search for merger and acquisition opportunities in the year ahead to help rationalise these costs. While global interest rates remain foreseeably low and may limit 2014 investment income for insurers, stock exchanges are hitting record levels and smart insurer investment managers should be able to capitalise on this.

Peter Olyott,

CEO of Indwe Risk Services The stagnant economy, high crime rates, increasing levels of cyber-crime, deteriorating infrastructure, a complex risk landscape, pressured consumers and declining broking

The current soft insurance cycle will continue to be a challenge in 2014, as insurers try to align the risks we write with how we price for them. This is particularly true in the personal lines space on motor books. Secondly, we are currently in a difficult underwriting cycle and need to help customers manage their risks. Severe weather-related events tend to happen in cycles and it’s a question of how you price for them without overreacting, while having the correct risk management in place. All of the big insurers have shown deterioration in their underwriting results and there is huge opportunity in addressing that. Insurers can’t carry this risk alone nor simply pass risks on to reinsurers, so it will be a challenge to find that balance. The regulatory and compliance environment continues to gain momentum and 2014 will be an important year for embedding regulatory changes. For example, when it comes to TCF, we must ensure that we are able to get our businesses to really think about our customers and how we operate. It’s not about satisfying the regulator, but rather, satisfying customers. Ensuring that the value chain – from the

customer, to the broker, to the insurer and reinsurer – works efficiently within regulatory parameters will be a challenge. The opportunity for insurers lies in connecting with customers, both in terms of what you deliver and how you deliver it. This plays out across a range of elements in the value chain, including price, access, product features, claims management, policy wordings and conditions, as well as how you help customers prevent, manage and prepare for risk events. The insurers that successfully partner with brokers, building effective solutions for them while delivering value to customers, will reap the  benefits.

financial and human capital constraints will continue to hamper business growth. If ever there were a trend indicator for 2014 and beyond, it would be that volatility is here to stay. Ongoing labour action and disputes, political upheaval, reputational crises across both corporate and government sectors, market and currency volatility, flagging investor confidence, growing regulatory pressures, power shortages and extended outages, failing infrastructure, serious levels of consumer indebtedness, hefty increases in operating costs and a dire shortage of institutional management capability are all culminating to take their toll on business and consumer confidence. Volatility is something that South Africa will face for at least a couple of years and businesses will need to find solutions to work within such an environment.

Anton Roux, CEO of Aon

All underwriters in South Africa have made unacceptable underwriting losses, so itâ&#x20AC;&#x2122;s very likely that we will see premium increases in 2014. As we are going into an election year, we can expect business confidence across the board to take a knock. The issue is not so much the outcome of the elections, but rather the fact that many key policy decisions will be delayed until after the elections. I believe that we will continue to see a deepening of strategic risks arising from economic, political, competitive and regulatory factors during the year and for the foreseeable future. The downward trend in local business risk readiness and risk maturity as a result of

The worrying trend is that elective expenditure on risk readiness is on the decline, as companies continue to defer spend on risk mitigation. The good news is that building overall resilience and ensuring that the business has plans and procedures in place to reduce risk can mitigate these risks to business. Threats provide opportunities for growth in that the best-prepared companies will be the ones that better manage their vulnerabilities and withstand a greater range of threats. While it is difficult to predict which risks will emerge and demand attention, we can be certain that successful companies will not be the ones that adopt a wait-and-see approach. Instead they will be the ones that prepare themselves thoroughly to anticipate future needs and undertake the difficult process of finding solutions to address them.

The power of Christy van der Merwe

20 2

H T G EN RS R T S E B M U IN N

associations C

ompliance with regulation is undoubtedly the top concern for associations, as their members struggle to keep up with the costs of compliance, and the constantly evolving nature of this regulation in South Africa at the moment. The new year will be particularly tough because so many issues are reaching critical junctures. “Whether you are located in the heart of Sandton or on a dusty road in the Karoo, Financial Advisory and Intermediary Services (FAIS) legislation, Regulatory Exams, direct insurers, challenging risks and a declining economy seem to have a hold just the same,” says Andrew Brauteseth of the Drakensberg Insurance Institute. Wynand Louw, president of the Insurance Institute of Northern Gauteng, adds, “2014 brings with it a number of uncertainties. We have elections, and it seems that investors are holding back on any investment or growth in their companies. That has a direct effect on most of our smaller independent brokers, many of whom have to divide their time between acquiring new business, compliance with new legislation, studying for various examinations and qualifications to ensure that their  company’s reputation stays intact.”

“Of course, this also comes at a cost. While not solely due to compliance, if we analyse the costs of doing insurance business over the last six years, costs plus commissions have increased from 25 per cent of premium to 32 per cent of premium for typical insurance. This increase has certainly placed underwriting margins under pressure, with this increase coming straight out of the underwriting margin, and ultimately being passed on to consumers,” Scott adds.

Expected regulation and legislation issues to be braced in 2014 include: Treating Customers Fairly (TCF); Twin Peaks; Retail Distribution Review (RDR); Binder Regulations; Solvency Assessment and Management (SAM), Protection of Personal Information (POPI) Bill; and the Medical Schemes Amendment Bill – particularly the demarcation of medical schemes and insurance businesses. The industry can also expect a review of the ombudsman landscape; the third-party cell captive review; the BRICS reinsurance project; and the policyholder protection scheme, which will see a fund being developed in order to protect consumers in the event of the failure of an insurer. “In my member visits to CEOs, the lament most often heard is that CEOs, especially of small- to medium-sized companies, now spend in excess of 50 per cent of their time dealing with compliance. This detracts from their ability to deal with underwriting challenges, marketing their products and growing their businesses,” says South African Insurance Association (SAIA) CE Barry Scott.

While keeping up with the changes requires vigilance, it is the job of the associations to keep abreast of developments within the industry and to inform their members about changes which may require action. It is then up to the members to turn the challenges into opportunities. “2014 is going to be a challenging year for the insurance industry; however, I strongly believe that the tougher the challenges, the bigger the opportunities. And a blend of experience and fresh thinking will create even more new opportunities,” emphasises Justin Naylor, president of the Insurance Institute of Gauteng for 2014.

of an association is member education and upskilling. “Continuous Professional Development (CPD) is an ongoing challenge for our members as they will constantly be required to obtain the hours necessary as required by the Financial Services Board (FSB),” says Insurance Institute of the Cape of Good Hope (IICoGH) president Natasha Wyborn. Wyborn notes that IICoGH made great strides in member education in 2013 with the Insurance Bootcamps run over the year. She adds that there is discussion around these being rolled out further afield than Cape Town, Johannesburg and Durban, and potentially being held in the Free State and Eastern Cape in 2014. Michelle Amm, president of the Insurance Institute of the Border, reiterates the difficulty for intermediaries in smaller cities to pursue educational activities. “Due to our distance

The Financial Intermediaries Association of Southern Africa (FIA) urges intermediaries not to get bogged down by regulation, but to rather welcome it. “If every FIA member embraces the TCF legislation – whatever form it takes – we can do wonders for the image and reputation of financial advice. By embracing TCF, we can ensure that product suppliers take joint responsibility for product failures, product training and good service,” says Justus van Pletzen, CEO of the FIA.

Member education With this rapidly shifting landscape outlined, one of the most important roles

Words of wisdom

from local insurance institute leaders • I am convinced that to be successful in today’s environment, one has to believe in ‘the power of association’. The days of trying to do everything alone are long gone. Liesl Ebersohn – President of the Insurance Institute of the Free State (IIFS) • The insurance industry is innovative and constantly changing and offers more than just a career in insurance. Members can venture into finance, marketing, legal and so on. Members need to take the opportunity to explore all sectors. Bonita Weeks – President of the Insurance Institute of KwaZulu-Natal • We would like to see a shift in the approach insurers take when marketing their products in future. Direct insurers watering down

and diluting the worth of brokers is not a sustainable solution for our industry, and will only continue to breed distrust of the insurance industry as a whole in the eyes of the consumer. We should rather look to emphasise the importance of our members in the industry, as their wealth of knowledge is vital in identifying and managing risks correctly. David Brauteseth – Drakensberg Insurance Institute member • There will always be the need for high advice and high touch broker relationships and there will also be consumers who are best serviced direct or online – the challenge is getting this balance right so the consumer gets the most appropriate solution. Distribution and meeting the needs of changing consumers requires the insurance industry to

from the major city centres, attending the necessary courses, workshops or seminars is often not cost-effective due to travel and accommodation costs, particularly when more than one member from the same company needs to attend. Our professional members who need to obtain their required number of CPD points are finding this particularly difficult.” On the topic of CPD, Louw notes that a big question for advisers

is which industry association they should align themselves with. “Which association will be willing to keep record of their CPD credits for life, medical, short term, employee benefits, investments and others? You currently have to make a choice between associations. It can be quite fragmented for advisers who crosssell between medical, employee benefits, life, short term and investments. This could cause an end to the truly independent broker, encouraging them to

specialise and align themselves with network companies,” he states. In addition to the continued education of existing members, the introduction of new skills into the industry is another area of concern. Van Pletzen notes that the short-term insurance Human Capital Development project – a multistakeholder initiative in which the FIA plays a major role – will continue to address key issues such as sustainability and transformation. “We believe there are huge opportunities for new entrants to the insurance and broader financial services sectors. And we believe that through training, skills development and education, we can secure a viable financial services sector for generations to come,” he adds. The project committee includes the FIA, the SAIA, the Insurance Institute of South Africa (IISA), the Insurance Sector Education and Training Authority (INSETA), Munich Reinsurance, Etana and the FSB.

deliver relevant products through a variety of appropriate channels. Justin Naylor – Deputy President Insurance Institute of Gauteng • One of the biggest opportunities available to us is to be involved with, and provide input into the formulation of legislation, and to participate in implementation. The chance to contribute to the industry at this high level should be taken up with zeal. Liesl Ebersohn – President IIFS • The challenge, and opportunity, for the Insurance Institute is to be relevant. While this might seem obvious, it is harder to achieve in practice. The Institute must be a social platform as well as a professional source of knowledge, training and information. Being located outside of the national capitals, the Insurance Institute needs to

become a conduit between the changing insurance environment driven by Johannesburg as the commercial hub, and Pretoria as the regulatory hub. Individuals tend to work in a vacuum, and it is for the institute to bridge this gap. Gavin Walsh – President of the Insurance Institute of the East Rand • There is a constant need and demand for knowledge and upskilling our members. The constant threat of a lack of expertise as senior members retire and exit the market means we need to implement continuous successful succession planning as new members enter the market. Natasha Wyborn – President of the Insurance Institute of the Cape of Good Hope

2014 FOCUS Above and beyond the regulatory and educational focus of associations and institutes in 2014, there are a number of other areas receiving attention.

FIA

The FIA places emphasis on its effort to build a stronger intermediary body, in particular through engaging with regulators. “The FIA’s board of directors, national executive committees and branch structures are actively fighting for intermediary rights, every day. Since all risk and financial advisers benefit from the hard miles that we put in, all should join up and contribute.” Building a stronger intermediary body also involves promoting the value of advice from risk and financial advisers. Improving the image of financial services is another focal point for the FIA. “We believe that any initiative to strengthen

the overarching financial services landscape is worthwhile. As such, together with SAIA, we have started a financial services forum to include the CEOs of ASISA, BASA, FIA, FPI, IISA and SAIA. This forum is tasked with improving the image of the financial services sector from both the consumer’s and the regulator’s perspective. The FIA has adopted ‘Building a future in financial services’ as its 2014 theme,” says Van Pletzen. Another area under the spotlight for the FIA is the growing middle market in South Africa. “A huge opportunity exists for both risk and financial advisers to sell to South Africa’s growing middle market as they heed government’s call to improve access to financial services products. Financial intermediaries need to understand this or risk losing future sales to the direct market,” adds Van Pletzen.

FPI

The Financial Planning Institute (FPI) notes that

in 2014, consumers will be more aware of the costs related to obtaining financial advice than ever before. “As financial planners it will be our role to make sure that we can clearly articulate our value proposition to our clients,” says David Kop, senior manager policy and research at FPI. The institute outlines the areas that financial planners will need to put emphasis on in 2014. These are: firstly, ensuring that the planner or practice has a client centric focus, because clients are increasingly more educated and astute, and the client experience will become a differentiating factor. The use of technology to deliver a seamless service to clients will become important. Secondly, the client profile and segmentation of a client base is important because a planner or practice can no longer be all things to all people. A planner will therefore need to take a critical look at the client profile they want to serve, and even after that, segment their client base. A segmented client base will provide the ability to deliver a good service to all clients, but a great service to clients who add greater value to the business, says Kop. And thirdly, a review of income sources and finding ways of generating recurring income is vital. Planners need to be able to demonstrate to their clients the ongoing value that they deliver. “The mind-set of a planner will need to change from a one-off transactionalbased approach to building long-term client relationships, which will lead to a growing recurring income stream. This change in focus will be beneficial to the client as they will get ongoing advice and value. It will also be beneficial to the planner or practice as they will be building a business that can one day be sold when the planner retires,” adds Kop.

• I am excited about the number of youngsters entering the industry and seeing the financial services environment as their playing field to make a living. We at the IING want to encourage these dynamic young people to become part of our institute to make our industry and our community a better place. Wynand Louw – President of the Insurance Institute of Northern Gauteng • Technology poses a challenge for some, but a world of opportunity for others. We cannot afford to ignore it. The opportunity exists to step out of the box, use the technology that is available to us and be creative. Social media tools have significantly changed the way that we

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communicate and it is imperative that we learn how to use these tools to our benefit. Michelle Amm – President of the Insurance Institute of the Border • South Africa’s insurance markets’ drive into Africa is growing daily. The African continent often looks at SA for direction in this regard, and this presents a great opportunity. Bonita Weeks – President IIKZN • Hold on tight to your independence, because good advice is one of the biggest and most valuable requirements of our profession. Liesl Ebersohn – President IIFS

SAIA

Keenly aware of the compliance burden on its members, the SAIA legislation team will remain under the leadership of general manager Suzette Strydom, assisted by the SAM team led by Nico Esterhuizen. Another issue top of mind at SAIA is transformation, which needs a boost in the industry. To address the transformation needs of the industry, at its last meeting the SAIA board created a new committee to deal with transformation and social risks, to be led by general manager Leila Moonda. “The access to insurance aspect is proving particularly difficult for insurers, which are expected to sell products into markets which, in most cases, they have no experience with. There is no ready-made intermediary network in place, especially in the areas where the products need to be sold. There are also some legislative challenges, around the FAIS area, and the failure of the legislative process to address the much-awaited Micro-insurance Bill (which we now believe will no longer be addressed through a specific bill). A Microinsurance Bill would have allowed composite insurers, with lower solvency requirements and less rigorous FAIS requirements,” says Scott, explaining some of the challenges with transformation. He adds that in the area of enterprise development, the Department of Trade and Industry-led discussions around the motor body repair industry continue, with progress being made at last. There is pressure for the industry to play more of a role in the development of black suppliers, and increasingly in the building trade. “We have previously shied away from creating our own enterprise development fund at the SAIA, but this possibility now needs urgent attention. As an alternative, we are looking at developing a relationship with the ASISA enterprise development fund,” notes Scott. SAIA will continue its flagship consumer education project, which has delivered more than R560 million to basic financial literacy education. Importantly, on the issue of insurance risks, SAIA has recognised that the underwriting results in the industry have come under pressure, and needed to address this. The board agreed that SAIA needs a specific focus on underwriting areas, and accordingly created a new board committee to tackle insurance risks, under the leadership of stalwart general manager, Viviene Pearson. “This new portfolio carries many challenges, as we need to consolidate much of the work previously done under a variety of portfolios. Pearson has been given this portfolio because of her experience and successful track

record in delivering projects. The portfolio will include motor, property, agriculture, marine, construction and machinery, among others,” explains Scott. Some of the specific projects include the green geyser project; sustainability of motor insurance; and sustainability of agricultural insurance.

And there’s more… As well as regulation and compliance, education and new skills, building a stronger intermediary body, serving a new market, ensuring client-centric advice, transformation, and insurance risks – there are even more issues on the horizon in 2014. Constantly evolving technology not only means that intermediaries must change the way they work, but it also means that the risks are constantly changing, and ways to deal with online scams and identity theft and so on must be found by the industry. The constant threat to brokers by direct insurers, generally weak economic conditions, global warming, rising claims costs and continuing consolidation in the market are additional pressures that must be dealt with by intermediaries.

Stacked up together, these may seem like insurmountable challenges, and it is no wonder that the industry experiences negative sentiment.

However, it is encouraging to hear the optimism coming from every organisation canvassed by RISKSA. “We need to tell government that insurance plays an essential role in the economy, protecting the assets and investments of our citizens and businesses. We are an ethical industry, with the interests of our consumers at heart, and with a long track record,” states Scott. Financial services is a vital and dynamic industry in South Africa – the market is constantly improving and innovating products that make a significant difference in the lives of South Africans.

MAN DE LA

A South African icon

Neesa Moodley-Isaacs

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rom his early years, fighting apartheid as a lawyer in Johannesburg in the 40s and 50s, to the 27 years he spent unjustly imprisoned on Robben Island, Madiba’s indomitable spirit has carried the weight of a nation’s hopes. When he was finally freed in 1990, his remarkable propensity for forgiveness astounded South Africans and the international community, which has since held him in the highest regard. In December 2012, when Madiba was hospitalised for nearly three weeks to have gallstones removed and receive treatment

for a recurring lung infection, the world held its breath. Just three months later, he was readmitted for the “recurring lung infection”. President Jacob Zuma issued reassurances that the former president was able to breathe without difficulty after water was drained from his lungs. In June 2013, he was readmitted. However, against all odds, and after a three-month stay in hospital, he was again discharged at the beginning of September. At 20h50 on Thursday, 5 December 2013 at the age of 95, Nelson Mandela passed away surrounded

by family at his Houghton home. Hundreds of South Africans converged outside his residence at all hours as global news channels paid tribute to this great man. The certainty of death does not make it any easier to accept and indeed, in the case of Madiba, the world is a lesser place. Growing up, I always knew who Madiba was. The first time I can remember being concerned about his health was in 1988 at the age of ten, when I spotted newspaper headlines screaming about Mandela’s first diagnosis

with tuberculosis. It was the first time I’d heard of TB and I remember my parents speaking in hushed tones about the implications of his illness. Today, 25 years later, as a woman in an inter-racial marriage, I have a deep respect and abiding love for Nelson Mandela even though I have never met him. His fight and role as leader of the country paved the way for me to publicly recognise my personal relationship. He created an environment where my son can hold his head high and experience opportunities he might not otherwise have been able to. As a nation and indeed the world mourns the death of this great man, RISKSA chatted to some of the leaders in the financial services industry about their Madiba memories.

What is your first memory of Nelson Mandela? Christelle Fourie, managing director of MUA Insurance Acceptances: I went to school in Paarl, so I was always very aware of Madiba living in the Victor Verster prison close by. A very big moment in my life was the day of his release when I was at boarding school in matric. My best friend wrote me a beautiful poem about Madiba and it has been one of my prized possessions ever since. I remember lying on my bed at La Rochelle, listening to the radio about his release. Prem Govender, chairperson of the Financial Planning Institute: My first memory of Nelson Mandela was around the late 1960s. The late Ismail and Fatima Meer were my parents’ friends and, during their visits to our home, I would listen in on the conversations they had about Mandela and the ANC. In particular, I remember the banning orders that were constantly being enforced on people like the Mandelas and the Meers. My clearest memories and a fair understanding of what was going on in the country only surfaced in the 1970s during my high school days. Then he (Mandela) was this mystical figure who was put behind bars for life, deprived of being with his wife and children and we felt very sorry for all of them. Dube Tshidi, executive officer at the Financial Services Board (FSB): Although I have some memories of the Rivonia trial, I was still too young to fully understand its significance. But, when Tata walked out of prison, that moment had a profound effect on me. Here was a man whose life was taken away forcefully and yet he walked out of prison and proclaimed peace. He could have said anything when he was released, but his focus was on forgiving those who had wronged him. That is quite profound. Anton Ossip, chief executive of Discovery Insure: My most significant memory of Madiba was the day he was released. I vividly recall

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gathering around the television to watch this historic moment. We all knew that South Africa would never be the same again. Tembisa Marele, communication specialist at the FSB: Tata Madiba’s release from prison will forever be etched in my memory. It’s a story I hope to relate to my great-grandchildren. He was the man who, up to that point, had only been a larger-than-life, almost mythical figure that I had sung and prayed about, and whose Rivonia trial speech I had memorised. That day he was finally set free and suddenly become more real to my teen self. Unforgettable.

Looking at where South Africa is today as a country, what do you think Mandela would think of the legacy he has left behind? Christelle Fourie, managing director of MUA Insurance Acceptances: It is human nature to often focus on the negative but if we step back and look at what we, as a country, have achieved since his release, it is still a miracle, brought about by an incredible man who had vision and true leadership. Obviously we have our challenges, but the spirit of our rainbow nation runs very deep in our veins. I believe he would be proud to see how the people of this country, ordinary South Africans, are living together, growing, to become the nation he envisaged. Great change often takes time and we must be patient. We still have a long walk

to real freedom but we have so much potential; we have no choice but to persevere. Prem Govender, chairperson of the Financial Planning Institute: I have no doubt that the rampant corruption and escalating poverty among the very people he went to jail for would distress him deeply. It can never sit well with such an icon that everything he stood for and promoted is being treated with disdain and disrespect, particularly by the people he mentored and hoped would carry his ideals and use them to create a better country for all. Dube Tshidi, executive officer at the Financial Services Board: Most of us think that Tata would look at the progress this country has made, and the challenges we still face, and either reflect on his pride or his disappointment. But that’s not the kind of person he was. Tata would look at everything and quietly find solutions to the problems that still remain. He always looked at the bigger picture. So, while he would agree that we have come a long way, achieved a lot, he would look at what more needs to be done. Anton Ossip, chief executive of Discovery Insure: I think he would be proud of all SA has accomplished and especially the peaceful nature of the transition that has persisted. South Africa is a miracle but mainly as a result of Madiba’s work and personality. However, he would expect even more from the country he fought so hard for. Tembisa Marele, communication specialist

at the FSB: I think Tata would have mixed feelings about where the country is today. I think he would give a fair assessment that acknowledges both our successes and challenges, and continue to fight for solutions to those challenges.

ensuring that his legacy continues by making South Africa a place where we can all stand tall and call it ‘home’. Let us pull together as a nation and put his legacy to work for the good of all so that this son of Africa will smile down on us in approval.

a blessing to have been alive at the same time as Tata.

If you were to pay tribute to this great icon, what would you say?

Dube Tshidi, executive officer at the FSB: Over the ages God has revealed himself to the human race through special human beings. These human beings all have one thing in common – selflessness. Their immediate families mean a lot to them, but the greater family, the human race, means even more. In Tata we have witnessed such a human being. Just as the Roman Catholic community recently proclaimed the arrival of the new pope by proclaiming “Papam Habemus”, meaning “we have a Pope”, likewise South Africans and the world are justified in saying “Tatam Habemus”!

Christelle Fourie, managing director of MUA Insurance Acceptances: My biggest concern is the talk of three to seven days of national mourning. We will have to prepare ourselves for a breakdown in service delivery, as well as not being able to conduct business during this time as a nation pays respect to the death of this incredible man. There will be a massive influx of foreign dignitaries, as well as other visitors who will surely flock to our country to pay their last respects. The logistics of arranging this at a moment’s notice will be a massive challenge for our government.

Anton Ossip, chief executive of Discovery Insure: His visionary leadership, humility and ability to transcend bitterness certainly stand out for me. South Africa and indeed the whole world owe so much to this great icon and, for many decades and generations to come, his legacy will live on.

Prem Govender, chairperson of the Financial Planning Institute: Fortunately we have had the most efficient and effective people at the helm of National Treasury, the FSB and the Reserve Bank. People who have ensured that we have some of the best regulation in financial services, which has already stood the test of time during and after the 2008 meltdown. With the implementation of the 'twin peaks' and Treating Customers Fairly legislation, the financial planning profession can certainly look forward to a bright future, thanks to the legacy of this great man who no doubt inspired the likes of Trevor Manuel, Pravin Gordhan and Gill Marcus.

Christelle Fourie, managing director of MUA Insurance Acceptances: I would thank him for creating a future in our beautiful land, a future for me as an entrepreneur and for my children. His capacity to forgive and to stay focused on his dream to build a country free of white domination and free of black domination is such an inspiration. He has created a vision that I believe we will achieve in years to come. Prem Govender, chairperson of the Financial Planning Institute: We are a nation in mourning for a man in a situation where no words could adequately describe what he has meant to South Africans in particular and the world in general. I don’t know of another leader or indeed any person who has inspired such emotion globally. We definitely share him with every country, he may be a son of our country but the rest of the world lays equal claim to him. In as much as it is difficult not to become emotional and publicly show our grief for his loss, this giant of a man would rather that we celebrated his life and his triumphs and expend energy on

Tembisa Marele, communication specialist at the FSB: The lessons we can draw from the life of this great man will live on for many generations to come. The selflessness with which he chose to live his life will continue to shape the character of the South Africa and the world that we all hope to live in. I consider it

What do you foresee in terms of an impact on the country and the insurance industry in the wake of Mandela’s death?

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Conuc g r n t i s t our future Sarah Bassett

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South Africa’s construction industry has experienced significant decline and instability since the end of the artificial bubble created by the 2010 Soccer World Cup preparations, and the ongoing impacts of global recession. 2013 in particular saw the industry in the headlines for all the wrong reasons, but experts suggest the industry is poised for recovery. We find out from insurers and underwriters where the growth and opportunities lie.

new report from PricewaterhouseCoopers entitled ‘SA Construction’ suggests that positive financial results from several large construction companies towards the end of 2013, coupled with order-book growth and the government’s public infrastructure commitments indicates that the economic cycle has bottomed out and is now set for upturn. “In the 2013 Budget, the government committed considerable funding, R827 billion over three years, to infrastructure development. We look forward to seeing this manifest in increased policy declarations and contract values, which will in turn increase the current premium pool,” says Storm Canham, casualty underwriter at Lion of Africa Insurance. “Entities such as the Passenger Rail Agency of South Africa (PRASA) have been allocated capital expenditure (CAPEX) to upgrade their

current infrastructure. We will also see more construction of industrial parks like Dube Tradeport.”

Energy growth With energy supply a major concern and a limiting obstacle for the country’s development prospects, it is the renewable energy sector that insurers point to as the key growth driver in the South African construction and engineering industries. The Department of Energy in November 2013 announced that it had signed agreements with 17 new preferred bidders, totalling investments of R33.8 billion in the third round of its renewable energy programme for independent power producers. This follows the signing of 47 projects in the first and second rounds of the programme.

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“We are heading into a new era of energysaving initiatives with a view to changing the landscape of our future energy to mitigate the shortage of conventional, coal-based energy technology,” says Canham. Renewable energy has indeed become a significant buzz word in South Africa and the continent at large. “I think in time this will be a major trend across the continent, but this will take a few more years. For the time being, everyone is looking to South Africa to see how it goes, and once our contractors have gained experience they will take that to the rest of Africa,” notes Brian Africa, head of marketing and business development at Performance and Custom Bond Services (PCBS). He notes that from a guarantee risk point of view, while much of this technology is new to South Africa, the construction is predominantly carried out in partnerships between local and foreign contractors, with international contractors bringing the experience. For this reason, lack of experience is not a concern for PCBS. The specialist underwriting agency offers performance guarantees to small and mediumsized contractors. Russell Myers, CEO of Mirabilis Engineering Underwriting Managers, expresses a more reticent view, noting that despite the swelling interest in renewable energy, Mirabilis does not feel entirely confident in the sector as yet, for a number of reasons. “The technology required remains expensive and the companies that are

able to win tenders are often those who make use of cheaper equipment, often brought in from China. While the European technology standards are well established and tested, we are not yet clear on whether these Chinese alternatives adhere to the same standards,” he explains. Nonetheless, Mirabilis does underwrite a certain renewable energy projects, but is extremely careful in selecting both the principal, secondary contractors and the funders involved. “This is untried and untested technology in South Africa and financing is often expensive. Because of the financial arrangements, lenders clauses are very onerous on the insurer.” These loan agreements between the lenders and the power producers, commonly referred to as the Facility or Common Terms Agreement (FA/CTA), often contain detailed insurance requirements. Where multiple parties are involved in a project, FA/CTA stipulations may mean that should one contractor not comply with the terms and conditions of the contract, the insurer will still be held to the contract if other contractors are compliant. In some instances, a non-payment of premium clause is added limiting insurer’s possible responses in the event that premium is not paid. “People want to get into the renewable boom, but you don’t have to do it on those terms,” notes Myers.

With the rapid growth of the sector, there has been an emerging need for new tailor-made products to carry the risk, particularly for products which offer a cradle to grave project solution, given that much of the technology used, including solar panels and wind turbines, are shipped from Europe, America, China and India. If there is an incident in the shipment, this would cause a delay in the start-up of operations, meaning that electricity cannot be generated and revenues are deferred. Alternatively, during the construction phase when turbines are erected and panels installed, an insurable incident on site could delay connection and result in an advance loss of profits and the inability to repay loans. Lion of Africa has launched an integrated product that includes the marine, marine delay in start-up (DSU), contract works, contract works DSU, operational risk (assets) including mechanical breakdown, business interruption and a blanket broad-form liability programme including the corresponding SASRIA risks. The country’s planned programme to increase energy supply through the construction of new nuclear power plants presents a further avenue for growth within the construction and engineering sectors. Such growth would provide new avenues for premium growth too and, according to Myers, will not present problematic risk for insurers. “The construction

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of nuclear plants will not be a major risk as the construction stage won’t require anything particularly special or unusual other than compliance with established standards for the construction of nuclear installations. The testing phase with a live reactor would become more complex, however.”

Africa on the horizon As growth in multiple African markets surges ahead, infrastructure and industry development is driving construction demand and South African contractors, engineering specialists and insurers alike are broadening their prospects and positioning themselves for a slice of the pie. “More and more of our premium income is made up from our Scintilla operations in Namibia, Botswana, Mozambique and Zambia, through Hollard Africa. We are able to offer our brokers and clients service with licensed insurers that aligns with the insurance regulations in those countries. In the rest of the continent we conduct business through our long-standing relationships with various insurers licensed in those countries,” says Jim Connolly, managing director at Scintilla Engineering Risk Underwriters. The mining and petro-chemical industries offer the greatest growth opportunities for South African companies, also general infrastructure projects funded by the private sector, says Africa. “Given the risk profile of many African countries, South African contractors and specialist engineers prefer working on private sector projects for the likes of a BHP Billiton or a Chevron, rather than for governments. The

general perception when you go into much of Africa is of high political and credit risk associated with the state.” PCBS is licensed and mandated to underwrite South African contractors working in African countries as long if they also have an office in South Africa.

Challenges remain “Access to credit facilities remains a challenge for emerging contractors,” comments Africa. “This is because of the troubled state of the construction industry and the general perception that small, medium and micro enterprises (SMME) operating in the industry are volatile because infrastructure development is driven by government spend. The delays in the award and implementation of construction projects affect contractors’ ability to maintain liquidity and business continuity which frustrates credit providers’ ability to develop new products. A sustainable construction industry will facilitate product development considerably.” Commenting on what it would take to create a sustainable and stable construction industry in South Africa, Brian notes that there have been calls for an infrastructure Codesa to enable all stakeholders from both the private and public sectors to come together and engage in how the country’s infrastructure programme will move forward over time. "Ideally, this would address bottlenecks in both the public and private sectors in order to establish implementable plans with clear roles, responsibilities and deadlines. From a financial services point of view, we need small businesses to be able to plan their cash flow. If they don’t know if a contract is actually going to be awarded this month or the next, there can

be no plan. This means that they cannot access credit, because from a risk perspective we need to consider whether a company will be able to cover their expenses and settle their debts from month to month. For this reason, we believe an infrastructure Codesa is a necessity,” Africa comments. The promotion of public private partnerships (PPP) is another area that could assist in stabilising the industry. “In most cases, existing PPPs are currently between government and foreign companies. We need to call for local private sector to move towards PPP initiative,” he concludes. The perpetuation of irresponsible capacity is an ongoing concern, adds Myers. “Whatever the rate is, someone will do it cheaper and the lowest price is king. In order to gain business, this irresponsible capacity is also reducing deductibles.” Eventually, he warns, the loss ratio will grow to a point where attritional losses (losses other than major catastrophes) exceeds gross premium. In a reactive market, it is only at this point that questions are asked and audits demanded.” With the deflated Rand driving up the value of claims, this could lead to problems in the market sooner rather than later. He notes further concerns over increasing claims related to defective workmanship, particularly in terms of consequential claims. “A lot of the experienced engineers have left the public sector and that body of knowledge is gone. An experienced engineer will look at drawing and know that it’s wrong, regardless of the technology, but for those with less experience this is not always the case.” A shortage of engineering skills in the local market remains a widely noted hindrance for the sector. 

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Thoughts for the broker “Brokers need to understand their clients’ business operations from beginning to end. The only way to understand fully what your client’s exposure is, is to spend time going through their operation with them. This will ensure that the right cover is sought by brokers and that the client is sufficiently covered. Our broker fraternity needs to ensure that clients understand exactly what they are and what they are not covered for,” says Canham. Connolly echoes the crucial role of the broker in understanding client operations. “We recently had a case where a building and waterproofing contractor had a contract works policy with another insurer which had warranties excluding construction or work on thatch dwellings, which also excluded contracts within 100 metres of a major waterway or river. On chatting to the contractor, 90 per cent of his operations were alongside the Vaal River and half of these involved thatch dwellings, so he really had no cover at all. Thankfully the situation was rectified by the broker before the insured had any losses.” “Brokers need to ensure clients fully understand their cover and exclusions. While many

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brokers in this field are specialists, some smaller brokers rely on insurers to explain the cover. We are certainly happy to provide this assistance, but in terms of the Financial Advisory and Intermediary Services (FAIS) Act, are not able to provide any advice,” Myers comments. According to Myers, terminology misunderstandings are common and brokers should ensure terms are fully explained. “Replacement value, for instance, often causes confusion. Clients assume that machinery will be replaced new in the event of a total loss. But new replacements apply only to individual parts and not to the item as a whole. In the event of a total loss, market value will apply.” Brokers specialising in this area do need to understand engineering risk in order to interpret their clients’ requirements and put these into clear underwriting language. “Brokers need to understand what the client sees as their exposure and risk. As insurers and underwriters, we look to the broker to have all the correct information,” notes Myers. Africa similarly emphasises the need for thorough and accurate information from the broker for the purposes of performance guarantee underwriting.

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ne of the most memorable and unusual risks Scintilla has dealt with has to be the Clock Tower development at the Cape Town Victoria and Alfred Waterfront," relays Connolly. “We originally offered a contract works policy to erect a corporate bank headquarters. I received a call a month or two into the project, not to notify us of a claim, but to advise of the discovery of ancient armaments while excavating for the foundations." "After negotiating with Cape Town City Council and the V&A and other stakeholders, it was decided that the armaments should be left where they stood and a museum established in the cellar with glass flooring over the reception area of the building. Fantastic!” An unusual area of risk Mirabilis has experienced is the ongoing human element in infrastructure operations. “There is an ongoing drive to improve and update designs, but in certain cases this can have unforeseen detrimental consequences. We had a case where new and improved imported technology was used to construct an arc furnace.

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But the ‘improved’ design did not account for South African market conditions and the reality of skill levels within the labour force. Required scheduled maintenance was not adequately carried out, causing the technology to fail. In a developed market where plant operators are thoroughly trained and labour disputes are not a significant concern, this would not be a problem, but the reality is simply different in South Africa.

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A blight on South Africaâ&#x20AC;&#x2122;s ambitious energy expansion plans, the construction of Eskomâ&#x20AC;&#x2122;s Medupi power station has been plagued with deadlocks and delays. The fallout on the surety and credit insurance sectors has been significant, leaving insurers and reinsurers reeling from claims running into hundreds of millions.

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onstruction on Medupi, a greenfield coal-fired power plant project situated in Lephalale, Limpopo, began in May 2007. Eskom predicted that the first of the six units of the plant would be completed and ready to come online by December 2013. But after a number of strikes at the plant and delays in the delivery of boilers and turbines by key contractors, it is now expected that South Africa will receive electricity from Medupi only in the second half of 2014 – a period ranging anywhere from July to December. The total cost of the project is somewhere in the region of R150 billion, making it one of the most expensive base-load coal-fired power plants in the world. The boiler and turbine contracts are the largest contracts that Eskom has ever signed in its 90-year history. These went to Hitachi Power Africa and Frenchmultinational, Alstom, respectively.

These contractors have used the latest technology in their construction and design, which although enhancing efficiency and mitigating environmental impact, has added additional risk and complexity to the project. Meanwhile, the number of variation orders or scope of work changes only exacerbated the cost increases as a result of the use of cuttingedge technology. “Two critical issues that contributed to the problems at Medupi were delays in granting contractors access to the site and the number of variation orders on the initial specifications given to the contractors,” explains Lukas Marquart, director at Performance and Customs Bonds Services (PCBS). PCBS is a specialist insurance underwriter, supplying guarantees to some of the small- to medium-sized contractors working on Medupi.

AN INDUSTRY

LEFT REELING “The complex nature of the project and the sheer size of the structure is something unlike any other energy project South Africa has seen in a long time. When the contractors first received the contract, there were agreements over what had to be produced and of what quality it should be. But once it became clear what production output was actually envisaged, all of these technical specifications had to be improved, which had an impact on costs,” Marquart continues. In addition to variation orders, nine months in days of production have been lost due to strike action, causing several contractors to experience severe cash flow constraints and consider mass dismissals, as they reach the end of a tight tether, frustrated by Eskom’s willingness to meet the increasing wage demands of workers. “To withstand a nine-month delay you need to be financially robust. While large contractors have got other projects on the go, many of the other contractors are in financial turmoil, as they did not tender for anything else because of the size of the Medupi contract,” adds Tunga Changamire of PCBS. 

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Financial contagion This has led to the widespread call-up of performance bonds and claims on credit insurance policies, which could ultimately threaten the viability of small contractors in South Africa’s construction sector. In August, the Supreme Court of Appeal (SCA) ruled that Eskom is entitled to call on guarantees that the Mizuho Corporate Bank of Japan issued on behalf of Hitachi. An Eskom spokesperson said at the time that it would not necessarily continue with the claim of R600 million it made in February against the guarantee, but the ruling could set a precedent for the payment of on-demand guarantees. “If ABC Company has not been paid by the employer, it cannot claim a bond issue from its subcontractor, because in principle there has not been any loss. The subcontractor might have done the work, but because their main contractor has not been paid, the company that has done the work cannot be paid either,” explains Marquart. “In our case, the losses suffered by the contractor are not a result of non-performance by its subcontractor, but rather, non-payment as a result of delays in construction.” According to Marquart, guarantors were induced to issue adjusted guarantees by the employer, in this case a contractor, before the employer would agree to pay the subcontractor, its client. “These guarantees were issued on the basis that everything was in order. If you were to induce a bank to give you a loan using misinformation, that would be considered fraud. This ties in with how demand guarantees are being abused,” he says. “We have tried to find international examples of guarantors being induced in this way, but this looks to be a precedent case, the outcome of which will be decided in court.”

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Insurance industry losses Saijil Singh, lead analyst at Coface, says that collectively, the insurance and reinsurance industries have suffered an approximate R500 million first-level loss as a result of exposure to Medupi. First-level losses are those due to direct default and failure from companies involved in a project and do not include losses that occur when other companies, which previously relied on income from first-level defaulters, begin to default. Singh maintains that first-level losses were not the result of poor risk assessment. “There were a number of factors at play. For example, many of these companies struggled with cash-flow issues and relied on payments being made at a particular time. Their operations were significantly affected if payments received were delayed by as little as a week, which was one of the antagonising reasons for the resultant labour issues,” Singh comments. Credit Guarantee Insurance Corporation paid claims to the value of R603 million in the first 11 months of 2013, in respect of payment defaults on the domestic market. “That is more than the claims paid during the 2011 and 2012 years combined,” says Luke Doig, senior manager of economics at Credit Guarantee. “If we consider that in the aftermath of the global financial crisis, the company paid claims of R410 million and R355 million in 2009 and 2010 respectively, it is fairly evident that the strains being felt in the South African economy are far from over.” Doig says that

2013 was typified by some notable company failures, like Cosira and First Tech, which gave rise to a few very large claims, with average values per claim rising some 130 per cent at November 2013. “There is evidence that the deterioration in the trend is moderating and we are hopeful that the economic momentum will gather pace somewhat, both at home and abroad, perpetuating a further improvement,” he adds. CEO of Mirabilis Engineering Underwriters, Russell Myers, comments that there is insufficient due diligence being done at underwriting stage. “Some insurers and UMAs are playing a topline game and not being diligent on their bottom line,” he says. “Underwriting guarantees today is a challenge, as many of the smaller, primarily BEE contractors that need them, are inexperienced.” While Mirabilis is the lead reinsurer for Escap, which is the Eskom captive, it has no direct exposure to the Medupi or Kusile power stations, as these fall under a separate programme. Singh highlights that the losses experienced by the industry will have a significant impact on the way credit insurance business is underwritten going forward. “It will become much more difficult for even reputable contractors to secure large amounts of credit insurance. Underwriting has been focused largely on the value of the contract, but credit insurers are now returning to more fundamental and traditional methods of

assessing risk, examining the feasibility of the facility and the operational efficiencies of companies, for example,” he explains. “Access to credit will be more difficult for small contractors that secure very large tenders. Where previously, future earnings were weighted heavily in their risk profiles, this will slowly shift towards an established history of servicing credit at defined levels.” Singh acknowledges that this will lead to more prudent risk management and enhanced transparency between contractors and insurers, ultimately having a positive impact on the sector overall. “We will now ensure that only those companies that can afford loans and credit facilities will get them. This may be perceived to slow growth in the construction industry, but it is likely to enhance transparency,” he says. “Smaller contractors are often reluctant to provide comprehensive financial information, but this scenario has led to a greater understanding among these contractors of the risks that the entire credit insurance industry is exposed to. We can now approach them on this basis and they are more likely to disclose detailed information, which could

enable us to improve their ability to access credit at a higher level or at least improve our risk profiling capacity.” Reinsurance premiums for this class of business are likely to increase, which will eventually push the insurance premiums up for the small, medium and micro enterprises (SMME) to which most performance bonds and credit insurance policies are issued. Munich Re has said that it remains committed to reinsuring the surety and credit insurance sectors, while other reinsurers

are introducing capacity to the market from other parts of the world. “Asian reinsurers for example, are looking for opportunities to establish themselves in the African market,” notes Singh. Mega-failure or not, for Medupi, the show must go on. Its contractors will no doubt lose money and Eskom will have to fork out more than anticipated, but Medupi must and will be finished. At what cost to Eskom, its contractors, the South African economy and its cashstrapped taxpayers, remains to be seen.

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Risking the

Antarctic winter Christy van der Merwe

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In March 2013, RISKSA reported on the aspirant departure of the Coldest Journey team: six men, led by Sir Ranulph Fiennes, who would attempt to cross the continent of Antarctica on skis, while the other five team members traversed mechanically, conducting scientific, geological, climatological, physical and psychological experiments over the months.

he winter crossing of Antarctica is considered the last unconquered polar challenge on Earth, with explorers worldwide fighting to break this record. It remains unconquered despite the best efforts of the UKâ&#x20AC;&#x2122;s Coldest Journey team, which attempted the traverse in the winter of 2013. The high-level risk management of this project has ensured that all expedition members and equipment made it safely back and, as yet, no insurance claims have been made. The aim was to make it over the steep escarpment of Antarctica at the start of the journey, and traverse the interior of the continent, over the high altitude plateau, before negotiating the way down the steep edge on the other side of the continent. It was to be a 4 000 kilometre journey, in two 25 ton Caterpillar bulldozers hauling sledges loaded with accommodation modules, science equipment and stores, and was expected to take about six months. ď&#x192;

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Insuring the journey The Coldest Journey’s bespoke insurance policy was brokered by Jardine Lloyd Thompson (JLT), and placed in the co-insurance markets of Lloyd’s and major insurance companies including Munich Re, Swiss Re, Inter Hannover and Partner Re. Top: The two 25 ton caterpillars that hauled the fully-laden accommodation modules. Inset left: Sir Ranulph Fiennes getting his eyes tested. The team were raising funds for the charity Seeing Is Believing. Inset right: Sir Ranulph Fiennes badly frostbitten hand put a premature end to his journey.

Those were the best laid plans that went astray. In February, before the official journey started, the team was laying depots with food and fuel supplies to prepare for the crossing, and Fiennes suffered severe frostbite to his left hand. He required expert medical treatment and in March had to get the last flight out of Antarctica for the season as there would be no chance to leave the continent once winter set in. Fiennes was later diagnosed with pre-diabetes, which affects circulation and explains why he contracted frostbite in relatively good conditions, compared to the cold that would have been experienced well into the journey. Fiennes lost the tips of his fingers on his left hand, and tells RISKSA that his future expeditions will take place with different ground rules. Considering the diabetes, he will use every available artificial heating source, and appears determined to continue attempting record-breaking feats.

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“The emergency repatriation of Sir Ranulph Fiennes, when he injured his hand due to frostbite, could have triggered a claim, but did not. Our insurers have a file on this incident but our preference has been to manage it without making a claim. The majority of the associated costs were able to be met ‘in kind’. That is, to make available to those providing assistance items of equipment, in this instance some surplus fuel, as a preferred method of proceeding. This also helps to foster a spirit of camaraderie and self-help within the intrepid teams that operate in Antarctica,” explains Tony Medniuk, chairman of the board of trustees for the Coldest Journey. Because Fiennes’ exit did not impact the mechanical team, they continued the attempt to traverse, under the leadership of Brian Newham, who has over 20 years of experience working in Antarctica. In fact, “the expedition went on ‘business as usual’, and with less risk because there was no longer a skier out in front,” says Newham.

The cover was part sponsored, and part funded through expedition resources. “Our broker’s services were sponsored and our insurers, given the very sizeable policy limits at risk, did require a risk premium. This premium was met from expedition resources,” says Medniuk. He adds that unusual, non-standard covers can often bring out the best of the insurance markets. “I think that is the case with our expedition. It is imperative to have an excellent, top quality broker and a strong, credible leading underwriter who, in tandem, will give confidence and encouragement to the co-insurance markets. We were privileged to have both. JLT, as broker, did a superb job in securing our lead underwriter – Beazley Syndicate at Lloyd’s – and subsequently bringing our risks to the market in a highly professional manner,” he continues. The insurance was focused on the legal requirement for the expedition to have adequate assets to clean up and remove all items supporting the traverse to leave Antarctica a pristine environment after the attempt to cross the continent. Adequate funds for search and rescue where feasible in the hostile polar conditions were also required.

silicone; adapting engines to use aviation fuel which has a much lower freezing point; very conservative contingency reserves in our kit and equipment; thorough preparatory cold weather training in northern Sweden for personnel and equipment; strong communications within a well thought out organisational structure; and a superb ice team, all of excellent character and with complementary skills to anticipate and swiftly handle prospective problems before they became threatening,” he says.

Above and below: Dubbed the 'Cat traps', the huge crevasses posed a constant threat for man and machinery.

Newham reiterates that the use of technology greatly mitigated the risk, and gave more clarity of conditions. Years of planning went into this expedition and ensured that risks were brought to an absolute minimum. UK Consul General in Cape Town, Chris Trott, explains that the government has a responsibility for its citizens wherever they may be in the world, hence the reluctance for the Coldest Journey team to take on such a risky expedition. However, the UK Government felt the scientific research potential of this expedition outweighed the risk, particularly since the risk mitigation and planning before the journey was so thorough. “You can’t stop people taking risks, but we had to guarantee that the project would not damage the natural environment of Antarctica. It is great to see the organisation raising the profile of important issues beyond the shores of the UK, and it is wonderful that South Africa was used as the launch point for the journey,” Trott comments.

Knowing when to stop The Coldest Journey team did not make it across Antarctica. After travelling about 350 kilometres inland, over incredibly difficult terrain, the team, led by Newham, made the decision to halt the journey. They had just made it onto the plateau, but were perilously low on fuel, having used almost double the amount initially calculated because the terrain was so treacherous that the team moved slowly, constantly crevassing and winching the vehicles out of icy chasms.

“No claims have been made to date and we shall do all we can to keep it that way. Of course, the cover is still current and will formally expire when the remaining items of our equipment are shipped out when sea ice conditions permit, probably in February 2014,” adds Medniuk.

Weighing the risk Emphasising the degree of risk, Anton Bowring, co-leader and coordinator of the Coldest Journey expedition, tells RISKSA that there was always the fear that one of the Caterpillars would get trapped in an icy crevasse, where it would have needed a crane to lift it out. This would have to be done in summer and would have been costly and potentially disastrous. Seeing some of the pictures from the journey, there were times when this could very well have happened if it were not for the degree of caution, risk mitigation and high-level skill employed by the team members.

Medniuk attributes the successful avoidance of insurance claims to thorough planning aligned to a self-reliant mindset. “Some important aspects of our risk management process include thorough selection of vehicles able to operate in the extremely harsh winter conditions; modifying all welding joints which might crack in extreme cold in favour of using

At the very worst section it took the team three days to progress 500 metres. And this was when the sun had set for three months, so the darkness had set in, the wind was relentless and the temperatures far below freezing. “Because we were burning twice as much fuel as we calculated for, the risk increased considerably. We were low on fuel and knew we would have to come back the same way. The risk equation just didn’t make sense anymore. I think the decision to abandon the traverse was absolutely the right thing to do, although some did not accept that easily,” explains Newham, who had the ultimate responsibility of making the decision. Rather than heading straight back to the station close to the shoreline, the team camped on the completely isolated plateau, conducted their 

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Coldest Journey team looked remarkably well and in great spirits. If the expectation was dishevelled, scrawny, bearded men with skittish eyes from months of isolation on the plateau of Antarctica – you would have been disappointed.

conducting their research and experiments and collected data commissioned by scientific institutions. They were the first team to ever camp on the plateau throughout the Antarctic winter, in permanent darkness, and temperatures as low as -60 degrees Celsius. The team achieved one of the longest Antarctic journeys in winter.

The physical and psychological risks for the team members were high, and these aspects were carefully monitored by Lambert. He conducted tests for the European Space Agency and NASA in a programme of physiological and psychological research, to study the effects of extreme isolation and the inhospitable environment.

Although the ultimate goal was not met, Fiennes maintains that the expedition has still broken records, and the team brings back invaluable experience. “What this team has achieved has broadened man’s knowledge of Antarctica. In this world of instant gratification they, and many supporters, have carried on the finest traditions of exploration for the benefit of many. I am immensely proud of all of them. The one thing I have learnt, is not to cry over spilled milk, and to be meticulous in finding out what went wrong. One vehicle will continue to work in Antarctica, but all of the other equipment will be brought back to sponsors where comprehensive testing will be done,” Fiennes tells RISKSA. In terms of the performance of the equipment and gear in the unbearably cold conditions, the feedback and testing is expected to yield positive results. This will all inform future attempts to traverse the continent in winter – an expedition which the entire team feels is achievable. “It is only worth trying again when you understand the rationale for the last failure,” reiterates Fiennes, who knows all too well that there are other teams (especially the Norwegians who recently completed the first winter traverse of the Arctic) anxious to break the record for first Antarctic winter traverse. “This great challenge remains unfulfilled and knowledge we have gained will be invaluable to explorers who continue to look for ways to broaden man’s understanding,” says Newham.

Life on the icy Antarctic plateau “I’ve been craving broccoli for months, you will have to excuse me,” Dr Robert Lambert apologises as he wolfs down his first taste of the fresh green vegetable in over nine months. He is part of the team that attempted to cross Antarctica in winter, and camped on the polar plateau at 3 500 metres above sea level for months. Sitting at a press conference in Cape Town a day after flying out from Antarctica, the

Called the White Mars Project, it is considered to be the best simulation of the effects of space travel on humans. This is because, with no search and rescue facilities throughout the winter months, Antarctica provides an environment similar to the conditions faced by astronauts. Lambert says that besides Fiennes’ frostbite, which changed the nature of the expedition, the worst physical incident the team experienced was a broken thumb. And it was Lambert himself who sustained that injury. He feels that any person would be able to cope with the physical conditions because the living space was comfortable, clean and they were prepared for the cold. The psychological aspects were more difficult to predict because you can never be sure how the people on the expedition will react to situations. The selection of the team was remarkable, affirms Fiennes. “A brilliant crew. You couldn’t have asked for a better leader than Brian. Fantastic doctor and incredible young mechanics. Each of them patient, clever and, most importantly for survival out there, a great sense of humour,” he concludes.

Describing it as one of the most beautiful places on the planet, here are Lambert’s top three Antarctic moments: 1. On the ship – SA Agulhas – getting my first sight of Antarctica, with the albatrosses swooping and soaring about. 2. When out exploring one day, we found frozen lakes of blue ice, and in them were entombed vertical streams of bubbles. Just amazing to see. 3. Seeing the Aurora, the Southern Lights, was absolutely incredible and a very special privilege.

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Intelligent Solutions

VAPs encourage client retention Neesa Moodley-Isaacs

Additional or add-on insurance products are available because they bring value-added cover beyond the typical insurance products. Different insurers use these products as a means to entice consumers to buy into their brand and then to encourage customer retention. RISKSA takes a look at whatâ&#x20AC;&#x2122;s available in the market.

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alue-added products have become so common place as part of insurance offerings that you may wonder whether they add any value at all. While this may have been an interesting innovation 20 years ago, today consumers take it for granted that they will be offered this additional service.

Steyn Rossouw, managing director of Quicksure Brokers, says the use of value-added products (VAP) has become widespread with about 85 per cent of the Quicksure client base using these products. “VAPs are used extensively by our clients on a monthly basis. I also believe that it plays a valuable role in retaining clients,” he says. Rossouw points out that although everyone in the market now offers VAPs, it is only one of the elements in play when looking at client retention. “Good service and pricing also play a major role in client retention,” he notes. Christelle Fourie, the managing director of MUA Insurance Acceptances, says MUA is looking at implementing more VAPs next year. “Outsourcing value-added products is a smart way to add value to your product at a reduced risk level,” she says. Karla Hunt, chief operations officer at Customer Loyalty Consultants (CLC), says: “We have definitely seen the impact of exceptional service levels to our clients translating into positive feedback to the insurer, underwriting manager or broker on a daily basis. Although pricing is critical to any purchase, when a client receives good service or product offerings over and above their expectations, it creates a clientbusiness loyalty relationship.” More than 150 000 policyholders currently use the CLC valueadded products on an annual basis. Wimpie van der Merwe, the chief executive of Global Choices, says currently there are one

million interactions with the Global Choices value-added products on an online basis. This can be further broken down into 83 000 online users, 23 100 SMS interactions, 894 400 e-mails, 9 000 app users and about 30 000 cases.

due largely to an increased awareness among clients of the products and benefits that are available to them,” he says. There are currently about 135 corporate clients and their members, policyholders or clients using the Europ Assistance services on an annual basis.

Anthony Kotton, managing director of One Loyalty, says there are more than three million users of the One Loyalty VAP on an annual basis. “Certainly, feedback from our clients indicates that they have seen positive acquisition and retention of clients as a result of using our VAPs. They have also reduced their number of claims due to our services assisting clients to prevent insurable incidents from occurring,” he says.

Sean Botha, the chief executive at Policy Provider, says he believes that VAPs are going to become more common as the consumer is looking for value for money and the opportunity to save money or costs to be covered, that can be covered by a VAP. Policy Provider has as many as 1 000 claims on its value adds per year. “The VAP market is so small currently that it’s difficult to measure how to improve on value. The market is evolving very quickly and will become more competitive. The level of improvement will be determined by consumer demand,” he concludes.

He adds that the company is launching an average of four insurance apps per month. “Our app can be customised and incorporates systems integration with most of the insurance systems providers. We are in the process of integrating into all major insurance systems providers by end January 2014,” he notes. Sean Jackson, head of Auto & General Brokers, points out that when it comes to insurance, loss or damage isn’t always just limited to material possessions. “Many of the incidents one claims for are often accompanied by some form of inconvenience, emergency or trauma. It is for this reason that Auto & General includes a comprehensive range of VAPs. We believe they make the difference between ‘insurance’ and an holistic insurance solution and, although they are not essential, they do make the insurance product an overall sensible investment,” he explains. Rouxle van Molendorff, the managing director of Europ Assistance SA, says while the company does not have an app yet, there is a mobi site, which has proven useful to customers. “Following the introduction of the Consumer Protection Act, we have definitely seen a higher utilisation of value-added products. This is

Services round-up We did a round-up of the different players in the market and what they offer:

CUSTOMER LOYALTY CONSULTANTS (CLC)

Offers the following value-added products: • Roadside assistance (including or excluding accident tow costs) • Household assistance (call-out and one hour labour) • Advanced household maintenance • Medical assistance • Legal assistance • HIV prevention • Eezi assist (panic button) • Safe ‘n Sound (designated driver) • LAW (lawyer at work) • Ur lifestyle (online discounts and shopping) • Road protect

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Karla Hunt, chief operations officer at CLC, says the company has an app which is in the final stages of development and will include the following features: • The ability to register on Eezi Assist • Send an alert to the contact centre to contact the client • Accident scene assistance • Claim registration • Policy wording • Designated driver request.

GLOBAL CHOICES

Global Choices offers more than 200 valueadded products to a variety of industries. Highlights for the short-term insurance industry include: • 24-hour case management call centre • Roadside assistance and accident management • Geyser replacement • Home safe chauffeur • Crime assist • Security assist • Road accident fund claims • Intelligent panic. The Global Choices app offers clients risk prevention tools, commercial roadside assistance and a means of calling for medical, legal, HIV or trauma assistance. Launched in July this year, the Global Choices One Assist App has been developed to provide brokers, underwriters and insurers direct access to their members.

The app is white labelled to suit each business at no additional cost. A content management system is provided to make immediate changes to both the brand and the content. The content management system manages all client interactions, requests and claims, as well as providing a communication platform to their clients via SMS, e-mail and in app messaging. The Global Choices One Assist App provides the broker with verified information from their clients (such as driver licence details) and their assets (VIN, engine number, registration, year, make and model) and allows clients to view their policy information as well as complete the entire claims process for all types of claims. Accident scene voice recordings, photographs, drawings, locations, witness details, plus all the vehicle and driver details involved in the accident are captured via licence disc scanning. The driver is also able to draw the accident scene and sign the claim form prior to submitting the claim.   The Global Choices One Assistant App provides direct access to the app user in the event of an emergency – the user has a panic button on the app that sends a message to the contact centre that includes vital information to ensure swift action: name, contact number, emergency contact details and most importantly the client’s location. This process is also used to access a suite of assistance services that are provided to members as part of the valued-added programmes. The app is free to download, but to make use of the Global Choices One Assist App and all the features, the app user must be linked to a broker or insurer who has a programme with Global Choices One Assist. The technology powering the Global Choices One Assist App is powered by Lightstone.

ONE LOYALTY

Provides users with the following value-added products: • Full roadside assist and accident assist • Legal assist • Funeral assist • Funeral repatriation • Medical assist • Home assist • Office assist • Trauma, assault and HIV counselling • Home drive assist • Tutor assist • Direction assist • Tax assist • Bail protect assist • Crime assist • Fines protect • Accident protect • Licence protect • Pothole protect • 24-hour call centre • Intelligent panic • Commercial assist • Agri assist • Disability assist • Motorbike assist • 4x4 assist • Bicycle assist • Caravan and trailer assist • First notification of loss • Claims assist. Key features of the One Loyalty app include: • A built-in panic button with geo-locate and access to 24-hour emergency services including emergency roadside assist, medical assist access, emergency home assist, legal assist and your security company and medical aid functionality. • Access to emergency location-based services such as hospitals, clinics, fire stations and  police stations.

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Momentum

Choice Elements - CMYK

Start the New Year off knowing your family is safe with our innovative mobile applications. For more information on our mobile applications, contact Momentum Short-term Insurance on 0860 11 15 12

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MomentumSTI_RiskSA_January2014.indd 1

2013/11/22 11:53 AM

AUTO AND GENERAL

Auto & General Insurance offers a range of VAPs that can be taken to enhance clients’ existing policies or they can be taken out as stand-alone products. These include: • Touch-up • Licence protect • Auto top-up • Tyre and rim guard cover • Fines • Protect • Personal accident • Legal • Funeral.

Th ha

O T O

If W se

O B

POLICY PROVIDER

S U l *

Offers the following services: • Stay Mobile – roadside assistance. Car hire for up to 30 or 45 days. • TransitSure – for goods in transit. Covers overloading, over height exceeded, debris removal, security in the event of an accident. • iCycle – all risk cover for cyclists, which includes cover for theft, bike jacking and damage. Cyclists are covered when competing in events, both local and international. Includes medical benefits up to R100 000 in the event of an accident and public liability cover of R1 million. • RetrenchSure – pays out for six months in the event of retrenchment.

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Offers the following services: • Travel insurance • A single call to the Dial-a-Discount service can source members virtually any product or service they need; from motor spares and equipment, to bricks, pool or garden services and accommodation. • Vehicle concierge service. • International Travel Assist offers extended medical cover when travelling outside the borders of South Africa. • Trip Monitor is a lifestyle benefit, specifically designed to provide motorists with peace of mind while travelling. Trip Monitor is a 24-hour helpline dedicated to facilitating safe travel. • 24Fix Auto Glass has a 24-hour incident management contact centre geared to handle all auto glass requirements. Lodge a claim or get a quote, obtain authorisation and arrange repairs with just one phone call. • Take Me Home is a designated driver service that ensures members always arrive home safely after a night out, with the added convenience of being driven home in their own vehicle. • Directions Assist is a 24-hour directions service providing guidance when travelling anywhere within the borders of South Africa. • Accident Manager – a single call to the 24-hour emergency call centre activates immediate and professional towing, medical and legal assistance. • Roadside Assist offers peace of mind through a 24-hour contact centre that will dispatch the appropriate services in the event of a roadside emergency, anywhere in South Africa. • 24Fix Solar offers a professional solar service, including a range of affordable and accessible solar water heating solutions.

• Real-time claim lodging and processing with the ability to upload incident-specific images. • Ability to update policy and insurance information at the click of a button. • The ability to request a copy of a policy. • Emergency services call me back functionality • Access to convenient lifestyle benefits: a full service VIP concierge desk; published travel deals and a travel aggregator; as well as monthly competitions and SMS vouchers that can be redeemed via a cellphone with discounted offers from more than 300 national retail partners and 19 000 local merchants. • Up-to-the-minute news, traffic and weather reports. • Push notifications, e.g. warning users of an approaching hailstorm. • Functionality downloaded from the respective app store under your brand • App is available across all mobi platforms (iOS; Android, BlackBerry and Windows) • Recommend and promote your broker via social media • Access to plumbers, electricians, etc.

EUROP ASSISTANCE

• Teacher-on-Line provides a valuable telephonic education service for primary and secondary scholars in the language of their choice. • 24Fix offers 24-hour solutions for plumbing emergencies and general plumbing maintenance requirements. The service includes geyser installations with approved Kwikot or Duratherm geysers. • Handyman Assist is a service designed to assist with any small household repairs in and around the home, including minor home improvements, maintenance and day-to-day repairs. • On the House is a 24-hour helpline offering a range of service providers equipped to handle ordinary home maintenance and repairs promptly and professionally. • Home Assist is a 24-hour helpline providing urgent assistance for emergency household repairs that could result in further damage if they’re not attended to immediately. • Trauma counselling • Repatriation of mortal remains • Legal assistance • Recoveries • Telesales • Legal cost insurance • Loyalty/rewards • Doctor network.

A a

R ry

INSURANCE INDUSTRY MOBILE APPS Incorporating emergency assist benefits, your company information and third party systems integration, our apps are designed with efficiency in mind, also giving you the opportunity to own the intellectual property in your app. A unique and innovative approach to engaging with your clients!

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Our Home Drive Service offers: Two convenient ways of making a booking: Pre-booking & Booking in the Moment Our Home Drive Team, consisting of a lead driver as well as a back-up driver and vehicle.

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Enhanced broker focus at Auto & General Auto & General has strengthened its broker division, and is heading into the third phase of its service roadmap. A number of improvements have already been made on the brand, products, services and pricing models, with renewed focus on the broker. Christy van der Merwe

eiterating the commitment to brokers, Telesure CEO Leon Vermaak explains that about onethird of Auto & General’s business is broker business. The shifting dynamics now indicate a move in the direct space from call centres to online. About five years ago, the direct component of the business was 80 per cent call centres, but now the split is about 40 per cent call centres and 60 per cent online. Leon Vermaak, Telesure CEO

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“The direct channel is here to stay but there will always be a need for the intermediary. In

our 28-year history, we have never made an underwriting loss, never exited a risk category, nor have we cancelled a broker’s portfolio because it was unprofitable,” adds Vermaak. The company is hoping to grow its share of broker business. Vermaak believes that growth begins with rebuilding trust. This will be done through continued improvement of the broker channels. Auto & General is also reaffirming its commitment to the broker model through the recently announced partnership with MUA

Insurance Acceptances. “With MUA we gain access to a previously unexplored market segment. MUA is the perfect partner, with its expertise and experience within the high net worth individual personal lines insurance market. Business will continue as usual at MUA and brokers will still deal directly with MUA,” says Vermaak.

Continuous improvement Auto & General affirms that it has listened to feedback received from brokers. “Policy administration and claims management requires some adjustment, and we have been working on it,” says Vermaak. “Technology is key for brokers,” he adds, and this is largely what the third phase of the roadmap entails. “It deals with third party platform enablement in the form of an online portal for brokers as well as online access to client schedules, renewals and an array of information and updates, explains Sean Jackson, head of Auto & General Brokers. At the recent broker roadshow in Cape Town, Jackson discussed an array of changes and improvements that have been made in the broker division. In addition to technology and product changes, brokers

now have access to the 1st for Women and Virseker brands and products, where “fantastic growth” has taken place. Other broker-focused enhancements include: • The ‘switching promise’ – Auto & General will not proactively switch a broker customer to a direct policy. • Advertising – the new ad campaign includes focus on ‘broker’. • 25 fast-track claims – brokers can now settle 25 different claim types immediately. • Rejections will be authorised only by management. Jackson maintains that the broker division will go from strength to strength with the continued commitment to improvements. “We have launched a new model that streamlines the entire claims process for broker clients. Claims are now processed easily and we have already reached our improvement target set for June 2014.” He notes that complaints to the ombudsman have also decreased substantially and the company is getting more compliments on Hello Peter.

Broker reaction RISKSA spoke to a number of brokers to

gauge the reaction to Auto & General’s enhanced commitment to brokers. Louise Olivier of V Plus Insurance Brokers explained that she has been increasingly happy with the service from the insurer, and appreciates the upfront approach. “The broker division has gone out of its way to assist if there is a claim, or if an extraordinary issue has been raised,” she says. While some brokers are excited by the changes, those who have not supported Auto & General are watching and waiting to see if they can deliver. One Cape Town-based broker states that he will be on the lookout for improvements at Auto & General as he will need to be convinced that the company is sincere, and hopes that more flexibility will be built in for brokers. Jackson has urged brokers to provide the company with feedback and suggestions on how systems and processes can be improved, as he strives to ensure that the broker community is well served by Auto & General. “Our plan is to build an offering that aligns to our partners’ needs. Ultimately, the changes we are making enable the broker to become more competitive,” concludes Jackson.

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“The reinsurer plans to strengthen partnerships with the reinsurance broker market, locally and abroad, while continuing to build partnerships with cedants directly.”

Filling a gap, carving a space Newly established Infiniti Re, a division of Infiniti Insurance, recently announced plans to offer treaty and facultative reinsurance solutions to smaller, niche insurers in the South African market.

ormer MD of Africa Re, Paul Ray, heads Infiniti Re, which will provide an additional income stream into the Infiniti holding company and give diversity to the premium and exposure mix in the current portfolio. “It is our intention initially to offer small reinsurance lines, both proportional and non-proportional, and provide local capacity to retain premiums written locally with a view to stemming, in some small way, the outflow of premiums and capacity to international markets,” says Ray, who is confident that he has a good solution for

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the African market, having travelled extensively on the continent and understanding the challenges of this environment. “Following a recent visit to Nairobi, Kenya, business has already begun to flow in from companies and brokers in this region,” he confirms. Infiniti Re also has plans to provide reinsurance to companies in the rest of sub-Saharan Africa, initially Botswana, Kenya, Lesotho, Mozambique, Namibia and Swaziland, with the intention to expand. The reinsurer plans to strengthen partnerships with

the reinsurance broker market, locally and abroad, while continuing to build partnerships with cedants directly. Although relatively small in comparison to its competitors, Ray believes that Infiniti Re is able to offer the market well-capitalised security and personal service, with a view to seeking reinsurance solutions for the benefit of all parties concerned. “Infiniti Re intends building on the well-established Infiniti brand, as well as introducing certain Infiniti partners into the sub-Saharan Africa markets, where there may be synergy between Infiniti Insurance and Infiniti Re business partners,” Ray says.

Infiniti and Kuda to deliver insurance for game industry With an A- rating from Global Credit Ratings (GCR), Infiniti Insurance is a short-term insurer focused on long-term partnerships with specialist insurance entrepreneurs and independent brokers. One such specialist partner is bloodstock underwriter Kuda, which has recently extended its product offering to include game. “It is evident that the game industry of Southern Africa has been growing at a rapid pace. All indications show that this trend will continue for some years to come, which is why Kuda has positioned itself as a major player in the market to complement its already successful bloodstock products,” says Kuda’s Gert Pienaar. The game industry has experienced doubledigit investment growth returns for the last 10 years and, in recent years, has yielded the same levels of returns achieved by listed equities and fixed properties, in many instances outperforming these returns, according to Kuda. Active throughout the year, the industry is characterised by a number of large auctions, followed by myriad smaller auctions, where game owners sell offspring to recapitalise on their initial investment. Game owners also trade among themselves, either in person or through networks of game capturers and traders. CEO of Infiniti, Sharon Paterson, says, “We are excited to enter this new and fast-growing area of business that is so much part of the South African culture with our partners, Kuda.”

Capital, cost and CATs:

reinsurance in 2014 Hanna Barry

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Increasing flows of alternative capital, an easing in rates and ongoing extreme weather events are some of the major trends that the reinsurance industry has highlighted for the year ahead.

EO of Munich Re of Africa, Junior Ngulube, describes 2014 as the year of corrective measures. “Insurance and reinsurance results in 2013 were anaemic, with underwriting losses impacting margins. The market needs to get its underwriting in order in 2014,” he says and highlights three areas locally that are particularly challenging in the current environment, where Munich Re will be following developments with interest. These include motor insurance, crop insurance, as well as surety and credit insurance. “A weak currency has significantly impacted the cost of imported spare parts, so that some insurers have shown poor results on their motor books. Only the direct insurers reported positive earnings in this area. The crop market has made losses for the last three years. Munich Re stopped writing this business for the 1 January renewal season, although we are not walking away completely and are engaging with government and other stakeholders around more sustainable alternative approaches to crop insurance, especially to cover drought on a wider basis.” Following large losses on performance bond and credit insurance, Ngulube says that the underwriting of this business will need to continue receiving specialists’ attention. Compliance with Solvency Assessment and Management (SAM) is an ongoing challenge, as the January 2016 deadline approaches, placing significant pressure on the industry in terms of resources, management time and costs. Along these lines, reinsurance has become a core board-level conversation for insurance companies, rather than left only to technical teams. “In the context of capital management, where the board is responsible to ensure SAM implementation and compliance, there is greater board-level focus on reinsurance as a capital management tool. This is especially true when trying to structure reinsurance optimally, in order to achieve expected shareholder returns,” explains Ngulube. “We will always have reinsurance treaties, but these are now part of a broader capital management conversation.”

Alternative capital Globally, Ngulube says that low interest rates mean that reinsurers’ returns on investments are depressed. “In addition, there is increased risk appetite from pension fund managers for investment in well-modelled natural catastrophe scenarios, where it is believed that better returns can be made. This is the background to the evident entry of new capital from the capital markets.” 

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“ Government-backed

schemes for flood and terrorism risk present real opportunities for reinsurers and brokers alike to create an alternative solution. Business interruption is another area that requires greater understanding, in order to find a reinsurance solution for clients rather than seek to hide from it.”

Viewed as both a threat and opportunity to traditional reinsurers, the market has experienced a proliferation of alternative capital. “A benign year and strong results have continued to make reinsurance attractive as an investment. We consider the insurance-linked securities (ILS) and new capital offerings to be both a challenge, as new providers try to enter the market space, and an opportunity for traditional reinsurers like us, if we can harness the same capital to improve the efficiency of our offering,” says Piers Sargent, a treaty broker for Jardine Lloyd Thompson (JLT) in London. At the Baden-Baden Meeting 2013 in Germany, which is one of the major annual events of the global reinsurance industry, one of the discussion points was whether the market was adequately serving its clients. “One senior commentator remarked that his company insured only around 20 per cent of its clients’ risks. This is quite a remarkable statistic,” comments Mark Finch, executive director at Willis Re, London. “While it represents a tremendous opportunity to develop products to expand beyond the 20 per cent, it raises the question of whether the industry has failed to remain in touch with the different needs that its clients face. As an industry, we ask ourselves whether we run the risk that others in the

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financial sector are moving into our world and offering the solutions that the insurance industry is too slow to recognise.” However, new capital could help to drive innovation and open up new opportunities. “For example, government-backed schemes for flood and terrorism risk present real opportunities for reinsurers and brokers alike to create an alternative solution. Business interruption is another area that requires greater understanding, in order to find a reinsurance solution for clients rather than seek to hide from it,” Finch highlights. Executive director of reinsurance at JLT in South Africa, Paul Turner, says that the continuing economic boom in Africa, albeit in the mining and oil and gas sectors, provides growth opportunity for brokers and underwriters. “It is a case of appetite and willingness to participate on these risks regardless of the challenges, as the upside can be worth the effort,” he says. “When it comes to writing African business, we can forget about the alternative capital markets, as there is generally sufficient capacity and appetite locally to facilitate these risks on a reinsurance inwards basis without the need for the traditional reinsurance markets. This is the challenge and opportunity that these underwriters need to look into.”

In the face of multiple challenges and opportunities, Turner says that a lot depends on the availability and cost of the necessary capacity required in order to get a deal done. “The appetite is important, but with other markets looking to stretch their nets globally, costing seems to be the sealer,” he comments. “An old boss of mine once told me: ‘Don’t stress on this account, there is someone out there who will write it.’ This is certainly true in light of easily accessible capacity. The trick is to keep it local.”

Rate movements Notwithstanding opportunity for traditional reinsurers to take advantage of alternative capital markets, an oversupply of capacity chasing limited demand does place pressure on rates. Renewal business for 1 January that had already been quoted at the time of writing reflected price reductions, after better than anticipated losses in 2013. “South African rates went up after the extreme weather events in 2012, but have been reducing again recently. My best guess would be between a zero to five per cent easing in 2014, depending on the company, their portfolio and loss history,” says Sargent. “The global market provides a background context, but the performance and risk profile of individual portfolios is the primary determinant of whether rate movements will be accommodative or corrective,” adds Ngulube. “Dependent on historical loss performance, risk management, values and policy structure, I would not be surprised to see the corporate market renewing flat, if not flat less five per cent,” reiterates Turner. “A multi-claiming policy may attract a five to 10 per cent increase, depending on the restructure of those particular accounts. As the South African market reinsures into segments of the global market, the terms and conditions received from these markets will reflect the losses sustained from various parts of the globe, regardless of the local performance,” Turner continues. “The economic and insured loss values of these events are rising, due to factors such as increasing insured values and greater market penetration. The challenge and opportunity for the reinsurers is to keep these events insurable and affordable in order to keep their product sustainable.” Finch remarks that capacity overcrowding in peak territories, where retentions are moving upwards, is forcing reinsurers to seek business opportunities elsewhere, including South Africa. “Whether the increased interest in South Africa will equate to greater competition driving lower prices remains to be seen. As has often been the case in developing markets, it is the local market that determines pricing.” Adds Turner, “As long as the local markets remain flexible and competitive, all parties should get their fair share of the market. The influx of global underwriters and brokers looking to do deals

in South Africa is ongoing; we just need to bat smartly and defend our pitch.”

Extreme weather At the time of writing, the total number of earthquakes that occurred worldwide in 2013 was roughly half the number recorded in 2011, according to Finch. Half-year figures from Swiss Re to 30 June 2013 revealed that insured losses totalled $20 billion, of which $17 billion stemmed from natural catastrophes. The main driver of these losses was flooding in Central and Eastern Europe, Canada and Australia. This was lower than the $21 billion in H1 2012 and also below the average of the last 10 years. The overall economic losses to society for the period reached $56 billion. “Since Chile in 2010; followed by Christchurch, New Zealand and Tohoku, Japan in 2011; Aceh, Indonesia in 2012; and Ya’an, China in 2013, earthquakes have occurred all along the Pacific Ring of Fire. The only corner left untouched is Southern California along the San Andreas Fault,” says Finch. “Experts have been predicting a devastating earthquake in Southern California for a while. Data shows that huge earthquakes happen every 45 to 144 years on the San Andreas Fault, instead of the previously established 250 to 400 years. A 7.9 magnitude earthquake struck the region 153

years ago in 1857, so the ‘Big One’ is already nine years overdue and devastation could happen at any time.” However, Finch admits that long-term weather predictions remain more of a lottery than an exact science. “Forecasters predicted the 2013 Atlantic hurricane season would be more active than normal. It was in fact the first year since 1994 when no major hurricane formed and the year with the fewest number of hurricanes since 1982,” he points out. “We will and should expect to see more extreme weather events,” says Ngulube. “In all my years of participation in the insurance market, I’ve never experienced hailstorms like those we experienced in 2012 in Gauteng.” He says that an increase in extreme weather events, coupled with the growth in built-up areas, has increased the exposure faced by insurers and we just have to accept this as the new normal. “In South Africa, the remedial action taken by clients following the severe weather events in 2012 has varied from a mapping and reevaluation of flood plains on one extreme to ‘fingers crossed it does not happen again’ at the other,” adds Sargent. “From our view, the number of these events will increase and hence we will judge clients on their course of action in addressing the underwriting implications.”

Market outlook “While the industry is generally in good health, thanks to better than expected loss activity around the world and the influx of alternative capital, reinsurers face a number of headwinds, not least of which is their margins,” says Finch, referencing lower ROE. “Size will continue to be a key factor for reinsurers, as economies of scale afford greater flexibility. No one can live on catastrophe business alone and cedants will look to their core reinsurance partners to provide expanded product offerings.” “I personally think that as most years, it will be much the same. As long as we all have shareholders who want to see returns, the competition will be aggressive but healthy,” adds Turner. “Diversity will be key going forward, as doing the same thing year in and year out will not be the best fit in a global market that is rapidly evolving," he concludes.

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ML MEDICAL

Healthcare funding

the year ahead Sarah Bassett

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The South African healthcare funding sector is certainly living in interesting times. Recent years have brought pressure from every side. Spiralling healthcare costs, regulatory challenges, poor growth and an ageing healthcare population have resulted in consolidation, reduced benefit offerings and questions over the ongoing sustainability of the sector. In the year ahead, these challenges will continue to shape the industry, but there is opportunity on the horizon too.

“H

ealthcare systems in advanced economies are increasingly deemed financially unsustainable,” CEO of Metropolitan Health, Blum Khan notes in the October 2013 issue of Inside Track. “Fortunately, in emerging economies like South Africa, new healthcare systems are still being shaped and we have an opportunity to proactively address sustainability issues at the start,” he adds. In response to challenges, the last decade has seen a steady trend towards consolidation, with 63 medical scheme

amalgamations and liquidations between 2002 and 2012. The medical scheme landscape has shifted to one dominated by fewer, increasingly large players. In the past 24 months, the number of large schemes with over 25 000 members decreased from 15 to 12. “The consolidation is expected to continue in 2014 and on into the foreseeable future,” says Mark Arnold, principal officer of Resolution Health Medical Scheme. “What will play an important role in the future of merged medical schemes will be the compatibility and synergies between schemes

that merge and whether these unions are undertaken with due diligence to ensure the structures and benefits of the two schemes will facilitate a successful amalgamation,” he continues. “More and more schemes are unable to sustain themselves as their risk pools are too small and reserves too low to mitigate exorbitant prescribed minimum benefit (PMB) claims. The major opportunities for schemes like Bestmed are growing its membership base through amalgamations,” comments Alan Fritz, head of sales, marketing and distribution at Bestmed  Medical Scheme.

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Tariff controls The Board of Healthcare Funders of Southern Africa (BHF) reports that a development it will watch with interest in 2014 is the Health Professionals Council of South Africa’s (HPCSA) tariff process. “This process, which began in 2012, seeks to establish fee norms for doctors and dentists. There have been positive comments in the public domain from the Minister of Health regarding reforms on pricing and charges within the private sector, especially as they relate to PMBs,” explains Heidi Kruger, head of corporate communications at the BHF.

Increased competition “The healthcare market is becoming increasingly competitive. It is essential for schemes to be strategically innovative and forward-thinking if they wish to attract and retain younger members and remain relevant and sustainable,” Fritz notes.

“Recent research commissioned by the BHF on the effects of the ‘pay in full’ ruling regarding PMBs produced sound evidence to demonstrate that this is a significant cost driver and that day-to-day benefits are being reduced to fund the shortfall.”

The reality now is that consumers want more than just medical cover from a medical scheme. They are looking for a composite, integrated healthcare and financial services solution that will provide for their needs throughout every life stage. This comes with new challenges for schemes, but also an opportunity for competitive advantage. “The opportunity in the market is for medical schemes to evolve from mere funders of healthcare to complete healthcare and well-being solutions for their members. This will include the integration of well-being programmes with healthcare benefits to provide holistic care that is both preventative and curative in nature,” Arnold suggests.

Carried out by Christoff Raath, an actuary and CEO of the Health Monitor Company, one BHF-commissioned study showed that between January 2010 and July 2013, many specialist charges increased by up to 300 per cent for PMBs, while amounts claimed for non-PMBs remained linear. The study was based on billing data submitted to medical schemes by general surgeons and anaesthetists.

Here, notes Khan, technology will play an increasingly significant role. “Our technology platform is constantly evolving to support the greater integration and continuity of care required for improved health outcomes and cost savings.” Going forward, attracting new members into the medical aid environment will remain a challenge for schemes. “New member growth is not sufficient at current levels. It remains difficult to grow the industry, considering that medical inflation, and therefore contribution increases, outstrips consumer price inflation,” Jordan comments. Fritz echoes this concern, “Challenges remain: the slow growth of the industry, exaggerated by high levels of unemployment, as well as limited foreign direct investment to stimulate the economy.” He adds that political and labour instability will remain a key challenge to the promotion of effective health policies in the work place.

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Jordan shares this interest, saying he believes that once implemented, the HPCSA’s tariff process would go some way to determining fair medical fees and highlighting instances of overcharging.

“In my opinion, there is no doubt that the impact of PMBs has had an undesirable financial impact on the funders of private healthcare and this could trigger a collapse of the industry,” says Fritz. At Bestmed, PMB claims increased in value by 50 per cent in 2013. “Opportunities for price and cost management also lie in the further extension of designated service provider (DSP) agreements between medical schemes and medical providers as a way to curb escalating healthcare costs for the coming year and beyond,” notes Arnold. Industry leaders will be watching the development of the Competition Commission inquiry into the private healthcare sector with interest, notes Kruger. The inquiry is set to start on 6 January and will investigate possible cost drivers including pharmaceutical manufacturers, medical equipment and the inter-relationship between the public and private healthcare systems. The Commission originally instigated the market inquiry after concern that specific factors in the healthcare sector prevent or restrict competition. The final report is due by 30 November 2015, but both Kruger and Arnold suggest that its results may offer new opportunities and may see some resolution to spiralling cost challenges.

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Data opportunities

Dispute resolution

“From the perspective of the Council for Medical Schemes (CMS), major opportunities exist in redefining data specifications to obtain critical data from medical schemes, specifically on PMBs and health quality outcomes,” suggests Dr Elsabe Conradie, head of stakeholder relations at the CMS.

In September 2013, the CMS implemented a pilot alternative dispute resolution project to alleviate the congested Appeals Committee roll of appeals in a cost-effective manner. The backlog had reached 87 cases with parties waiting several months for matters to be heard.

Another 2014 CMS intervention will be a beneficiary registry. “It is important to monitor movement of members and beneficiaries between schemes and options for risk profiling purposes. The registry will also assist the Department of Health (DoH) in verifying membership status when members use State facilities as designated service providers.

National health insurance While the pilot phase of the National Health Insurance (NHI) is implemented and the White Paper is anticipated, a key focus for the CMS will be on working closely with the DoH to address immediate challenges in the medical scheme environment. “A major challenge is relieving public sector primary healthcare facilities from the current pressure levels. Another is encouraging young, potential members to join medical schemes,” notes Dr Conradie. Jordan notes that the NHI continues to be topical area for schemes. “It remains to be seen

He adds that it is incumbent on the private sector to assist and engage government, working with them to provide quality healthcare to more South Africans. “The private sector has a huge role to play to assist in the process, as it contains a great deal of information and experience.” “The experts in our sector are generally in favour of assisting the state with the implementation of national health to broaden the base of healthcare service delivery, which will have positive spin-offs for private health,” comments Fritz. “There is a real opportunity to make healthcare more affordable from a service provider point of view and accept that our social needs in South Africa are a challenge. Less profit does not necessarily mean failure; we need to strive to marry social needs with capital needs. This will certainly see membership growth in the medical schemes industry.”

FEDH2729RSA The Cheese Has Moved

If the registry is integrated with the South African Revenue Service (SARS) it could be helpful to calculate family income that can inform the CMS and the NHI process on affordability issues,” Dr Conradie adds. For schemes and insurers, the newly passed Protection of Personal Information Act (POPI) will be a datarelated hurdle in 2014. Dr Monwabisi Gantsho, chief executive of the CMS and registrar of Medical Schemes, warns, “The medical scheme industry will have one year to comply. Medical schemes and intermediaries need to consider having policies in place to ensure compliance with the POPI Act.”

Though the pilot has been operational for only a few months, Dr Conradie reports that the success is already noticeable. “Out of the 21 matters that were referred for conciliation, 15 were settled. The mechanism will be officially implemented going forward.”

whether there will be a White Paper in 2014. The industry is awaiting clarity on the extent to which the pilot projects have worked, as well as questions around whether it will function on a single-payer system, among others. There is still a fair amount of uncertainty and not a great deal of direction as yet,” he comments.

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7 ML Fedhealth. Real Medical Aid.

Bridging

the gap Sean Calmeyer

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Consumers want to know that they will be able to cover medical costs, unforeseen or otherwise, but this is becoming ever more complicated. Sean Calmeyer, director at JDH Financial Solutions, steers us through the stormy waters of PMBs, DSPs and gap cover, and how to ensure that the individual is not saddled with the medical cost risk. unfavourable impact on the membersâ&#x20AC;&#x2122; out-ofpocket expenses. Certain medical schemes have lowered their tariff amounts from 300 per cent to 200 per cent, or from 150 per cent to 100 per cent, while others have chosen to cover treatment only at a PMB level of care for specific medical conditions such as cancer. This means that not all forms or all stages of cancer will be covered by the medical scheme. It is also evident from the 2014 product information that a number of medical schemes have increased the compulsory co-payments or deductible portion, or they have introduced new procedures to the list of defined procedures where member copayments are being applied. The impact of this is that members are faced with having to pay far more for private healthcare than just the monthly contribution.

relatively small proportion of the South African population belongs to private medical schemes. The private healthcare market comprises 8.6 million individuals, making up just 17 per cent of the total population according to the Council for Medical Schemes. This proportion has remained fairly constant over the last decade. The consequence of this small membership is an ageing healthcare population and, with age, comes co-occurring diseases and increased costs. This has a direct impact on member contributions. It is also believed that the introduction of prescribed minimum

benefits (PMB) has impacted on the financial sustainability of medical schemes. We have witnessed a number of cost-saving initiatives by medical schemes to counter these increasing costs. This includes a broad spectrum of risk management. However, medical scheme members point out that their benefits are decreasing over time, while the contributions continue to increase. These decreases are said to be inevitable as medical schemes endeavour to meet their financial objectives. Although not always immediately apparent, these decreases have an

The consequence of these increased costs and the transfer of risk onto the medical scheme member has resulted in the introduction of a growing number of insurance-type products. These are commonly known as top-up or gap products and are regulated under the Short-term Insurance Act, thus cannot be defined as a medical aid product. National Treasury and the Department of Health (DOH) launched an investigation into the validity of gap products during 2012, as they viewed these products as performing a similar function to a medical scheme. They proposed that these products should be regulated under the Medical Schemes Act 131 of 1998. For now, it has been agreed that they will continue in their current form, owing to an outcry from individuals and advisers in favour of gap cover. This does, however, leave uncertainty in the market as to the future of these insurance products. It also leads to the question of whether or not these top-up or gap products adequately address the membersâ&#x20AC;&#x2122; out-ofpocket expenses. To answer this, we need to understand the rules of the respective medical schemes. ď&#x192;

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Too often members rely on the medical scheme’s benefits, unaware that their portion for in-hospital treatment will run into thousands of Rand. This often leads to an investigation by the member or the financial adviser into the applicable diagnosis or ICD10 codes, with the hope that the treatment falls within PMBs. However, this is no longer sufficient. PMBs, or as they may soon be known,

mandatory minimum benefits (MMB), as proposed in the Medical Schemes Amendment Bill submitted to the DOH on 4 October 2013, no longer necessarily mean that the claim will, or must, be paid in full. The most recent court ruling on this matter determined that a medical scheme is not obliged to pay for a non-emergency PMB condition in full when the member elects not to use the scheme’s designated service

providers (DSP). This follows after medical schemes negotiated contracts with various service providers and formalised preferred fees and payment arrangements. Where these arrangements exist, members should be made aware of them, as this will have financial implications if they make use of a non-DSP. The scheme will, in instances such as this, pay only the maximum amount that is equal to the medical scheme’s agreed tariff amount. It is therefore critical that members are aware of these preferred providers when they plan admissions or procedures in hospital, as PMBs no longer imply full cover. Medical scheme members often think that because they have top-up or gap cover, they will simply claim any shortfalls from their insurance products. It is no longer that simple. The gap products do not cover these co-payments or shortfalls simply because the medical scheme has not paid in full. These insurance products, similar to any medical scheme, have rules and policy terms that need to be adhered to. Consumers often forget to focus on the small print or the terms and conditions of their purchases. This is crucial because the cost difference between the medical scheme tariff and the doctor’s charge could be significant. Compulsory scheme co-payments or deductibles could range from between R450 to R16 000 (based on 2013 information) for identified operations, and this is without taking into account any difference between the tariff amount and the charge of the service provider. One critical exclusion, not applicable to all gap providers, is the exclusion of PMBs from cover. This puts the onus on the member to know their benefits, and on the financial adviser to provide accurate advice on the implications of not following the medical scheme’s risk management initiatives or protocols. The following important points should therefore be taken into account: 1. Does the medical scheme make use of designated service providers for treatment? 2. Will the medical scheme pay PMB-related, non-emergency treatment, in full, irrespective of the service provider being used? 3. Does the top-up or gap provider exclude PMB-related claims from their benefits? If so, to what extent can this be negotiated with the medical scheme and/or insurance product provider? Consumers, more often than not, do not understand PMBs or how this should be managed by their medical scheme. It is evident that even if members do buy top-up or gap insurance for unforeseen expenses, they must be made aware of the implications associated with PMBs and the use of DSPs. Without a deep understanding of the consequences of not following scheme protocols or understanding the terms and conditions of the insurance policy, members will continue to fund these out-ofpocket expenses.

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LONG TERM

2014 Life assurers weigh in

Financial pressure, legislative issues and continued change for intermediaries. RISKSA chatted to some of the movers and shakers in the life assurance industry and this is what they had to say about what lies ahead in 2014â&#x20AC;Ś Neesa Moodley-Isaacs

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ver the last 10 to 15 years, life assurance premiums have decreased by 30 to 40 per cent and claims payouts across the industry have increased in line with the enhancements in benefits and claims criteria, according to Kenny Rabson, the deputy chief executive of Discovery Life. “In addition, with a greater degree of focus being given to the impending implementation of Treating Customers Fairly (TCF), companies will spend an increasing amount of time ensuring that all their products, processes and marketing material are compliant with the TCF principles and are in line with a consumer-centric approach to business. Transparency and objectivity must be at the forefront of everything life assurers do,” he says. He points out that the entire industry has already come a long way in this respect with the move towards objective medical criteria as a claims assessment mechanism in the disability claims space. To support this view, disabilityrelated complaints at the ombudsman’s office are 60 per cent lower than they were in 2000. Altrisk’s managing director, Michael Blain, expects that the focus on distribution will remain in the spotlight until the industry has more clarity on regulatory proposals for intermediary remuneration. “We will continue to see a battle around distribution as well as a continued drive to enhance and improve products. There are indications that the economy will continue to struggle and consumers will remain under pressure. This means that we can’t expect significant growth in the life risk industry,” he notes.

Intermediaries are invaluable However, Sanlam’s chief executive of personal finance, Lizè Lambrechts is more positive, and of the opinion that financial advice will remain invaluable to clients in the South African retail financial services industry next year and beyond. “The bulk of our business is and will remain intermediated in the short to medium term, and change here will be a matter of evolution not revolution,” she says. Lambrechts notes that people generally underestimate the extent to which the financial advice profession has evolved, and the benefits of financial advice for clients. “Specialisation to provide clients with the most professional and 

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Other features which Discovery Life offers to ensure affordable premiums over time include the paid-up benefit; after reaching the age of 65, which is generally viewed as retirement age, a client no longer needs to pay their risk premiums and they continue to receive their life assurance cover in full. “These types of benefits ensure the longterm sustainability of benefits for our clients, particularly at times where lapse rates may increase due to increases in interest rates,” he says. Assupol’s senior executive, group corporate governance and risk management, Bodo Meyer, says the life assurer does not expect increases in the interest rate to affect its customers, “We operate in a niche market where our policyholders specifically value their funeral cover. The niche market is also not heavily exposed to changes in interest rates, as they generally do not have house bonds and car loans, so changes in interest rates have a reduced impact on disposable income,” he explains. Looking back over recent years, Blain notes that the stock market and economy have been propped up with cheap credit on a global and local scale. As a result, consumers have, to a certain extent, been shielded from economic hardships.

relevant advice offering is the order of the day and, given the range of the industry’s product offering to clients, it is imperative for clients to seek advice, particularly those in the middle and affluent markets,” she says.

aimed at promoting client and investor confidence, she says.

“Working as a financial planner is certainly no easy task, though, and the requirements for success are onerous, ranging from being consistently up to date with industry issues to nurturing and developing the skills required in running a successful practice.”

Interest rates have remained steady since August 2012 and economists are predicting that the situation is only likely to change towards the end of 2014. However, an increase in interest rates will have a bearing on policy lapse rates. “An increase in interest rates would typically mean lapse rates will increase while growth across the industry will decrease. Insurers across the industry address lapse rates through various product features that ensure that client’s premiums remain affordable over time. An example of such a

In a dynamic industry, Lambrechts predicts intermediaries will continue to experience a steady course of change. These changes, including regulatory change, should be welcomed if they are ultimately

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Interest rates and policy lapses

“This easy money environment may come to an end if interest rates start going up again in 2014. This will have a negative effect on heavily indebted consumers and some consumers may need to be reminded of the value that their life cover provides. At Altrisk we work very hard to offer alternatives to policyholders who can no longer afford their premiums rather than cancelling a policy as this often leaves the person without valuable cover,” he says. Lambrechts expects that most clients will find a gradual rate increase manageable. “Given the access to quality advice from financial planners and our experience of an improved understanding of their savings objectives and commitments, a rate increase should not impact client behaviour too much.”

Challenges Life assurers across the board are anticipating several challenges in the year ahead. Rabson says two main challenges will be increasing regulation in the 

NET#WORK BBDO 8016135

feature is seen in the Discovery Life PayBack benefit which returns a portion of a client’s premiums each year, depending on their level of health and wellness management. This ensures that a client can afford a potential increase in their policy premium over time,” says Rabson.

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industry spurring a greater need to ensure compliance; and dealing with an increasing disease burden as well as constantly increasing longevity. Derick Ferreira, market development manager for Old Mutual’s retail affluent division, agrees with this view and notes that on the retirement side, the biggest pressure is more and more people finding themselves at risk of: • Retiring with insufficient capital. • Outliving their capital. • Not being able to meet their monthly budgets. “The consequence is that people are forced to select annuity income options that provide the highest income as opposed to buying the most appropriate income options that ensures

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provision of a sustainable income for life. As an industry, we assist, guide, educate and support customers to be able to acquire income options that provide a sustainable income. The most appropriate option would be one that provides an escalating income to counter the eroding effect of inflation on a client’s purchasing power,” he says. Rabson says in terms of an increasingly regulated environment, the life assurance industry will need to constantly review how it operates, and ensure that governance principles and best practices are compliant with local laws and international best practices. Lambrechts says while regulatory changes are likely to present the biggest challenge to the

industry for the foreseeable future, there are important positive outcomes for clients in a well-regulated environment which is monitored and enforced. Nevertheless, the sheer volume of regulatory change and periods of uncertainty will continue to test the industry.

Increasing disease burden Even though people are living longer, this doesn’t necessarily mean that they are healthier in the long term. “Given the many technological advancements in medicine, non-communicable diseases such as cardiovascular disease, stroke or even diabetes are no longer seen as fatal. They are now preventable or manageable conditions. This means that even though

alone, 36 million people died from noncommunicable diseases, and this number, if left unaddressed, will increase to 55 million deaths by 2030. South Africa is not alone in experiencing an increased disease burden in non-communicable diseases, as cardiovascular disease is one of the country’s leading causes of death.

ARNOLD Married with children. Main breadwinner. Loves his job.

Rabson says Discovery Health has 2.7 million members in South Africa, and the administrator’s data shows the following: • More than 523 186 Discovery Health members are living with one or more noncommunicable diseases. • The average age of Discovery Health members living with a non-communicable disease is 45.96 years. • About 31 per cent of families have at least one family member who has a noncommunicable disease condition. • In 2012, a total of 146 030 members were admitted to hospital for causes related to non-communicable diseases.

Demanding trading conditions Rudi Schmidt, Assupol group chief executive, says one of the challenges in the year ahead will be to increase the value of new and in-force business amid demanding trading conditions. “Given the challenging economic environment and the lack of economic and employment growth, this will take a lot of focus and continued cost control,” he says. With a major period of corporate activity behind it, Assupol is now focusing on nurturing and developing its core businesses, creating the foundation to exploit new opportunities that arise for building sustainable growth.

clients are living longer, they may be leading a poor quality of life with one or more non-communicable diseases, and this translates into multiple claims over their lifetime,” Rabson adds. To illustrate the increasing disease burden and potential for increased multiple claims, research shows that three unhealthy habits – physical inactivity, smoking and a poor diet – cause four of the most common non-communicable diseases; cardiovascular disease, diabetes, chronic respiratory conditions and certain cancers. These four non-communicable diseases are responsible for 50 per cent of the world’s deaths. According to World Health Organisation (WHO) statistics, in 2008

“The two most critical issues in the life insurance industry are the continuous increase in regulatory compliance, and the fraud which is inherent in life insurance. There is uncertainty surrounding future legislation, more specifically the new Insurance Act, and the impact of changes in commission regulations and microinsurance, and regulators will have to work with industry to find a solution,” Meyer says. With respect to fraud, he says the industry will have to find creative ways to join forces to combat fraud in order to have a better impact against fraudsters.

Window of opportunity However, it’s not all quite doom and gloom. Schalk Malan, the managing director of BrightRock, believes that a



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more informed, more engaged consumer – thanks both to the implementation of TCF regulations and to the way technology is facilitating consumerempowerment – presents a significant opportunity for the life assurance sector. “The latest report from the Financial Advisory and Intermediary Services (FAIS) Ombud notes an increase in complaints by policyholders, a sure sign of increasing consumer activism,” he notes. Malan explains that for new incumbents in the market, who have no legacy issues to address, a golden opportunity exists to introduce new thinking and product innovation that is more transparent and delivers better value to consumers.

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“This in turn creates opportunities for financial advisers to offer their clients access to more sustainable products. The growth at the lower and middle income segments of the market also provide strong opportunities for providers who can offer accessible, affordable options to a broader spectrum of clients,” he says.

Remuneration challenges Blain says there are issues around the question of how financial advisers are remunerated. “Independent financial advisers are entering into tied agency agreements and are being courted by certain product providers with large upfront payments and ongoing sales remuneration,

well in excess of regulated commission. The consequences of these arrangements are that advisers are no longer independent and these arrangements aren’t in the interest of the consumer,” he elaborates. Blain says the industry is also seeing a rise in early claims, which suggests non-disclosure or anti-selection in the application process. Another concern is the high degree of underinsurance. The Association for Saving and Investment's (ASISA) 2013 SA Insurance Gap study shows that South Africans remain critically underinsured for death and disability by as much as 60 per cent. In 2013, the insurance gap (which is

the difference between existing life and disability cover and the actual insurance need of South African earners) widened to R24 trillion. “These are deeply concerning figures,” Blain says. Lamprechts adds that the value of advice, however, cannot be over emphasised – particularly given the dire state of savings and insufficient focus on retirement planning among South Africans. “Solving these challenges requires a joint effort by industry and government, and our industry is well positioned to encourage savings through appropriate advice, through educating clients on the longterm nature of retirement products, and through continued product improvements and innovation.” She believes the conversation around product charges will continue and notes that this issue is, potentially, the industry’s greatest reputational challenge. “Yet, I don’t believe the industry is as expensive as perceptions present it to be. Ultimately, clients respond to the value they perceive in the industry and change is driven by what clients require. Given the long-term nature of our industry, these changes are more often evolving rather than revolutionary in nature.”

Product changes As the industry evolves, there is always room for improvement in product offerings. Rabson tells us that innovation is a critical component at Discovery Life, to ensure the company remains highly competitive while offering clients incredible value for their money. “Since Discovery Life first entered the market in 2000, we have launched over 50 new products and product enhancements. With the advances in medicine as well as increased accessibility to information through technology, the life assurance space is full of opportunities for more accurate, effective and dynamic risk assessment methodologies as well as benefit innovations,” he says. Meyer notes that TCF regulations should enhance product understanding. “Guidelines around medical schemes demarcation could see product offerings changed or discontinued. Retirement reform will lead to more consistent treatment with regard to taxation, and a change in the preservation rules of funds. This could impact retirement product offerings. At the same time, commission regulations (RDR) could impact the distribution channels used by life insurers,” he says.

Schutte says there is no doubt that consumers are becoming increasingly aware of the cost of advice and other product costs they are incurring when investing in a long-term savings contract. “This is not a new trend. Liberty has identified the need for a new generation of investment products that give customers a better deal. The Liberty Evolve range of investment products were brought to market in October 2012 and are unique in that the client does not pay for advice fees or product set-up costs until a target rate of return (15 per cent a year) has been achieved,” he explains.

...THE TERMINATED No one expected the wave of retrenchments.

While it is still early days, consumers have responded extremely well to this new generation proposition, and it has been Liberty’s most successful new product for many years. “The main battle for insurers will be to convince policyholders of the value of their policies, particularly in an economic climate where consumers are already under financial pressure. Risk insurance is a long-term commitment and tends to shift lower down on the priority list during tough economic times. It is important to communicate this message to consumers, and this is where financial advisers play an important role. There is always the option to restructure a client’s financial plan, such as reducing benefits, instead of cancelling cover altogether,” says Blain. “I don’t think we will see consumers cancelling insurance policies, but new sales will be tough. Adding unnecessary and complex options and benefits to policies in these difficult economic times makes no sense – we must focus on good, honest value instead,” he states. Bearing this in mind, he goes on to say that there is always room for improvement. “When it comes to products, I expect to see continued incremental changes, nothing too radical. Consumers are looking for value, not gimmicks. Recently there’s been an increase in insurers offering loyalty programmes, but I think customers will start asking more questions about the value that such programmes add to their cover.” While there are likely to be several challenges in the year ahead, there is no doubt that the life assurance industry will have an interesting 2014. As the Chinese proverb and curse says: “May you live in interesting times.” Life assurers will have to make the best of it and move forward with a positive attitude.

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The ham in the

sandwich generation

Ryan Chegwidden, actuarial head, Altrisk

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The financial burdens and responsibilities of middle-aged South Africans are increasingly driven by two trends â&#x20AC;&#x201C; an ageing population and a generation of young adults struggling to achieve financial independence.

hen these two collide, we have what is aptly termed the sandwich generation; adults in their 40s and 50s who are providing financial support for their own ageing parents, as well as supporting children of their own. The growing prevalence of sandwich generation families is spurring financial advisers to be extra prudent in getting clients to take a critical look at whether they, and their families, are really financially prepared for worst case future scenarios.

...IS BACK

It’s also one of the reasons why long-term care insurance is increasingly becoming an essential part of a comprehensive financial plan. Many clients take out this type of cover to avoid the financial devastation that can happen if they take a bad health turn and to avoid becoming a financial burden to their children and loved ones. Others who think ahead invest in long-term care cover for their parents to ensure that they can enjoy a dignified retirement with the care that they may need one day. The bottom line is long-term care insurance provides policyholders with the assistance they need while they are alive and in need of care, giving them the flexibility and freedom to preserve their assets, lifestyle and dignity. This is exactly what happened to Jenny earlier this year, when she unceremoniously became the ham in the family sandwich with the unexpected arrival of her ageing – and ailing – father from the UK. Jenny’s life, and that of her family, was thrown into upheaval.With only a small monthly pension, his retirement savings virtually depleted, no medical aid, and suffering the onset stages of dementia, Jenny’s 73-yearold father was in urgent need of a support structure, and full-time care. After some months spent living with the family, Jenny’s father was eventually placed at a reputable care facility – an essential move for the sanity of her family, her marriage and her own career ambitions. Jenny faces at least R10 000 of unbudgeted costs per month for the full-time care that her father requires; that’s without annual increases and inflation taken into account. A further condition of getting her father into a care facility was that he had to be on a hospital plan, which is another cost that

Jenny has had to pick up and which does not come cheaply at age 73. So how can your clients survive the sandwich years and guard against depleting their savings and retirement funds? As a financial adviser, it often means crossing some very uncomfortable turf. It’s often a case of seeing the writing on the wall. If your client has children to support and ageing parents without sufficient health insurance and retirement savings, it’s likely that they will need to factor this into their own financial planning as you can only cut a cake so many ways. Many sandwich adults also base their own retirement planning on the fact that they and their own parents are healthy and working, but things can change. They may not relish discussing the topic with mom and dad, but they are essential conversations to have and, as an adviser, you play an important role in guiding them towards this goal. What if a parent has a stroke or is diagnosed with Alzheimer's? What if they need full-time home care? By guiding your client and their family through these what-if scenarios, you allow for more proactive planning and less trauma – emotionally and financially – should the worst occur. Trying to make decisions in the midst of a crisis isn’t optimal. The best time to discuss long-term care needs with your client is when things are calm, before their loved ones need help. In many instances, your clients won’t have considered such scenarios until you have an open conversation with them about the implications for sandwich generations. And there’s nothing palatable about being caught in the middle.

Arnold was prepared. He had Altrisk’s new Retrenchment benefit that pays a lumpsum of up to five times his monthly salary in case of retrenchment. Which gave him the financial security he needed while he was unemployed. Tell those like Arnold about Altrisk’s Retrenchment benefit. Because everyone needs a chance to make a comeback. For more information speak to your Altrisk broker consultant or go to www.altrisk.co.za

We’re your type of risk insurer.

Altrisk is a division of Hollard Life Assurance, an authorised ﬁnancial services provider (FSP 17697).

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MR MANAGING RISKS

Safe as houses

The frightening reality in South Africa, as crime statistics constantly remind us, is that homes are targets for burglary and sinister deeds. Technology provides solutions that can considerably mitigate risks through clever high-tech solutions. Christy van der Merwe

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o longer the preserve of James Bond or the perpetually paranoid, RISKSA takes a look at some of the technological innovation providing protection and enabling South Africans to feel ‘safe as houses’. Headache-inducing alarms, click-clicking electric fences and security guards on patrol are standard in South African suburbs. Now, as we hurtle through the 21st century, the prevalence of high-tech security is becoming more widespread, and the level of control offered to home owners is evolving. Shaun Mackrill, director at AMC German Technology (AMC), which provides a range of intelligent-building technology, explains that most security systems in South African homes are considered relatively basic and use old technology. “But as we educate people on the options, create awareness and advise people on the benefits of spending a little more on security, we find more homes are moving towards newer, improved technology.” Based in Cape Town, Mackrill explains that at this stage the majority of the company’s clients are Europeans with homes in South Africa, and are used to having a certain level of energy-saving and security technology at their fingertips.

Independent security consultancy (ISC) owner, Renford Brand, says that South Africa makes use of high-tech security products, since the high rate of crime gives a great deal of exposure in this market. However, the installers and security companies with the knowledge to apply the latest technology or design overall systems in South Africa are in the minority, he adds. As an independent security consultant, Brand evaluates and tests all products for resistance to defeat based on a comprehensive risk and vulnerability analysis. “The latest and most effective technology is video analytics and other early warning detection systems, but this depends on the situation, environment and risks. It is essential to plan security holistically incorporating all the disciplines of security, namely technology, hardware, manpower, crime intelligence, response and procedures,” emphasises Brand. The importance of comprehensive security systems is highlighted again and again. Brand tells RISKSA that in 2013, upmarket homes installing the latest technology spent R650 000 on average. This includes a security plan, internal and external intruder detection, CCTV, fences and gates and intercom or access control. It excludes guarding and armed response monthly.

The average cost for estates can vary between R1 million to R6 million. This includes hardware such as fences and technology such as perimeter detection, surveillance and access control, but excludes monthly guarding and response costs.

Keyless access and mobile visibility Mackrill notes that much of the current hightech home security relates to personal security outside of the home. The threat of mugging, smash-and-grab or petty thievery means that South Africans seek to expose minimal risk items when outside of their premises. “The less you have showing in your pockets or bags, the lower your risk of becoming a target.” High-tech access control for homes means that home owners no longer have to carry a key when leaving the house and going for a jog for example, because they can use biometric fingerprint technology or enter a pin number to get into the home. “Carrying keys is a risk. If lost or stolen, a stranger may have access to your home," cautions Mackrill. "The same goes for any situation such as hijacking, when keys are left in the car, or losing your keys or bag. With our Gira intelligent-building technology, you no longer

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Integrated intelligence Residential risk is no longer only a matter of security. Technology must be embraced as a way for all risk elements to be incorporated into a single comprehensive risk management platform. By doing this, all losses are managed, controlled and effectively reduced, says Neil McDonald, national sales manager at e-Green Power Optimisation.

have to worry about the visible risk and have peace of mind knowing that when you get home, you can gain access with or without keys,” adds Mackrill. Keyless access controls can be set up to unlock any gate or door with biometric controls using the fingerprint method, a keypad or transponder card. AMC’s range of access control equipment includes an outdoor call station, or video call station, which calls one or many indoor intercoms and provides a visual of the caller. There is also the option of forwarding the call to a mobile telephone number; if no one is home, thereby decreasing the risk. The home owner is therefore always aware of any visitors or possible intruders. Video imaging can also be displayed on a TV screen when the outdoor station has been rung. When questioned on his first choice in security enhancement, Mackrill opts for video and audio signals from the outdoor station which ring the home owner’s mobile. “This allows you to speak to whoever is at the gate, and potential intruders think that someone is home. Most burglaries are planned and potential intruders monitor the house. They will ring the doorbell to check if anyone is home.” Mackrill emphasises that the integrated security system must work in synergy, and there is no single product that is a fail-safe solution. In addition to the visual mobile monitoring and keyless access, the Gira intelligent-building technology systems include motion sensors to control lighting circuits.

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Traditional security systems are focused on reducing losses from criminal activities. But because any loss ultimately impacts your pocket, it makes sense to incorporate all lossincurring elements into your risk management system. By combining motion detection technology from Digital Security Controls (DSC), with energy and water management technology from e-Green, a complete risk management platform has been created with real-time access and control from any authorised PC, laptop or smartphone, from anywhere in the world. Passive infrared detectors designed and installed for intruder detection can be used to control lights, while the alarm is disarmed. Lights are programmed to switch off at predetermined times or when there is no movement. This also allows the home-owner to recoup the cost of the system through energy savings. e-Green can switch any light on and off or dim it based on motion, time of day or lux level. The system can also simulate occupancy by randomly switching lights on and off after hours or when the family is away. This deters would-be criminals. Integration of energy management and security systems also allows for the inclusion of seemingly non-connected systems such as the perimeter detection and sprinklers. The sprinklers can be set to start as soon as a perimeter beam is triggered, hampering intruders from accessing the property. Event-based, offsite CCTV monitoring allows an operator to investigate whether an alarm activation is real or false. Visually inspecting a site before a response team is sent dramatically reduces false alarm call-

outs and allows real-time onsite knowledge to be relayed to the responding team, in case of an emergency. The CCTV operator can also speak directly to criminals from a monitoring station through two-way audio communication, once a trigger has been detected and identified as true. “The dramatic and at times comical effect of an unexpected booming voice is clearly evident in the immediate evacuation tactics of criminals. Real-time CCTV footage can also be viewed on demand, anytime, anywhere in the world, as long as there is an Internet connection,” says McDonald. By merging multiple technologies onto a single platform, modern risk management systems can protect home owners against criminal losses, as well as losses due to the uncontrolled use of water and energy, explains McDonald. Seamless integration between different technologies is the key to complete risk management; and a proactive rather than reactive response, manages and reduces the risk. “The secret lies in the creation of a technological symbiosis. Each individual system functions in its own right, but they share communal information to the benefit of the system as a whole.” Knowledge is power, and the same can be said for high-tech security systems such as these, which provide visibility. Embracing technology can dramatically reduce risk and provide comfort to home owners who can use it to protect their families.

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RisksSA_D

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Success does not come from eliminating risk.

SUCCESS COMES FROM

MANAGING RISK FOR GROWTH.

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We help you balance your strengths against the risks that come with growth.

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MARSH AFRICA www.marsh-africa.com | +27 11 060 7100 An authorised financial services provider | FSB/FSP: 8414

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RisksSA_Dec2013

PCI DSS v3.0

know

basis beginning 1 January 2014, but while organisations are encouraged to begin the process of implementing the new standard changes as soon as possible, it will not be mandatory until 1 January 2015.

What is missing?

Andrew Kirkland Regional director, Africa at Trustwave

outh African companies are now responsible for implementing security controls that help to protect their customers’ information from getting stolen, according to the Payment Card Industry Security Standards Council’s (PCI SSC) new regulations, published in November. The latest version of the Payment Card Industry Data Security Standard (PCI DSS 3.0) will soon be a requirement for all businesses that process, store or transmit payment card information.

When does version three come into effect? PCI 3.0 will be effective on a voluntary

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While many parts of PCI 3.0 will help businesses better protect their customers’ private and sensitive information, the standard still fails to address a few critical areas – the most pressing being the lack of any standards surrounding mobile security. As businesses increasingly use mobile point-of-sale devices to conduct transactions, they may also be putting their customers’ payment card information at risk. Some mobile application developers do not necessarily make security a top priority when designing applications leaving unpatched vulnerabilities that could lead to a data breach. The 2013 Trustwave Global Security Report revealed a 400 per cent increase in mobile malware in 2012, an increase demonstrating that mobile devices continue to be a top target for cybercriminals. In order to prevent another increase in 2014, developers and businesses need to incorporate penetration testing and other security controls before putting these devices to use. This includes the following: 1. Retailers should make sure they are PCI

What about POPI? The Protection of Personal Information (POPI) was passed into law when the bill was signed by President Zuma in November. POPI will now have a major effect on South African businesses as it regulates the processing of personal information and, as a result, companies are now obliged to be compliant with privacy and data protection legislation. Businesses need to ensure that they have proper security tools in place to help protect their customers’ data from a security breach. This is where PCI 3.0 will be able to help, as it stipulates the minimum controls necessary in order to keep sensitive data secure.

What next? South African businesses that are not yet working towards POPI and PCI 3.0 compliance are urged to speak to a qualified security assessor for a risk assessment, as failure to comply by the set deadlines could result in hefty fines and potential reputational damage in the event of a security breach.

FSP No iS 274

What you need to

compliant. This means having the basic security controls in place to be compliant and going beyond this by incorporating security controls that help them stay ahead of the latest threats and implicitly maintain compliance. 2. Evaluate the threat landscape. Since each retailer has its own unique needs when it comes to security, it’s important that they have a risk assessment performed so they know what security controls they need in place to help prevent a data breach. 3. Frequent penetration testing. Retailers should have penetration tests performed on their devices so that they can identify and remedy vulnerabilities before a potential criminal exploits them. 4. Encrypt, encrypt, encrypt. Make sure your business has point-to-point encryption installed across its devices’ hardware and software. 5. Get educated. Retailers should hold security awareness training for all employees, even temporary workers, so that they are aware of best practices when it comes to security and can spot any red flags that may indicate a breach.

Protecting your

reputation

PROFESSIONAL INDEMNITY Attorneys Built environment professionAls: Architects consulting engineers Design AnD construct lAnD surveyors QuAntity surveyors project mAnAgers estAte Agents freight forwArDers computer inDustry insurAnce Brokers unDerwriting mAnAgers chArtereD AccountAnts – (cApim AnD others) estAte Agents freight forwArDers computer inDustry insurAnce Brokers unDerwriting mAnAgers LIABILITY INSURANCE generAl puBlic liABility BroADform liABility proDucts liABility events liABility excess lAyers AnD umBrellA covers Agrichem liABility motor fleet thirD pArty liABility personAl liABility top-up (xol AnD umBrellA) commerciAl liABility top-up wArehousemen’s AnD cArriers’ liABility

Telephone: +27 11 459 1640

FSP No iS 274

Professional indemnity stuart sinclair stuart@leppard.co.za

Facsimile: +27 11 268 5887 Liability insurance caroline macnair caroline@leppard.co.za

www.leppard.co.za Accountants (CAPiM) Sherelle Horsfield sherelle@leppard.co.za

CR CAREER

Investments

are a r i c k advice area t

Neesa Moodley-Isaacs

As licensed financial service providers, brokers must adhere to the letter of the law and should not advise clients on products they do not understand. Generally, these products are far more complicated than the version explained to brokers at product launches. 8 2 CR 92

his was the strongest message in the Financial Advisory and Intermediary Services (FAIS) Ombudâ&#x20AC;&#x2122;s recent annual report for 2013. Ombudsman Noluntu Bam kicked off her report with the succinct observation that â&#x20AC;&#x153;we never lose sight of the fact that behind the complaints we handle are living beings who cannot simply be treated as statisticsâ&#x20AC;?.

Case resolution fast track Ten years since it was first formed under the auspices of the first FAIS ombud, Charles

Pillai, Bam’s office has made great strides in reducing the time taken to resolve a case. Abel Sithole, chairman of the board of the Financial Services Board, points out that the office had set itself a target to close cases for adjudication within nine months of receiving a complaint and has managed to achieve this. Sithole describes this as a significant milestone in the history of the ombud’s office.

At the time that financial advisers solicited the investment, Zambezi (the property) was sparsely occupied and building activities were still going on, while the new derelict and half-built villa was not close to being habitable. “The villa, now an eyesore to the public and an attraction to vagrants, is a constant reminder that when an investment sounds too good to be true, it usually is,” warns Bam.

Of the 9 949 complaints received during the financial year, 7 898 were resolved within the same year. If cases carried over from previous years are included, the resolutions increase to 9 033. Through the 1 387 cases that were settled or determined, the ombud managed to recover an amount of R51 million to the benefit of consumers.

Case 2: Carel Johannes Weideman and Anna Maria Weideman vs Huis van Oranje Beherend Beperk and Stephanus Johannes van der Walt

Bam also made note of the fact that the FAIS ombud’s office has now been running a graduate programme for the last three years, exposing 21 law graduates to the environment of the ombud’s office. The majority of complaints for the year stemmed from the Gauteng area (34.1 per cent), followed by Western Cape (13.44 per cent) and KwaZulu-Natal (13.40 per cent). The area of financial services that scored the most complaints was short-term insurance at 27.38 per cent, followed by long-term assurance at 25.3 per cent while investmentrelated complaints accounted for 23.1 per cent of total complaints.

Property syndication scourge Bam says that the area of investments has once again challenged her office’s resources. “Judging from our workload, it appears as though complaints arising from investments in property syndication companies and other phony investments are still going to be with us for a very long time,” she says. Bam then highlighted a few cases over the course of the past year that illustrate the need for brokers to do their homework and not blindly sell investments to their clients. Case 1: Elizabeth Johanna Siegrist vs Cornelius Johannes Botha “This case cracked wide open the myth behind the supposedly great offering that Sharemax Investments, its alter ego FSP Network trading as USSA and its foot soldiers sold to consumers,” Bam says. Elizabeth Siegrist was just one of many elderly South African consumers who were made to believe that Sharemax could pay them a return of 12.5 per cent a year, while their funds were safely ensconced in the attorneys’ trust account.

This was listed as “yet another example of the types of complaints that have occupied the bulk of this office’s resources”. It relates to an investment in the now-defunct Bloubergstrand Hotel, referred to as Realcor. The complainants came to know about the public property syndication and its promoter, Realcor, from advertisements placed by Van der Walt in print media and radio. The one-year investment was touted as safe, with a return of 12.5 per cent a year and a possible growth of 30 per cent on capital. Investors were further told that they could double their money over four years. The complainants invested R708 000 of their life savings based on the broker’s assurances that their investments were safe. However, both entities that the couple invested in were placed under business rescue and later liquidated. Following an investigation commissioned by the Registrar of Banks, all the companies comprising the Realtor Group were found to have contravened the Banks Act by illegally taking deposits from members of the public despite not being registered as banks. Realcor was directed to repay all the funds illegally collected.

had taken early retirement due to illness and on the basis of Edgcumbe’s advice, they invested their savings. Genesis was liquidated through the Cape High Court in 2009. When the complainants realised they had lost their investment, they queried the appropriateness of Edgcumbe’s advice. “I do not understand how a licensed financial adviser can commit a handicapped, risk-averse person like myself to a life of destitution when the government is currently battling to provide social security for every South African citizen. I saved money for 44 years in order to make myself and my wife financially independent in our retirement. It seems so unfair that he (Edgcumbe) may keep all his assets while I have to walk around with a begging bowl. He has his business intact and is young enough to continue building wealth while I have no chance of working in my present predicament,” Roelof Germishuys told the ombud. Bam says that during the examination of documents, it became clear that Edgcumbe had taken no time to understand the product he recommended to his clients. “The broker communicated to his client exactly what he learnt from the pioneers of the scheme and nothing more,” she says. Bam says brokers have a responsibility when selling a financial product and particularly investments, to ensure that they themselves fully understand a product so that they can clearly articulate the risks involved before investing their clients’ money.

Case 3: Louise Ellen Danielz and Maria Germishuys vs Bernard Marc Edgcumbe and others Germishuys and her husband, Roelof, were advised by Edgcumbe to invest their retirement capital in an entity known as Genesis, marketed as a “safe, low risk investment secured by property”. Roelof

“Of the 9 949 complaints received during the financial year, 7 898 were resolved within the same year. If cases carried over from previous years are included, the resolutions increase to 9 033.” 93 3 CR

New risks

new opportunities Volker von Widdern, MD of Marsh Risk Consulting was winner of the Institute of Risk Management South Africa’s (IRMSA) Risk Manager of the Year 2013. He chats to RISKSA about the work that Marsh does and the changing nature of risk and insurance. Hanna Barry

What do you believe sets the Marsh Risk Consulting team apart? At Marsh Risk Consulting (MRC), our job is to advise clients regarding risk. We take this a step further by partnering with our clients in risk management, sharing and owning the risk together with them. Our teams are practically engaged with clients, ensuring the success of what is happening on the ground in their organisations. Why do you think you won Risk Manager of the Year? I’ve been in the risk management industry for most of my career, working in asset financing and private equity investing, before joining Guardrisk, where I was involved in the financial modelling of risk as it pertains to cell captives. At Marsh, the focus is on the qualitative and strategic side of risk. MRC is the largest risk advisory service in South Africa and the second largest of its kind in Marsh’s global operations. We have done well in a small economy to build one of the largest and most successful risk advisory practices. My colleagues and I

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are passionate about risk management and there are a number of areas where we have a highly specialised understanding of risk. What does this award mean to you; and how do you plan to use this achievement in the coming year? I hope that this award brings some recognition to the MRC team, which works hard to deliver on its projects. Over and above that, I’d like to work together with IRMSA to create a facility where we can provide resources to answer questions relating to risk management, facilitating interest and excitement around the industry. This facility would elevate the risk management industry, making it more accessible and generating interest from job seekers and students. Having worked in the insurance industry for over 20 years, what strikes you most about how the nature of risk has changed? In a hyper-connected world, risk events have changed from being unique and separable occurrences to having far more of a knock-on

effect. The scale of risk, risk velocity and the rate at which risk intensifies is much faster. In the past, risk was most often defined in relation to physical property and physical damage or casualty. Increasing legislation creates an overlap between property and casualty risk, where property damage leads to personal injury for instance, and gives rise to liability risk. Companies are exposed to many more direct implications on brand and reputation than they were before and there is a greater need to understand the wider consequential exposures around risk. Twenty years ago, if there was a fatality on a mining or construction site (i.e. industries with poor safety records), there would be a brief investigation, but work on the site would continue as usual. Now, operations could be stopped altogether until the company has proved that safety regulations have not been compromised and that the rest of its staff members are safe. The volcano in Iceland, major earthquake/ tsunami effects and Bangkok floods provided reality checks for risk management with regard to the international production and supply chain models.

From left: Gordon Howes (2012 IRMSA Risk Manager of the Year), Volker von Widdern (2013 IRMSA Risk Manager of the Year) and Sheralee Morland (IRMSA President)

Do you think insurance is becoming more or less relevant in this changing risk landscape?

What would you like to see change or improve in the risk management practices of the insurance industry?

You may intuitively feel that insurance is becoming less relevant, but the scope and scale of insurer activities are now a lot more complex and diverse. Insurance is about protecting what is important to people, which means it continuously has the opportunity to become more important and more relevant.

There is still inadequate representation of risk management at a strategic level, with limited opportunities for risk professionals. We need to shift our idea of a risk manager from an individual in charge of primarily health and safety to someone who assesses and evaluates the strategic risk influencers for business. While the first role remains crucial, the second role of strategic risk influencer is full of potential. Effective risk management creates opportunities to solve business problems and enhance the strategic alignment of goals in the organisation. For example, an employer that is committed to optimising staff risk exposures could avoid future labour instability.

For instance, the exponential growth in mobile devices and the need to protect data presents new opportunities for insurance coverage that didnâ&#x20AC;&#x2122;t exist 10 years ago. The Thai floods were an excellent example of the types of contingent business interruption losses caused by the interconnectivity of global supply chains. This event highlights the opportunity to create insurance policies that cover the third and fourth tier of supply chains. In this sense, the insurance industry is more relevant than ever. In particular, there is an important role in supply chain risk assessment for the risk advisory industry.

How should South African insurers use their risk management skills and expertise for national development imperatives, if at all? With only a third of motor vehicles on South African roads insured, there is tremendous opportunity to develop solutions that enhance the risk protection of the population at large.

We need to be attuned to what people need and want to protect. It is clear from the money spent on cellphone networks that protecting mobile communications is important to consumers. Provision of value for money risk transfer models that address multiple life stages highlights the opportunities that exist for those insurers that can develop the right products. In the corporate space, there are risks that are either not insurable or simply not insured. Here there are opportunities to pool risks between a number of companies, in order to protect against crises. Spreading and transferring risk in a cost-effective manner could ultimately keep a company in business, resulting in the continued employment of staff and ongoing economic development. A message for RISKSA readers? There is substantial value add in risk management solutions. When risk management is operating well, it creates a competitive advantage. Iâ&#x20AC;&#x2122;ve seldom seen cases where a reasonable and feasible investment in risk management hasnâ&#x20AC;&#x2122;t paid off in multiples, reducing the total cost of risk, providing a return on investment and creating new opportunities for the organisation.

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g n i v i v r t u s S he fir s t year

Advice for new

advisers

According to Maureen Walton, an adviser with more than 30 yearsâ&#x20AC;&#x2122; experience, 93 per cent of new financial advisers leave the profession within the first two years. Clearly, starting out is tough. Sarah Bassett

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t takes time to build your income and to learn about managing yourself, your business and your clients. We went in search of practical advice on how to build your client base, your profile and your career. Are you committed? “It is a fee-based business and this means that it will be tough at the outset,” says Gavin Came, chair of the Financial Planning Executive Committee at the FIA. “You have to ask yourself if you are really committed. Sometimes people get into financial planning as a door into the industry, wanting to do something less client-facing, such as asset management. The job is a multifaceted one and it’s important that you are passionate about it.”

Give yourself at least three years. “Give yourself a three-year commitment at the least,” Came advises. “It’s a tough commitment, certainly. As a young person starting out you will initially have to rely on the credentials of your employer while you are building your own. Give yourself the time to build your business."

Choose your target market. “A mistake many inexperienced advisers make is to target high net worth clients, often far above their own age set,” notes Came. “It is unlikely that a 24-year-old, new adviser will be selected by a retired, former CEO in his seventies. This is not impossible, but the danger in chasing such clients is that they often have more experience in managing wealth than you do.” Focus on finding clients within your age group. The going wisdom is, you can sell to someone five years your senior and 10 years your junior. These clients may not yet be high net worth, but it is important to build a solid base with them. As their careers develop, your business will grow with them.

Specialise. “My preference is to specialise in one area and become deeply knowledgeable about that aspect of financial planning,” says Warren Ingram, winner of the Financial Planning Institute’s (FPI) 2011 Financial Planner of the Year award and 2013 FPI Media Award. “I chose investments for high net worth individuals as my area of expertise and I always focus on this area. If a client requires estate planning or insurance advice, I am happy to refer them to another specialist.”

Build yourself a public profile. “Write, present and educate people about money. Write regular articles. The Internet is a great forum for getting published and you can use your social media profile to ‘broadcast’ your articles. Try to get on radio and TV as often as possible and always make yourself available to the media,” Ingram suggests.

Work on your interpersonal skills, especially client coaching skills. “Technical knowledge is important but it is only the first step, there are many technically knowledgeable people in our industry but very few of them can effectively impart this knowledge to financially unsophisticated people. They usually resort to jargon which either intimidates clients or confuses them,” Ingram explains. Came echoes this, “Success as a financial planner requires a delicate balance of people skills and technical skills and it is rare to find both in one person. It is crucial to put time into developing these people skills in the early years, including your ability to network, sell yourself and build relationships. Invest in your own development, find courses in these areas and seek guidance from a mentor," he advises.

Always be available to your clients. Especially if you have to give them bad news. Investment advisers tend to hide from their clients when markets are falling which is a cardinal sin, Ingram cautions.

Try to choose clients who you can relate to on a personal level. “If a potential client makes you uncomfortable at the start, pass that client to someone else. I have always regretted taking on clients who I did not ‘gel’ with in initial meetings. When stock markets or other circumstances work against you, it is important that you have a good relationship with your clients so that you can work through the bad times,” says Ingram. “Find clients you like and make sure you are prepared to have them come to you for far more than financial advice. You may have to counsel them through divorce, family death, job loss and many more life challenges,” agrees Came.

Manage your reputation. If you’re unhappy in a particular organisation, try something different, but be careful to manage your reputation. “A lot of advisers have shot themselves in the foot by job hopping. You spend a long time convincing your clients

that one set of products is the way to go and then suddenly you’re selling the opposition,” warns Came.

Keep educating yourself. For this career, you need to stay constantly up to date and must continuously update your knowledge. You should develop this habit right from the start, Came emphasises.

Don’t sell products. According to Ingram, good financial planners are not product sellers; products are simply tools for implementing good advice. “There is nothing wrong with being a product seller unless you try to disguise product selling as financial planning. You should always focus on providing the right advice for the client, even if it means that you do not earn money from selling a product.”

Don’t make predictions. Financial planning is not about predicting the markets. “If you deal with money, clients often expect you to be able to tell them where stock markets are going in the next few months, what interest rates will do and what is going to happen in the currency markets. You will be tempted to appear knowledgeable and might give them a prediction based on research you’ve read. Statistically, your prediction is likely to be wrong and this will damage your credibility. Being constantly wrong is not a great way to build your professional reputation. Rather be honest and tell people that you have no idea what is going to happen and neither does anyone else,” Ingram advises.

Financial planning is the best job in the world. Ingram reminds us of the best bit, “If we do our work correctly, we materially improve people’s lives in a way that few other professions can.”

"If you’re unhappy in a particular organisation, try something different, but be careful to manage your reputation. A lot of advisers have shot themselves in the foot by job hopping." 97 3 CR

ob applicants are now able to purchase fake telephonic references using an online company that sells the perfect reference. What is scary is not the fact that applicants would use this kind of service, but rather that any company would so blatantly market such a fraudulent service in the realm of the worldwide web with absolutely no shame. “Unemployed? Fired? Forced Out? Bad reference? Create an entirely new work history using our fake reference service. Don’t let these issues keep you from finding meaningful work. Explain away these periods using one of our virtual companies. Our fake companies are so real, our virtual companies actually get sales calls from the public. If you find yourself fired for cause, or simply dealing with a long period of unemployment,

You and your business have come a long way. So get

Business Insurance from the bank that’s been around for more than 150 years.

We can provide you with the right cover for your business needs. Our customised solutions cover damage to property and office contents, business interruption, public liability, goods in transit and a whole lot more. Call us on 0860 999 334. Let’s talk business. Standard Bank Insurance Brokers (Pty) Ltd is an authorised financial services provider (FSP224). A member of the Standard Bank Group. Moving Forward is a trademark of The Standard Bank of South Africa Limited. Standard network rates apply. Products are underwritten by Standard Insurance Limited. SBSA 171002-12/13

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Moving Forward

we can help. If your former employer won’t give you a good reference, we can replace him. For the most part, we are only limited to our mutual imaginations. You tell us what, we figure out how! Our clients range from corporate executives to newly released prison inmates and everyone in-between. No two clients have the same needs. No detail is overlooked. Every case is managed by a case manager best suited to your needs. If you're calling us from London, Sydney or even Texas, we'll assign a voice actor with the appropriate accent to fit that of any region.” www.thereferencestore.com. Where does this leave us as recruiters and human resource professionals? How do we distinguish between a fabricated reference and that of a genuine employer? The truth is that no job applicant with a bit of savvy is going to put a bad reference on their CV. So it’s either going to be omitted, replaced with a friend, family member or colleague who will give a good reference or even be paid for. It’s really up to recruiters and HR professionals to ensure that references that are properly investigated through the HR departments of companies that the applicants have worked for. First contact the HR department and verify employment, then verify reporting lines and use those verified reporting lines to conduct performance references. A well-investigated, genuine reference can really add such value to the screening and recruitment process. It’s not worth taking shortcuts.

Kirsten Halcrow Managing director: EMPS (PTY) LTD www.emps.co.za

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NEW PRODUCTS

The best of the latest

Watermark eliminates risk of being underinsured A new and exclusive short-term personal insurance solution by Glacier Asset Protection, underwritten by MUA and designed specifically for the high net worth market, helps clients eliminate the risk of being underinsured. The Watermark productâ&#x20AC;&#x2122;s policy deletes the underinsurance condition on the policy and MUA appoints a professional valuator to assess the clientâ&#x20AC;&#x2122;s risk on site to establish the sum insured. Under the Watermark product, items such as cellular phones, laptops, CDs and iPods/iPads no longer need to be specified on the policy. They are automatically included in the R250 000 all risk cover. They will, however, attract an excess of R1 000 if unspecified. Home offices and the liability attached to it can be included in the cover. Public liability cover can be extended to R30 million and there is no excess for claims over R100 000. This solution also offers extended 4x4 cover. A typical client for this cover would be over the age of 35 and wanting to insure a home to the value of R3 million or household content to the value of R750 000.

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Santam offers legal compliance product Short-term insurer Santam has launched a business legal insurance offering to assist small, medium and micro-sized enterprises (SMME) to meet the risks and cost to legal compliance. The number of small and medium-sized businesses in South Africa is estimated to range between one and three million. Unlike larger firms that have resources to access legal services, many small enterprises find it difficult to absorb the costs and expenses of legal compliance. Santam’s Business Legal Review service has been designed with an online portal through which business information can be processed. Santam’s service providers then assess whether the business is at risk of non-compliance with applicable laws. According to head of corporate legal services at Santam, Joseph Makgopa, the review gives a snap shot of a business’s current legal and compliance standing and assesses its legal health and potential legal risk. “The assessment contains some of the most common legal issues that affect small businesses. It is designed to give useful insight into the business’s legal requirements allowing them to pre-empt and mitigate legal risks that could pertain to any issue from labour disputes to issues under the Consumer Protection Act,” he says. Legal services for the drafting or vetting of commercial contracts and legal costs associated with civil actions, as may be instituted by or against the company, are also covered in the policy. The legal risks could range from disputes with a customer or employee labour disputes. Business legal insurance cover, designed to be affordable for small business, is meant as a convenient and accessible way to receive assistance on compliance with legal issues that may arise during the day-to-day running of a business,” Makgopa says.

Specialist cover for winemakers Zurich South Africa has launched a specialist insurance solution covering the entire winemaking process. The cover includes accidental damage, extended liability and fire, as well as loss of revenue for wineries, cellars, bottlers and co-ops. Farmers, distillers and co-ops can package the winery’s insurance with their current Zurich Farmers Insurance policy. “Crafting and producing excellent wine takes precision, time, care and creativity. We are well versed in meeting the specific needs and requirements of wineries, from the vineyard to the wine glass,” it said in a statement, adding that customers will have access to a team of knowledgeable, specialist underwriters. “We are pleased to have used our global experience and knowledge to tailor a solution that meets the distinct needs of customers in the South African wine industry,” says Clyde Troup, portfolio head of property at Zurich South Africa.



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Infiniti Re: niche reinsurance Newly established Infiniti Re, a division of Infiniti Insurance, has announced its plans to offer treaty and facultative reinsurance solutions to smaller, niche insurers in the South African market. It also has plans to provide reinsurance to companies in the rest of sub-Saharan Africa; initially Botswana, Kenya, Lesotho, Mozambique, Namibia and Swaziland, with the intention to expand. The offering will provide an additional income stream for the Infiniti holding company and giving diversity to the premium and exposure mix of its current portfolio. “It is our intention initially to offer small reinsurance lines, both proportional and non-proportional, and provide local capacity to retain premiums written locally with a view to stemming, in some small way, the outflow of premiums and capacity to international markets,” says Paul Ray, Infiniti Re MD. “Following a recent visit to Nairobi, Kenya, business has already begun to flow in from companies and brokers in this region,” he confirms. Infiniti Re plans to

strengthen partnerships with the reinsurance broker market, locally and abroad, while continuing to build partnerships with cedants directly. Although relatively small in comparison with its competitors, Ray believes that the reinsurer is able to offer the market wellcapitalised security and personal service, with a view to seeking reinsurance solutions for the benefit of all parties concerned.

Saxum to launch commercial, industry insurance products With a focus largely on the corporate insurance market since its inception in 2005, Saxum Insurance Limited has announced that it is expanding its focus to provide commercial and industrial insurance solutions. “We will shortly be introducing a commercial policy with cover elements designed specifically for small- to medium-sized businesses,”

says Thomas Ohlenschlager, MD of Saxum. “We’ll also be offering hospitality, engineering and guarantee products. We have engaged with a range of experienced insurance experts to achieve this strategy and would like to be seen as the insurer with a highest degree of technical expertise,” continues Ohlenschlager. “Increased complexity, coupled with increased market expectation for technical know-how and the more demanding regulatory environment, means we need to bring these expertise on board in the Saxum environment,” he adds. The new product range will be launched early this year.

New products are ready to be served

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We can provide you with the right cover for your business needs. Our customised solutions cover the various risk exposures faced by transport business. Various optional extensions may be added such as risk of downtime, credit shortfall and loss of deposit following an accident or theft. Call us on 0860 999 334. Let’s talk business. Standard Bank Insurance Brokers (Pty) Ltd is an authorised financial services provider (FSP224). A member of the Standard Bank Group. Moving Forward is a trademark of The Standard Bank of South Africa Limited. Standard network rates apply. Products are underwritten by Standard Insurance Limited. SBSA 131708 11/12

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Moving Forward

2012/11/22 10:59 AM

Mutual insurance

sector outperforms total insurance market Christy van der Merwe

The mutual insurance sector has grown by 26 per cent since 2007, compared to the total insurance market which grew by 11 per cent, according to the report: ‘Chief Executive InSights: Perspectives on leadership in the fastest growing insurance sector’.

he report was released at the biennial International Co-operative and Mutual Insurance Federation (ICMIF) conference, which was held in Africa for the first time in 2013, in Cape Town. The report showed that ICMIF member firms further outperformed the total mutual market during the past five years, growing by 30 per cent. The study argues that this success has been driven by high quality service at competitive prices; proximity to customers enabling a clear understanding of their needs; and concern to ensure that the organisation has the right talent, the right technology and a culture of active innovation. The ICMIF represents more than 220 cooperative and mutual insurers from over 70 countries worldwide, with its members

accounting for 5.5 per cent of the world’s insurance market in 2012. According to the CEOs interviewed for the report, emerging opportunities for this sedtor include providing no-nonsense insurance, coverage for social needs such as healthcare and pensions where governments are withdrawing or do not offer support, and risk education and advice. Looking further ahead, CEOs suggest that there may be greater international expansion of the sector. Elaborating on the report, ICMIF chief executive Shaun Tarbuck notes that the findings suggest that the customer-focus and values that underpin co-operative and mutual insurers are evident drivers of strategic thinking, performance measurement and, crucially, of business success. Co-operative or mutual organisations benefit from the freedom to be able to think, act and achieve for the long term rather than bend to short-term shareholder pressures. The biennial ICMIF conference was hosted by the South African mutual financial services company focused on graduate professionals, PPS, and delved into some of the issues facing mutual insurers worldwide. As with all sectors of the financial services industry, regulation is a paramount concern. Because mutual insurance companies are owned by their policyholders, and profits are rebated to policyholders through dividends or reduced future premiums, they do not slot neatly into the existing regulation, when compared to listed insurance companies.

Addressing international delegates at the conference, Marcel Kahn, president of Réunion des Organismes d’Assurance Mutuelle (ROAM) and chief executive of the MACSF group, reiterated that because mutuals are essentially owned by their members, they are very well regulated and use robust models, thus can deal with most regulation and legislation within any country. “We must make sure that regulators understand the specificity of mutuals and co-operatives. Financial services are often lumped into one category, but as we know, what is good for banks, is not always good for insurers. It is our responsibility, especially mutuals, to make sure our own distinct niche is understood,” Kahn adds. Mike Jackson, CEO of PPS, explains that in South Africa, there is a lot of emphasis on the implementation of Treating Customers Fairly (TCF). This piece of legislation is already central to how mutuals and co-operatives operate, however, other regulatory mechanisms may not be as easily applied in this sector. Ultimately, mutuals and co-operatives are a competitor like any other in the industry, and are required to fit in with relevant regulation. In her address to delegates, Kathy Bardswick, CEO of Canada’s The Co-operators, said that finding solutions to issues of regulation, as well as sustainability, in the context of the rising claims levels from extreme weather events, were key to the survival of the industry. She called in particular for co-operative and mutual insurers, as organisations run for the benefit of their policyholders, to take the lead.

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Brokers abroad

Switzerland Welcome to the first in a series of articles uncovering the challenges and opportunities in the global insurance industry. Dave Labarthe is a financial planner in Geneva, Switzerland, and has been working in the industry since 1987. He started his own consultancy, Dave Labarthe and Associates in 1995, which offers clients a variety of short- and long-term products. Christy van der Merwe

Have there been significant changes in regulation and qualifications required to work in the industry in Switzerland? We went through rigorous changes between 1995 and 2000. The Swiss Federal Banking Commission (Commission fĂŠdĂŠrale des banques â&#x20AC;&#x201C; CFB) was established and became stringent. Previously, you could learn the ropes and become a salesman. After the CFB was set up, you had to qualify and have a licence. For that, you had to bring forward third party liability insurance worth 250 000 Swiss Francs (CHF), above R2.9 million. In 2008, the Swiss Financial Market Supervisory Authority (FINMA) was established, and further clamped down on insurance industry professionals. Everyone who sold insurance had to obtain a qualification and a certificate number. Now, all business cards must display a FINMA number, proving registration with the authorities. The CFB and FINMA protect clients, and the increased regulation means that clients are properly briefed and informed on technical

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aspects of the information, such as the start date of a policy and how long it runs for.

advice, and rather get the commission invested into the product for the client.

Is there a negative perception of financial services in Switzerland, with people viewing insurance as a grudge purchase?

How competitive is the insurance market in Switzerland?

Yes. I would say the public is now much more careful, and shops around. Whether it be for life insurance, or just basic banking investments. Another law that came into effect and changed the industry is that brokers are no longer allowed to cold call people. Personally, I have always worked through referrals, so this did not impact me. Brokers who have worked like this from the start, not relying on cold calling, are now well settled. We don’t have representatives and sales teams – it’s illegal. Is fee-based remuneration discussed in Switzerland? We are talking about it, but it’s not moving fast enough. Between 1995 and 2000, insurance companies were being questioned on why they only pay acquisition commission, when they get commission on signature, and then annual commission on the portfolio. This is very expensive for clients. We are not yet at the stage where we can invoice the client for

Very competitive. The population is small – about eight million people in total. In Geneva, there are hundreds of companies in the life insurance industry and hundreds of brokers all competing within a small, tight market, and representing perhaps 15 to 20 major insurance companies.

qualify to work in the industry. Previously, you just learnt as you went along, which was fine, we had good results. Today it takes a bit more time to get there. How long does it take to earn good money in a career in financial services? That depends entirely on the person. Somebody who is quick, agile and works hard will not be frightened by the first obstacle, and could earn well within three months. For another person it might take between one and three years.

How does your business stay lucrative?

How much can brokers earn in Geneva?

I have always done a complete holistic financial analysis. I can render a better service if a client’s whole situation is studied – income, income tax, rent, whether or not they are a homeowner, existing insurance policies, banking costs and so on. This is what South African intermediaries call a needs analysis, which is now mandatory. It’s not compulsory in Switzerland at all.

A decent income is between CHF5 000 and CHF7 000 (about R53 400 and R74 800). And hardworking people, who are good at networking, usually earn between CHF8 000 to CHF10 000 (about R85 500 and R106 900), and more.

Have the barriers to working in financial services become too high? No, it’s a little more technical and you have to

So there you have it RISKSA readers. It appears that the insurance industry in Switzerland is a very competitive market, with earning potential between R50 000 and over R100 000 per month, at current exchange rates.

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The brand is one of the most important assets for a business when it comes to engaging with customers and potential business partners. We take a look at what a brand really is and some ways to help it stand out against the opposition.

BUILDING A Nick Krige

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The essence of a brand

Trust and respect

Firstly, a brand is not just the logo that is stuck next to the company’s name on the letterhead. It is not even the combination of the two or the product that a company offers. Those are all things that help others associate a company with its brand.

Building a community around a brand is essential to creating a feeling of trust and respect with customers. This can be done online via social media and a blog. It is important to stress that once the brand has been placed on Facebook and Twitter, the community needs to be actively managed and maintained. As great as an online presence can be for a brand that engages with its customers through social media, a lazy approach to the online community can be damaging for a brand.

In essence, a company’s brand is everything. It is the way the company is seen by the public and the experiences they have had dealing with the company. Of course, this includes those visual elements, but it also includes what the company does, how it does it and how it engages with its customers and business partners. Establishing a strong brand is about combining all these elements to create a feeling of trust and credibility for the business.

Offline community building involves associating the brand with local community activities such as fundraisers and charities, and possibly even hosting events under the brand itself. A trusted brand is the key to an organisation’s continued success because faith in the brand extends past one good product.

Exceed expectations It is important to remember that value, as perceived by customers, has very little to do with the price of any one particular product or service. It is evident time and again that consumers are more than happy to pay for a product or service that they trust or can rely on over a seemingly cheaper alternative. This means that establishing a brand that customers can relate to and trust should be the number one priority of business leaders, after ensuring they offer a superior product, of course.

Offer outstanding service There are many physical and digital ways to bring a company’s logo to people’s attention, but it will do nothing for a company’s brand if it offers an inferior product. In fact, it will most likely have a detrimental impact. It is often said that word of mouth is a small business’s greatest way of getting ahead, but the same can be said for an organisation of any size. Even the most charming CEO or salesperson is going to have trouble securing new clients and repeat business if they are offering a mediocre product. The best advertising campaign in the world has nothing on the effectiveness of a recommendation from a trusted friend.

Don’t bite off more than you can chew It is one thing getting clients excited by promising them the world, it is another thing entirely living up to those promises. Nothing is more detrimental to a brand than failing to live up to standards that it has set for itself. The foundation of a successful brand is exemplary service, and exceptional service is judged on the brand fulfilling its obligations. The moral here is: do not just say things to make the brand sound better than its competitors, make sure that all promises can be backed up with quality service.

Everyone is a brand ambassador It is important for every employee to understand they have a role in broadcasting the company’s brand message. It is not solely the job of the salespeople and client-facing staff to champion the brand. Every aspect, from the way the phone is answered to the way staff talk about the company outside of the office and address clients on social media, needs to carry a consistent brand voice.

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advertorial

CEN

when they exit the system. The burden on the government to fix the broken education system is overwhelming. Almost 80 per cent of the 27 000 schools in the country are dysfunctional. This means there are fewer than 6 000 properly functioning schools. You will appreciate that the need for all of us as citizens, including South African businesses, to support schooling is becoming more and more urgent every day. We cannot under-estimate or under value the importance of learning to read and write. But, too many of us take it for granted that this is happening. Unless, perhaps, you have kids going through this phase, we often just assume that simply because everyone must learn these skills in order to function in our society, they do. The reality, sadly, is different.

RITE Renasa Insurance Company is a business that believes in giving back. RITE is Renasa’s social responsibility initiative, and we have earmarked education as our area of concern.

evelopment of human capital is a pre-condition for any society to be able to achieve sustained economic growth. Such development requires investments in education, training and healthcare but our focus is specifically at the grass roots level – the Foundation Phase of education. This phase is fundamental because of its significance for nurturing cognitive capacity, literacy, numeracy and the ability to communicate.

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South Africa’s schooling system is performing very poorly by international standards, and is far from achieving what is needed both to satisfy the core aspirations of our people and to ensure that the country remains a leading player among emerging economies. The problem is one of poor quality – of teaching, of governance and, critically, of the intellectual development and basic competence of the students (even those who complete the full 12 years of schooling)

We believe no one should be denied the right to learn these skills. It is an amazing and exciting experience for young learners but, tragically, it is a process fraught with difficulties. Because the Foundation Phase is the basis for all further education, RITE has bought the rights to the Alphaland Literacy Programme and has already donated it to over 250 schools in past years. RITE further extends its reach through the RITE Reader Project. We have written and produced readers, and now donate packs of 110 readers per class to each teacher who attends our RITE workshops. At these workshops, teachers are trained, motivated and inspired to try new and innovative methods of teaching; fun ways to engage the children to experience and learn. The set of Grade 1 readers that RITE has written and produced are currently being used in needy schools across Gauteng and KwaZulu-Natal. These readers cover the concepts that need to be learnt in the Foundation Phase: for example, colours, shapes, counting, spatial awareness, degrees of comparison and family. They support the curriculum taught in schools. RITE is passionate about children learning to read and write. The more the children can read, the more they will learn, and the extra reading material we provide will go a long way in helping achieve our goal of improving literacy levels in this country. Businesses spend millions each year on interventions in schools. And while this may be small money compared to the annual education budget, funding for very important select projects can make a real difference. Renasa is proud to be one such insurance business that is giving back to society.

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Enrol for the insurance programmes and courses offered by the Unisa Centre for Business Management in association with the Insurance Institute of South Africa. OFFERINGS: SPECIALISING IN SHORT TERM INSURANCE: NQF5 IISA Elements of Short term Insurance (76635) 12 credits. IISA Introductory Programme in Short Term Insurance (7652X), 60 credits. IISA Programme in Short Term Insurance (76546), 60 credits. SPECIALISING IN RETIREMENT FUND MANAGEMENT: NQF 5 IISA Introductory Programme in Retirement Fund Management (76600), 60 credits. IISA Programme in Retirement Fund Management (76511), 60 credits. PROGRAMMES COVERING SPECIALISED TOPICS IN INSURANCE: NQF 6 IISA Introductory Programme in Advanced Insurance Practice (7649X), 60 credits. IISA Programme in Advanced Insurance Practice (76481), 60 credits. ENROLMENT DATES: First semester: 29 November to 24 January. Second semester: 2 June to 11 July. TUITION FEE PAYABLE AT REGISTRATION: R1 100 per module with an additional levy for foreign students. Fee does not include prescribed books. ADMISSION REQUIREMENTS AND DETAILS: Details regarding admission requirements, module contents, prescribed material and registration forms can be obtained from www.unisa.ac.za/pins or requested from the Administration Office:

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Euro’s PI market worth billions by 2017 M

arket research consultancy Finaccord forecasts that the market for professional indemnity insurance across 10 European countries – namely Austria, Belgium, France, Germany, Italy, Netherlands, Poland, Spain, Switzerland and the UK – will be worth around €7.5 billion (R107 billion) by 2017.

Finaccord has calculated that gross written premiums for this form of insurance amounts to around €6.78 billion (R97 billion) across the 10 countries in 2013, having grown from approximately €6.15 billion (R87.8 billion) in 2009. The UK is estimated to have the largest market, followed by Germany and France. Moreover, gross written premiums grew between 2009 and 2013 in all countries except Spain.

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Finaccord consultant Bernd Bergmann says that while the pricing of professional indemnity policies has been soft for several categories, including accountancy, finance and legal services in most countries, other segments have seen rapid growth in premiums. He adds that the cost of negligence claims for medical specialists has risen at an especially rapid rate in recent years, making medicine and dentistry (including hospitals), the fastest-growing professional indemnity insurance market in Europe between 2009 and 2013. “In addition, the cover is being made compulsory for an increasing number of professionals. The most notable example of this trend is Italy where professional indemnity insurance is now being made obligatory for some important professional categories, including architects and engineers,” he says.

Affinity schemes set up by professional associations are one of the main ways in which enterprises acquire professional indemnity cover. Finaccord surveyed 1 125 associations across Europe and found that 464 (41.2 per cent) had established such a scheme. The countries in which such schemes are most common are the UK (with a provision rate among professional associations of 62.7 per cent), Germany and Italy (50 per cent each). They are least widespread in Poland (19 per cent), Spain (32.2 per cent) and the Netherlands (32.7 per cent). In terms of their revenues, Aon and Marsh are by far the largest commercial non-life insurance brokers in Europe. Finaccord’s research shows that they are also the leading brokers of affinity programmes for professional indemnity insurance in Europe in terms of their number of partnerships with professional associations. However, their overall share of these partnerships is relatively low at 10.6 per cent in the case of Aon (including its UNITA subsidiary in Germany) and 4.5 per cent for Marsh. Thereafter, affinity schemes are accounted for primarily by brokers with a focus on just one national market.

services; marketing; medicine and dentistry; and other professional sectors. Specifically, it anticipates growth across all 12 sectors ranging from a low 0.6 per cent as a compound annual growth rate in the case of the broadcasting and publishing segment to a high of 4.3 per cent in the fields of both alternative medicine and IT and business consulting. Bergmann says growth in professional indemnity cover for some segments is highly correlated with trends in the underlying number of insurable enterprises. “While there are good reasons to insure the liability risks of media professionals, this market is currently held back by the stagnation or actual decline of the publishing sector. Given strong increases in the number of insurable enterprises for both alternative medicine and IT and business consulting, growth for the professional indemnity insurance market is expected to be especially strong for these two segments,” Bergmann concludes.

Bergmann continues, “The generally fragmented picture among insurance providers confirms the specialised nature of professional indemnity insurance. By necessity, many commercial insurance brokers are specialists and professional associations are likely to choose brokers with a detailed understanding of the particular risks faced by their members to run their affinity schemes.” Finaccord’s report also predicts how the market will develop across 12 distinct professional categories, namely accountancy and finance; alternative medicine; architecture and engineering; broadcasting and publishing; estate agency and property; financial and insurance intermediation; healthcare-related services; IT and business consulting; legal

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news Payment default costs Credit Guarantee R600 million in claims Credit Guarantee Insurance Corporation paid claims to the value of R603 million in the first 11 months of 2013, due to payment defaults on the domestic market. “That is more than the claims paid during the 2011 and 2012 years combined,” says Luke Doig, senior manager of economics at Credit Guarantee. “If we consider that in the aftermath of the global financial crisis, the company paid claims of R410 million and R355 million in 2009 and 2010 respectively, it is fairly evident that the strains being felt in the South African economy are far from over.” 2013 has been typified by some notable company failures, like Cosira and First Tech, which gave rise to a few large claims, with average values per claim rising some 130 per cent so far this year. “This experience is corroborated to an extent by the average value of default judgments against businesses having risen some 41.4 per cent in the first nine months of the year,” continues Doig. “The company’s overdue payment indicator (potential future claims) is 28.2 per cent higher in the first 11 months of this year, but there is evidence that the deterioration in the trend is moderating and we are hopeful that the economic momentum will gather pace somewhat, both at home and abroad, perpetuating a further improvement.”

Sanlam fined R3 million for broker over-payment The Financial Services Board (FSB) has slapped a collective fine of R3 million on Sanlam Developing Markets and Channel Life Limited for paying independent brokers more than the maximum commission allowed them under the Long-term Insurance Act. The contravention relates to commission paid in respect of funeral policies and was in violation of part three, together with section 49, of the act which regulates commission payments. The excess remuneration of intermediaries was the result of a system design error. According to Sanlam, the error was not intentional but dated back a number of years. Sanlam has agreed to pay a fine to the FSB of R2 million in respect of Sanlam Developing Markets Ltd and R1 million in respect of Channel Life Ltd, in which it holds a majority share. According to the registrar of long-term insurance, the contravention was as a result of an oversight in the system design. The registrar took into account that both companies fully co-operated with the investigation and have subsequently amended their processes where required.

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F&I now underwriting for Lloyd’s Specialist commercial, industrial and hospitality underwriter, Factory & Industrial (F&I), has announced that it is now underwriting as a cover holder of Lloyd’s of London. “This development complements F&I’s existing strategy and provides an excellent platform for diversification and expansion into the future,” comments Brian Muller, F&I managing director. He adds that F&I has plans to grow its presence in new markets, developing the products and underwriting expertise to support new initiatives. “Lloyd’s is a wellestablished, international organisation, with an international A+ rating by Standard & Poor’s and Fitch Ratings, as well as an A rating from AM Best, which provides excellent security to our clients.” The new arrangement brought to an end its partnership with Lombard Insurance Group, which has been its risk carrier.

JLT acquires South African healthcare broker Insurance broker and employee benefits consultant, Jardine Lloyd Thompson (JLT) has acquired Eluleka Consulting, a South Africa-based employee benefits and healthcare broker consultant. “This acquisition will immediately position JLT as the one of the largest players in the South African healthcare market,” commented Rhys Edwards, CEO of JLT Benefit Solutions South Africa. Based in Johannesburg, Eluleka is focused on the corporate market. Edwards said that the transaction would provide JLT with the capabilities and market profile to build its international reach, in a region where there is growing demand for its specialist expertise. Adrian Parsons of Eluleka expressed excitement at the opportunity to build on the company’s recent success, serve existing clients better and capitalise on growing EB opportunities in Africa.

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New UK partnership, new insurance solution from Genasys Technologies

S&P raises outlook on SCOR rating Global ratings agency Standard & Poor’s has raised the outlook of SCOR SE and its main subsidiaries from A+ to positive. According to the rating agency, “SCOR SE’s enterprise risk management and management and governance have improved and its business risk profile has benefited from further diversification following its Generali USA acquisition. We now expect SCOR’s earnings to sustainably bolster capital and earnings to very strong levels.” As part of this new assessment, S&P has raised SCOR’s Enterprise Risk Management (ERM) score to very strong, the Management and Governance score to strong, and the liquidity score also to strong.

Find the T competition Ryan Brickell of Standard Bank, Durban is the latest winner in the RISKSA and Tracker ‘Find the T’ competition. Brickell (middle) receives his prize, a TomTom Start 20 from Tracker CEO, Alan Hutcheson. He is pictured with Razia Khan, Jacqueline Redman, Joedi Bester and John Nolte, all from Tracker.

Liberty reports reduction in HIV-related disability claims Statistics from Liberty Corporate reveal that the percentage of disability claims submitted by HIV-positive policyholders has fallen sharply over the last few years, with HIV dropping from the number one claim cause for disability to number two. “This can be attributed to a combination of antiretroviral (ARV) availability, better awareness, free testing and counselling, as well as better workplace accommodation of HIV positive people,” says Graham Thomas, head of risk product solutions at Liberty Corporate. Liberty’s data shows that many HIV-related incapacity claimants can return to gainful employment through compliance with proper treatment. “The disease should no longer be a cause of a lengthy stay away from work or permanent disability, except in a few cases,” he notes.Thomas says that while fluctuating symptoms are common among people living with HIV, employers can make reasonable adjustments to accommodate those living with the disease in order to ensure they can continue their employment and provide for their families.

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Insurance software developers Genasys Technologies has announced a partnership with F2X Group Ltd, a UK business technology consultancy and developers of the Instanda online insurance sales platform. The partnership signals a move on the part of Genasys to expand its footprint in the UK and Eurocentric insurance markets. Integrating Instanda and the insurance management platform developed by Genasys, Software Key to insurance (Ski), the F2X-Genasys partnership will provide a new platform for insurance sales, product design, policy management and reporting. A software package that enables users to design, test and launch insurance products online, Instanda provides complete control over every aspect of insurance policy creation, billing and selling, while enabling businesses to prototype a product, define its ratings and business rules, build it quickly and make changes easily as often as needed with minimal upfront risk and cost. Genasys SKi provides a platform for multi-currency, multi-branch insurers, supporting all aspects of insurance including underwriting, rating engines, claims management, service provider management, premium management and reinsurance.

newappointments MMI Holdings

MMI Holdings Limited (MMI) has announced the appointment of Mary Vilakazi as CEO of MMI Balance Sheet Management, with effect from 1 May 2014. Mary Vilakazi

Vilakazi replaces Nigel Dunkley. Dunkley will be transferred to the MMI office in London where he will take up an executive role at Momentum Global Investment Management. Vilakazi is a CA by profession. She was previously a non-executive director of Metropolitan Holdings and a partner at PricewaterhouseCoopers and was director of several companies, including the Development Bank of South Africa and Kagiso Media Limited. She has also served on the Financial Services Board’s Long-term Insurance Advisory Committee to the Minister of Finance.

Sasria

every success in his new role and look forward to the significant contribution he will make to the success of Artinsure,” comments Gordon Massie, Sasria has appointed MD of Artinsure. “I have wanted to supplement my Suzanne Harrop-Allin as offering to brokers and, as a keen photographer, chief risk officer. Harropthis opportunity will allow me to market something I Allin is a qualified am truly passionate about,” says Clark-Miller.

CA and joins Sasria from PricewaterhouseCoopers, Johannesburg where she spent 10 years gaining Suzanne Harrop-Allin valuable experience in the insurance industry in the position of senior manager in the financial services insurance and investment management division. “Suzanne brings a wealth of experience to Sasria and we wish her all the success at Sasria,” comments MD Cedric Masondo.

Artinsure Alain Clark-Miller joins Artinsure as chief representative in the Western Cape. ClarkMiller was most-recently Cape Town manager of Flexible Accident and Sickness Acceptances (FASA). He will continue his responsibilities at FASA in addition to his new role. “We wish Alain

Financial Planning Institute The Financial Planning Institute of Southern Africa (FPI) has announced the appointment of Adv. Wessel Oosthuizen as general manager for the Centre for Professional Development. A certified financial planning professional, Adv. Adv. Wessel Oosthuizen Oosthuizen most recently served as the director of the Centre for Financial Planning Law at the University of the Free State. “Adv. Oosthuizen’s extensive experience over the last 20 years makes him the best qualified person to head the FPI Centre for Professional Development,” comments Godfrey Nti, CEO of the FPI.

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news roundup Here is a collection of articles from our website (www.risksa.com) that received the most hits via RISKSA WIRED and Twitter, as well as Facebook posts that received the most likes, shares and comments. Hanna Barry

Also in this RISKSA WIRED, we featured an article with commentary from industry leaders such as Santam’s Ian Kirk and Telesure’s Tom Creamer around the unreasonably high costs of some original equipment manufacturer (OEM) parts. The South African Insurance Association (SAIA) confirmed that it was seeking talks with motor manufacturers on this issue. Kirk, Creamer and others also commented on the unintended consequences of writing off vehicles at a lesser value of damage, such as increasing the number of unroadworthy vehicles on the road, due to the high costs of repairs. Subject: Tongaat tragedy a warning for insurers Date sent: 22 November

RISKSA WIRED (Subscribe on our website) Every Friday, we send out a newsletter containing the week’s top stories. Here are the past month’s most popular newsletters and stories. Newsletters with the most opens Subject: Sanlam fined R3 million for overpaying brokers Date sent: 29 November Summary: In November, the Financial Services Board (FSB) fined Sanlam a collective

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amount of R3 million for paying brokers commission in excess of the regulated amount. Sanlam Developing Markets and Channel Life, a subsidiary of Sanlam, were fined R2 million and R1 million respectively for contravening the Long-term Insurance Act. The contravention related to commission paid in respect of funeral policies and was the result of a system design error. According to Sanlam, the error was not intentional but dated back a number of years. Both companies fully co-operated with the investigation and amended their processes where required.

Summary: The tragic collapse of part of a mall under construction in Tongaat, KZN in November, which killed one person and injured 29 others, highlighted the risks facing construction and engineering projects. It elicited a warning from Etana Insurance to the industry, urging that clients comply with the necessary building and construction regulations to ensure the safety of workers and ensure that insurance claims are paid. RISKSA contacted a number of insurers in this sector, who confirmed that they were not the risk carriers. This led to speculation that the contractor was, in fact, uninsured.

Summary: Each week we tweet our weekly RISKSA WIRED newsletter. The tweet we sent out on 22 November – ‘Don’t miss the top insurance stories from this week in RISKSA #WIRED’ – won the highest number of clicks for the month. Public warned against Hello Doctor by Health Professions Council Published: 22 November Clicks: 101 clicks Summary: The Health Professions Council of South Africa (HPCSA) issued a warning in November urging healthcare practitioners and members of the public not to participate in or make use of telemedicine services provider, Hello Doctor. The council said that the business model clearly contravened the HPCSA’s ethical rules and discouraged face-toface consultations between patients and practitioners. It described Hello Doctor’s text conversations with doctors and telephonic access to doctors as a breach of patient rights. Hello Doctor executives, however, were surprised and disappointed at the HPCSA’s statement, saying that they had been engaging with the council and had not received a response for over a year. They noted that Hello Doctor had been operating successfully for over three years and had not received a single consumer complaint, adding that mobile phones were an affordable way of sharing relevant health information with millions of South Africans. Hello Doctor is majority owned by Metropolitan Health. RISKSA WIRED Published: 29 November Clicks: 45 Summary: The post tweeting the RISKSA WIRED newsletter published on 29 November received the third-highest number of clicks for the month. It was: ‘This week’s top #insurance stories in RISKSA WIRED: Tackling cost of car parts; POPI; FSB fines Sanlam and more…’

Like our page / RISKSA Albums with the most likes The album entitled ‘RISKSA celebrates PICA win!’ received 11 likes and three shares. It featured a picture of the RISKSA team with its five PICA trophies and certificates, as well as a very large and delicious congratulatory cake from Etana Insurance. Post with the most likes The RISKSA WIRED post on 22 November, which featured articles on Tongaat, Allianz’s comeback in the South African insurance industry, as well as Health Professions Council’s public warning against Hello Doctor, received 22 likes.

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events IRMSA

Conference 2013 Under the theme, 'React. Reflect. Restart.', the Institute of Risk Management South Africa (IRMSA) Conference took place at Gallagher Convention Centre in Midrand, Johannesburg on 26 and 27 November. With the likes of Bruce Whitfield, Michael Judin, Dr Johan Burger and Clem Sunter addressing attendees, it did not fail to impress. Presentations on political and economic risk, by political analyst Justice Malala and Nedbank chief economist Nicky Weimar were great highlights. Other speakers included Teri Salomon and Volker von Widdern of Marsh Risk Consulting, as well as Alicia Swart of Turner and Townsend. One of the panel discussions held at the conference suggested that the onerous obligations imposed on organisations to protect the information they possess, whether through the Protection of Personal Information Act (POPI), the Companies Act or King III, is indicative of the enormous threat the world faces from cyber terrorism. “South Africa has a significant cyber problem. This is not just a threat, we are knee-deep,” warned Dean Chivers, head of Deloitte Legal. “Part of the reason for this is that we don’t handle data very well. It is easily available, which is why South Africa is a prime target for these attacks.” Michael Judin of Goldman Judin Inc pointed to a lack of awareness among directors and officers of ICT and social media risk. “We don’t see chief information officers (CIO) at board level in many South African companies, as is the case in the US. In other words, the guardians of wealth in many companies are unaware of these issues,” he commented. To read the entire article, visit www.risksa.com and search for ‘Data protection laws signal increasing cyber risk’. Commenting on the success of the conference, IRMSA President Sheralee Morland said, “I am very pleased with the excellent support we received from members, sponsors and exhibitors at the 2013 conference. The programme was designed to deal with the rapidly changing nature of risk, because we believe it is necessary to constantly reflect, react and restart.”

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Old Mutual’s CoDA induction ceremony RISKSA attended Old Mutual’s Circle of Distinguished Advisers (CoDA) ceremony on 17 October at the Twelve Apostles Hotel in Cape Town. This year, CoDA welcomed three new members who met the membership criteria: Deon Schoeman, PB Dippenaar and Steve van Rooyen. Congratulations to the following 2013 CoDA inductees: Bernhard Visser, David Hall, Dieter Schwendinger, Erin Bothwell, Gideon du Plessis, Glen Mukheibir, Jan Loubser, Johan de Villiers, Petri Joubert, Renier de Waal, Tony Hurlbatt and Willie Horn. The guest speaker at the celebratory induction dinner was Old Mutual Investment Group CEO Diane Radley.

The RISKSA Better Business Breakfast A packed house at the Gateway Hotel in Umhlanga, KZN, received food for thought at yet another successful RISKSA Better Business Breakfast seminar, sponsored by Cura Software Solutions. Alicia Swart, head of risk services at Turner and Townsend, gave an informative presentation about the basics of risk management; while Paul Haydock, regional account manager at CGE Risk Management Solutions in Perth, Australia demonstrated the benefits of the globally popular ‘Bowtie’ risk management technique. The seminar was concluded with a talk from Cura Software Solutions’ CEO Karl Campbell about the current state of the GRC industry.

Innovation Group’s year-end function Innovation Group held its year-end function at its offices in Randburg, Johannesburg on 28 November. Innovation Group CEO Glen Mollink opened proceedings by welcoming all guests, which included clients and service providers. With a Cirque du Carnival theme, guests were treated to some spectacular displays as well as non-stop laughter from local comedian Ndumiso Lindi. Great food, good wine and even better company made it a memorable evening.

Allianz Cocktail The annual Allianz Cocktail was held on 20 November at Katzy’s in Rosebank, Johannesburg. CEO of Allianz Global Corporate and Speciality (AGCS), Delphine Maidou, spoke about what the company has achieved over the past year, underscoring its growth plans for niche lines of insurance in the African market. Board member and chief regions and markets officer, Andreas Berger, was present, as was Chris Fischer, the global CEO of AGCS. Former Saracens coach, Brendan Venter thanked Allianz for its support of the England club rugby team. He was accompanied by Saracens player, Mouritz Botha. With a great turnout and Katzy’s filled to capacity, guests were treated to excellent food and drink, as well as a live band.

DAREdevil Run 2013 Team RISKSA was out in full force in bright red Speedos, joining hundreds of other DAREdevils across the country to run five kilometres in support of cancer. Scores of men (and some ladies) brightened up the streets of South Africa with their colourful attire (or lack thereof). Well done to all the DAREdevils who raised more than R500 000 for cancer charities, and more importantly, raised awareness of male cancers. Thanks Etana Insurance for supporting this initiative.

Auto & General Broker Roadshow The Auto & General Broker Roadshow hit Cape Town on 15 November, with Telesure CEO Leon Vermaak there to kick off proceedings. He assured those in attendance that Auto & General is strengthening its broker model. Christelle Fourie, MD of MUA Insurance Acceptances, highlighted the synergy between the two companies off the back of their recent partnership. Sean Jackson, head of brokers at Auto & General explained some of the product changes and enhancements. He was upbeat about the growth shown by the company over the last year and enthusiastic about taking this forward in 2014.

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An industry

celebrated The insurance industry knows how to celebrate its people and practice. Here’s a round-up of the annual institute dinners held towards the end of 2013.

Insurance Institute of Northern Gauteng (IING)

Insurance Institute of the Border With a record attendance, the 61st annual dinner of the Insurance Institute of the Border was themed ‘Welcome to Burlesque’. Etana chairman, Paolo Cavalieri, was MC for the evening and multi awardwinning performer Ian von Memerty was one of a number of performers who kept guests entertained. Long service awards were given to Michael Thayer and Ian Koekemoer of Cunningham Lindsey, who have been in the insurance industry for 40 and 44 years, respectively. In recognition of their loyal support, the institute gave perfect attendance awards to two companies that had attended every one of its social events in 2013, namely, Bate Chubb & Dickson and Stephenson Insurance Brokers.

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Chairman of Etana Insurance, Paolo Cavalieri, with Hazel Bentley, Etana branch manager for East London. They are pictured here with four live props.

Held on 24 October at Utopia Place in Equestria, Pretoria, the theme of the IING’s end of year function was black and white. Guests were entertained by Classic Cartel, which added to the ambience created by a superb venue and décor. IING President, Wynand Louw, thanked sponsors and supporters for their help throughout the year. CEO of the Insurance Institute of South Africa (IISA), David Harpur, handed IING honourary life membership awards to Willie Greyling and Jan Venter. André Middleton received the IING meritorious service award. Sun Gardens Hospice was chosen by the IING as the charity for its 2013 golf day and given R10 000 at the dinner.

Insurance Institute of the Cape of Good Hope (IICoGH) The insurance industry was treated to a spectacular IICoGH gala dinner at the Zip Zap circus on 14 November. Hilarious hosting by comedian Marc Lottering and thrilling performances from the talented Zip Zap acrobats ensured it was a memorable evening. The institute raised R182 770, which was distributed among three charities in the Western Cape, namely, Perpetua House, Tafelberg Remedial School and the Aquarius School Feeding Project. IICoGH President, Natasha Wyborn, handed out long service awards to the following individuals, for service to the industry of 30 years or more: Madelon Moretti, Allie Wiehman, Tim (Gerald) Timmerman, Evangelos (Vango) Georges Kolovos, Leoni Victor, Clive Nel, Daniel Oostendorp, Lorraine April, John Reeding, Martin Campbell Wilson, Zainab Siebritz, Wesley de Vries, Najema Johaar, Robert Corbett and Sidney Gene Beeton. The award for the most active IICoGH council member went to Brent Lyall.

Long-service award winners.

Insurance Institute of Gauteng (IIG)

winners pictured here Long-service award Michael Dash (back). with IIG President,

Close to 1 600 people turned out for the IIG dinner. Entertainment from Fire & Ice Acrobatics was outstanding and R606 000 was handed over to the three IIG charities: SSVP Frederick Place, Wet Nose Animal Rescue Centre and Oasis Haven. Ron Kirby received the first ever Ruby certificate from the IIG, in recognition of his 40 years of service to the IIG council. The following individuals received 40-year service awards: Brian Seach, David Dowding, David Marais, David Rose-Innes, Fanie de Beer, Hendrik Ehlers, Mary Warney, Morag Dover, Robert Shaw, Steve Levitt and Anne Meadows.

Insurance Institute of KwaZulu-Natal (IIKZN) The IIKZN gala dinner was held at the Durban International Convention Centre on 22 November. The theme of the evening was Great Gatsby. A Rolls-Royce greeted guests on arrival and a live jazz band set the scene. Together with various singing and dancing acts, MC Melanie Roberts kept guests entertained. Long-service awards went to Nelson Nair, Bert Ewing, Dan Kanniah, Raj Oodith and Diana Steenkamp. Gay-Lynn Rheeders of Rhed Oliv Insurance Brokers received the Christine Allen Award, an excellence award given to a person who inspires and creates stewardship in the industry. It is not awarded every year, but only when there is a worthy recipient. Rheeders received the award for her outstanding contribution to the short-term insurance industry through, among others, her non-profit company My Career in Insurance, which promotes the industry to school leavers and creates opportunities for holiday work experience.

IIKZN council.

RiskSA wishes all our readers a happy new year

ABM Insurance Brokers: Wayne and Cathy Axford and guests.

121 3 CR ABM Insurance Brokers: Wayne and Cathy Axford and guests.

news international

Europe AIG launches broker trading platform

AIG is rolling out an e-trading product for brokers across five European countries following the launch of the platform in the insurer’s UK and Ireland businesses earlier this year. Through the platform, brokers will be able to process quotes, bind new business and make mid-term changes and renewals in real-time.

Morago, group risk director, Aviva, have been appointed as deputy chairmen with immediate effect. Richard Anderson has been re-elected as chairman of the board of directors for a third one-year term. Anderson is managing director at Crowe Horwath Global Risk Consulting, UK.

United Kingdom IRM appoints new deputies, reappoints chairman

The Institute of Risk Management (IRM) has elected two deputy chairs to its board of directors. Jeremy Harrison, a director at Faithfields and former head of project risk and value management at Network Rail, and José

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“Jeremy and José bring with them experience and enthusiasm to support Richard in leading the board over the coming year. We are delighted that Richard has been elected IRM chairman for a third term," comments IRM chief executive Steve Fowler. "He has been instrumental in driving a number of thought leadership projects and supported IRM to position risk management as a key issue at board level.”

The service will be launched initially in Sweden, Denmark, Belgium and Luxembourg and business will be traded in Danish, Swedish, French and Dutch. It will be launched in Spain in February 2014. The first three products to be traded on the platform are professional indemnity, directors’ and officers’ and group personal accident and travel insurance. European insurers investigate private debt market

Dutch insurer Delta Lloyd is leading efforts to kick-start the European private debt market with a collective scheme to provide loans to mid-sized corporates in the Nordic region. The insurer, which has built a corporate loan portfolio over the past four years, is in talks with other European institutional investors to launch a €750 million (R10. 6 billion) senior debt fund early this year.

Insurers across Europe have flirted with lending directly to companies after traditional lending markets seized up following the 2008 financial crisis. Insurers, however, have struggled to build up the necessary capabilities, such as credit risk assessment, in order to do so. The fund will enable institutional investors to leverage Delta Lloyd’s lending expertise, while sharing risk and increasing the fund’s firepower. Borrowers will be rated by Delta Lloyd, and the asset manager will provide enough information for insurers to look through to the underlying assets and utilise their internal models to better reflect the investment risk. The cost of 2013 disasters – Swiss Re

Disasters caused global economic losses of about $130 billion (R1.3 trillion) in 2013, according premilinary figures from to Swiss Re’s soon-to-be-released Natural catastrophes and man-made disasters in 2013 Sigma report. The reinsurance group noted that economic impact was sharply down from $196 billion (R2.2 trillion) in 2012, a year marked by Superstorm Sandy in the United States. November 2013's Typhoon Haiyan in the Philippines was the deadliest single disaster, killing more than 7000 people, though insured losses are expected to be modest. Insurance- and disaster-risk modellers AIR Worldwide recently put the economic losses at $6.5 to $14.5 billion and insurance coverage at $300 to $700 million. The insurance industry is likely to cover about $44 billion (R454 billion) of the 2013 disaster losses, Swiss Re reports, substantially lower than the $81 billion (R837 billion) in payouts in 2012. The costliest single disaster of 2013, both in terms of losses and likely insurance payouts, was the flooding in June that battered Germany, the Czech Republic and neighboring countries in central Europe. The floods caused economic losses of around $18 billion (R186 billion). The company is set to release its definitive 2013 disaster data in March 2014.

Africa

Japan

East, West African insurance behind the digital pace

Insurers move to exclude gangsters

East and West African nations such as Kenya and Nigeria are lagging behind in the use of automated and integrated systems for insurance claim processors, says management software provider SAP Africa. Most insurance companies in both regions still use paper-based methods, with insurance companies having stored as much as three auditoriums worth of information in paper boxes. The Kenyan regulator recently reported that the country loses approximately 4.2 billion shillings annually in insurance fraud claims. The fraud claims were either related or multiple claims, where one person has insured a product with multiple insurers and made claims more than once. In West Africa, claims processing takes a long time and, in most instances, the customer has to go to the insurance company personally to verify details in order for the insurance company to pay out. According to SAP, insurers are looking to change this with central databases to enable information sharing and better customer risk profiling.

The General Insurance Association of Japan has stepped up measures to shut out gangsters and other antisocial forces from insurance contracts. The Japanese Bankers Association and the Life Insurance Association of Japan will share databases on antisocial elements. The non-life insurance association will also provide its data to the Japan Consumer Credit Association. In addition, the group will connect its database to that of the National Police Agency. The group’s database is based on information provided by member insurers and from other sources such as media reports. The association will call on member companies to strengthen checks on contracts for not only insurance, but also loans provided in a tie-up with consumer credit companies.

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In the lap of luxury

-fractional yacht ownership If you loved getting wet and wild at our recent RISKSA Regatta, you may be flirting with the idea of getting back out on the water. Well, hereâ&#x20AC;&#x2122;s a way you could join the world of sailing on your very own yacht, without the headaches of upkeep or breaking into Fort Knox. Anton Pretorius

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ome say there are only two happy days in a yacht owner’s life: the day you buy it, and the day you sell it. According to those in the know, yacht racing is a lot like standing under a cold shower and tearing up R200 notes. While owners of large yachts derive as much pleasure from the idea of being the owner as they do from cruising or sailing, there are several good reasons not to buy a boat. Not only are they expensive to keep, from fuel to maintenance to storage, but people do not use them as often as they’d like. Thabo*, a CEO of a major financial services company, visited the recent Cape Town International Boat Show and coveted a luxury sailing yacht – a Leopard 44 Catamaran that costs in the region of R3 million. He promptly signed up to own part of it with nine others. “I was still working full-time,” Thabo says. “I didn’t have time to spend more than four to five weeks on a boat. It fit my lifestyle and my needs perfectly.” Fractional yacht ownership offers a costeffective solution to the financial burden and stresses of owning a vessel. Owning a share enables the buyer to pay only for what they will realistically use by splitting all the running costs as well as the initial capital outlay; and all these annual expenses are handled by a third party management company. Rob Sharp, director and partner at David Abromowitz and Associates, a leading yacht

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Charter yacht ownership Charter ownership is another option for those with an interest in a sailing holiday across worldwide destinations without the burden of maintaining the yacht and paying monthly costs and insurance. Yacht brokerage David Abromowitz & Associates offer a wide selection of luxurious motor and sail yachts under their fractional yacht ownership program.

brokerage and importer of the prestigious Princess range of yachts, says that CEOs, CFOs and those with general time constraints will find fractional yacht ownership appealing. “These individuals have come to the realisation that owning a month’s worth of a yacht – big or small – makes more financial sense (and is more practical) than paying for all of a boat that will be idle the other 11 months of the year,” he says. He adds that purchasing a share in a boat is a safe investment with low initial capital requirements, minimal costs towards operating expenses and, when the time comes to sell the share, it’s quick and easy. Under David Abromowitz and Associates’

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share boat programmes, the fleet consists of a Princess 85-footer, two Princess 58-footers (all based in Cape Town), a Princess 67 in the Mediterranean and a Leopard 46 sailing catamaran based in Mauritius. The Princess 85 – a high-performance motor yacht – is the company’s flagship model. Air-conditioned and carpeted throughout with teak decks outside including amenities like LCD TVs, cocktail bars, ice-makers and lavish cabins, the Princess range of boats are pure luxury. “While money isn’t a problem for these people, the fractional ownership concept is attractive because it is a managed programme, and there are no hassles for the owners. The administration and maintenance are taken care of by the staff.”

Sunsail and Moorings Charter Yacht Management, with regional offices in Cape Town, assists with ownership programmes and holiday bookings at 27 Moorings and 32 Sunsail bases worldwide, which include places such as the Seychelles, Greece, Croatia, Turkey, Malaysia, Thailand, Australia, Tahiti and the Caribbean. “Moorings and Sunsail have successfully operated for the past 40 years. They belong to the TUI Travel Group, one of the largest travel companies in the world. If it was not for great management and exceptional administration, this winning recipe would never work,” says Snyman. However, with Sunsail and Moorings ownership programmes, there are no offers of fractional ownership, yet the company is willing to accommodate a maximum of three purchase partners to share benefits, usage and ownership. The benefit of this programme is that the owner has usage of a sister boat at any of Sunsail

*Not his real name

There is a huge variety of fractional boats and yachts on offer, from modest day cruisers and sailing yachts, to futuristic mega-yachts that wouldn’t look out of place in a Bond movie. And there is wide variety of location choices. Many fractional boat ownership programmes are regionally based, usually close to popular marinas. But some larger vessels move according to the season.

and Moorings’ worldwide bases for up to 12 weeks of the year and has actual ownership of the boat after about 60 months. “Our current clientele consists of family men, doctors, CEOs and business owners who love to travel the world and enjoy time on the water,” says Daniel Snyman, head of sales at Leopard Catamarans. “Charter yacht ownership also offers the investor a guaranteed monthly income, which is why it is such an attractive option for investors.”

*Not his real name

According to Snyman, the company offers two options in the charter ownership programme: a guaranteed income programme where a client receives a nine per cent fixed income for the five years of the programme or an option to purchase programme, where the owner of a yacht pays 65 per cent of the price and 35 per cent will be on loan from the company. “Should an owner want to remove the yacht from charter, it will be possible after the yacht has been in operation for two years. In the case where the yacht was bought in the option to purchase programme, the owner needs to pay the balance of the loan account. The yacht can then be removed, traded or sold,” says Snyman. Leopard focuses on catamarans built locally by world-renowned yacht builder Robertson and Caine; and sailing catamarans, which include the Moorings 3900, Sunsail 444, Moorings

4800 and the Moorings 5800. It also offers the following Power Cats: Moorings 3900 PC and the Moorings 5100PC.

Managing your assets While it’s possible for a group of friends to get together and verbally agree to buying and sharing a boat, it’s usually the management and administration that’s overlooked and more often than not, causes a rift. “It’s extremely important to have the shareholders of the company that owns the boat looked after by our management team. We have a dedicated operations team, which works closely with the staff and crew on each boat to ensure the boat-booking calendar works seamlessly for all owners. All maintenance programmes are adhered to and all administration is done at a centralised office,” says Sharp. Each boat is owned within a company where the boat is a sole asset and each company has its own administrative team that looks after the accounts and the monthly levies. But buying into the boat isn’t necessarily a life-time commitment.“Owners buy a share or shares in the individual companies that own the boats. They are in no way locked into the programme for any period of time. If they want

to sell their share, we have a pre-emptive rights clause where that particular share is offered first to the existing shareholders and thereafter, if not taken up, it is made available on the open market.” However, you would think that with only four to five weeks' holiday per year available to most working people, setting schedules for 10 or more owners on one boat can be somewhat tricky. But according to Sharp, they’ve never had an incident where clients have become irate over usage or schedules. “All of our owners have become friends over the years and the different boat calendars are run and managed by the skippers and our operations manager. Since 2006, when we started with the first boat in the programme, we have never had to refer anybody to the rules document to settle any form of dispute. It works well; people adhere to the rules, respect each other and respect the usage agreement.” For literally a fraction of the price, you get to be in control of your dream boat, but designate all the management responsibilities to a professional. David Abromowitz and Associates offers an entry level price of R750 000 for a 10 per cent share in the sailing catamaran in Mauritius; to a R3 million price tag for a 16.66 per cent share in the flagship Princess 85 footer.

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An SUV for all seasons

2014 Range Rover Sport

Anton Pretorius

We know several of our readers have been drooling over the new Range Rover Sport. And why shouldn’t you? After an extreme weight-loss programme (involving a strictly aluminium-only diet), the 2014 Range Rover Sport has shed a whopping 420 kilograms, getting its beach body ready just in time for summer. But it’s not only a lighter car with reduced fuel consumption figures; it’s also attractive, luxurious, fast, well engineered and off-roads like a beast. And with a little massaging, you may even find it fits into your car allowance budget. 8 2 AS 130

ou may have noticed the explosive way that the new 2014 Range Rover Sport burst onto our local car market. The new talk-of-thetown SUV has created quite a stir and, after doing a test with the lads from Land Rover Stellenbosch, we find out if the new Rangie Sport is worthy of all the hype.

Affordable? So what does it take for the average broker to get their bum into the seat of a Range Rover? According to Genevieve Teitge, business manager at Land Rover N1 City, prospective buyers must be earning a monthly salary of nearly 50 grand per month to drive the Rangie Sport. “The Range Rover Sport V6 retails at R850 300. If we were to do calculations based on this model, your average gross salary would have to be in the region of R48 000 per month. This has been calculated over 72 months, 30 per cent residual and an 8.5 per cent interest rate. The monthly instalment would work out to around R12 000,” she said (numbers are illustrative only).

Something else you may have noticed is that Jaguar Land Rover (JLR) is currently in the midst of a renaissance. Parent company Tata’s willingness to give their British engineers carte blanche with design and construction, without too much interference at the top, has meant record sales and profits and a wave of exciting new models. The new Range Rover Sport is at the crest of that wave, and it’s one that the brand has to get right, as it is their bestselling vehicle. Although it’s quite capable on dirt trails, the 2014 Range Rover Sport is primarily aimed at buyers looking for a mid-size luxury SUV that handles as well on the beaten track as it does on the tar. Its ability to deliver all-out luxury in the cabin is also under close scrutiny from prospective buyers. With its 2014 redesign, the Rangie Sport is significantly improved in both areas, and it’s more fuel efficient to boot, but more on that later. There are three engine models at your disposal in the form of two supercharged petrol blocks

(5L 375 kW/624 Nm V8; a 3L 250 kW/450 Nm V6) and a 215 kW/600 Nm 3L SDV6 diesel. Really, the V6 with 340 HP sports more than enough grunt to flog through any countryside, whether it’s meek or wild. Land Rover estimates its 0 – 100 km/h time as 7.2 seconds, but the Sport V6 feels slightly faster than that. The all-new Range Rover Sport slots into the Land Rover line-up between the compact Evoque and limousine-like Range Rover. This all-new version ditches the heavy steel platform of its predecessor in favour of a much lighter aluminium chassis. Clever active anti-roll bar technology and adaptive dampers aim to deliver agile handling without sacrificing comfort, while the heavy reduction in weight means even stronger performance from the familiar line-up of petrol and diesel engines. It has the straight-line performance and sharp handling to match the Porsche Cayenne – a car considered to be one of the finest handling SUVs on the market. Yet, it’s equally at home cruising the freeway or negotiating city streets in comfort. However, with so much power at your fingertips, the V8 Supercharged may just become a little frustrating to drive in bumper-to-bumper traffic. With a 0 –100 acceleration time in a sliver over five seconds, the magnificent-sounding V8 just longs to be given its head and your ‘evil twin’ will be hard pressed not to concur. 

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The 2014 Rangie Sport is hugely capable off-road, although it’s a shame that the vast majority of buyers will never get anywhere near the limits of its abilities in the rough. But city street rovers might get a kick out of the vehicle’s improved fuel consumption. The supercharged V6 model has a combined fuel consumption of 11.3 L/100 km – a sufficient 7.4 per cent improvement in fuel efficiency compared to its predecessor. It’s the economical choice, and comes loaded with kit that makes it feel just a little bit more special than its rivals. If you need a car for all seasons, the Rangie Sport is by far the most desirable option you can buy. In fact, it’s so impressive in this respect that it makes you wonder why you’d need to splash out an additional R600 000 to upgrade to the Range Rover.

Performance Overall, the Range Rover Sport is 635 millimeters longer than its predecessor, but the wheelbase has increased by 178 millimeters. The proportional changes give this Rover a much more aggressive and streamlined appeal. And don’t underestimate the luxury SUV’s brute off-road capabilities. Land Rover’s success relies on all its vehicles being able to get to more remote locations than the Mars Rover. The V8, on the other hand, is a whole other animal in the handling department. It delivers an incredible 380 kW and bites when you stomp on the accelerator. During our test, we reached 180 km/h on a short stretch of tarmac with relative ease. The platform also remains surprisingly stable through turns. We quickly realised this as we it swerved aggressively

through a series of traffic cone tests. It is much stiffer, much flatter in corners and managed to be genuinely fun to drive on back roads. Is it on par with a sport car? No, but it’s not supposed to be, and it displays handling prowess that will surprise most people. With either engine, it is more agile and responsive thanks to its slimmer weight and size. Land Rover gave the Rangie Sport some great engines, and to its credit it did a fine job of letting the driver hear them. The V6 is relatively quiet during cruising, but with your foot on the gas, it produces a satisfying roar with just the faintest hint of supercharger. The money shot comes with the V8. An angry sound with a beefy exhaust note will have you on the throttle probably more than you should be. The sound alone will probably be the reason behind most of your speeding tickets. Let’s be real: most Rangie Sport owners, at least when these cars are new, will never take them off-road. But neither will Porsche Cayenne or Mercedes ML owners. That’s no reason to discount what it can do, and its abilities onand off-road are worthy of the utmost respect. You get comfort, style, speed and off-roading ability should you want or need it.

Range Rover Evoque Coupé The Range Rover Evoque Coupé 2.2 SD4 Prestige model retails at R671 000. With a five per cent deposit and 40 per cent balloon payment, JLR SA offers a R79 800 subsidy and Land Rover Stellenbosch offers a R10 000 dealership subsidy. Monthly payment: R7 736

Range Rover Evoque MY13 The Range Rover Evoque MY13 2.0 Si4 Dynamic model retails at R675 000. With a R33 750 deposit and zero per cent balloon payment, JLR SA and LR Stellenbosch offer a R15 188 subsidy (2.25 per cent of retail price). Customer rate is prime less three per cent. Monthly payment: R15 025

Finance and insurance If you've had a great 2013, we know you deserve only the best as reward. Here are the facts and figures for your choice of Land Rover wheels.

Discovery The Discovery 3.0 TDV6 XS model retails at R634 300. With a R31 715 deposit and zero per cent balloon payment, JLR SA and LR Stellenbosch each offer a R14 272 subsidy (2.25 per cent of retail price). Customer rate is prime less three per cent. Monthly payment: R14 135

O B t i

• • • • • • •

C Freelander The Freelander 2.2 TD4 S (manual) model retails at R446 300. With a R22 315 deposit and zero per cent balloon payment, JLR SA and LR Stellenbosch each offer a R10 042 subsidy (2.25 per cent of retail price). Customer rate is prime less three per cent. Monthly payment: R9 995 Information courtesy of Land Rover Stellenbosch +27 (0)21 882 8388 and Land Rover N1 City +27 (0)21 595 7107. Prices subject to change.

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Is the smart money on smartwatches? Anton Pretorius

Savvy brokers in todayâ&#x20AC;&#x2122;s competitive market know that tech can help gain a competitive advantage over the rest of the field. With our new business tech section, we give you the inside-skinny on the latest gadgets and how to utilise them as effective business tools.

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n the early 1900s, a decade-long rivalry ensued between two prominent businessmen to see who could acquire the most ‘complicated’ watch – a term used to describe features on a watch that went beyond simple time-telling. The result was a gold pocket watch known as the Graves Supercomplication with features that included sunrise and sunset times in New York City and a chart of the city’s night sky. In 1933, banker and ardent watch collector Henry Graves paid $15 000 for the watch (roughly R2.8 million today). At an auction in 1999, the watch sold for $11 million (R114 million). Years later, a different kind of complicated watch battle emerges. Inspired by the success of smartphones and tablets, electronics companies such as Samsung, Sony, Google and Apple hope that smartwatches could become the tech industry’s next big thing. Glancing at a watch on your wrist to check time and information is considered more graceful or socially acceptable that pulling out a smartphone from your pocket. While it’s good to see an old custom returning, people want to see more at a glance than simply the time. Unfortunately, early models of the smartwatch proved disappointing. Complicated in a way that makes them more curiosities than helpful tools, it merely performed basic tasks such as calculations, translations and games, destined to be ignored or replaced by a sharper model. However, modern smartwatches are effectively wearable computers. Many smartwatches run

mobile apps while a few models run a mobile operating system and function as portable mobile players, offering playback of FM radio, audio and video files to the user via Bluetooth. After scoping some smartwatches, we’ve determined that a great one will need to be more than just reliable and simplistic. It should be persistent. We want it to figure out what we’re doing and what bits of information are most important among countless e-mails, app updates, and other alerts. And of course, it must look good.

Sony Smartwatch 2 Sony is a prominent player in the smartwatch market and, despite the name, it is the maker’s third attempt. Smartwatch-wise, it is certainly a promising device, as it comes from one of the giants in the industry which has already churned out a couple devices to further refine the smartwatch. Kevin Erasmus, independent business gadget specialist in Cape Town, recently gave the new Sony SW2 a test drive with mixed feelings. “Of course, the ultimate question is: why do you even need a smartwatch?” Erasmus says. “You don’t really, but Sony’s solution makes checking e-mail and accepting calls that much more convenient, making your day-to-day business a bit easier.” For brokers, the Sony SW2 functions as a companion device for your smartphone, bringing notifications straight to your wrist. It can scan your existing accounts to notify you of incoming e-mail or calendar events. That

Sony SmartWatch 2 Between R2 000 – R3 000 Available in South Africa: Yes

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means business users are less likely to miss an important e-mail, phone call or meeting. Straight off the bat, you can see a smartwatch that’s in a different league when it comes to hardware; it oozes style, which is vital for wrist-wear. For years, watches have been linked to style, image and fashion, and Sony SW2 is certainly not short of that.

apps for call handling (answer, reject, mute, volume handling), SMS/MMS retrieval, other e-mail, viewing pictures stored on the phone in a slideshow, calendar and music handling. “However, these must be installed on the phone rather than on the watch, which is unfortunate given how many Android devices have very little storage capacity,” he says.

SW2’s square face with rounded corners, neat edges and flat sides tick all the right boxes when it comes to cool-looking tech. But it’s not too jazzy – and we like it that way. But is it a case of more style than substance? Does it fill the gap in our tech lives; the gap between your hand and the device in your pocket?

But the cool thing about this device is the notifications. You wouldn’t want to read a lengthy mail on the small screen, but being able to glance at your watch and know if that beep from your pocket is worth your attention is the whole point of this category right now. “At nearly R3 000, the Sony SW2 is a luxury rather than a necessity, but it’s also hard to live without once you’ve become accustomed to all the available data on your arm,” Erasmus says.

Unlike other smartwatches, where several geeky steps are required to pair the devices, Sony’s SW2’s process is extremely simple. There was no need to read instructions or fiddle with different settings. Simply use the NFC on your device to pair the two with a simple touch.

So do you need a smartwatch? More importantly, do you need Sony’s SmartWatch 2? “You don't need a smartwatch right now, but they’re convenient, and convenience is sought after in the business world. The company has developed an awesome gadget and will only get better with the third, fourth, fifth generations and beyond,” Erasmus concludes.

It’s important to note that the Sony SW2 will work in conjunction with any Android smart device. This immediately gives it advantage over the Samsung Galaxy Gear, which works only with Samsung devices. What’s really enjoyable is the way you can customise the watch from your smartphone. The settings for the device are readily available through your notification tray. It is easy to find recommended applications for the watch (directly from Sony), or you can browse the app store for dozens of apps to use, from games, notifications and fitness software. There’s also a setting app on the watch itself, and this is where you can choose some of the more practical features such as Bluetooth, vibrate, watch faces, default apps, the master reset and so on. You’ll definitely need apps to add functionality. The bad news is that much of the selection isn’t worth getting excited about. There are plenty of apps that aren’t really useful or practical. But this should change over time. “Some of the apps are a tad expensive and, given the limited functionality, I couldn’t justify many,” says Erasmus. Out of the box, Sony’s SW2 packs apps for Gmail, Facebook and Twitter along with

One for the future: The Pebble The Pebble $150 (R1 600) Available in South Africa: Not yet (mid-2014)

The Pebble smartwatch, which launched earlier this year, is the crowd favourite. Its creators had the vision, the experience and, most importantly, effectively marketed the hell out of this device before the first unit shipped. If you’re a self-confessed tech junkie, the Pebble smartwatch is your best choice. It is still an incomplete product, but provisions have been made where better software will be made available in the near future. Its strength lies in its technical specs and in its ability to be upgraded through firmware and completed through software. Its sheer popularity ensures that useful and productive apps will be available soon. Safest bet is to wait another year perhaps until a newer, more functional model hits the market.

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72941 Risk

IRELAND/DAVENPORT 72941/F

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Flying high

ccording to the International Air Transport Association (IATA), the number of airlines in the world stands at nearly 230, and just about every airline in operation has its own loyalty programme; there are over 200 frequent flyer programmes (FFP) globally.

Navigating frequent flyer programmes Christy van der Merwe

The lure of a free flight is attractive, but for readers who travel extensively for business â&#x20AC;&#x201C; the true frequent flyer, it is the extraordinary service that makes being part of these loyalty programmes worthwhile. RISKSA stacks up your choices.

FFPs build loyalty among core customers; gather valuable marketing information that serves as a customer relationship management tool; create an extra source of revenue through the trade of loyalty points; and introduce an element of product differentiation. In a special report, 'The Price of Loyalty', IATA notes that FFPs are a major direct cash generator for larger airlines, through the sale of miles to credit card and other partners. â&#x20AC;&#x153;Without that revenue source, there would be very few major airlines in North America in business today,â&#x20AC;? the report states. When United Airlines filed for bankruptcy in 2002, the only money-making operation was its FFP. Aeroplan raised $250 million in 2007 for just 12.5 per cent of the company, says IATA. The aviation industry is a cut-throat one, and major global airlines have formed strategic alliances to extend their service networks and improve profitability. These alliances extend to FFPs, and give frequent flyers the opportunity to earn more miles on a single programme, with a number of partners. It is possible to join multiple FFPs, however, choosing one in each alliance should be

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sufficient, as points for one FFP can be earned with all partners within an alliance. This means flyers do not have to restrict their choice of carrier for global flights, or dilute their rewards. As well as the ability to accrue miles across alliance members, the status and treatment benefits are becoming an alliance-wide standard. For example, by earning miles or points across all member airlines in the Star Alliance, flyers can achieve Star Alliance ‘gold status’. This entitles special treatment, such as priority check-in and excess baggage allowance across all member airlines, not only the single airline FFP, such as SAA’s Voyager, that one might be a part of. The larger the alliances and partnerships, the larger the potential for accruing points. This is why it is useful to know which alliance a company belongs to, and its allied partners. It makes sense to join a programme that would reward you for frequenting places you already visit. In a quick RISKSA poll of frequent business travellers, Skyteam Alliance member KLM’s Flying Blue and OneWorld Alliance’s BA Executive Club came up trumps as favourites ahead of Star Alliance member SAA’s Voyager FFP. One of the reasons for this is apparently the ability to redeem miles for flights with Voyager, which can be frustrating because of limited flight availability.

Evolving FFPs Frequent flyers are often more concerned with status and levels of service while flying, than the lure of a free flight. There is increasingly more differentiation between reward miles, and level or status miles, which serve to separate those who are purely in it for the eventual free flight, from those who prefer to get the special treatment. Airlines know that flyers who spend more money on flights are more valuable than flyers who buy the cheapest flights but still manage to accrue many frequent flyer miles. As a result, they are starting to tailor their FFPs. In January 2013, Delta Airlines announced its SkyMiles Medallion programme, which combines miles flown and money spent as better indicators of a ‘good’ customer for its airline. In its changes for 2014, Lufthansa announced that the mileage levels in the economy-class booking classes would be reduced, thereby reflecting the actual value of the airline ticket. The structure of FFPs remains largely the same, with the major distinguishing factor being the partners aligned to the FFP. RISKSA compared some of the FFPs across the different airline alliances, and onenon-aligned airlines.

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The major alliances Star Alliance members Adria Airways Aegean Airlines Air Canada Air China Air New Zealand ANA Asiana Airlines Austrian Avianca, Brussels Airlines Copa Airlines Croatia Airlines EGYPTAIR Ethiopian Airlines EVA Air LOT Polish Airlines Lufthansa Scandinavian Airlines Shenzhen Airlines Singapore Airlines South African Airways SWISS TAM Airlines TAP Portugal Turkish Airlines THAI United US Airways

OneWorld Alliance members Airberlin American Airlines British Airways Cathay Pacific Finnair Iberia Japan Airlines LAN Malaysian Airlines Qantas Qatar Airways Royal Jordanian Sri Lankan Airlines S7 Airlines TAM Airlines US Airways

SkyTeam Alliance members Aeroflot Aerolinas Argentinas AeroMexico AirEuropa AirFrance Alitalia China Airlines China Eastern, China Southern Czech Airlines Delta Kenya Airways KLM Korean Air MEA, Saudia Tarom Vietnam Airlines XiamenAir

Voyager (SAA, Star Executive Club Alliance) (BA, Oneworld Alliance)

Flying Club (Virgin)

Flying Blue (KLM and Kenya Airways, SkyTeam Alliance)

Joining fee

None

Earning miles

On any SAA or Star Alliance member flight. Domestically, though their extended code share agreement, SAA Voyager miles can also be earned on Mango flights, as long as Voyager members book their flights on the SAA flight number.

Avios is the currency and these can be earned on flights with all Oneworld Alliance partners. Bonus points when booking a flight, car rental and hotel together.

Virgin is not part of an alliance, but has partners for its FFP. Miles can be earned when flying Virgin Atlantic or partners, which include: Air China, Air New Zealand, All Nippon Airways, Cyprus Airways, Delta Airlines, Gulf Air, Hawaiian Airlines, Jet Airways, Malaysia Airlines, Scandinavian Airlines, Singapore Airlines, South African Airways, Virgin America and Virgin Australia. You can also earn one mile for every Pound spent on buying Virgin Holidays.

Award miles and level miles are earned. Award miles can be spent on tickets, upgrades, promo awards or products and services from the 130 partners. Level Miles bring members to a higher Flying Blue membership level that offers extra services and benefits, such as being entitled to a bonus of award miles for applicable flights. Points can be earned on flights with KLM, Kenya Airways or any SkyTeam alliance partners.

HOTELS: 9 hotel groups worldwide.

HOTELS: 14 hotel groups worldwide.

HOTELS: 25 hotel groups worldwide.

HOTELS: 20 hotel groups worldwide.

CAR RENTAL: Avis, Budget and Europcar.

CAR RENTAL Avis.

CAR RENTAL Alamo, Avis, Hertz, Sixt and Stoutes Car Rental.

CAR RENTAL Driving Blue taxi transfers, Hertz, Avis, Sixt, Europcar, Enterprise Rent-aCar and Budget.

FINANCIAL SERVICES: UCount Rewards, Voyager Credit Card (Nedbank), Diners Club and Bidvest Bank.

FINANCIAL SERVICES: American Express Moneycorp, MasterCard multi-currency cash passport card. When booking parking at UK airports; and when making any purchases using BA American Express credit cards.

FINANCIAL SERVICES: American Express, Chase Ultimate Rewards, Diners Club Rewards and Virgin Atlantic Foreign Exchange.

Points can be earned with Travelex and Diners Club cards.

SHOPPING: Miles for Style, Spec-Savers, House of Busby, Seeff, Voyager Wine Club and Health Spas Guide.

SHOPPING: Online shopping at Gate 365, which features over 150 retailers.

SHOPPING: Chic Outlet Shopping; Retail therapy; when using a Tesco Clubcard, or a Heathrow Rewards Card; theatre tickets bought through Love Theatre, or entertainment tickets purchased through Last Second Tickets.

SHOPPING: Online shopping with the 410 associated retailers. Voyageurs du Monde, UGC Cinemas, DDA Classic Airlines, 4 roues sous 1 parapluie, Ecole du Vin.

Miles can be spent on free flights, upgrades and services with all alliance and non-alliance partners. SAA and Mango announced in December that miles could be spent on Mango flights in part, or full.

Avios can be spent on flights with BA and Oneworld partners, flight upgrades, hotel accommodation and car rental.

Miles can be used to upgrade or get a reward flight. Miles can be used with airline, hotel, car rental and shopping partners.

Can be spent on flights and upgrades with SkyTeam alliance members, hotel, cars and entertainment partners, and in the Flying Blue store, or donated to KLM or AirFrance charities.

Spending miles

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Expiry

Miles expire if not used within three years.

If no Avios activity is recorded in three years.

If there is no spending or earning activity within three years.

Award miles are valid as long as the member takes a qualifying flight at least once every 20 months. For level miles, an annual check takes place.

Benefits

Silver membership allows priority check in, lounge access, preferential seating if booked on eligible fare, excess baggage. Platinum membership allows for expediting and change fee exemption for awards, airport upgrade and chauffeur service. Lifetime platinum membership entitles the member to a companion card.

Increase as members progress to bronze, silver or gold membership. Extras like priority check-in, free seat selection seven days prior to flight, access to business lounges (silver), additional baggage allowance (silver), additional reward flight availability (gold) are included.

Seven to 10 per cent off Virgin Holidays bookings. Silver members: extra mileage and status renewal bonuses; use of premium economy check-in; priority waitlisting for flights; complimentary Regus Businessworld gold membership. Gold members: 10 per cent airport parking discount with purple parking; use of upper class check-in; priority waitlisting for flights; access to Virgin Atlantic’s clubhouses and Heathrow Revival lounge; fast track through immigration and security at Heathrow or Gatwick; free companion ticket on renewal; a supplementary Flying Club silver account; priority boarding and baggage handling and increased excess baggage allowance; and a birthday mileage bonus.

Ivory, silver membership levels. Increased membership levels mean more benefits, and these also extend beyond flights and airports, to include late check-outs or room upgrades in hotels, and discounts on rental prices or car upgrades and extra fuel with car rental partners.

Top tips from Thompsons Travel Chantal Kliche, retail manager for the Cape region at Thompsons Travel, says she recommends clients choose one frequent flyer programme, and for it to be from an airline that flies the routes that you anticipate travelling to over the years. “However, do not fall into a trap when booking your tickets; always ask for a comparison on various airlines. You will find that if there is a special fare, this far outweighs the value of frequent flyer points that you will earn. Although this will slow down the rate of earning mileage, in the long run it will save you money.” Always ensure that your frequent flyer number is given at the time of booking and always keep your boarding cards as proof of travel – some partner airlines require these if miles or points have not been credited.

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Conference hotels REVIEWED

Selecting the right venue is a central decision to hosting any successful event, whether it’s a conference, a seminar or a team-building experience. We chat to RISKSA head of brand and people, Angelique Edwards, about venue selection and her review of three South African hotels used for previous Insurance Bootcamp seminars. Sarah Bassett

electing the right venue is a central decision to hosting any successful event, whether it’s a conference, a seminar or a team-building experience. We chat to RISKSA head of brand and people, Angelique Edwards, about venue selection and her review of three South African hotels used for previous Insurance Bootcamp seminars. The RISKSA Insurance Bootcamps take place three times a year, on three consecutive days, across three different cities. The events cater to between 100 and 200 hundred delegates and a team of speakers and sponsors travel from city to city to set up and run each event. “Working with a good event co-ordinator at the venue is crucial for a successful event,” says Edwards. “You need to be able to

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communicate easily, as they will ensure that any specific needs are met, that timing requirements are considered and that you as the event manager know anything you need to about the venue. Quality of staff and their attentiveness to set-up and service during the event also has a major impact. Parking is another important consideration as this can add significant cost if not offered as part of the package and insufficient parking will cause frustration. A convenient location is an important consideration for both guests and organisers. In the case of the RISKSA Insurance Bootcamp, we travel in a large team and put on three events in three cities in as many days, so it is important that we can reach each venue with minimal stress or delay.”

Durban: Southern Sun Elangeni and Maharani

Cape Town: Lagoon Beach Hotel

Johannesburg: Protea Hotel Balalaika Sandton

Look and feel The Southern Sun Elangani and Maharani was recently refurbished and offers a modern aesthetic and beautiful beach-side location.

Look and feel The Lagoon Beach Hotel has a beautiful setting and beach access. The function area has a tasteful modern feel and there is a restaurant and reception area close by which can be booked and used as required.

Look and feel A recent refurbishment gives this hotel a modern, luxury feel. The facilities offer every modern convenience, including Wi-Fi throughout the hotel and a full business centre.

Co-ordination and staffing The hotel has a focus on conferencing and events facilities. The event co-ordinators are extremely helpful and on the ball. They are readily available at all times. During the event, there are two people on hand to assist throughout and they are quick to help if anything is needed. Set-up for the event is well organised and efficient and all the staff are always very helpful. Capacity The Southern Sun Elangeni offers nine conference venues of different sizes to accommodate up to 1 000 delegates. Eight of these venues boast splendid sea views. Catering In-house catering is provided and the food is always brilliant. The offering includes a variety of snacks and there is always plenty of everything. The staff continuously check and quickly replenish anything that is finished. Audiovisual The audio quality is great and we’ve had no problems with sound or equipment. The hotel includes the standard AV equipment in its halfday conference package rate, which includes everything required for the Insurance Bootcamp seminars including great sound, presentation and video capabilities. I often order extra microphones as certain speakers prefer a countryman or lapel microphone, so I make sure I am prepared. Location convenience The King Shaka Durban Airport is 31 kilometres from the hotel. Our delegates love the location as we have people coming in from Pietermaritzburg, Umhlanga, Ballito and central Durban. It is centrally located and traffic to the hotel is not significant. I order a shuttle for our guests travelling from the airport and the 30-minute travel time is very convenient.

Co-ordination and staffing The set-up staff are excellent and helpful. The venue is ready before 18h00 the day before, which is brilliant as there is no stress on the day of the event. Capacity In addition to seminar-style and conference events, the hotel has partnered with teambuilding experts to offer experiences including kayaking and wind-surfing and can tailor events to specific needs. The facilities cater for events of any size up to 450 guests, from as little as R50 per delegate. Catering Catering service is available and snacks and meals can be catered for all dietary needs. Snacks provided have always been great, but it would be worthwhile to request a second coffee and snack station. At Insurance Bootcamp events for 100 people, one coffee station is not enough and a queue forms. More clearing staff would also be beneficial. Audiovisual The audio and visual equipment is offered inhouse; it is of excellent quality and included in the conference package.

Co-ordination and staffing The banquet co-ordinator is always helpful and accommodating and I never have to worry that things won't be correct. The staff are excellent and helpful. They often set the venue up the night before so everything is ready when we arrive to add our own set-up. Capacity The conference and function centre offers nine well-equipped rooms and can accommodate from six to 350 delegates. Catering The food is always great, though occasionally not enough. More staff to clean up plates and cups would also be beneficial. They do offer excellent coffee service. We have over 200 delegates at our Johannesburg events and their set-up with four or five coffee stations works perfectly without guests needing to queue. Audiovisual Audio and visual equipment is outsourced. This is the only venue that we have had problems with. The room is large and we sometimes find the speakers aren’t loud enough. The technician is often not around and is hard to find, and microphones have often had feedback.

Location and convenience Lagoon Beach Hotel is seven kilometres from Cape Town’s central business district and 20 kilometres from Cape Town International Airport. This location is perfect for us because we have a selection of clients from the northern and southern suburbs and the centre of town; Lagoon Beach is central for all and traffic does not pose a problem from any direction.

Location convenience The Hotel is within walking distance of the Sandton City Shopping Centre, Nelson Mandela Square and the Sandton Convention Centre. It is also within walking distance from the Gautrain and the hotel offers a shuttle service to and from the Gautrain, so I don’t have to arrange a shuttle service or rent cars from OR Tambo and there are no traffic worries.

Parking Parking is included at no extra cost and there is plenty available.

Parking Parking is not included and is an additional cost.

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Carel Nolte, ex-head of people and brand at Etana Insurance shares his insights and the inside skinny from his years in the South African insurance industry.

Kuier with

Carel

have been lucky enough to work in the insurance industry for many years, my career spanning several different areas of our incredibly diverse industry. Throughout the years, I have met many wonderful people, travelled to some amazing places and been a part of several exciting projects. Our industry’s history is filled with stories (some real, others slightly exaggerated and a few perhaps a bit too salacious to be told without a blush) of the men and women who have passed through industry functions, conferences and the executive fourth floor of Santam’s head office, the glass room in Hollard’s Villa Arcadia or Lombard’s Sunnyside spot. I will be sharing some of these stories with you in my column each month. Names and/or places may be changed to protect the innocent. As we start 2014 without the physical presence of our beloved Tata Madiba, but with a rich treasure trove of his words and example, it is my great privilege to write for RISKSA about the legends that have built our industry. This column will open the Pandora’s Box of the South African insurance world. The column seeks to educate readers about the insurance bedrock of our society. It will reveal little-known facts about legends, living and dead, to whom we owe so much. It will challenge and encourage debate about our future while providing a few laughs along the

way. My hope is that the column will inspire young and new members of our industry and be a source of reflection for our more established members. We’ll chat about stories and people from the past that foreshadowed and made possible the people of today. I leave you with this thought about legends: “We shouldn’t be here at all, if we’d known more about it before we started. But I suppose it’s often that way. The brave things in the old tales and songs, Mr Frodo: adventures, as I used to call them. I used to think that they were things the wonderful folk of the stories went out and looked for, because they wanted them, because they were exciting and life was a bit dull, a kind of a sport, as you might say. But that’s not the way of it with the tales that really mattered, or the ones that stay in the mind. Folk seem to have been just landed in them, usually – their paths were laid that way, as you put it. But I expect they had lots of chances, like us, of turning back, only they didn’t. And if they had, we shouldn’t know, because they’d have been forgotten. We hear about those as just went on –and not all to a good end, mind you; at least not to what folk inside a story and not outside it call a good end. You know, coming home, and finding things all right, though not quite the same – like old Mr Bilbo. But those aren’t always the best tales to hear, though they may be the best tales to get landed in! I wonder what sort of a tale we’ve fallen into.” JRR Tolkien, The Two Towers.

Please stay in touch via carel@comms.co.za, and look out for February’s column where we learn a bit about South African insurance family empires.

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