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contents july 2014

8

Filling the gaps

The National Treasury published the second draft regulations on the demarcation between health insurance policies and medical schemes at the end of April.

While the outright banning of gap cover is no longer on the cards, the regulations in their current form would significantly water down the value of these products.

20 |

short term

ST

52 |

medical

ML

58 |

long term

LT

20 / The worth of equine cover

52 / Hypertension epidemic

58 / Aggregation of disability benefits

26 / Cultivating opportunities

56 / Growing healthy decisions

64 / Covering the high life

34 / Fully loaded - Extreme sports insurance considerations 40 / Insurance scan

70 / The best of two opposites

FOLLOW US ON TWITTER @RISKSA Like us on FACEBOOK / RISKSA

74 | managing risk

MR

74 / Agriculture’s top ten risks 78 / New visa laws: risks and

opportunities for travel agents, operators and brokers

80 |

career

CR

80 / Ombuds point to increased consumer awareness 84 / The SAM time is now 88 / A question of trust 102 / Social reputation 104 / Build your brand: practical insights for advisers 106 / News 112 / Events 114 / FIA Awards 122 / RISKSA Regatta sets sail

128 |

ASSETS

AS

136 |

travel

TL

128 / A bull market for bokkies?

136 / Airport navigation 101 - JHB

132 / Redefined – Toyota RAV4

140 / For the regular guest

Dearreader

B

ack in SA’s bad old days, travel was something of a challenge for those holding a green passport. Getting ones travel documents in order was an onerous affair and South Africans were generally (lets face it, understandably) not well received in many parts of the world.

After 1994 things changed, and Saffer’s were flying all over the world with only the odd visa application to contend with.

At the risk of sounding a little paranoid, it seems draconian rules being implemented around the world will again encroach on our freedom of movement. Our President has lofty ambitions for our tourism industry, setting a goal of 15 million visitors to our country by 2017, during his State of the Nation address in parliament recently. Last year a record 9.6 million folk visited our shores. In his address, Zuma also hoped to grow tourism revenue to R125 billion by the same year.

All this shortly after Home Affairs began implementing new immigration rules at our borders, designed to curb child trafficking. Visitors with children entering our borders will have to present an unabridged birth certificate along with their passports. The scourge of child trafficking is, of course, abhorrent, but the impact on SA's tourism industry clearly wasn't factored into the thinking before this law was passed, along with other rules dictating that visa's for visitors had to be applied for in person, in their country of origin.

Elsewhere on our continent South African visitors will, for the first time, have to apply for a visa before visiting Kenya. Botswana, Brunei, Burundi, Cyprus, Ethiopia, Gambia, Ghana, Jamaica, Lesotho, Malawi, Maldives, Mauritius, Namibia, Rwanda, Samoa, San Marino, Seychelles, Sierra Leone, Swaziland, Tanzania, Tobago, Tonga, Trinidad, Turkey, Uganda, Uruguay, Zambia and Zimbabwe are all exempt from this requirement.

And South Africans who hold dual UK/SA passports will find it increasingly hard to return to that country as a result of the UK’s new e-Borders passport control system that is designed to use data supplied to it by the airlines. Depending on which passport info is used at the time of ticket purchase, the traveller could well be denied entry if the strict immigration rules are broken in that country.

With many financial services businesses increasing their footprint in Africa and beyond, the costs incurred by these new measures are the last thing we need.

Our congratulations go out to the FIA award winners, and we look forward to meeting readers and our partners at the insurance conference next month.

Enjoy the read.

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Filling the Christy van der Merwe

8 4

The National Treasury published the second draft regulations on the demarcation between health insurance policies and medical schemes at the end of April. While the outright banning of gap cover is no longer on the cards, the regulations in their current form would significantly water down the value of these products.

C

alls for greater clarity on the latest demarcation regulations have come from all quarters, with more questions emerging from the latest draft document than answers. Product providers and associations are rallying together to ask that National Treasury address the inconsistencies. Once general acceptance is reached, implementation of the regulations can go ahead, however the regulations in their current state are felt to be premature.

Interested parties have until 7 July 2014 to comment on the second draft regulations, and National Treasury has indicated that it hopes to publish final regulations by September 2014. “The current regulations appear unwieldy, and propose derivatives of gap cover. There are vital things that are not mentioned such as copayments. The regulations also state that it must be mentioned in marketing that these products could change – which infers doubt in the mind of a consumer,� explains Tony Singleton, CEO at health insurance provider, Turnberry.

he gaps HEALTH INSURANCE TUG-OF-WAR 9

Singleton and other health insurance providers urge brokers to remind their clients at this stage that the status quo remains unchanged, and those who have gap cover in place remain covered. Should there be changes in legislation that will impact policyholders, they will be advised of the implications of these.

The regulations essentially propose a number of conditions on health insurance products, including gap cover and hospital cash plans, which currently operate under either the Shortterm Insurance Act or the Long-term Insurance Act. Treasury says these conditions seek to ‘ensure that the design, marketing and sale of health insurance policies do not undermine the social solidarity principles in medical schemes, while at the same time serving the needs of those who require additional protection against health-related risks.’

There are about 500 000 South Africans who have gap cover health insurance, and about 3.5 million South African consumers who hold hospital cash plan policies. Commentators agree that hospital cash plans appear to be where the issue lies, as South Africans who cannot afford to subscribe to medical aid schemes are opting for this cheaper cover.

Gap cover, on the other hand is most often only sold through intermediaries, to consumers who have medicals aids in place as a requirement.

Gap cover would step in to pay medical bills over and above those that medical aid rates would cover.

“Do I believe in the value of gap cover? Five years ago I would have said no, but today, yes I do,” affirms Peter Jordaan, CEO at medical aid scheme Fedhealth. Because medical aids cannot control healthcare costs, which are increasing at rapid rates, they have been forced to cut back on what they can offer, and gap cover has become very useful as a top up, he adds.

It is interesting to note that the initial desire to ban gap cover on the part of the Council for Medical Schemes (CMS) in 2006, stemmed from the fact that this type of insurance was viewed as ‘conducting medical schemes business’ in contravention of the Medical Schemes Act, and the CMS sought to protect medical schemes from losing members to health insurance options. However, the regulations in their current form seem to push health insurance more into ‘the business of a medical scheme’ than ever, for a number of reasons.

Some of the major changes proposed under the latest regulations can be grouped into the following categories.

Commission The regulations propose alignment of broker

10 8 6

commission between health insurance and medical scheme products. This effectively means that commission would be calculated at three per cent of contributions received (it is currently 20 per cent of monthly premiums), and commission paid would not be able to exceed R71.07 a month. This has been decried by industry stakeholders.

“The proposal to reduce broker commission from a maximum of 20 per cent to three per cent appears to be arbitrary and not commensurate with the minimum services that brokers will be expected to deliver. Many of the gap products cost as little as R100/month and as proposed the average commission will be between R3 and R5.

For this level of remuneration, it would not be financially viable for financial advisers to deliver a service that is fully compliant with the onerous obligations as outlined in the Financial Advisory and Intermediary Services (FAIS) General Code of Conduct.

One needs to also consider this with a backdrop of the involvement of the CMS, which has failed to ensure that financial advisers involved in medical schemes receive the inflation-linked annual increases that are entrenched in the law,” reiterates Financial Intermediaries Association of Southern Africa (FIA) CEO Justus van Pletzen.

“The proposed commission structure is in line with that of a medical aid, which is 3 per cent, capped at R71.07. You have to work hard for that, and medical aid relies on the volumes, which are often not the same for gap cover.

This will change the landscape for brokers,” explains Jordaan.

“Three per cent for advice on a gap product doesn’t reflect the value of this advice. Twenty per cent is more appropriate,” emphasises Singleton.

Gap cover provider, Zest Life, agrees that the commission issue will definitely be strongly contested as the three per cent limit on gap cover premiums results in commission much lower than on medical scheme contributions.

“The limit is not sustainable, and in our view a minimum Rand amount of commission for gap policies should be allowed. However, even if this does not change in the final regulations, it is permissible for the intermediary to charge the client an extra fee under the Short-term Insurance Act provided that they disclose this fee. This would then compensate the intermediary for the limited commission amount,” continues the company.

Underwriting National Treasury notes that the regulations stipulate that health insurance policies are

prohibited from discriminating against any person on the grounds of age, gender and other criteria. This would bring health insurance into line with the way medical schemes operate.

With no ability to discriminate, or refuse clients, effectively ruling out the underwriting process, the industry will need to ensure that it prices the risks correctly, which could make products like gap cover less affordable, and thus less attractive.

The implications are that any person could take out a policy at any time regardless of age and health status, which will mean that there will be

anti-selection on a large scale. The only form of projection allowed will be a waiting period that cannot exceed six months. No claim may be refused on a pre-existing condition.

Singleton explains that products are constantly evolving and would likely be structured to ensure they remain affordable. In the UK, for example, products include structures like excess.

Product The regulations propose the introduction of product standards which limit policy benefits, and limitations of bundled type health

insurance products that replicate medical schemes.

In terms of medical expense shortfall, the following criteria is required for any policies providing cover: Rand value of cover must be stated in the policy contract; maximum benefit may not exceed R3 000 per person per day for hospital cash plans, and R50 000 for a defined health event; the insured person must be a member of a medical scheme; and the policy contract must be an annual policy with premiums payable monthly.

The contract is required to state: any representations made by, or on behalf of the

policyholder, which are material to the assessment of risk under the policy; the premium payable and the benefits provided under the policy; and the events in respect of which benefits will be paid and when they will not be paid.

Capping of benefits at R3 000 for hospital cash plans, and R50 000 for a defined health event are largely viewed as being insufficient. Singleton notes that because of escalating healthcare costs and expensive treatments, Turnberry has clients claiming for procedures in excess of R100 000. Capping the benefit would leave clients exposed

11

to significant medical expenses, or there could even be over payments in some cases.

Therefore Turnberry will generally pay up to 500 per cent of the medical aid, he says.

“There is a need for clarity on which product category the proposed limits apply to. Health insurance products by design complement or supplement a deficiency in medical schemes. A R50 000 limit may be grossly limited for a topup product to give access to cancer treatment that costs R500 000, for example,” adds van Pletzen.

“We expect, following public comment, that the limit of R50 000 may be increased. Although our average claim amount is R3 500 and, out of the last 6 360 claims, only 10 claims exceeded R50 000,” says Zest Life.

Marketing and disclosures National Treasury says that the new demarcation regulations draft puts forward enhanced disclosure and marketing requirements.

The regulations further state that: the product name may not contain the names ‘medical’ or ‘hospital’ or any derivative thereof; Policy contract or marketing material may not create the perception that policy covers the

12 8

policyholder against medical expenses for health services, or that the policy is a substitute for medical scheme membership. Products must display in clear legible print and in a prominent position, ‘This is not a medical scheme and cover is not equivalent to that of a medical scheme. This is not a substitute for medical scheme membership’; and, the product should clearly explain premium, benefits, terms and conditions and cancellation periods.

It is suggested that health insurance products are creating confusion among consumers. Gap cover providers do not feel that this is the case, and stakeholders agreed that it is likely hospital cash plans that are creating the confusion, and have many terms that are not actually beneficial to clients.

Stakeholders do not seem convinced that there are massive amounts of people dropping their medical aid schemes in favour of hospital cash plans.Medical aid is costly, and when money is tight it is often one of the first things people change to a lower plan, but instances of dropping it altogether are rare.

Reporting structures The new regulations propose enhanced regulatory reporting and monitoring.

Health insurance products are currently managed through the Financial Services Board (FSB) and FAIS accredited intermediaries. These structures are clear on what they require from intermediaries in terms of finding the right products for their clients, explains Singleton.

If the amendments to regulation are implemented, this would mean that an insurer wishing to introduce a new accident and health policy would have to submit to the FSB and the registrar of medical schemes, or CMS, at least one month prior to launching the product. The registrar of medical schemes may, within one month, indicate to the registrar that some or all of the requirements submitted are contrary to the objectives and purpose of the Medical Schemes Act. Within one month, the registrar may: prohibit the insurer from launching the product; instruct the insurer to stop offering or renewing, by giving 90 day notice of cancellation from a date determined by the registrar; and require the insurer to make amendments.

Requirements for products already being marketed include: within three months of the regulations coming into operation submit a summary of benefits, terms and conditions and marketing material of all policies introduced

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or launched on or after 15 December 2008 to the Registrar (FSB) and the Registrar of Medical Schemes. The same process will then be followed as described above, with the exception that the Registrar and the Registrar of Medical Schemes will have three months to complete the process.

These reporting structure proposals have drawn a significant amount of criticism. “The gap cover industry simply cannot ignore the blatant bias and unfounded allegations leveled against it by the CMS and now, simultaneously, subject itself to de-facto regulation by this same entity.

“If the CMS demonstrates contemptuous defiance of the Supreme Court of Appeal [the 2008 case], the second highest court in the country, then what hope does a gap cover provider have of receiving an objective assessment by the CMS?” questions Xelus Specialised Insurance Solutions MD, Michael Settas.

He reiterates that this structure will not provide an objective and balanced product approval process and is substantially worsened by an extremely vague benefit definition of gap cover in these proposed regulations, paving the way to a product approval process that will be prone to prejudiced conjecture rather than adherence to a clearly pre-defined set of criteria.

It is also perhaps worth mentioning that at the time of writing, the current CMS CEO and Registrar for Medical Schemes, Monwabisi Gantsho has been suspended on allegations of corruption. While the outcome of this is yet to be determined, and CMS chief financial officer, Daniel Lehutjo, has been appointed acting chief executive and registrar of the CMS, it does highlight the potential pitfalls of giving one individual this kind of approval power. Particularly within the entity which previously tried to ban these products.

Requiring approval from the CMS certainly seems to push health insurance into the business of a medical scheme. “The current legislation under FAIS and FSB is an excellent mechanism, and I wouldn’t see the logic of moving this type of insurance to be governed by the CMS,” adds Singleton.

At the heart of it The crux of the matter is that quality, timeous healthcare in South Africa is pricey.

Intermediaries wishing to ensure that their clients are comprehensively covered against the risk of these sky-high medical costs will use the array of products available to ensure their clients are protected.

Gap cover in particular has proven that it is valuable and appreciated by consumers in the South African market. All of this scrutiny on gap cover has highlighted the problems and weaknesses of medical aids. There are incredibly high costs in the healthcare industry, and medical aid members are being left out of pocket. Premiums contributions are high, because thanks to technological advances and exorbitant specialist fees, medical inflation is moving faster than consumer inflation.

The questions remains, if the CMS was successful in banning gap cover as it aimed to in 2006, how would this have helped to lower the cost of specialist fees?

Unfortunately the CMS declined to comment when approached by RISKSA. “There are systemic problems with medical schemes and this piecemeal approach is like applying a sticking plaster to a gaping wound. The crux of the matter is that access to quality health is unaffordable for the majority of South Africans. We have a shortage of doctors and the few that we have can charge high fees, because demand is higher than supply.

Compounding this problem of unregulated prices is the burden of disease, and medical schemes that are priced out of reach,” concludes Van Pletzen.

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The demarcation timeline 2006

Guardrisk faces court action when registrar of medical schemes Patrick Masobe files for a declaration order at the Johannesburg High court to stop the company from ‘conducting medical schemes business’ in contravention of the Medical Schemes Act.

A T

2008 The Council for Medical Schemes (CMS) loses its court battle at the Supreme Court of Appeal, with leave to appeal the Constitutional Court.

The Supreme Court stated that gap cover was legal and has a role to play in the South African market.

2012 March, first draft demarcation regulations published for comment. Prohibition of gap cover products and hospital cash plan products was proposed.

2013 October, National Treasury published the 343 comments received decrying the proposal of banning gap cover, as it is a valuable product in the market. Treasury says gap cover will stay, but structural changes will be required.

2014 May, National Treasury releases the second draft regulations on the demarcation between health insurance policies and medical schemes.

Industry stakeholders call for greater clarity.

Going forward in a nutshell: Medical aid schemes: Don’t drop medical aid in favour of hospital cash plans. Stopping medical aid to save costs and then attempting to get back onto a scheme will result in an individual being underwritten and paying a latejoining penalty.

Gap cover providers: Business continues as usual, policies remain unchanged. “There are a large number of gap policyholders who have contracts in place. These contracts will continue to be managed in accordance with the policy conditions. This position will only change once the current demarcation debate has been finalised following discussion and debate with all stakeholders,” says Tony Singleton, CEO at Turnberry.

CMS: Declined to comment. The CMS advised RISKSA that the task team dealing with demarcation had not yet formulated its response to the last draft as it had until July 7 to comment.

We were also directed to the Department of Health, which had not responded to questions or requests for an interview by the time of going to print.

16

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The worth of

EQUINE COVER Luka Vracar

20 8 4

The insurance of horses has a long, often turbulent history. With rising vet costs and a dense equine population, South Africa has become a competitive bloodstock insurance market.

S

outh Africa is a horse-riding nation, by any definition. Kyalami is thought to have the largest concentration of horses per square kilometre of anywhere in the world. The two most prestigious national horse races, the J&B Met and the Durban July, attract thousands of spectators, and are covered by the national and international media each year.

Cape Town has the densest population of racing horses on the continent. They are used for leisure, horseback safaris, mounted police units, and farming. The health and mortality cover for bloodstock is complex, but essential.

Horses are notoriously accident prone, and Thoroughbreds even more so. They suffer from stomach ailments like colic and viruses like African horse sickness (AHS), which is highly infectious and potentially deadly and often leads to quarantine. This year an AHS outbreak in the Western Cape, affected 28 properties with 74 confirmed cases.

This high risk factor makes bloodstock insurance more of a necessity than vehicle insurance, if owners wish to protect their investments, because when it comes to horses, there are no guarantees.

“The main threat is colic, which is about 80

per cent of the claims. Then there are lighting strikes, broken legs, and other diseases.

But colic is the main problem; when the weather changes and it gets cold the horses stop drinking and impaction colic becomes a problem,” says Nicole Giraud, owner of Equipage Insurance Brokers.

The insurance of horses was initially a part of marine cover, which developed to tailor the needs of owners of expensive horses who sought insurance cover for transporting their horses from the UK to the USA. Initially, the first bloodstock policies were written to cover only mortality, however, cover was extended to include fertility when shared ownership of expensive stallions became common practice.

The famous champion racehorse, Secretariat, become the first to have this tailored policy.

The policy was brokered by Roger Barklam, who arranged the cover though Lloyd’s of London which would include cover to provide indemnity if Secretariat was infertile or became infertile. Immediately, there were concerns after the initial veterinary tests showed that the stallion was indeed infertile, but later tests and the impregnation of mares proved otherwise.

In fact, the 1973 US Triple Crown winner went on to impregnate a high percentage of his mares and since then veterinary tests for

fertility have not been a requirement for fertility cover.

Fraud Fraud is common throughout the history of bloodstock insurance. When the mortality cover of expensive stallions, especially racing horses and show jumpers, meant a small fortune, often worth more than what the horse could fetch at an auction, insurance fraud became alarmingly common.

Scandals would involve everyone from desperate owners and unsavoury characters to insurers themselves, in some of the most brazen, cloak and dagger dealings in insurance history.

Alydar was often regarded as the greatest racing horse to never win a championship. In 1978 he came second to Affirmed in all three legs of the US Triple Crown. Sadly, Alydar’s legacy is one most often associated with greed and speculation.

His owner, JT Lundy, who had inherited the famed stables at Calument Farm, reportedly turned Alydar into one of the most highly leveraged horses in history. Lundy borrowed from international bankers and mobsters, and used the stallion as security.

21

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anything it could die from, or the humane euthanasia by a registered vet. They also take out critical care cover policies, which covers the horse for any life- saving in-hospital procedure. These days many surgeries are colic operations, and 80 per cent are successful.

We do expect the clients to try, if the vet says that the horse needs surgery, but it costs anywhere from R50 000 and up for colic surgery,” explains Giraud.

There is a very competitive market in equine insurance in South Africa, and the biggest challenge to insurers is the rising cost of veterinary procedures. Giraud emphasises the need for critical cover because of these increases.

“Veterinary bills are getting higher and higher, you are paying what you would be paying for a human to go to a private hospital, and there is no alternative, there is no public hospital for horses, so the clients unfortunately either euthanise the animal or bond out to pay the bills. It is actually a serious problem,” says Giraud.

Furthermore, brokers are able to sell critical care cover as a stand-alone policy. This should be essential to horse owners in case of the need for surgery. Equine vets will generally ask

24 8

for a deposit, but if the operation is for the treatment of colic, they will ask for the full amount upfront.

Communication is key “Everybody thinks that all brokers use the same wording and information, and it is not so. Insurers use different wording, so when they send a quote be sure that you compare apples with apples and that the insured is properly covered. This oversight can be costly.” says Giraud.

Bloodstock insurance policies change constantly and often the horses increase in value so policies need to be updated. Giraud states that it is not something that can be put on cover once, and then forgotten.

“A horse is not like a car that you park in the garage at night; it eats while you are sleeping. Brokers need to be on top of the policy all the time to make sure that their client is fully informed. For example, we had issues with some brokers who had put a horse on cover and then did not communicate that it had colic.

It stood for six days and eventually died, but the broker did not inform the client that the horse’s condition needed to be reported right away. There needs to be communication at all times,” concludes Giraud.

Cultivating o p

South Africa’s agricultural sector is gaining importance on the international stage. Both new opportunities and challenges are arising in agribusiness insurance as small scale farming gives way to larger operations.

Dominic Uys

26 8 4

o pportunities

D

irect insurance may be growing significantly in other sectors but agriculture is still dependent on the intermediary market. According to Gerhard Diedericks, head of Santam Agri, this is unlikely to change in the foreseeable future.

Not only do the majority of farmers prefer interacting with brokers on a personal level, but brokers need to know the farmer’s day-to-day operations, according to recent market entrant, Agruma.

This is, however, a dying trait in the industry.

“We see more brokers in the industry getting less involved with their clients. The fact is that every farmer’s situation is unique and unless

you have a ground-level understanding of his farm, you won’t be able to help insure him correctly,” says Agruma CEO, Hannes du Plessis.

He notes that underinsurance is still prevalent in this sector. “The biggest challenge on the assets side remains the shortage of technical knowledge. It is a fact that the average age of brokers with in-depth knowledge is going up as the skills leave the industry without being replenished.

A broker needs to understand, for instance, the inner workings of the irrigation system in order to understand how to insure them. The lack of

technical knowledge in the broker market is starting to show, and this is where we saw an opportunity for Agruma,” he adds.

Du Plessis states that personal involvement and technical skills go hand-in-hand. “Large insurers are becoming more call-centre driven and many brokers in the industry are following suit. We went the other way and interacted with the clients on a personal level,” he says.

Insuring assets is also becoming more complex as farming technology develops. “It isn’t enough to rely solely on 20 years’ experience.

The industry is evolving and we need to start learning more about what the farmers are

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doing to mechanise. Years ago you were still insuring a Massey Fergusson for R10 000, now they’ve been replaced with R2 million machines and sophisticated electronics. Keeping abreast of technical specs, maintenance and the like, means continued ground-level involvement,” du Plessis adds.

The advances in technology have however not reached every aspect of the farm. “One of our main challenges resulting from this relates to infrastructure. Road degradation is becoming a particular problem.

It is a major challenge when access roads are in such a bad state that they end up damaging equipment. It is also a risk that we have somewhat limited control over. While there are risk mitigating procedures that the farmers can implement against fires or floods, roads usually

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fall under municipal control,” he continues.

Du Plessis states that Agruma has done well in the sector so far, and that the company sees many more opportunities in agriculture insurance going forward.

Is small scale farming dying out?

The crop side of agricultural insurance carries significantly more risk, according to du Plessis.

It is projected that the population of Africa will reach the 2 billion mark within the next 30 years and South Africa’s role in providing food for the continent will become substantially more important.

Dr John Purchase, CEO of the Agricultural Business Chamber (Agbiz) says that Africa is poised to deliver the highest population growth globally over the next 90 years, more than tripling from the present 1 billion, to 3.6 billion. “This makes Africa an extremely important target for agri-exports,” he comments.

According to Purchase, agriculture and agribusiness are projected to be a US$1 trillion industry in sub-Saharan Africa by 2030. Every effort should therefore be made to ensure that South Africa does not miss the opportunities.

The industry should be at the top of the agenda for economic transformation and development.

A high number of farmers are leaving the industry, creating the impression of a weakening sector. Purchase however, disagrees with this. “Commercial primary agriculture is not declining, but growth is slow at around an average of 1.7 per cent per annum over the past decade. It is true that smaller and more marginal farmers are exiting the industry as risk increases and investor confidence is undermined by policy uncertainty, especially with regard to land reform,” he says.

According to Purchase, the gap left by the small scale farmers leaving the industry is again filled by the larger players. “Bigger and more profitable farmers consolidate these smaller units into their own operations as scale of economy is a very significant factor in determining sustainability. These bigger operations have considerably stronger balance sheets and are more able to survive the cyclical nature and risks associated with agriculture,” he continues.

Small scale farming is by no means becoming redundant through this shift. As Hollard’s head of Agri, André van der Walt indicates, developing more opportunities for small scale operations through insurance is paramount to accelerating the growth of the industry.

“Insurance can and does play a significant role in mitigating risks, but I seriously doubt whether the insurance industry on its own can revive the agriculture industry. The industry is evolving globally, with governments becoming increasingly involved in disaster relief, or as a co-reinsurer by providing some sort of safety net. Our own government is currently investigating such an initiative to support agriculture, especially smallholder and smaller scale agriculture,” Purchase says.

“The insurance sector is doing far more good than harm, but it has become increasingly clear that multi-peril crop insurance in its current form is a highly risky business. Given our exposure to periodic catastrophic droughts, a rethink is necessary to develop sustainable products in this regard,” he concludes.

South African insurers are especially vulnerable to providing sustainable multi-peril crop insurance to the commercial sector, owing to its already small market penetration.

In light of this, there are negligible, if any, adequate solutions provided to the small and emerging commercial producer sector.

Constantia partnering with Agruma “Agruma, an underwriting management agency catering for the very specific insurance needs of the agricultural sector, inclusive of rural commercial businesses is proud to announce its new partnership with Constantia Insurance Company Ltd.” says Hannes du Plessis, managing director of Agruma.

The combination of our sound knowledge of the industry together with the expertise and support of Constantia Insurance Company Ltd and the Agri Mega Group, will enable the Agruma team to provide insurance that is perfectly tailored for this market.

With over 40 years of combined experience in agricultural and rural commercial insurance, Hannes du Plessis and Pierre Rossouw, Agruma’s directors, are the perfect leaders for a team that will ensure that every specific insurance need of this niche market will be addressed.

“We are pleased to be partnering with Agruma (Pty) Ltd in order to provide the Agriculture market with a valueadding product.

Constantia Insurance Company Ltd has researched and studied the Agriculture Insurance market and believes that this particular product will not only add value to the insureds, but also be sustainable.”

Robert L Shaw, CEO of Constantia Insurance Company Ltd.

For more information please contact us on: Tel: 087 809 1691 | hannes@agruma.co.za

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Powerful reach Christy van der Merwe

The areas where Mirabilis Engineering Underwriting Managers work are growing at a rapid rate as the company follows opportunities in Africa and now further afield. “The big opportunity for the business is to go international,� Mirabilis CEO Russell Myers tells RISKSA. 30 8 4

B

acked by insurer Santam, which is pursuing its acquisition strategy in Africa, the Middle East and Central and Southeast Asia, this opens doors for Mirabilis to write business in these areas, where there is major construction and development.

These projects are fuelled by the need for power and energy, transport and minerals processing in these areas. The extreme growth in renewable energy projects in particular, meant a lot more work in Africa for Mirabilis, and has also prompted the launch of the new

In the recent devastating floods in the region, five hydro stations were under construction and everything was lost. The insured losses amounted to between $800 million and $900 million. You are dealing with very different economies of scale and you have to control the accumulation in the area. You need a much keener eye for catastrophe exposure,” Myers continues.

He adds that Mirabilis is able to get the business because it has a good reputation as an underwriter with capacity and expertise that can offer the right covers and will pay claims.

“The amount of premium collected certainly shows a growing book, but of course the most important thing is that we are here to pay claims,” he reiterates.

Claims trends

Russel Myers, Mirabilis CEO through the renewable energy market. It is a specialist business product covering all the risks that may arise, and Santam simplified the process,” says Myers.

Indeed, simplifying processes is the order of the day at Mirabilis; the company has started moving towards a paperless environment.

Policy management systems and document management systems are becoming integrated.

“This move to online platforms simplifies the quoting process; a quote can now be issued from anywhere in the world, which helps to speed up processes,” adds Myers. Risk will also be accepted online, which means that brokers will be able to show options to clients immediately. This allows for business to be instantaneous, and still face to face.

‘seamless’ product offering, available from June throughout Africa.

This is increasingly important as the company starts to write more business further into Africa and internationally. “About 35 to 40 per cent of Mirabilis’ premium is coming from Africa now.

This market does not represent the majority in terms of premium income, but it is growing.

There are definitely more actual deals happening on the continent. The business comes out of local brokerages there, or through London,” explains Myers.

Myers explains that this product will take projects from the cradle to operational phase, and provide every cover that a project and project team might need, including insurance of works, professional indemnity, professional liability, medical, travel, asset all risks and so on.

There are also a lot of foreign, and particularly Indian contractors, as well as investors working in Africa, in power and coal predominantly.

With Indian brokers contacting Mirabilis, this is opening doors to work in this market.

The client will receive comprehensive cover under one policy through Mirabilis as a single point of entry. “This product was designed particularly with all the new work coming in

“Of course working in India is a very different ballgame – they experience major perils that we don’t even think about here in Africa, such as earthquakes, massive floods and monsoons.

And of course, the claims continue to come in. “We are seeing a lot more weather-related claims,” says Myers, who adds that a change in severity of storms with more damage to machinery and works is evident.

There is also a concerning trend of ever-more brazen daylight robbery, which is taking place in South Africa, says Myers, who regales a grizzly tale of a site that was attacked by seven robbers wielding AK-47s who cleaned out the stores and the site office in Gauteng.

Cable theft remains a big problem affecting sites and often interrupts work in unexpected ways. For example, when power cables to a site were stolen, the air conditioner cooling a data centre stopped working. The equipment, powered by an uninterruptable power supply, continued to work but was operating outside of specification. This resulted in voiding the IT equipment extended warranty. This claim was settled to the satisfaction of all concerned.

The Rand/Dollar fluctuations have also been impacting the business, especially when it comes to the claims stage, and Myers urges brokers to ensure that the sum insured is correct and adequate to cover the loss fully.

“The onus is on the insured/broker to ensure that the client is not underinsured, and costs need to be updated accordingly at renewal.”

The depreciation of the Rand also means that the cost of claims has increased significantly, particularly since so much plant and heavy earthmoving equipment is imported; these costs soar and impact the sums insured.

Consequently, deductibles are impacted and Myers advises that deductible levels are likely to go up in Rand terms.

Mirabilis is the only Standard & Poor’s A-rated engineering insurer; hence the company can take on risks that others may not be able to. “We have the best paper in the market,” concludes Myers.

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7

Fully loaded Extreme sports

insurance considerations

Extreme sports are no longer the preserve of young adrenalin junkies in neon gear, guzzling energy drinks as they snowboard downhill at pace, zigzagging through massive pine trees.

It is now a booming industry, and even top CEOs are no longer content to stroll around the golf course, when instead they could be getting muddy on mountain bikes, and trail running like warriors.

Christy van der Merwe

T

he insurance industry has had to keep apace with these extreme developments, and offering cover for more risky pursuits, without the additional weighting, has become a unique selling point for insurers.

If your client is an adrenalin junkie, you should be analysing their portfolio of cover to ensure that there are no gaps where they might be left exposed, and also weighing up the options of what is available to them.

As ever, full disclosure is the key, and Chris de Klerk, executive director at mutual insurer PPS points out that it is vital for consumers to make

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their broker aware of risky activities they partake in, as most policies require people to apply for the additional cover at an extra premium, which can often prove expensive compared with the cost of an ordinary policy. “It’s not cheap to get coverage for activities that are perceived as hazardous. In fact, some insurers not only automatically exclude coverage for hazardous pursuits, but will also refuse to provide cover against such activities at all,� de Klerk notes.

However, not all insurers automatically exclude extreme hobbies. Altrisk, for example, offers cover for once-off participation in an event.

So a person who does a diving course while on holiday or a once-off bungee jump would be covered. Altrisk also does not exclude or apply a loading for sports such as mountain biking. However, the company cautions that it is important to check policy wording in this regard.

Dr. Dominique Stott, executive of medical standards and services at PPS, says consumers who partake in extreme sports that pose a risk of accidents or falls, including mountain biking, road cycling, mountain climbing or paragliding, must be vigilant when it comes to ensuring they have appropriate cover in place.

“Most people wrongly assume that their insurance policy will still cover them if they have an accident regardless of how it happened, yet this is often not the case. If the leisure activity is deemed to be a ‘hazardous pursuit’ by the insurer, then some insurance policies may not cover them in the event of an accident,” she says.

PPS has no such exclusions on its policies and their members are also covered anywhere in the world in any eventuality.

“All of our members are automatically insured and there is no need to specify the sports they are taking part in or to obtain separate cover,” says Stott.

De Klerk says that it is particularly important for all consumers who engage in activities such as sailing, paragliding, quad biking or other extreme sports to consider having the appropriate cover against death or disability, especially when dependents – including family members and employees – are involved.

PPS believes that its professional members are provided with the freedom to do what they want, where they want to. “When taking out a standard sickness and disability insurance policy with PPS, it is not necessary to inform PPS of any extreme activities that the member may take part in, as there are no loadings or exclusions applied.”

On the medical front While the increased chance of fatality while partaking in extreme sport is a constant concern, the risk of accidents that will require serious medical attention, should also remain top of mind. Brokers should ensure that their clients have medical aid cover that will keep up with their active lifestyle. Some medical schemes may not pay medical bill if clients participate in an extreme sport, but most Liberty Medical Scheme options cover treatments within the rules of the scheme. Liberty Medical Scheme offers specialised cover for those who take part in contact or potentially dangerous sports where one could sustain an injury, and clients can take out specialist cover, such as Liberty Medical Scheme’s professional and extreme sports cover.

Andrew Edwards, executive principal officer of Liberty Medical Scheme says that whether it’s mountain biking, touch rugby or diving, clients should make sure that their medical scheme covers any injuries inflicted from professional or extreme sports. “At Liberty Medical Scheme, these are covered within the benefits of the scheme, meaning you can be adventurous and rest assured you’ll get the best treatment should you need it. This is not an additional benefit – it’s part of your normal benefits,” says Edwards.

With Fedhealth’s Maxima basis plan, clients get additional benefits of cover if they are involved in high risk sports in case of any mishap. As with PPS, Profmed also provides for clients who are graduate professionals. Profmed covers injuries from extreme sports, however, when travelling and partaking in extreme sports, cover would be weighted to take this into account.

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Degrees of extreme

Scuba diving

Extreme sports are defined as an activity which involves a high level of danger, generally involving speed, height, a high level of physical exertion and highly specialised gear. The reality is that most extreme sports and activities have an element of risk, which could result in injury or even death, and it is very often this risk that is the appeal.

Normal recreational diving up to 40 metres would not be loaded by Altrisk provided it’s within the client’s qualifications. However, sports such as cave diving, potholing (a deep hole under water or a reef) can carry an additional loading or, if preferred, an exclusion.

Dalene Allen, specialist risk consultant and co-founder of Altrisk, notes that action sport is a multi-million dollar industry, and the total number of participants in the five most popular action sports in the US alone – skateboarding, paintball, wall climbing, mountain biking and trail running – is more than 40 million people.

In South Africa, sports such as mountain biking are rapidly growing in popularity, motorsport remains a firm favourite among speed junkies and even cage fighting is gaining popularity among executives keen to work out their stress through one-on-one combat.

Allen highlights some of the extreme pursuits that would require specific cover:

Mountaineering Altrisk considers the following factors for clients who are ardent mountain climbers: • climbing alone increases risk, both technically or in the event of an accident; • climbing without ropes is dangerous for more obvious reasons; • Mountains that are 6 000 metres above sea level require extra skill to climb and bring an additional risk of altitude-related disorders such as pulmonary hypertension, hypoventilation and right heart failure (which is caused by respiratory failure).

Aviation To ensure a fair rate and appropriate cover, aviation rates are individually calculated according to the client’s personal experience. Considerations to take into account include the type of aviation licence, type of aircraft, how much experience the pilot has and the number of hours he or she is expected to be in the air over the next 12 months.

Even factors such as the type of airstrip and quality of airport used are considered in the assessment.

Motorsport Allen says that motorsport safety standards have improved dramatically over the years in terms of practice, and also in terms of track conditions and management, vehicle design and protective wear. Applicants with a valid motorsport licence could qualify for cover from Altrisk with no loadings or exclusions, although it is still the individual that is underwritten, so the client’s health and lifestyle still remains a key factor.

www.globecreative.co.za

Zenith For The Accomplished (Pty) Ltd, partnered by The Hollard Insurance Company Limited, manage and design insurance products for an elect market of financially accomplished individuals.

Our products are augmented by their distribution through an elect broker network who presents after sales advice to policy holders, based on the content of a comprehensive inventory and risk appraisal obtained from independent industry leaders.

www.zenithinsure.co.za info@zenithinsure.co.za | Tel: +27 21 872 7065 | Fax: +27 21 872 7168 191 Main Road Paarl 7646 | PO Box 3505 Paarl 7620 Registration Nr: 2006/032693/07 Zenith For The Accomplished (Pty) Ltd is a licensed Financial Services Provider, Underwritten by The Hollard Insurance Co. Ltd, an authorised Financial Services Provider. FSB Number: 36469

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Full disclosure The temptation exists for clients to simply hide details of dangerous hobbies to avoid the higher premium, but this could result in a rejected claim. Taking part in adventure sports without adequate cover is a foolish endeavour.

It is important that hobbies and sports deemed dangerous are declared before the policy starts, and if clients take up such a sport after the policy starts, they are obliged to let their broker or insurer know.

“Even though hazardous pursuits can impact on a person's eligibility for cover and the offered rate, it's extremely important to answer this section of the application honestly and completely. The insurer can rescind coverage if

Climbers case study Gregory Borman, 33 and based in Johannesburg, is a civil engineer and sponsored mountaineer and climber for Vertigo industries. He is a competitive rock climber, loves skiing, snowboarding, and paragliding, and is a recovering mountain biker. Borman gives us some insight into the importance of insurance as an adventurer.

I have seen many accidents and the difference in experiences between friends who are insured and friends who are not insured is dramatic.

Being adequately insured means being airlifted off a mountain with a broken femur and taken directly to a big state hospital in France, as opposed to having a two-hour recovery with a sled, a three-hour wait in a local clinic, and then a one and a half hour ambulance ride to

there is missing information or any type of nondisclosure,” says Allen. “Ensure that you have made full disclosure regarding the nature and frequency of these pursuits. Make sure you get cover from an underwriter with the necessary expertise to rate you fairly and on an individual basis,” Allen adds.

It is also very important for brokers to remind their clients never to assume that something is not important enough to disclose when it comes to application stage. “If it crossed your mind, the underwriter needs to know about it,” she reiterates.

Financial advisors should make sure that a financial plan is in place that secures their clients’ financial position while they enjoy the thrill of their chosen action sport.

the nearest provincial hospital without any pain meds. Being stuck in a foreign clinic waiting for your family and friends to scratch together enough money to pay your emergency room bills and to get you home, while your actual injuries go untreated, is even worse.

For me, the worst case, be it highly unlikely, would be my family receiving a bill for the retrieval of my body. When you think of all of this, the loading on your premium is not that bad. However I do think that insurers don’t properly understand the level of risk we climbers and mountaineers face and as a result they penalise us excessively. For example when I look at my mountain biking friends cost to insurers versus climbing friends, it does not seem to make sense that they are not paying higher premiums than climbers.

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Fancy footwork In my first year of work I was involved in a training accident at my local climbing gym.

I fell four metres on to a concrete floor and broke both my feet. My friends put me into a car and I was admitted to Milpark Hospital ER and operated on two days later. I was in hospital for 10 days, and spent two weeks in bed, with no load bearing on my feet. I was in a wheel chair for a month, on crutches for six weeks, and the left foot was in a moon boot for a further two weeks.

Over this period Borman had two operations, one to put in pins and screws, and one to take the pins out. A year later Borman had another operation to have another screw removed. In that time he was off work for just under two months.

At the time, Borman was insured with PPS and Profmed was his medical scheme. “All my medical bills were covered with no questions asked. My income saver kicked in with very little admin from myself. I was paid out for the weeks I was off work. The following year there was no additional increase in my premiums above the blanket inflationary increase applied to the

Borman on the climb ‘fossil fuel’.

Photo: Dave Johns.

group. All my dealing were done directly with PPS and Profmed, my broker was not aware of the accident till three years later when I changed jobs and had my portfolio updated.”

While initially choosing Profmed and PPS because they didn’t penalise him for participating in mountaineering and rock

climbing, Borman has since moved his insurance portfolio to Discovery as the offerings through vitality have made them the more cost effective alternative, despite being loaded for his sport. With this migration he changed brokers, and is considering changing his medical scheme to tie in with wellness benefits.

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Insurance

SCAN Luka Vracar

40 8 4

Can technology ensure that automotive insurance companies eradicate archaic and costly means of verification and inspection?

I

n a market as competitive as automotive insurance, it is essential to reduce unnecessary costs and curb fraudulent claims. Error-free inspections and proper validation of motor assets are the most effective way for a short-term insurer to remain competitive and profitable. And technological advances are making this possible.

The Financial Services Board’s (FSB) decision to implement new Treating Customers Fairly (TCF) regulations this year, means that insurance companies will have their policy pricing regulated and will have to increase focus on customer satisfaction and claims services. This will add significant pressure on insurers to make fewer mistakes, limit fraudulent claims, and keep operational costs down, in order to remain competitive.

Data analysts from South African data, analytics, and systems providers, Lightstone, have a solution to curb unnecessary costs. Last year it launched a contribution to help eradicate fraud, mispriced risk and operational inefficiencies in the automotive industry with the release of LIVE (Lightstone Information and Verification Exchange), an app suite created together with Custom App, that allows for real time motor asset verification of driver and vehicle.

Verification Automotive dealers and insurers need to have a clear understanding of the automotive assets they come into contact with, in order to make informed decisions regarding the risk profile of the driver and the vehicle. Typically, this would involve using several data sources.

However, the LIVE app makes use of eNatis and the National Association of Automobile manufacturers of South Africa (NAAMSA) databases, and Lightstone’s own technology to instantly make available the driver’s details and vehicle specification, as well as the vehicle’s condition and incident history. “The user can scan a drivers licence and score an easy-score report which gives a light credit profile of the individual, to help the dealers or insurer work out if the person has a legitimate drivers licence. Along with that credit profile, it gives an affordability score and a risk score.

The operator then knows whether it will be worthwhile spending time with the client, because he can afford the Jaguar X-Type that he wants to test drive.

Also, they need to know for insurance purposes that the person has a valid driver’s licence so that

their claim is accepted, should the person have an accident,” says Jasper van Heesch, head of business development at Lightstone Auto.

Van Heesch emphasises that insurers will benefit from proper verification as this process helps rid the greater car pool of illegitimate vehicles. This means that the cars that are taken on by the dealerships are verified and insurers are not being called upon to insure cars which would have otherwise been unacceptable, or drivers that do not qualify.

Inspections Pre-inspections of vehicles can also assist in avoiding unnecessary expenses. Currently, while some insurance companies use pre-inspections with varying degrees of success, many insurers do not check cars at all before taking on claims. Often the expenses and time incurred are detrimental to the business, particularly if the data that has been collected is unreliable.

“We did a sample test looking at some previous inspections done and the make, model, and/or VIN were incorrect in 40 per cent of the cases we looked at,” says van Heesch.

The VIN number on a car is 17 digits long, and eliminating the need to record it by pen and paper will reduce these types of errors in the insurance data management systems. Van Heesch explains that insurers will look for the VIN to verify a vehicle when a policy holder has a claim and, because the inspection process is one of the key times that insurers can determine what the VIN number is with accuracy, any discrepancies will cause issues with the claim.

Lightstone Auto’s LIVE Inspect is a recent addition to their LIVE App suite. It promises to simplify the pre-inspection process for insurers by ensuring the instant and correct input and transfer of data. The mobile app makes use of form pre-population and license disc and driver’s license scanning and decryption.

“The insurance inspector holds his phone over the licence disc and it scans the barcode. There is a VIN number as well as a few other details in that barcode, and the app extracts that, and because of the technology interface the details get loaded into the app, and that loads to our system and directly to the insurance system,” explains van Heesch.

“Humans don’t touch the VIN number at all, which is beneficial because that was the problem child, and that is the key thing to help

the insurers manage their costs, so they know for sure that they should be picking up that specific car and they know for sure that they should be repairing that vehicle, because they know it is the right VIN,” adds van Heesch.

Furthermore, the app can additionally help curb fraudulent claims because the system includes GPS date and time stamps on photos, meaning that anything recorded during the inspection can be verified as there is an audit trail. An insurer assessing old or unreliable data could be open to fraud.

Possibilities The fact that all verifications of both driver and vehicle are available in one tool is convenient and, if used correctly, could help dealers and insurers to mitigate the potential losses caused by human error. The most important aspect is, however, that Lightstone has shown how technology can simplify record-keeping and data transfer, and offer the automotive insurance sector a means of eradicating unnecessary or fraudulent costs.

Lightstone is now also tailoring an app for policy holders. “We are currently building a self-inspect version of LIVE Inspect which insurers can put into the hands of their policy holders. With fraud detection mechanisms like number plate recognition and proximity evaluation, Lightstone Auto is helping insurers make things more convenient for their clients, while still retaining the integrity of the solution,” states Graham Harvey, CEO of Custom APP. Insurers and assessors would be able to make informed decisions regarding the vehicle and driver should they have all the correct information available instantly, thereby avoiding further need for inspection and reducing fraud, in turn lowering operational costs. If 40 per cent of driver and vehicle information within the automotive insurance systems is incorrect, out-dated or misleading, insurers need to re-evaluate their verification and inspection procedures.

Brokers benefit because eradicating these costs has the potential to keep policy pricing competitive, and proper verification ensures that there are no unnecessary complications when their clients need to claim. Instead, claims are processed quickly and accurately.

Furthermore, eliminating fraud would benefit brokers and automotive insurance companies as it will reduce the number of illegitimate cars and drivers.

41

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Key cover

There was a time when replacing a lost car key or set of office keys was no biggie, a call to the locksmith would probably have you up and running in no time. These days, with new technology and security features, the simple ‘key’ has been upgraded to an often complex and expensive device. While clients may assume these are covered in general insurance policies, brokers are advised to check this carefully.

M

ost people take it for granted that their keys and replacement of locks are covered under their motor or buildings insurance policy, but this may not always be the case,” explains Bina Ferreira, national manager of commercial products at Aon South Africa.

“Even where cover is included, the limits of cover may not be sufficient if the client has expensive transponder type keys for their vehicle, or where their building keys are numerous and more specialised. It is essential to check what they are covered for in this regard and discuss any amendments needed with the client to ensure that their policy will respond to their specific requirements.”

Costs to replace a single key on certain luxury vehicles can be anywhere between R5000 and R15 000 per key, plus keys with built-in transponder chips must still be programmed by a qualified dealer at an additional cost, plus

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the time that your vehicle will be out of action to get it re-programmed and re-keyed. “If car keys are stolen, it means that someone has the keys and may know where the vehicle is, putting a person at risk for theft. This can mean that all the door lock cylinders and ignition must be replaced, plus a new key and spares complete with programming of the key transponder and chip, which comes at a serious cost,” explains Ferreira. If the keys to a building are stolen, it will require that every lock is replaced, which can run into thousands of Rands.

“If there are extra security requirements on an office building, it may mean that locks will have been upgraded, say to multi-point type locks that run the whole length of the door, for example, and these can be very expensive.

A tally of locks and keys and the potential costs a client would face if their security is compromised can add up to significantly more than the R5000 or R10 000 key and locks cover on a commercial insurance policy,”

she warns. “Schools in particular are one example where a groundsman or caretaker may have hundreds of keys in his possession at any one time – a loss would incur significant replacement costs, but would be non-negotiable to ensure the safety and security not only of the school assets, but more importantly the children and staff on site,” she adds.

It is essential to check that your clients’ insurance policy covers them for lost or stolen keys, and whether the limits of coverage are sufficient to replace all of them, plus locks, should this be necessary.

“With advances in security, losing vehicle or building keys will do a very impressive job of keeping a person firmly locked out, with an expensive predicament on their hands if their insurance limits have not been customised for their specific requirements,” Ferreira concludes.

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43

Put

foot

Discovery driving app reveals SA’s best drivers Christy van der Merwe

P

reliminary data from the new Discovery Insure smartphone driving app has shown that South Africa’s best drivers reside in the Northern Cape, while the worst performing province is Limpopo.

The app was released by Discovery Insure on 1 June and has already been downloaded by over 19 000 users after the first two weeks, Discovery Insure CEO Anton Ossip tells RISKSA. It picks up on information such as sticking to the speed limit, harsh acceleration and sudden braking, and how often a driver is using their phone while driving, and then gives the driver a rating for each drive.

More initial data from the app that has been collected and analysed, showed that South Africa's best drivers per age group are men over 60 and women over 50 while men in their 20s scored lowest. The best drivers per vehicletype are hatchbacks, followed by sedans, and station wagons.

The app was developed over six months in collaboration with US experts, and is part of a programme to get South Africans to improve their driving, as well as for Discovery to drive new business as the app is available to nonDiscovery clients as well.

Ossip highlights that the app adds value to all parties and is a way for intermediaries to realise the opportunity to become more of a ‘risk coach’ to their clients.

It is a way to differentiate their value-adds to clients, because interacting through the app allows brokers to wade through the data collected, making sense of it and analysing it with clients in a meaningful way to derive benefits and make improvements.

“This app can truly make a difference to the

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Age Group 10 20 30 40 50 60 70 80

Phone Motion (Seconds/trip)

Phone Motion (Relative to worst)

8.76 13.82 13.55 12.06 8.76 5.80 3.85 0.48

0.63 1.00 0.98 0.87 0.63 0.42 0.28 0.03

way people drive. People are conscious of the telematics and make an effort to behave better on the road. The ability to challenge others, invite friends to use it, and compare information is also creating interesting dinner table conversation. The uptake has been incredibly positive to date,” Ossip confirms.

the app that might mean that the driver is using their phone to text or make phone calls while driving. Phone motion by age is represented both in average seconds of distracted driving per trip and relative to the worst age group (70 year olds are 72 per cent better than 20 year olds).

The app is available free from Apple and Android app stores and has been a top performer in the app store since release.

Below are more phone motion stats by province, ranking them from best to worst.

The company is also running the Discovery Insure Driver Challenge until 31 August, and prizes include weekly draws to win a share of R1 million in BP petrol vouchers, and the grand prize of a trip for four to the Monaco Grand Prix.

The app works in the background and only starts recording when it detects driving activity, as it is linked to the smartphones GPS and accelerometer.

The top graph shows interesting phone motion stats. Phone motion refers to the number of times movement of the phone is tracked via

Province Northern Cape North West Gauteng Mpumalanga Western Cape KwaZulu-Natal Free State Eastern Cape Limpopo

Rank (best to worst) 1 2 3 4 5 6 7 8 9

5

Becoming the

risk coach Christy van der Merwe

The rapidly changing short-term industry requires that financial advisers and intermediaries become risk coaches for their clients who need to lower risks.

R

ecent harsh weather conditions combined with the weakening Rand and the labour environment have put a strain on the short-term industry, leading to significant declines in insurers’ underwriting profitability over the past year, says Anton Ossip, CEO of Discovery Insure.

He was speaking at the inaugural Discovery Insure Financial Summit held in Sandton, which focused on challenges facing the short-term insurance industry, with the view to empower financial advisers on how to deal with them. These include emerging mobile and digital technologies, and the impact of changing weather conditions such as the 2013 hailstorms, which caused massive damage to property across South Africa.

Ossip says it has become imperative for operators in the short-term industry to start thinking differently. In the case of financial advisers, focus must shift to becoming risk coaches, where the advice given to clients centres on assisting them to make choices that will help them lessen their risks and thereby reduce their cost

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of insurance. A major focus for Discovery Insure, which covers more than R63 billion in personalised assets and pays in excess of R2 million in claims daily, has been reducing the cost of risk to both the company and its clients. This is being done through telematics – the integrated use of technology to assess how a motor vehicle is being used.

By using telematics, Discovery Insure has tailored a novel package of benefits never before applied in the insurance industry. An example is the recently launched Discovery Insure Driving Challenge app which encourages and rewards good driving.

Since the launch of the app, Discovery Insure has seen many South Africans downloading it, with significant improvements in their driving.

“In most cases, we have seen South Africans improve their driving habits by 10 points over two days after downloading the application,” he said. “This just shows that people do improve as they get information about their behaviour.” Users of the app are scored out of 100 points.

The conference covered trends in other areas of the short-term insurance industry with leading experts such as Peter Rogers, CEO of NetAssets, sharing insights into insurance claims, and environmental scientist Simon Gear unpacking the meaning of changing weather patterns for companies.

Attendees had the opportunity to interrogate the short-term industry’s regulatory landscape as part of a panel discussion which included Edite TeixeiraMcKinon, deputy ombudsman for short-term insurance; Caroline da Silva, deputy executive director of the FSB; Justus van Pletzen, CEO of the FIA; and Suzette Strydom, general manager for legal at SAIA. The discussion was chaired

by Themba Baloyi, executive director of Discovery Insure.

5

The life of the

business While insuring a business’ physical assets is paramount, needs-matched insurer BrightRock highlights that business owners must remember that they themselves are their most important asset and should be covered, too.

S

mall, medium and micro-enterprises (SMME) contribute more than 40 per cent of South Africa’s gross domestic product, despite the tax and labour red tape these entrepreneurs have to endure. This figure is testimony to the determination of South African entrepreneurs.

With the majority of South Africa’s small businesses operating in the agricultural trade, tourism and construction industries, these business owners face substantial risks. It’s important to advise clients who are small business owners to insure their small business against rainy day disasters.

BrightRock offers business owners cover in the form of contingent liability insurance for major debts, cover for buy-and-sell agreements, and key man insurance. However, the affordability of cover could be a stumbling block for many business owners. Schalk Malan,

executive director at BrightRock, notes that traditional business assurance policies are structured in the same manner as personal life insurance policies. “There tends to be a single capitalised block of cover for all needs, and this cover is priced for the maximum term. This cover structure is not necessarily in the best interest of the small business owner because the cover increases as your needs decrease, leading to cost inefficiency in the way premiums are structured.”

BrightRock follows a more flexible approach, which allows an upfront premium saving of 30 per cent on average, allowing business owners to invest more funds in their businesses or allocate the savings to more cover in the event of underinsurance.

By structuring business owners’ cover to meet their exact needs, BrightRock removes premium waste and saves money from the payment of

their first premiums. Their approach allows advisers to tailor business owners’ cover over time to match the profile of their needs.

Business owners also have the ability to convert up to R7.5 million of their cover to personal cover at a later stage, without the requirement of medical underwriting. “Standard BrightRock polices automatically include the ability for you to redirect your premiums to cover your personal needs if your business cover needs reduce or end. This is done free of underwriting, giving you the benefit of the underwriting you initially underwent and premiums you have paid thus far,” adds Malan.

Should the business’ growth exceed expectations, leaving the business owner with a desire to increase cover, “standard BrightRock policies automatically have access to an extra cover account, to access later in the business lifetime with only an HIV test,” concludes Malan.

Long-term insurance for a small business: what should be covered?

Contingent liability insurance for major debts

Long-term insurance for buy and sell agreements

Key man insurance

Contingent liabilities are liabilities that may be incurred by an entity (like a small business) depending on the outcome of an uncertain future event – such as the inability to honour a major debt due to a serious illness, debilitating injury or death.

This will ensure that co-owners of the business can continue to operate the business with as little disruption as possible in the event of the death of the business owner. It also ensures that the estate of the deceased business owner receives fair value for their business interest, as well as the settlement of the credit loan account.

An insurance policy taken out by a business to compensate the particular business for financial losses that would arise from the death or extended incapacity of an important member of the business.

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49

Climate change

combined effort needed Extreme weather events have caused massive damage and cost the insurance industry over R1 billion in claims over the last year, said organisations gathered in Sandton recently, for an urgent forum on the impacts of climate change on the industry.

T

he South African Insurance Association (SAIA), the Insurance Institute of South Africa (IISA) and several key players in the industry attended the forum addressing insurance risk and exposure owing to recent extreme weather events. Prominent insurers, reinsurance experts, meteorologists and an international agricultural insurance specialist were in attendance.

Despite differing views on the impact of climate change among the scientific community, insurers are questioning whether the increase in storm and hailstorm related claims are indicative of fundamental changes in global weather systems. SAIA chief executive, Barry Scott, said that 2012 and 2013 saw a dramatic increase in hail insurance claims in both the motor and property sectors. These claims were driven by severe hail storms predominantly in Gauteng. He added that crop damage due to extreme weather led to massive losses over the past two years.

IISA chief executive, David Harpur said the industry needs to look forward on its risk and exposure to weather related claims. “We can’t predict what is to happen if we don’t put our heads together and find solutions to mitigate the impact on the industry as a whole,” he said.

“Our challenge is to encourage a culture of risk mitigation and risk awareness. We have to

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ensure that we, from an industry point of view, are prepared to deal with the challenges faced by such an event,” said Waldi Els, regional claims manager at Santam. He also quoted Charles Darwin saying, “It is not the strongest of the species nor the most intelligent that survives, it is the one that is most adaptable to change”.

“The hail event on 28 November 2013 caused the largest market catastrophe loss in the history of the local insurance industry, estimated at R1.4 billion. The impacts of the rapidly expanding urban sprawl in Gauteng, combined with the increased participation of the emerging middle class in insurance are main drivers in changing the hail loss environment,” Pieter Visser, catastrophe analyst for AON Benfield said.

International and local weather scientists, Dr Deon Terblanche, from the World Meteorological Organisation and Professor Stuart Piketh, from the North West University addressed the changes in the weather patterns at the forum.

“A growing and urbanising global population, and a warming climate, imply greater exposure to extreme weather events, including hail storms. There is an urgent need for improved techniques to observe and predict these events and for the financial tools to build resilience,” Terblanche said.

“South Africa has cutting edge infrastructure and capacity to study hail events, and a rich history and body of knowledge of local hail research. The North West University is busy expanding this infrastructure and capacity to specifically meet the needs of communities interested in the impact of hailstorms as well as evaluating the trends in storm frequency and severity,” Piketh added.

“With more humidity in the air the precondition for torrential rain and thunderstorms (having the potential for extreme hail) is fulfilled. A significant trend toward more humidity can be seen in North America, in parts of Europe and in the eastern parts of South Africa.

Consequently the events that occurred and the severe losses in these regions in 2013 are not surprising. The South African farmers are ever more exposed to hail and other natural perils. Therefore they need comprehensive insurance cover as a risk management tool.

This can only be based on a public-private partnership between the public sector, the farmers and the insurance industry,” said Holger Schwarz, from Munich Reinsurance, Germany’s international based agricultural insurance team.

“The industry will assess the information shared at the forum and will decide on future engagements in this regard,” Scott concluded.

The underrated

risk of terror Business leaders significantly underrated global terror risk in 2013.

This was a key finding of the Aon Risk Solutions 2014 Underrated threats report, Aon’s first research report into the perceived importance of risks as seen by captive directors and is a follow-up to the 2013 Global Risk Management Survey.

T

he report presents key findings from the 2013 survey and asks captive executive and non-executive directors for their opinions on the rankings of various risks and findings as identified by over 1 400 risk decision-makers including risk managers, CFOs and CEOs globally, representing over 100 organisations from a broad range of countries, revenue sizes and business sectors.

Most notably, more than half of the research respondents stated that a ranking of 46 in the 2013 report was too low for terrorism risk.

“Not a day goes by without news of political unrest and terrorist attacks which are taking place all over the globe destroying lives and disrupting businesses, but it seems that the world has become de-sensitised to such news as these events are now occurring with regular frequency and may soon be regarded as a normal part of our lives,” comments Darlington Munhuwani, regional controller for Aon Sub-Sahara Africa.

“Based on the research in the 2014 Underrated threats report, it appears larger organisations place a much lower priority on this risk which leads us to the belief that they are better prepared for such events and have appropriate measures in place to address and manage the impact of human and economic loss to their organisations, either through insurance or business continuity planning. But, can any of us be fully prepared for these events and have the capacity to carry the risk in our balance sheets?” he asks.

“Given that this is a global report, we need to consider more closely the relevance of the findings to what is happening in Africa.

From an African perspective, there can be

no denying that the threat of terrorism or political risk is real. The ranking of country risk ranges from medium to severe in 43 out of 54 countries on the continent. This has significant implications for multinational and Africa-based businesses in terms of their risk management strategies, business continuity plans and decisions on where to deploy their capital. Risks arising from civil unrest and terrorism had limited effect on business 10 to 15 years ago, this is no longer the case,” Munhuwani adds.

The war in South Sudan and terrorism threat by the Al Shabaab in Somalia, Kenya and Uganda, political instability in the Central African Republic and Boko Haram activities in Nigeria are key political and terrorism issues facing regional and multinational businesses as they seek to increase their African footprint. The report authors suggest that these risks have, and will, continue to have a negative impact on the flow of foreign direct investments and expansion plans of most companies.

“This constellation effect of, or interconnectivity between risks, might not always have been recognised by organisations but could have a significant impact on their approach to risk management and overall business performance,” concludes Munhuwani.

51

Luka Vracar

Epidemic

Hypertension is one of the most common chronic conditions in South Africa, and, left unabated has become one of the largest annual pay-outs for medical schemes. In order to guarantee complete coverage, brokers need to ensure full disclosure from policyholders and advise them on long term implications of the condition on their medical aids.

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T

he World Health Organisation (WHO) announced at the end of 2013 that 970 million people suffer from hypertension, or increased blood pressure. It is estimated that in 2013 hypertension was responsible for at least 45 per cent of deaths due to heart disease and 51 per cent of deaths due to stroke.

Overall, some 9.4 million people die due to complications from hypertension each year.

South Africa has one of the highest rates of hypertension anywhere in the world, with 55 per cent of adults believed to have high blood pressure.

Graham Anderson, principal officer of Profmed, indicates that not all of the 55 per cent of South Africans with high blood pressure require medication.

However, at least 25 per cent of adult South Africans do need treatment for the disease, and that certainly up to 55 per cent have elevated blood pressure, which can become more serious over time.

“Hypertension forms part of the chronic disease list and is a Prescribed Minimum Benefits (PMB) chronic condition, which has to be covered by all medical schemes.

Depending on the medical aid and option chosen, members may be required to obtain medication according to a prescribed formulary and from a designated dispensing provider in order to ensure full benefits,” says Karin Claassen, marketing manager for Momentum Health. However, not all medication for hypertension is covered. According to Momentum, the option selection

45% Of deaths due to heart disease in 2013

often dictates the medication covered, which is governed by medicine formularies. Brokers need to ensure that their clients are aware of the implications of their policy options in the long run, particularly if it involves chronic medication. And even if the policyholder does not have at the time of application, development later on could result in a significant expense if medication is not included in the policy from the outset.

Risk Factors “It is a silent killer. You could have high blood pressure and not be aware of it. It may cause headaches, but usually people attribute headaches to other causes. The only way to know if you have hypertension is to have your blood pressure checked on a regular basis, especially if you are over the age of 40,” says Anderson.

There are cases where there are no specific causes of hypertension. Anderson points to possible genetic and congenital factors. The WHO indicates that when hypertension occurs in people below the age of 40 it is important to consider secondary causes such as kidney disease and malformation of arteries, thyroid problems, and adrenal gland tumours.

“In a medical scheme environment, any member who develops a condition after joining the scheme, will not be penalised or discriminated against in any way. If the condition however exists prior to joining the scheme, a 3-month or 12-month waiting period may be applied, depending on the person’s prior medical cover history,” says Claassen.

51% Of deaths due to stroke in 2013 53

Currently there is no cover for one of the main contributors to high blood pressure: chronic stress. However, stress caused as a result of an acute incident, or post-traumatic stress, is covered, according to Claassen.

“When you are under stress you have peripheral narrowing of the arteries, and that increases blood pressure. Most people get stressed over issues at work: heavy workloads, deadlines that need to be met, changes in the workplace, and job insecurity, particularly in this day and age with the unemployment that we have, all contribute to stress that could lead to high blood pressure,” says Anderson.

Furthermore, stress often encourages behavioural risk factors that contribute to the development and high blood pressure and its complications.

The WHO points out that an unhealthy diet, tobacco use, physical inactivity, and drinking too much alcohol are all major contributors.

Claassen indicates that rehabilitation for drug abuse and alcohol addiction can be provided to policyholders, based on available limits and within the framework of PMBs. “All these factors contribute to high blood pressure: a sedentary lifestyle, eating a lot of carbohydrates, putting on weight, smoking, and leading an unhealthy life. These all aggravate hypertension. So the best way to avoid it is through a healthy lifestyle. It is also important to note that most chronic diseases are improved with lifestyle changes. A healthy lifestyle helps you keep your blood pressure under control,” adds Anderson.

25%

of adult South Africans do need treatment for the disease 54 8

Potential Epidemic The rise of hypertension reported last year by the WHO was so concerning that the International Journal of Epidemiology (IJE) compared the condition to the HIV epidemic.

It underlines the notion that hypertension is an extremely serious chronic condition that is not being attended to as it should be.

The IJE points out a number of similarities: both conditions are largely asymptomatic, but can lead to debilitating illness and death; both can be easily diagnosed with screening tests and with the roll out of antiretrovirals for HIV, both conditions are now managed through lifelong medication, monitoring, and healthy lifestyle.

Personal behaviour was thought to be a factor in both conditions – early on in the HIV epidemic it was believed to be a disease only suffered by those of wealthier society and there is a similar notion regarding hypertension, which the WHO report proves is false.

of the healthcare system need to address hypertension by strengthening governance, finance, information, and service delivery.

Anderson notes that the rising number of people with high blood pressure and hypertension, and the diseases related to it, has the effect of increasing medical scheme premiums across the board.

Discovery Health indicated in 2013 that high blood pressure was the top chronic condition paid out amongst their members, with 244 826 members with the condition.

High cholesterol was second with 135 839 members and asthma came in third with 79 745. HIV was in fifth place, with 28 711 members.

Discovery announced this year that the average member contribution will be 8.9 per cent higher in 2015, which will be applicable to all of the almost two and a half million Discovery members.

Developing countries are also slow to prioritise non-communicable diseases like hypertension, and this is reminiscent of the slow implementation of programmes and awareness for HIV in the 1990s.

Brokers, for their part, need to emphasise the importance of disclosure with regards to any chronic condition. Even though high blood pressure is asymptomatic, blood pressure tests are relatively easy to do, and are even available at most pharmacies.

The World Health Organisation is pushing for the control and prevention of hypertension on several fronts. Chiefly, governments and policymakers must revaluate hypertension, and allow for affordable, sustainable, and effective intervention. Health services need to increase coverage, and indicate the dangers of cardiovascular health. Essentially, all components

“Disclosure is very important when applying for membership. Even if a person is not making use of chronic medication as yet but only sought medical advice based on symptoms of hypertension, such consultation must be mentioned at the time of applying membership to avoid a later penalty or cancellation of membership based on nondisclosure,” concludes Claassen.

9.4 million

people die due to complications from hypertension each year

55

Growing

healthy decisions to make n e r d il h c hers and Vitality c a e k te li g s e in g m a By encour te program g habits and a r o p r o c , y priorit etter eatin b e g a wellness a r u o c ools en sts.

Healthy Sch reduce healthcare co gs

Laura Owin

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T

he Discovery Vitality programme is well-known for the benefits it bestows on members. Everything from airfare discounts and theatre tickets to a cheaper grocery bill are offered up in the programme, which awards loyalty points to those who make healthy lifestyle choices.

The subject of local and international medical research, the Vitality incentive-based wellness system has benefits that are verified by science.

In fact, a 2009 study from the US Centers for Disease Control and Prevention found participation in the programme linked to decrease healthcare costs, including the cost of managing chronic disease, as well as fewer hospitalisations.

With a proven history of improving the health of South Africans, it is only natural that the programme would extend to the country’s

youth population. The programme has been joined by other South African companies seeking to decrease the number of kids who dine on junk food.

“This guide helps them to make the transformation, and to actively promote healthy eating habits and well-being in their communities,” she says.

According to recent figures from the South African National Health and Nutrition Examination Survey, more than 16 per cent of girls and 11.5 per cent of boys between the ages of two and 14-years old are overweight or obese. One of the causes of these figures is the convenience and lower price of unhealthy food, states the report.

Although the Woolworths programme does not provide incentives, there is research that suggests that children who are involved in cooking meals make better food choices.

According to a study from researchers at Nestlé and published in the journal Appetite, children who help to prepare their own meals eat significantly more vegetables.

“Based on emerging trends of obesity in younger cohorts, it has been predicted that the current generation of children may experience a shorter life expectancy than their parents,” says Craig Nossel, head of Vitality Wellness.

“Therefore, the need for primary prevention of obesity and physical inactivity has become a greater imperative. It is in the interest of business to have healthier kids, as this will translate to a healthier health insurance company,” he says.

"We found that children who were in the kitchen, cooking with a parent, ate more overall of their meal, and a significantly larger amount of vegetables," says nutritionist Klazine van der Horst, who led the study.

"The results suggest that involving children in food preparation could help develop healthy eating habits,” she says.

A curriculum-based health and wellness initiative, the Vitality Schools Programme aims to achieve this, using schools as a point of guidance. Giving teachers and learners comprehensive tools to lay the groundwork for healthy change including curriculumbased lesson plans on physical activity and nutrition, sports coaching manuals, playground and circuit training tools and a healthy tuck shop guide.

Like Vitality for adults, there is incentive in the schools programme. Schools that create healthy environments are rewarded with prizes which also focus on health. Amongst these are first aid kits, CPR and basic first aid training, sports injury courses, wellness day for staff, an invitation to attend Discovery sponsored events and a chance to win R100 000 for the school.

Encouraging healthy habits in kids is an effort that has also been taken up by Woolworths.

The grocery giant distributes the Making the Difference Healthy Tuck Shop Guide, a resource that encourages schools to enable children to make better eating choices. Specifically, the handbook presents practical tips for healthy drinks, snacks and cooked lunches as alternatives to traditional tuck shop foods that are often of poorer nutritional quality.

“It just doesn’t make sense to teach children in the classroom that they should use foods and drinks containing sugar sparingly, and then serve them sports drinks, fizzy drinks and sweets at break time; or to eat fat sparingly, and then provide pies and doughnuts as the only options,” says Penny Luthi, brand manager for the Woolworths programme.

In addition to supporting youth nutritional research, Nestlé has also published a guide for children and their parents with helpful tips on how to grow their own organic vegetables.

The manual is part of its global Healthy Kids Programme, which was piloted in Gauteng and North West and has grown worldwide to more than 280 partners in 68 countries.

In South Africa, teachers receive Nutrition Education LTSM to help them educate learners about good nutrition practices.

Workshops for teachers to share best methods of teaching learners about good nutrition practices are also held, in addition to Nutrition Education days hosted by partners such as the Johannesburg Zoo. “Education is a powerful tool to help children understand the value of nutrition and physical activity. We have identified that educating school children about the benefits of good nutrition will pave the way towards achieving our goal of nourishing Southern Africa and help with building a healthy nation,” said Nestlé South Africa’s Spokesperson, Ravi Pillay.

While the long-term outcomes of healthy eating programmes in schools have yet to be documented, there is support amongst educators for such initiatives. According to Anne Harman, Principal of Blairgowrie Primary School in Johannesburg where Vitality Schools Programme first launched, corporate support in education is appreciated.

“Educational institutions value such corporate involvement which, with the support of teachers and parents, will help to develop the youth of South Africa in mind and body,” she said.

57

AGGREGATION OF

DISABILITY B

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Y

A BENEFITS WILL YOUR CLIENT FEEL THE PINCH?

Brad Toerien FMI CEO

ggregation of disability benefits is well-established in the life insurance industry. That said, the industry does not apply a consistent approach to benefit aggregation with each provider specifying its own policy. These differences may seem minor at face value but, all else being equal, they could result in materially different claim outcomes for clients.

Why aggregation matters Very simply, aggregation of disability benefits refers to the process of reducing the benefit amount paid by the insurer to allow for income being received from other sources.

The principle reason the industry aggregates disability benefits is to ensure that the claimant is not placed in a better financial position after a claim than he or she would have been in, before a claim. In the absence of aggregation it would be possible for clients to over-insure themselves (relative to their earnings) and/or to receive insurance benefits whilst they are still deriving an income from working activities.

From an insurer’s perspective, this is undesirable as it both incentivises claims and serves as a disincentive to return to work.

The purpose of disability insurance is not to enrich claimants but rather to put a claimant in the same position they would have been in, had they continued working for the period that they are unable to work.

Factors specific to aggregation to consider when constructing a client’s disability insurance portfolio:

What types of income stream will be considered, and for what claim duration?

Most providers in the market distinguish

59 5

a zero benefit on a policy that aggregates.

Thereafter, they will receive 100 per cent of their benefit for the remaining two weeks of the claim. Contrast this against the value offered by a policy that does not aggregate, where the client receives 100 per cent of their insured benefit for the full term of the claim and the importance of the aggregation basis becomes self-apparent.

The policy that aggregates only pays out 33 per cent of the amount paid out by the policy that doesn’t aggregate. It is also worth noting that this effect is cumulative over the life of the policy as multiple periods of temporary disability are very likely during a working lifetime.

FMI’s claims statistics show that 82 per cent of temporary claims last less than 90 days so it is critical for self-employed individuals to be covered on a policy that does not aggregate against work-related income during the initial period of a claim.

Multiple policies

between different types of income and different lengths of claim, and structure their aggregation policies accordingly:

• Passive income: Passive income refers to income streams that will not fall away when a client becomes disabled. Examples include rental and investment income.

Most insurers will exclude passive income from the aggregation calculation.

• Disability benefits: This category includes all insurance pay-outs received as a result of the disability. Most insurers will automatically reduce their benefit payments to allow for any other disability benefits being received by the claimant. This typically occurs from day one of the claim although some insurers (FMI included) only consider this from month 13 of the claim.

• Work-related earnings: This category includes all income derived from performing occupational duties and may take the form of a salary, fee income, or share of the profits in a business. Many insurers will automatically reduce their benefit payments by the amount of any work-related income the claimant receives during the claim. In principle, this is reasonable, although there are scenarios where this approach is unfair to the claimant.

Subtle differences in aggregation rules can lead to substantially different claim outcomes, particularly on shorter-term temporary claims Financial advisers are a great example – in a simplistic model, a financial adviser’s monthly

60 8 6

income might comprise 75 per cent new sales and 25 per cent renewals on sales made one year ago. The renewal income will be paid irrespective of the disability and will be considered as work-related income by an insurer that aggregates.

So, a policy that aggregates work-related income would only pay-out 75 per cent to cover the lost sales income. This does not take into account the losses the adviser will incur 12 months later, when their renewal income stream reduces as a knock-on effect of the disability period.

This logic extends to almost all selfemployed individuals as there is often a time lag between the work or service they provide and settlement. In many small business scenarios it is likely that this time lag runs anywhere between 30 and 90 days.

This means that a self-employed person may still be receiving close to 100 per cent of their insured income for up to three months following a disability event. Any policy that aggregates against work-related income will pay a vastly reduced (possibly zero) benefit during this overlap period.

Consider a self-employed individual with a four week settlement lag who suffers a six week temporary disability. For the first four weeks of the claim this individual will still be receiving settlement income roughly equal to the insured benefit, and thus will receive

Where a client has disability products with more than one provider it is important to understand how both providers handle aggregation. Consider a client who has an employer-sponsored income protection benefit replacing 75 per cent of their salary.

This individual might take an individual policy out to cover the remaining 25 per cent.

Possible outcomes in this scenario:

• The employer-sponsored benefit aggregates and the individual policy does not: The employer-sponsored benefit will reduce to 50 per cent and the individual policy will pay 25 per cent.

• The individual benefit aggregates and the employer-sponsored benefit doesn’t: The employer-sponsored benefit will pay out 75 per cent and the individual policy will pay zero per cent since the client is receiving more than 25 per cent of their income from another source.

• The employer-sponsored benefit and the individual benefit both aggregate: The two insurers ‘share’ the claim on a pro-rata basis – the employer-sponsored scheme pays 75 per cent of 75 per cent and the individual benefit pays 25 per cent of 75 per cent. The claimant only receives a 75 per cent benefit.

• Neither benefit aggregates: The employersponsored benefit pays 75 per cent and the individual benefit pays out 25 per cent bringing the total benefit to 100 per cent.

Interaction between income and lump sum benefits This is less of an issue on newer generation policies but it was common industry practise

until quite recently. It’s possible that the insurer will consider both income-based and lump sum benefits when performing aggregation calculations to ensure that the combined ‘value’ of the benefits does not exceed a specified replacement ratio.

This introduces the murky world of commutation bases – the basis the insurer uses for converting a lump sum benefit to a monthly income equivalent.

Much like aggregation policies, commutation bases are not consistent across the industry so where the insurer does consider lump sum benefits when applying aggregation, it is important to understand the basis on which they will convert that lump sum payment to a monthly-income equivalent, to ensure that the client’s benefits are not reduced at claim stage.

Manage your client’s aggregation risk Clients are likely to view any claim outcome where they do not receive 100 per cent of their benefit as unfair, irrespective of the underlying rationale. Avoid this outcome:

• Do the homework: Ensure that you have a complete view of all the client’s disability benefits (including type and timing)

and the applicable aggregation basis before recommending new or additional disability insurance.

• If there is any doubt, disclose the client’s information to the insurer and ask for assistance. The best time to manage aggregation risks is at application stage.

• Consider the possible claim outcomes on policies that apply different aggregation rules when performing price/value comparisons.

• Select a product that does not aggregate on temporary benefits for income earned from working as this is where clients are most likely to lose out. At the very least, select a product that applies limited aggregation and only at longer claim durations.

• Take note of the interaction between the aggregation rules and the ‘proof of loss’ requirements on a policy. These terms work in conjunction – where a policy does not require the claimant to prove loss of income for a specified period the insurer will not have ‘sight of’ any income received during that specified period, thus taking aggregation out of the equation.

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High

risk

territories

High risk regions include countries like Iraq, Sudan, Afghanistan and Somalia. Even places such as Nigeria have a concerning risk profile, due to the increasing trend of terrorist attacks, corporate kidnappings and ransom demands.

W

hen it comes to assessing life and disability cover for these regions, a number of factors are analysed in evaluating the underwriting risk.

In areas that are considered particularly high risk, applicants may only be able to get life cover for death due to natural causes. Some of these underwriting considerations include:

Hayley Taylor, managing underwriter at Altrisk

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• Political stability – this influences the safety of the individual due to the likelihood of war, acts of terrorism or other acts of unrest that could pose a direct threat to the individual or jeopardise his care in the case of an emergency.

• Access to medical care – underwriters consider the nature of medical facilities

in a territory and the level of care they can provide. In addition, whether medical facilities are easily accessible and whether emergency vehicles are in operation is also a consideration. Either way, having medical evacuation cover is essential in order to get adequate and speedy healthcare in the event of an injury or illness.

• Accident risk – socio-economic, political and infrastructural factors have bearing on accident risk. In addition, underwriters would consider accident statistics and evaluate the relevance of the causes in underwriting the individual.

• Infectious diseases – some areas are rife with diseases like malaria, typhoid, Ebola and yellow fever. Not only do the underwriters

in question but retain full cover while in South Africa.

• Offer cover for natural death only – possible for countries such as Ethiopia, Gabon and Iran.

• Load for natural causes and exclude for accident – possible for countries like Iraq, Pakistan, Afghanistan and North Korea.

The following facts on Sudan are provided as an example to illustrate some of the important considerations that underwriters look at when assessing an application for cover in this country:

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Political stability: • South Sudan is still contaminated with unexploded land mines.

• Terrorism against US and European interests is still prevalent.

• An increase in political activism with outbreaks of violence and aggression is seen ahead of elections.

Accident risk: • Death by road accidents doubled between 1999 and 2008.

• One person dies every five hours and one is seriously injured in traffic accidents, 45 per cent are pedestrians.

• Forty per cent of vehicles are unlicensed.

• Seventy per cent of accidents are due to tyre bursts.

• There is poor road infrastructure and street lighting is poor.

• Motorists have a general disregard for road rules.

• Sudan has one of the worst air traffic accidents rates.

consider the likelihood of an individual being exposed to such diseases, but they also contemplate the medical care available to treat such a disease in the event that it is contracted.

With these considerations in mind, it is still the individual who is underwritten so the client’s health and occupation remain key factors.

Would a traveller suffering from a heart attack in Iraq receive the same level of care as a traveller in, for example, the US? Would an accountant be more at risk in Iraq than a bodyguard?

The underwriter has various ways of granting cover: • Exclude for events in the high risk territory

Access to medical care: • Outside of Khartoum very few facilities are available (and very few exist for tourists) and these fall short of conventional standards.

• Medical practitioners are unable to treat anything other than a minor injury.

• Medical facilities are poorly equipped and patients must pay cash up front.

• No ambulance service is available and emergency assistance and medical care are limited.

• Medical care is often lacking in blood and medical supplies including antibiotics and surgical instruments.

• Medicines are only available intermittently.

Infectious diseases • Chloroquine-resistant malaria is prevalent in all areas, while typhoid and other tropical diseases are also rife.

Underwriting for these territories is based on extensive experience and research supported by case-based reasoning. While good quality and statistically relevant data is needed, it is often hugely challenging to obtain for areas where information is not readily available and reporting of any kind is virtually non-existent.

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Covering the

high life Dominic Uys

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Life cover for high net worth individuals presents unique challenges to the insurer.

Replacing lost income and the client’s lifestyle may be anything but run-of-the-mill.

C

atering to clients in the upper income market can be challenging.

On the short-term insurance side, covering assets such as private watercraft and high-end art can require some work from the insurer to keep their own premiums competitive.

For the long-term specialists, replacing a high-value client’s lost income after death can bring about the same challenges.

Relative newcomer in the life insurance sector, BrightRock has made some strides in the upper income market, with the company’s largest life cover pay-out to date standing at around R16 million.

Schalk Malan, executive director at BrightRock starts by pointing out that, when it comes to high net worth individuals, the focus tends to be on the investment side and ensuring that the client has made adequate financial provision to maintain their high standard of living, in retirement.

“However, these individuals tend to have a substantial need for risk protection as well, given their large income stream and their significant expenditure on costs such as private schooling for their children, top-end private health care cover and debt repayments on vehicles and properties,” he says.

“Often, on the death of a high net worth individual, this income stream comes to an end and dependants may have limited access to funds as the client’s wealth may be tied up in fixed assets, investments and businesses.

It may not make sense for dependants to liquidate these assets to fund day-to-day living expenses for the family to the age where the clients’ retirement savings come into play,” Malan adds.

Breakaway from tradition According to Malan, traditional risk product structures in the market do not necessarily provide an efficient vehicle for protecting the present value of the high net worth client’s future income stream.

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He explains that traditional products tend to cluster the family’s short-, medium- and longterm needs into a single capitalised lump-sum per insurable event in the form of disability, dread disease and death cover.

This amount is set to grow at a prescribed rate and priced from the outset for the maximum term. However, over time, certain needs may decrease substantially or fall away altogether, while other needs may increase substantially at specific times. While debts may be paid off over time, other costs such as the potentially substantial increase in education costs for children entering tertiary education, could conceivably take their place.

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

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While not willing to disclose Liberty’s statistics regarding this issue, he adds that the company has not seen an impact on its claims statistics yet. “We believe that this is mainly as a result of us declining covers where social drug abuse is present,” van der Nest says.

One interesting tendency according to van der Nest is, however that the majority of drug-related disclosures from clients do not come from the regions that one would expect.

“Surprisingly, we have seen very few of these disclosures coming from high net clients in Gauteng. The increase is mainly from other parts of the country,” he says. “Clients in Gauteng have their own trend emerging. We are starting to see more and more clients with stress and respiratory related issues, which is worrying as well,” van der Nest continues.

“As a client nears retirement, for example, they may choose to lapse or reduce their disability cover based on the decreasing number of pay cheques they need to protect. When clients lapse this cover, they also lose the value of the premiums they’ve paid from day one towards later years’ cover. In other words, there is an inherent disconnect within traditional product structures between how cover grows and how financial needs grow,” Malan adds.

Addressing this gap, Malan points to the company’s needs-matched life insurance which it has developed over the last two years.

“It offers cover for the same insurable events, but because the cover precisely tracks the behaviour of each separate need over time, cover is priced more efficiently,” he says. This ensures sustainability of cover, removing the need to lapse or surrender cover in future.

Importantly, clients and their beneficiaries have the choice at claim-stage to change the pay-out from a capitalised lumpsum to a regular income, on guaranteed terms. According to Malan, it removes the investment risk inherent in a lump-sum payout, ensuring greater certainty for clients that the pay-out received at the time of claim, will provide the family with the income they need to maintain their lifestyle.

Clients have access to more cover should their needs change in future. The cover conversion facility allows policyholder’s to redirect the premiums for unneeded cover to other areas of need, and the extra cover buy-up allows clients to buy more cover subject to only an HIV test, guaranteeing clients’ future insurability.

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Malan states that this more flexible policy structure has a marked advantage for the upper income market. “High net worth clients may have a significant estate duty liability on death, given their large asset base and the value of their deceased estate. The estate duty deduction is equal to 20 per cent of the estate’s value for estates of more than R3,5 million,” he starts.

“BrightRock offers the ability to cater for their estate duty liability on the same policy.

However, the Estate Duty Act protects the last surviving spouse against an estate duty deduction in cases where a couple has a joint will,” Malan continues. To allow policyholders to benefit from this protection, the company’s cover for death-related needs offers a Last Death pay-out option, whereby the pay-out of the cover of the first dying spouse is delayed to the death of the last surviving spouse.

Hard living lifestyle There is however another aspect to the upper income market. Nicholas van der Nest, director of risk product innovation at Liberty, notes that social drug use amongst higher earning individuals has increased over recent years, having apparently become more socially acceptable over time.

“We have in recent years seen a marked increase in the number of disclosures in respect of this question. The increase is most significant among higher income earners and those in executive positions, where ‘harder’ drugs such as cocaine, khat and the like seems to have become more socially acceptable. Previously the large majority of disclosures were in respect of marijuana,” van der Nest says.

“While BrightRock operates in the upper income market, our claims experience does not support any evidence of an increased prevalence of claims related to stress or heart disease among Johannesburg-based policyholders or of drug-related claims among Cape Town-based clients,” Malan contends.

He adds that both internationally and in South Africa, mortality rates are down overall, thanks to advances in treatments for conditions such as heart disease and cancer and, importantly, a significant reduction in the mortality rates related to HIV/Aids.

“BrightRock’s clinical definitions cover a wide variety of stress and heart-related disorders, giving policyholders certainty of claim.

However, it’s important to note that most insurers, BrightRock included, will not cover self-inflicted conditions for non-death claims.

Illness or injury as a result of drug abuse will therefore be excluded from any form of disability or dread disease cover. Typically, suicide within the first two years of a policy is also a claims exclusion on death cover,” he adds.

“There are providers in the market that offer incentives for good health management and penalties for poor health management.

Typically, these incentives are linked to other product lines and offerings. However, BrightRock’s focus is purely on risk insurance, and providing predictable, transparent and guaranteed future premiums and premium increases. We are opposed to any form of conditional selling and do not perform ongoing health management of our policyholders, as this could potentially affect the certainty and future affordability and sustainability of their life insurance premiums,” Malan concludes.

The landscape for high net cover continues to evolve and the industry is sure to see many more new products to cater to this demographic over the coming months, and with that, certainly more departures from the traditional models.

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LICENS

KINGJAMES 30284

It’s more than an award.

It’s a challenge to earn your respect again next year.

We’re honoured to have been awarded the 2014 FIA Award for Product Supplier of the Year in the Employee Benefits category.

Awards aren’t always the be-all and end-all, but these are important because they’re voted for by your financial advisors, which means the awards are independent, objective, credible and highly soughtafter by companies such as our own. For you, it’s extra reassurance that your retirement savings are being well looked after, and that your financial future is in the hands of a company that will continue to respect every rand you entrust to us.

www.seb.co.za LICENSED FINANCIAL SERVICES PROVIDER

7

Mind the UNDERINSURED

gap S

outh Africans are still severely underinsured for disability. This is according to the Association for Savings and Investment South Africa (ASISA) 2013 Gap Analysis, which indicates that 67per cent of the country’s working population do not have enough risk cover to finance their lifestyle, should they become disabled.

Jaco Gouws, risk product manager at Old Mutual.

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Over and above that, becoming disabled will impact on their ability to save for retirement.

“What we have found is that when people become disabled, they are no longer able to earn a salary, which means they are no longer able to save,” says Jaco Gouws, risk product manager at Old Mutual.

Disability wears a young face To add to this challenge, Old Mutual’s experience is that people claiming for disability are relatively young – on average 45 years of age. “If you think about it, 45 is right in the middle of your working life,” adds Gouws. “If you are disabled and unable to work, you can no longer save.

What usually happens is that you either dip into your retirement savings, depend on your loved ones, or rely on the government’s disability grant, which is currently R1 350 per month.”

Gouws says that people, in general, are covered for only 25per cent of their risk cover needs, and many don’t have cover at all. This

could mean that an individual’s income could drop from R10 000 per month to R2 500, if they become disabled and are unable to continue earning an income. For some, this amount could drop to nothing.

A recent claim statistics guide, released

by Old Mutual, showed that R3.1 billion in claims was paid to the group’s retail customers in 2013. This was made up of: • Death claims - 76per cent • Illness and physical impairment claims – 13per cent • Disability claims – 11per cent • Retrenchment claims – less than 1per cent.

A further complication is that many who cover themselves against permanent disability forget or don’t think about temporary disabilities.

“Take mountain biking, for example,” says Gouws, “many people actively participate in this sport and the risk of suffering a fracture is high. Most of these injuries are temporary and require only a short recovery period, but this could mean weeks or months without an income. A recent study found that 93per cent of South Africans are underinsured for temporary disabilities and rely mostly on their savings to absorb this event. Individuals are also 40 times more likely to suffer a shortterm disability or illness than a long-term one. It is therefore important to protect your earning ability, not only for the long-term, but also the short.”

Monthly income cover or lump sum cover?

Income disability cover pays out a monthly

income if the claimant cannot work because of a temporary or permanent illness or injury. This monthly income is designed to help replace any lost income. Lump sum disability cover, on the other hand, pays out a once-off amount, but only upon permanent illness or injury. The lump sum can be used to pay for once-off disabilityrelated expenses and the remaining funds can be reinvested to provide an income.

Gouws says that in the past the majority of people preferred a lump sum product, but there is a shift towards income disability as it covers both short- and long-term disabilities. It is important to add temporary cover if a lump sum product is chosen. This will protect against both types of disability. By speaking to a financial adviser, you can determine your needs, find out which cover will match your life stage, and get yourself closer to your financial goals.

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The best of two

opposites Glacier by Sanlam’s latest retirement income product has combined the offerings of two distinct annuity types into one. The result is a blend that the company believes is a much-needed solution to a gap that exists between guaranteed life annuities and investment-linked living annuities.

Dominic Uys

T

he rationale for the development of Glacier’s Investment-Linked Lifetime Income Plan, which launched in May this year, is explained by associate director of product management at Glacier, Patrick Sheehy.

To start, Sheehy points to the, by now, well known statistic relating to retirement in South Africa. It is estimated that only around 29 per

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cent of South Africans have saved enough money for their retirement.

In addition, statistics reveal that most of the people who fall into the other 71 per cent of the demographic only start saving around 15 to 20 years before reaching retirement age.

Choosing an annuity can be tricky, with the choice between a guaranteed annuity (GA)

and investment-linked living annuity (ILLA) presenting some significant advantages as well as disadvantages.

While a GA allows the client to buy an income with relative certainty on the pay-out that they receive for the rest of their life, the annuity is inflexible and the annual increase in pay-out is determined at inception. In many cases, clients often find that their

income suffers as a result of the annuity's growth not keeping up with inflation rates.

client starts out with a guaranteed annual income of R180 000,” Sheehy says.

The alternative, ILLA is more suited to the client with a bigger appetite for risk since there is no guarantee of investment performance or income. These policies provide the client with a choice on the policy’s underlying investments but there is a real danger poorly performing investments eroding the client's capital. It is a scenario that is becoming ever more possible in the face of advancing medicine, and increased longevity.

This annual income is transferred to the investment platform that the client chooses, which includes a wide range of unit trust funds and investments with guarantees. The client’s income then earns returns throughout the year, which affects the following year’s pay-out. “If your underlying investments grew by eight per cent after fees in the first year, the value of each unit is now R1.08, meaning that the client’s income has increased to R194 400 in the second year,” Sheehy explains.

In 2014, the average retiree can realistically expect to live around 17 years after retirement at 65. And with that number increasing steadily each decade, the the need to find a sustainable model is becoming ever clearer.

After that, the interest of the year’s growth is added to that of the previous year. Assuming that the next year sees another R4500 in returns, the following year’s pay-out will be R198 900.

The gap created by the difference in the two options, presented Glacier with an opportunity, according to Sheehy. “We developed a product that combined the advantages of both, and made it flexible enough to accommodate the client's need for inflation-beating investment options,” he says. The company has hailed the product as a market-first in South Africa.

With this as the most basic scenario and upon the client’s death, the plan terminates.

However, the client has a number of options that will affect the allocation of units and the plan itself. Firstly, there is the option of adding a second life insured to the plan, which reduces the number of units made available to the client, but transfers the income to the second life insured.

Sheehy points to the harsh reality that a staggering number of people will continue to fall short on their retirement savings, not simply because of poor saving methodology but also as a result of the economy. “The product is aimed at these people who need income certainty while remaining invested in the market,” Sheehy says.

There is also the option of a guaranteed income payment term. This again reduces the number of units but guarantees that the annual income is paid out to a beneficiary for up to a maximum of 15 years after inception.

The nuts and bolts The Investment-Linked Lifetime Income Plan sold through the intermediary market, converts the client’s investment into income units, initially valued at R1 per unit. The client receives a fixed number of income units per year, determined by factors such as age, gender and other chosen product options.

Once the annual income is determined, the annual growth of said income is determined by the performance of the underlying investments selected. “In terms of investment, the client has a number of options to choose from, with varying degrees of exposure. The client can decide whether he is interested in a cautious, moderate or high growth portfolio,” Sheehy says.

To illustrate the concept, Sheehy offers a basic example. “If the client invests R3.5 million, the capital is converted into units and we arrive at an annual figure of 180 000 units valued at R1 each. In other words, the

The policy also offers the option to buy an acceleration of the client’s income. The accelerator gives the client a higher initial income which is offset against his future returns.

Not for every client The plan is relatively flexible and according to Glacier, clients and intermediaries can structure their investment portfolios throughout the life of the plan. There are, however limitations that Sheehy discusses.

client’s pay-out in the following year then drops to around R174 000.

“The product is not aimed at clients who plan on leaving a legacy, we focus on making sure that the client has enough to retire on and live with dignity,” he adds.

“Firstly, it has to be pointed out that this product is not suited to each and every individual. A client who has zero appetite for risk or who has no tolerance for a reduction in income won’t benefit from this solution,” he starts.

In a case where the client has chosen a guaranteed payment term for the plan, the client is also not able to name a trust as his beneficiary, as is the case with certain other retirement and living annuities.

Just as the client in the previous scenario’s unit price grew by eight per cent to yield R194 400 by the end of year one, bad performance on the part of the investment fund can see the unit price decrease. A loss of three per cent, for example, will see the unit price plummet to R0.97 per share. The

The recent amendments to South Africa’s legislation relating to retirement funds have made a number of advances in this sector a possibility and it is safe to say that the retirement industry will witness quite a few more market-firsts like Glacier’s in the coming months.

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One door closes Dominic Uys

M

ost can agree that National Treasury’s retirement reform proposals, announced in the 2014 Budget speech, will be beneficial to the industry in years to come. More South Africans taking part and investing in retirement will potentially grow the industry by leaps and bounds, and the changes to regulations can see the market becoming significantly more accessible to low-income earners.

That said, uncertainty has grown in the intermediary market, according to Richard Carter, head of product development at Allan Gray. “At first glance, compulsory retirement fund membership, compulsory preservation, and default annuities may even appear to be detrimental,” Carter starts. The news, however, isn’t as bad as it may seem at first and Carter contends that the broker market will see significant opportunities arise in the long run.

“We see quite a few openings for advisers to branch into new areas and we truly believe that those already operating in the retirement space will not have to make too big of a paradigm shift to take advantage of these arising opportunities,” he continues.

Another opens Retirement reform may bring unexpected opportunities to the intermediary market, according to one expert.

membership will mean less business in terms of individuals looking for retirement funding solutions. However, in practice, clients need more than just product advice; they need a solid financial plan, encouragement to stick to that plan and help in addressing the gaps that may prevent them from achieving their goals,” Carter starts.

“Until most South Africans begin saving when they start working, and never cash in their savings along the way, the money saved in an employer’s fund won’t be enough to retire on,” he continues, adding that there will always be clients that need products to complement their compulsory savings to help them to reach their goals. Another proposal that has advisers worrying, relates to enhanced preservation.

While this may stop clients from cashing in funds, eliminating the need for advice before retirement, the long-term will see more investors arriving at retirement age with more capital.

Opportunities for branching out

Advisers not becoming redundant

According to Carter, with employers having to take on the responsibility of setting up retirement funds for employees, the retirement sector will see significant opportunities in advising small- to medium-sized businesses.

One point that Carter stresses is that the role of the adviser does not become redundant once pension funds become compulsory. Both in the short- and long-term, advisers still stand to gain. “You may be concerned that compulsory

“Many advisers are not operating in this space at the moment but most of the fundamentals that apply to individual investors, apply here.

Advisers shouldn’t be afraid to branch out,” he adds.

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Treasury’s proposals envisage trustees playing a more prominent role in assisting retirement fund members in the transition from working and contributing to a retirement fund, to being retired and earning an income from a default annuity.

Carter agrees with the Institute of Retirement Funds’ observation that many of these trustees may be lacking in skills and experience in this regard. “It is not yet clear exactly what the obligations on trustees will be. But whether they merely offer a default annuity product at retirement, or go further and offer a more comprehensive service, individual members will need targeted advice when it comes to assessing if the default option is suitable for them, and in making individual member choice around underlying investments,” Carter states.

Creating a compelling value proposition Carter concludes by saying that advisers help their clients make sense of complexity and products available and in so doing, better equip them to match an investment to their needs and how to react when things change.

Most importantly, they help their clients manage themselves with discipline, identifying and understanding how their emotions can lead them astray in the investing process.

“There is a place for good, unbiased advice regardless of what happens in the retirement reform environment and, perhaps even more so than before,” he imparts.

*Standard

KINGJAMES 30281

We’re in the business of planning for tomorrow. The never-ending pursuit of meticulously crafting our clients’ futures. And while everyone’s expectations of the future may be different, we take great pride in instilling a sense of security to the unknown. We do this in the way we’ve always done it – by staying true to a traditional set of values, grounded in a tireless work ethic and an unwavering dedication to making the most of every rand entrusted to us. Values that choose functional over fancy and never waste time worrying about window dressing.

It’s what works for us. And it’s what works for our clients. Turning the materials we’re given into something more is our trade and it is this determined, timeless approach to the future that makes us Wealthsmiths™.

For more information, speak to your Sanlam adviser or broker or SMS your name to 44529*.

*Standard SMS rates apply. Sanlam is a licensed financial services provider.

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Agriculture’s

top risks

There is no denying that agriculture is a risky sector to operate in. Large commercialised farms fare better in the market than small and emerging operations due to economy of scale. But the relatively low profit margins mean that even bigger farms cannot sustain much loss before their businesses become unsustainable.

Dominic Uys

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T

he low market penetration of insurance into this sector certainly adds to the difficulty but insurable risks may not be the biggest threats to the modern farmer. Ultimately the farming sector's biggest concern is business continuity. Where many businesses can operate at a loss for long periods, an abrupt stop in cash flow can kill an operation within a month.

Nice Groenewald, head of agriculture at Standard Bank takes RISKSA through the top ten risks of agriculture both insurable and uninsurable.

1

Market pricing

The commercial pricing of crops leaving the farm for market has always been at the forefront of the average farmer's woes. With food security and affordability sitting high on the government's agenda, maintaining the balance between the end price and the farmer's profit margin has been difficult.

The crop that has gained the most notoriety in this regard has been maize. With a current market value of R2 400 per tonne, many farmers have had difficulty maintaining sustainable businesses.

2

Political instability

3

Hail and drought

Remote as this risk may seem, it deserves a spot on this list. The stance of some political parties regarding the redistribution of especially farm land is not new, and the debate has been raging on for years. The probability of farmers having their land seized in South Africa seems small for the time being, but the real threat in this regard is low investor confidence, especially when farms look for meaningful foreign investment.

South Africa is known for its large drought ridden areas. The occurrence of short periods of drought can be predicted with relative accuracy but sustained drought can bring a farm to its knees. Many farms are also located inside the country's hail bands and massive crop damage is always a real threat during rain seasons.

While this threat can be insured against, the current insurance model for multi-peril crop insurance is proving to be unsustainable.

4

Climate change

The statistics for climate change-related weather events are few and incomplete, especially in South Africa. The threat to agriculture is however increasingly becoming a reality. The

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Workman's compensation and insurance against injury also eat into profits.

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The on-going labour issues have driven the move towards greater mechanisation in agriculture but with initial costs still being too high for most, the agriculture industry is still largely reliant on manual labour.

8

Infrastructure

In terms of asset insurance, local infrastructure may be one of the most significant challenges. Deteriorating access roads to farms pose significant risk for accidents. In a best-case scenario, bad roads shorten the lifespan of farming equipment substantially.

Poor stormwater management and power interruption can also lead to extensive damage to equipment and halt operations. Risk mitigation in this regard is one of the biggest challenges since the responsibility of maintaining them, lies with the local municipalities. While many insurers have made efforts to interact with local governments regarding these issues, progress has been slow.

9

Violent crime

Farm houses still present a vulnerable target because of their distance from emergency services. While this is a threat that can be mitigated with heightened security, the prevalence of violent crimes against farmers is still evident.

unseasonable rain in the Western Cape at the beginning of this year is a case in point.

Winemakers, who are largely dependent on exact harvesting schedules and predictable weather patterns had to delay harvesting, and wine quality for this year has suffered as a result.

The same is true for many other crops, where an overabundance of rain has led to crop failures.

5

Fire

Often going hand-in-hand with periods of drought, the vast majority of farmers are well aware of this risk. Measures such as preventative fires are commonplace but it has to be kept in mind that areas burnt for fire prevention are essentially lost land for farming purposes.

As a result, many farmers have on occasion taken shortcuts in this regard. It is also a significant risk to large self-insured farms when

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assets such as harvesters are caught in a blaze.

While most self-insureds can sustain partial losses, the total loss of an automated piece of equipment can be catastrophic.

6

Theft

Diesel theft is rife in any industry that relies on heavy equipment. Not only is this aspect not insured against, it is also difficult to detect at times. Yet the eroding effect that this has on operating costs is significant. Secondary issues such as equipment damage also result in some cases, as thieves often replace stolen diesel with water in the machines’ fuel tanks.

7

Labour

The last three years have seen a record number of labour strikes across all sectors, farming being no exception. Once again the business interruption caused by this is significant.

Game farms have statistically lower incidents of violent crime but this is still a threat that can be said to affect all forms of agriculture.

10

Water security

Farms cannot exist without local rivers or groundwater for crops and livestock.

Drought has been mentioned before but in areas where water may be abundant, water quality is still not guaranteed. Upstream mining and industrial activity have had a proven detrimental effect on farming communities downstream.

A number of environmental damage cases have been lodged against mines operating near rivers and streams, with the most widely publicised recent case being against Blue Platinum, which was found guilty of gross negligence.

The problem is more far-reaching than willfully negligent mines however. The possibility of legal fracking activity in the Karoo may threaten the quality of the groundwater used to sustain farms.

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Success does not come from eliminating risk.

SUCCESS COMES FROM

MANAGING RISK FOR GROWTH.

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

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MARSH AFRICA Africa’s pre-eminent Insurance Broker and Risk Advisor

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New visa laws

Risks and opportunities for travel agents, operators and brokers Sarah Bassett

n e r d er l i ch nd u 18 78 8 4

Recent controversial changes to immigration regulations, requiring that children travelling with adults present an unabridged birth certificate when arriving, leaving or transiting in South Africa, could have liability implications for travel agents, brokers and operators.

number of passengers travelling with children – and could see the economy lose an estimated R6.8 billion a year. The change is one of a number to the immigration regulations, seeking to combat illegal immigration, child trafficking and the control over employment of foreign nationals in South African companies.

“As with most regulations, there are sure to be unintended or indirect consequences. These include the estimated loss of tourism revenue in both inbound and outbound markets due to more onerous requirements for travel with children and visa requirements,” comments Paul Halley, managing director of specialist tourism and hospitality insurer, Ascentsure.

“As underwriters, our focus is on the direct, intended impact of such changes and how these can either contribute to operators’ exposure and/or be used positively to improve operators’ risk environment,” he explains.

According to Halley, the most significant aspects of the changes which are likely to affect operators in the tourism and hospitality sectors involve the following:

Travel visas and travel with children From 1 October, South African citizens and tourists travelling with children will require the parent to carry an unabridged birth certificate and valid passport for each child. Guardians travelling with children not their own will be required to produce affidavits from parents proving permission for the children to travel.

Airlines will be forced to refuse travel to families not in possession of these documents.

“The potential negative consequences could affect travel agents, travel brokers and tour operator segments who will have additional and more onerous visa and travel requirements on which to advise travellers, both inbound and outbound. This could inadvertently impact professional duty, and could affect professional indemnity exposure arising from errors, omissions, neglect or even wrongful advice. Visa issues are a common form of exposure in this segment,” warns Halley.

I

mplementation of the change has been temporarily delayed to 1 October 2014, when South Africa will become the only country in the world that requires children under 18 to produce an unabridged birth certificate in addition to a passport when entering, departing or in transit through its borders.

Application for an unabridged birth certificate can take up to eight weeks and, according to the Board of Airline Representatives South Africa (BARSA), tourist arrivals could be negatively affected by up to 20 per cent – the average

The complexities are significant and could extend as far as a tourist missing their visa expiry deadline due to an error of the agent/operator/ broker, resulting in the traveller’s detention or possible listing as an ‘undesirable person’, unable to return to South Africa for a period of time. Such instances could have consequences for the agent who arranged the itinerary or the suppliers whose negligence resulted in a missed departure date, says Halley. But there are some changes which could see benefits for the industry’s risk:

Tourist visitor records All accommodation establishments are now

required, by law, to maintain a register or record of any foreign national/tourist staying at or on the premises. Details are to include individual details, copy of passports, proof of residence (if living in South Africa under a visa) and their signature.

“This requirement can assist the operator in managing the risks which come with accommodating tourists and foreign nationals.

These risks include increased frequency of bilking (leaving without paying), commercial crimes or fraudulent use of credit cards.” These records could also dissuade guests from lodging falsified claims for loss of their possessions, discourage theft from the establishment and allow for recovery against damage by the guests. If combined with a suitable disclaimer and indemnity, this could protect the operator from frivolous attempts at extortion presented as liability claims.

Employing foreign nationals All employers are now required by law to keep a register of any foreign nationals, including casuals, employed at the establishment with full individual particulars including a certified copy of their passport, copy of their visa and work permit, contract of employment and IRP 5 form.

The hospitality sector is renowned for employing foreign nationals whether as hotel support staff, kitchen staff or waiters in restaurants. Staff in the lower to middle operational structures are often highly mobile in these sectors and change employers frequently. Without these details, the establishment carries additional exposure to crime, either perpetrated or assisted by unregistered and untraceable employees. This can involve simple fidelity losses but can also escalate to full-blown aggravated criminal events putting the lives of other employees and guests or customers at risk.

“While it is not the sectors’ responsibility to enforce the immigration laws, it is their responsibility to be aware of the regulations and to abide by them. Doing so can assist in both directly and indirectly improving their risk exposure,” Halley suggests.

“Adhering to the above regulations will go a long way in ensuring South Africa can continue to grow and develop a professional, responsible and secure tourism sector into the future,” he concludes.

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The

SAM time is now Christy van der Merwe

The Financial Services Board’s (FSB) Solvency Assessment and Management (SAM) 2014 update indicates that the first public version of the SAM primary legislation is expected to be released for comment in the third quarter of 2014. The FSB says it is working closely with the National Treasury to co-ordinate the development and release of this document.

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t the same time as the release of the primary legislation for public comment, the FSB will release a comprehensive version of the subordinate legislation to the SAM governance structure for consideration.

The 2014 SAM Update also confirms that the SAM implementation phase will run from 1 July 2014, and will continue to the end of 2015. The final implementation date for SAM is 1 January 2016, and this is in line with the Solvency II regulation in Europe. The FSB explains that this SAM implementation at insurers entails a two-phase parallel run: a light phase through the second half of 2014, and a more comprehensive phase taking place during 2015.

The biggest change from the SAM 2013 update is that the interim measures for SAM initially envisaged in the Insurance Laws Amendment Bill (ILAB) will now be introduced through alternative means, including: enhanced governance and risk management framework requirements to be introduced through a board notice; and a formal framework for insurance group supervision to be provided for through the Twin Peaks process.

What is required?

In the light parallel run, insurers and insurance groups will be required to produce quarterly returns under the SAM basis, in addition to their normal reporting, continues the FSB. A thematic review on non-life data is also planned for the latter half of 2014, to ensure that short-term insurers are on track to meet the SAM data requirements and that

the future calibration of parameters for non-life underwriting risks in the standard formula, yield meaningful results.

In 2015, implementation efforts will be bolstered through the comprehensive parallel run. During this phase, insurers will be expected to complete quarterly and annual returns on the SAM basis, in addition to their normal reporting. There will also be a mock own risk and solvency assessment (ORSA) exercise where insurers will be required to submit some ORSA information to the FSB. As well as the significant amount of work required from the industry when it comes to implementing SAM, the regulator has also taken on a sizeable chunk of work in committing to get the SAM legislation through parliament within these ďƒ

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timeframes. This includes measures around the training, processes and systems that need to be in place for the FSB to regulate the insurance industry on a SAM basis in their business-asusual environment.

Raymond Bennett and Alfons van der Vyver from KPMG explain that the 2015 ‘comprehensive parallel phase’ essentially means that firms should treat SAM as live from 1 January 2015. This is because all of the reporting requirements (including the ORSA) are required by the FSB, although it is anticipated that some of the governance requirements for SAM will not be enforced.

The FSB has also initiated an economic impact study on the potential impact of SAM in mid2013. This project was said to be reaching its final stages and the FSB is expected to publish the key findings in May 2014.

Key activities for 2014 and 2015 Bennett and Van der Vyver highlight some of the major SAM processes that will require action from July 2014.

Light parallel runs: will be performed quarterly starting from 1 July 2014. This will effectively mean firms will re-do third quantitative impact studies for each quarter thereafter.

Development of ORSA: ahead of the full parallel run in 2015, firms are expected to develop their Pillar 2 capabilities, and in particular their approach to ORSA with many firms performing a dry run in 2014 ahead of the compulsory submission to the regulator in 2015.

to be met through a similar format as the current regulatory returns – questions which are to be answered on a yes/no basis with explanations and comments provided in certain areas.

Development of Pillar 3 reporting capabilities: while the full set of quantitative reporting templates (QRT) has not been finalised, a large portion of these templates have been produced, and firms will be expected to do full reporting in the 2015 comprehensive parallel run; many firms will aim to automate the production of the QRTs to help meet the tight reporting deadlines for SAM.

KPMG notes that many companies have a lot to do to meet the reporting requirements.

The main areas of work are likely to be focused upon: • ORSA development ahead of the comprehensive parallel run in 2015. Firms will also be looking ahead to the ILAB requirements which will mean that some changes to governance structures and processes will be required ahead of the SAM changes.

• Whether the required data is available.

• How quickly the data can be reported.

• Whether the systems and processes for reporting data have been sufficiently tested and subjected to appropriate dry-runs.

KPMG states that the SAM requirements, together with other practical difficulties that insurers are facing (such as the requirement for collective investment schemes assets to be disclosed on a look-through basis) is creating significant implementation challenges for insurers that need to start working on their reporting solutions.

The qualitative (narrative) reporting requirements are also currently being drafted through various working groups consisting of industry representatives.

The qualitative reporting requirements are expected

Orderly reporting

Gary Allemann, MD at Master Data Management, notes that the momentum is once again picking up with regard to companies getting data management in order to assist with implementation of SAM, particularly in the case of companies with global operations requiring alignment to Solvency II requirements.

Global companies, with local offices that have plans to adopt much of the European frameworks and processes, will need to consider how much of Solvency II is good for SAM, and they will need a glossary of terms. “This glossary can clarify things such as exactly what we mean when we talk about risk. We can’t have companies or divisions defining terms, and not measuring the same thing,” says Allemann. Having a business data directory will clarify what the formulas mean and what information the data is used to derive. Allemann asserts that in addition to the regulatory push factors, there is real value to proper data management.

“There are cost reductions because things are more efficient, there is no more rework or duplication, less admin thus requiring fewer resources, and greater accessibility to data.

There is also risk reduction because there is greater management of compliance and reputation. Companies can calculate their risk properly, hedge against it, and limit their exposure to risk,” he says.

Adequate data management also leads the way to revenue enhancement, which comes from marketing improvements allowing for up-selling and cross-selling opportunities, because if insurers have a single view of their customers, they can truly understand them and develop target demographics, Allemann concludes.

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7

trust A question of

The article on the most (and least) trusted professions in South Africa was originally written by a fellow called Quinton Bronkhorst for Business Tech. I can only assume he had to wade through tons of mind-numbing figures before getting to the table on the right, which I think you’ll agree is quite distressing if you’re in journalism, law enforcement, insurance or politics.

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Simon Colman, underwriting executive, SHA

T

he original report was produced by global market research company, GFK. I always take these global studies with a pinch of salt because the samples used to derive the information are often relatively small, particularly once you drill down into the South African specifics. In this particular instance, 28 000 people were interviewed around the world. The number included 1194 South African respondents.

The numbers in the table (below) indicate that of the total number of people interviewed, a specific percentage trusts the specific profession. This means effectively that out of 1194 South Africans, 95 per cent said they trust doctors compared to only 43 per cent who trust politicians. It seems likely that 43 per cent of the respondents were politicians. Incidentally, if one benchmarks SA against other countries, politicians, on average, have a trust level of 31 per cent.

It would be far too easy for us to dismiss the insurance numbers by simply sticking the whole industry into the grudge purchase box.

However, I don’t believe the nature of the product or service has anything to do with trust.

In fact, if trust were inextricably linked to the nature of the service, even doctors would find their score slipping to the bottom of the table.

Not too many people enjoy a visit to the doctor, unless you are a hypochondriac or a medical sales rep.

We are more trusting of our elected officials. I guess that is borne out of our recent election results where a slew of corruption charges against some individuals appear to be less concerning to the populace than the dress code in parliament.

If the negative perception is not related to the nature of the service then perhaps it is related to the dreaded claims rejection? Shortly after I read the Trusted Professions report, I noted that the Ombud for the short-term insurance industry had also published some figures. The Ombud is a free resource for consumers who feel their claims have been unfairly rejected. In 2013, he received just under 10,000 complaints. This is a pretty big number but the reality is that out of almost 2.7m claims, less than 0.4% resulted in a dispute with the consumer.

Also worth noting is that 5 per cent of the respondents don’t trust anyone.

As an insurance professional, I took serious umbrage to the notion that we only scored 57 per cent, especially when one looks at the overall context, even cab drivers, whom I assume are actually mini-bus taxi drivers, scored higher than the insurance industry. For goodness sake, even South African policemen fared better than insurance agents.

So if the grudge purchase factor and claims payments are not the cause of our risky reputation, what remains?

Some years ago, I was privileged to attend a presentation delivered by market leader, Peter Todd. In his presentation he spoke of insurance professionals having a noble purpose. The word noble or nobility, generally conjures up all sorts of regal, even saintly imagery. This struck me as strange as many of the professionals I had worked with in the industry over the years knew the risk transfer business inside out, but didn’t exactly fit the knightly bill.

Todd’s reference to our noble purpose had quite an impact on me. Attention had been thrown on the fact that much of the negative perception in our industry is self-perpetuating, partly through the way some insurers market their services but largely due to the way the individuals in the industry carry the message.

There isn’t a great deal we can do to halt the commoditisation of insurance products and I guess to some extent, buying insurance will always largely be about the premium. I do however believe there is something we can do about the way we carry our noble purpose message every day.

Percentage

I’ve worked in a big insurance company, a few global reinsurance companies, a couple of Underwriting Agencies and more recently, in a local brokerage, and I noted a few things that many of these firms had in common: • Most of the older staff had not made a conscious choice to be in insurance. They had fallen into the industry. Many would even joke that they’d been sentenced to life but commuted to short-term.

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• Often these businesses struggled to attract and retain younger talent. Graduates with some insurance experience were in high demand due to their scarcity. Many actually left the industry after gaining some work experience.

• Generally, a high percentage of the staff (particularly in the bigger companies) had a negative perception of insurance themselves.

It was not uncommon for brokers to blame insurers in front of clients when a claims problem arose and it was not unusual for insurers to dismiss brokers as perpetual moaners when policy issues arose.

The talk made me think about how I perceive the industry that I’ve earned a good living out of over the past 23 years. It also made me think of the enormous impact the industry had on my kidneys and liver for the first 10 years, but that is a bleary-eyed, dialysis infused story for another time.

I was transported back in time to the moment I started in insurance. I recalled being almost immediately embarrassed by my chosen profession. I discovered in my early 20’s, at a very impressionable age for a young underwriter, that insurance was not as sexy as depicted in the brochure. In fact I remember concocting a joke that elicited much mirth at insurance functions.

I’d introduce myself as an underwriter, then I would quickly qualify that an underwriter was like an undertaker. The only difference being that an undertaker had clients that were livelier.

This joke, it transpired, was not very funny to non-insurance people, or to undertakers.

Unfortunately it would appear that this vocational embarrassment is not unique, and still exists in today’s insurance industry. Some would argue that the sector is filled with brilliant products that no one really wants to buy, sold

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by people that don’t really want to sell them.

Not only a grudge purchase but a grudge sale too. Somewhat of a miracle then, that the combined short and long-term industries produce almost 20% of the country’s GDP and employ over 100 000 people.

The 2013 KPMG report draws attention to how the insurance industry is trying to clean up its image. R2.1 bn in fire and hail claims were paid in the last quarter of 2012 alone. Without that valuable service many people would have lost their homes, cars and even their jobs.

If one adds to that the number of families that benefited from life policies (R6.8 bn across the whole year) it becomes apparent that society would actually grind to a screeching halt without the risk transfer industry.

The KPMG report is extremely comprehensive but I very much doubt that the majority of people employed in the insurance industry even know of its existence, let alone read it. So if we as an industry don’t know about the impact of our noble purpose, how can we expect this from the begrudged buyers?

A political party recently used the phrase ‘A good story to tell’ in its 2014 election campaign. The insurance industry is filled with ‘great stories to tell’ but if we don’t tell them no one else will. We will be doomed to hover around the bottom of the Trusted Professions list, saved only from last place in morbid hope that our politicians will continue to disappoint the electorate, making us look good.

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Corporate culture

that delivers - an employee’s perspective

Setting goals is about deciding what you want and determining how to get there. In the Treating Customers Fairly (TCF) regulatory environment, so much more needs to be considered when setting goals and, specifically, the goal to develop a true culture of ethics and integrity.

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Elana Honiball, head of compliance at Masthead

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CF Outcome 1 states that customers should be confident that they are dealing with firms where the fair treatment of customers is central to the firm’s culture. The way to find the link between this TCF requirement and good ethics is to build a TCF approach into the business culture.

This includes the structures and processes such as leadership, strategy, decision-making, governance, performance management and reward.

Ethical culture is the extent to which a business’s ethical standards are given priority and promoted by management, employees, policies, processes and decisions. In essence, an ethical culture teaches employees ‘how things are done here’. The place to start for a culture of good ethics is at the top. Managers, supervisors and executives of financial service providers (FSP) will always be the cornerstone of successful ethics and compliance management.

If management does not demonstrate a commitment to ethics and compliance, no employee will be inspired to care either.

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Secondly, good ethics needs to be explained to employees. Do not think that ethics is always common sense to everyone, and that everybody knows what ‘doing the right thing’ means.

Employees cannot be expected to intuitively know your business’s standards. Management has to define the business’s ethics before any employee can understand it.

As an example, think of honesty. FSPs expect their employees, management and boards to be honest. But honesty can mean different things to different people; such as telling the truth, not telling lies, not withholding information, not allowing a person to be misled or deceived by one’s actions and being forthcoming and candid.

When communicating information on ethics to employees, they must also be trained on how to conduct ethical behaviour. This includes how to make ethical decisions when rules are ambiguous, seek guidance when navigating ethical grey areas and raise ethics concerns.

To check whether good business ethics have been successfully communicated, businesses should be able to affirmatively answer questions such as: are employees trained to know the business mission, vision and values? Do employees know what the business’s ethical expectations of them are? Do they understand the ethics component of success?

Employees who clearly understand their individual goals and how these relate to the larger goals of the business automatically

engage better with their work. Successful FSPs realise their achievements are linked to their business’s ability to manage, track and communicate goals, keep employees informed and link reward systems with individual and team performance to keep employees engaged in their work. By developing an ethical culture, the business culture is strengthened so that it stands for integrity, both within and outside the business. A culture of integrity means employees know the standards and rules that apply to them in their roles.

They believe management is committed to integrity; they raise concerns about misconduct as they know their concerns will be addressed, and they are held accountable to act consistently with the business’s code of conduct and standards. Stakeholders and others who expose the company to risk are held accountable to high ethical standards, and doing the right thing is the accepted daily practice.

The value of this goal is not only in achieving the goal itself, but also in the action steps taken to achieve the goal. Fear of legal action, financial loss and reputational damage have inspired more FSPs to pursue the goals of ethics and compliance but, as a business process, ethics and compliance management generates positive value.

FSPs have more satisfied, more productive, lower-risk employees, and customers are more likely to buy their products and use their services.

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Is an FSP liable for fraudulent conduct of its representatives?

Brian Martin, executive director Legal and Compliance Renasa Insurance Company Limited

T

he liability of an FSP for the actions of its representatives was recently considered by the Appeal Board of the Financial Services Board in the case of First National Bank, a Division of First Rand Bank Limited versus Registrar of Financial Services Providers and the Ombud for Financial Services Providers.

The case involved the liability of a financial institution for the actions of an employee, a certain ‘Mooi’ who had been employed

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Employers are quick to assert, when facing claims from clients arising out of the conduct of their employees, that the employee acted outside of his or her scope of authority and hence the employer should not be liable for any loss suffered by the client. by the financial institution in their financial planning and advisory services department in Cape Town, as a financial planner. Mooi’s employment contract explicitly set out the scope and ambit of his authority when rendering financial services and advice and stated that he was only permitted to deal with investments or services authorised by the employer. Contrary to the terms of his employment contract, Mooi had marketed a product that emanated from a pyramid scheme. The complainant had invested a

substantial amount in this scheme on the advice of Mooi. The financial institution maintained that it was the fraudulent and dishonest conduct of Mooi that had resulted in the loss suffered by the complainant and other members of the public, and it was not liable for these losses.

The matter eventually reached the FAIS Ombud who found the employer to be liable for the loss suffered by the complainant, ‘that Mooi went beyond his scope of

authority is irrelevant because in rendering the financial service to the complainant, he was doing what he was appointed to do, namely to advise clients.’ The decision of the FAIS Ombud was taken on appeal by the employer.

The complainant’s version was that she had been approached by Mooi who had introduced himself as the financial institution’s financial planner and that she had “really trusted him”. She knew nothing about finances and accepted that, “he was doing this for my good... I didn’t see him as separate from the employer”. She assumed that what was offered to her was “a new additional investment”.

The Appeal Board, after examining the provisions of the FAIS Act found that the complaint fell within the ambit of the FAIS Act and in particular the definition of ‘advice’ and that the definition of ‘financial product’ included ‘any other product similar in nature to any financial product referred to in paragraphs (a) – (q) inclusive.’

The product sold to the complainant was, in essence, similar to a loan and was covered by the Act. The Appeal Board then considered whether,in law, the employer was vicariously liable for the actions of Mooi. It found that there are instances where the employer is held accountable even when the employee commits unauthorised acts. The Appeal Board referred to the case of Feldman (Pty) Limited versus Moll 1945 AD 743 where the Court stated that, even if the employee was not authorised to perform certain actions, the issue was whether the employer ‘has put the agent in his place to do that class of acts, and he must be answerable for the manner in which the agent has conducted himself in doing the business which it was the act of his master to place him in.’ The concept of ‘ostensible authority’ may exceed the scope of actual or implied authority. ‘For there to be ostensible authority the employer must, by words or conduct, induce the victims belief that the employee was acting within the latter’s authority’ (Ess Kay Electronics PTE Ltd and Another versus First National Bank of Southern Africa Ltd 2001 (1) SA 1214 (SCA).

The Appeal Board accepted that members of the public are entitled to assume that when they transact business at a bank which is of the kind that falls within the ordinary business of the bank, that they are dealing with the bank and not with an unauthorised third party and that there was no reason the loss should fall upon the innocent party who was ignorant of the lack of authority or because the actions of the employee were unauthorised. The employer had created an ‘aura of authority’ with which it enveloped Mooi as its financial planner.

Mooi had been presented as their financial advisor to the public, and the employer was aware that members of the public were not aware of their internal rules and procedures and were thus not protected by them should they be presented by a dishonest advisor. The Appeal Board consequently upheld the finding of the FAIS Ombud that the employer was obliged to compensate the complainant for the loss suffered through the actions of Mooi.

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Premiums grounding

market growth Private jet sales in Nigeria are booming but the country’s high-risk airspace is keeping insurance premiums sky high.

Laura Owings and Dominic Uys

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O

n the heels of being named the biggest economy in Africa, Nigeria is now said to be home to the fastest-growing aviation business on the continent. Much of this is thanks to a growing wealthy class that prefers to fly private over economy.

Nigerian airline owners and the Ministry of Aviation have singled out the insurance industry for unfairly designating the country’s airspace as high risk, resulting in huge premiums for aircraft insured locally, in spite of the country being ranked 12th in Africa in terms of overall safety.

Speaking at the Nigeria Business Aviation Conference 2014 in Lagos in March, Evergreen Apple Nigeria (EAN) Aviation CEO Segun Demuren said, “Nigeria is now Africa’s fastestgrowing aviation business with more new and pre-owned aircraft delivered to Nigeria than South Africa in the last year.” According to Demuren, there is no exact figure for the number of private jets in the country, but estimates suggest between 100 and 150, with an anticipated 350 set to be in operation by 2016. “The country’s private jet fleet is larger than the commercial aircraft fleet,” he adds.

Infrastructure provides challenges and opportunity

Despite this growth, the industry faces challenges including the fact that aircraft insurance premiums in the country are up to 35 per cent higher than average, even higher in some cases because of the operating environment. He also said maintenance and service support still remains a challenge.

Based on this, Wiggle says the air safety of Nigeria cannot be compared to that of other countries. Premium costs are negatively affecting the growing private jet industry and many local jets now carry foreign registration numbers so owners can avoid local premiums.

Some Nigerian private jet owners also hire foreign aviation firms to supply pilots and maintenance services that are covered by separate insurance policies.

The deputy chairman of the Nigeria Insurers Association (NIA), Gaius Wiggle, explains that a number of risk factors are considered in determining local insurance premiums, including the poor state of Nigerian airports, lack of resources and history of aircraft incidents. In particular, he notes the only airports approved for landing in the country are in Lagos, Abuja and Port Harcourt, bearing the burden of the growing air traffic demand.

Poor transport logistics in Nigeria plays a part in stimulating the private jet market and has led to broader regulatory change. Remarking on the

country’s poor roads, limited domestic airline fleet and no train network, chairman of the Airline Operators Committee, Captain Nogle Meggison says that executive jets provide a solution to much of the logistical challenges in the country. “The time saving, the convenience and the increased productivity that follows means business aviation is not a luxury but an essential tool for growth in Nigeria he added.

He continues that the government is supporting expansion by signing the Cape Town Convention, thus reassuring lessors about asset security. He also notes that government has invested in new infrastructure including a private jet terminal that opened last year in Abuja and does not impose a time restriction on the amount of time a foreign registered private jet can stay on Nigerian soil.

The government has committed to co-operating on insurance, with the aviation minister assuring engagement between the body and the National Insurance Commission (NAICOM) to co-operate on insurance premium rates.

Wiggle is sceptical as to the result of such engagement. He says that in terms of safety measures, Nigerian aviation operators still have far to go before meeting the level of their counterparts in countries where aviation insurance premiums are said to be low.

As long as insurance premium rates are determined by the exposure to risk, he urges aviation industry operators to reduce their risk by putting adequate safety measures in place. When this is done, aviation insurance premiums will come down.

With South African aviation insurance having gained a good reputation as the most progressive on the continent, it would be interesting to see what new opportunities may arise from Nigeria’s private jet boom.

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Leading a high

performance team Any of the delegates at the 2014 PSG Conference will tell you that one of their favourite presentations at the event in Sun City in May, was that of UK business leader, entrepreneur and adventurous skydiver, Kevin Gaskell.

He feels that “there is nothing more fun than working in a highperformance team.” RISKSA caught up with him after his presentation.

Christy van der Merwe Kevin Gaskell

What, in your view, is the role of a leader?

The role of a leader is to create an atmosphere where other people can contribute. To create a culture and a framework where people feel as if they are engaged, they are part of the company and they really want to make a difference because they can see where the company needs to go, and they want to help it get there.

Does that mean that leaders should always be ahead of the pack, leading everyone?

No. If I can create the culture and the atmosphere where people understand what is expected of them, then we can generate leaders at every level of the organisation. It doesn’t have to be the person at the top, it needs to be throughout the organisation.

And that comes from people knowing

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exactly what is expected of them, and understanding what the business plan is and what a vision of success for this business actually looks like. And then inviting them to contribute to get us there.

You say that you can’t always outspend the competition, but you can out-think them – how do you stimulate that kind of thinking within a company?

What are the three stages of achieving real success?

You are never going to outspend all of your competition, and I hear it as an excuse time and time again. Forget that. We are bright people, everyone is at least five per cent genius, allegedly – so let’s get all those five per cent’s together and create a whole genius, and then let that whole genius drive the business forward.

I divide it into the three Cs: Commit – Really commit and make your mind up that you are going to save the business.

Connect – Create the framework, make it easy for people to join in with the process, and let them see a roadway, a map. Create tools so that they can put their contribution toward driving the business forward.

Create – This is about creating magic – about having fun. Building a business should be fun, it should be exciting.

To do that, it is critical that people understand where we are going, what that will look like, and use simple tools to get us there. There is an ideas wall, where we invite people to get creative. You can think about anything you want to change in the business, put it on the wall, and then we talk about it.

e

We also invite everybody in the business to do that. It is like an enhanced suggestion scheme, but we do it in a way that becomes interactive. We drive our business by discussing with the team, utilising their skills and their knowledge. They know how to do their jobs better than I do, so let’s take that knowledge, and let’s use it to drive the business forward.

How do you encourage, and incentivise people to share those ideas?

I really don’t believe in staff suggestion schemes.

I feel that short-term, that doesn’t tend to work.

What we do instead is create a piece of the company that is owned by the team.

We create something with shares, and we say these are available for the whole team, and as and when we increase the value of this company, they can share in that. I have done that

throughout my career, and some people have become very wealthy as a result, and that’s great.

What advice would you give people when things go wrong and there is the temptation to give up?

Things really do go wrong. If they don’t go wrong, you are not pushing hard enough.

But when things go wrong, it’s not the end of the world. Don’t shout about it – shouting doesn’t help. What we should do is ask what we have learned from that experience, and how we as a team can improve? If I shout at people, they stop doing stuff. “I am afraid to give my ideas again because I can get into trouble for that,” kind of behaviour. No, let’s talk about it.

Sometimes I do get annoyed, but I get annoyed when people are not trying hard enough, not when they are trying too

hard. But when it goes wrong, sit down, consolidate, think about it, step back half a pace, and then move on again.

Gaskell has driven successful business turnarounds in the automotive industry at Porsche and BMW in the UK, after which he achieved success in the e-commerce industry, and later in private equity.

Always up for a challenge, Gaskell is recognised as one of the most capable managers of his generation and is able to define and implement positive change within organisations large and small.

He has also climbed Mount Everest, walked unsupported to the North Pole, then three years later to the South Pole, recently climbed Kilimanjaro, and is about to go for the ‘Seven Summits’. In less demanding moments he played international cricket and now relaxes by playing in a rock band.

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Communications function when to bring it in-house and when to employ an agency Michelle Camps

T

he conundrum is whether an in-house communications function is better than outsourced and which option is better for a business. My answer is quite simple: have both. This is obviously dependent on whether you can afford an in-house resource, as well as the cost of an outsourced agency. Alternatively I would recommend the outsourced solution. I can hear the audible sighs of companies who dread the idea of outsourced agency.

As with any choices in life, sometimes there are good choices and sometimes you end up paying the price. It is important to be selective in your approach of agencies and weigh up their capabilities versus your affordability, but don’t ever compromise on quality service. An agency can be a valuable resource if they become an extension of your business and clearly understand your strategy and the desired objectives.

A client must understand their business and the business of an agency is to get that client’s business into the market.

This sounds quite simple but in reality, if a client is telling an agency how to do their job and the client does not have a clue what their business is about, the fundamental agency/client relationship will break down. It is surprising how many budding communicators or marketers are scattered around. I am not professing that

good ideas are not generated throughout the business but allow the agency the courtesy to do what they are trained and paid to do.

It is important to ensure your selection of agency gels with your business ethos, and that they are well versed in your industry sector.

Check their credentials in terms of industry experience and do reference checks with current and past clients. Also ensure that you have the right team resourced on your business and that they will consistently remain on your business. It is pointless having the lead team in the initial pitch and when it comes to the day-to-day business you are allocated junior, inexperienced people.

Clearly define your business needs versus what the agency offers, and double check whether these services are an in-house capability within the agency or whether they outsource.

A fully integrated communications agency will offer an array of services; ensure they are well equipped to suit your requirements.

Some agencies offer stakeholder relations management which can be a valuable strategic component to your business, which requires an agency to be well connected in certain industries and with relevant key industry players. Often, the reason behind an agency failing is that they do not have the relevant experience. Double check and go through the necessary tender process to evaluate the different offerings from alternative agencies.

Agencies usually prefer working on a retainer and this does normally work out more costeffective if you require diverse activities from them. An ad hoc project arrangement is normally done when you merely require an agency’s expertise for a limited period of time; for example, a one-off product launch.

Going back to the nirvana of having an insourced individual, as well as an outsourced agency; this results in an experienced internal resource understanding the communications discipline to effectively manage the agency relationship. However, I am yet to meet an internal communications person who has the diverse skills that an integrated agency can offer and who excels at every discipline. What is preferable about agency resourcing is that if they don’t gel with your team or perform adequately, you can have that resource changed. This is not that easy if the resource is employed by the company. The agency concept also gives you the flexibility to change your resource needs as your business needs change, without necessarily adding a huge burden to your bottom line by employing more people.

Michelle Camps is a marketing and communications specialist with a wealth of experience covering a broad spectrum of industries from financial services and healthcare to aviation and tourism. Michelle is an independent consultant assisting clients with marketing and communications strategy, brand management and business development. If you have questions for Michelle regarding advice for your business, please forward these c/o editor@risksa.co.za

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Insure Group Managers Holdings Limited is an authorised financial services provider (FSP 2882).

Its main operating company, Insure Group Managers Limited is an authorised FAIS representative of FSP 2882 and a registered credit provider (NCRCP 131).

Social Reputation

Luka Vracar

Social media and cyber-attacks have been singled out as one of the biggest threats to company reputation. This has led to 91 per cent of African companies changing the way they approach reputation management over the past three years. Cyber insurance could help mitigate the consequences of reputational damage.

E

arlier this year Meerendal Wine Estate came under fire through an online boycott, owing to their use of elephants in their wine making process. In fact, Meerendal had developed a solid foreign market using the ‘Pressed by Elephants’ tagline, and had applied to create an elephant tourist attraction. However, the boycott, led through popular social media platform, Facebook, accused Meerendal of mistreating the animals.

which serve as disruptive if strategy and objectives are not prepared to evolve.

In June, Meerendal stated that they would stop their ‘Pressed by Elephants’ trademark application and announced that they did not want to be associated with any project that would cast doubt over their reputation.

Deloitte recently published the results of a global risk survey of more than 300 senior managers and executives and included insights from all five major industry sectors: Consumer and industrial products; life sciences and healthcare; technology media and telecommunications; energy and financial services.

Insurance does not cover the consequential losses as a result of damage to company reputation, because those things that get damaged, like loss in market share or a drop in stock price, cannot be quantified.

Yet, innovation and technology contribute to these risks in the form of social media and cybercrime, and other technological advances

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Should a company be attacked in a way that damages their reputation, their option could be to take action under a typical liability policy, which may include the libel, slander and defamation of character in its definition of injury. But this does not cover the aftermath of damage to reputation.

According to the results, 50 per cent of companies from the African region considered social media and cyber-attacks to be the greatest risk to their businesses. Globally, the financial services considered cyber-attacks, data

mining and analytics and cloud computing as threats. A report by Norton in 2012 indicated that cybercrime had cost South Africa R2, 65 billion.

Cyber Cover “Social media is a really good recent example of how customer dissatisfaction can quickly impact an organisation. In the past [should something happen] you could worry about it over months, now it could happen over a weekend, get into the press almost instantly, and become a major issue for the company,” says Mark Victor, risk advisory director at Deloitte.

According to Natalie van de Coolwijk, managing director of CyGeist, cyber cover provides cover for the cost incurred to contract a public relations campaign, which could aid in minimising the reputational damage done to the affected company. “Cyber insurance also covers other actions taken by the company to try and mitigate the consequences of a cyber-

attack or a data breach. When the Protection of Personal Information Act (POPI) is fully in place, a company will have to send out notifications to clients and other third parties when they have been affected by a breach, and the content in those notifications is critical, because if you are able to alleviate their fears, that should already assist in reducing the potential consequences,” adds van de Coolwijk.

The policy would cover the cost of any remediation services that the policyholder would like to offer the affected parties. For example, if financial information has fallen into the wrong hands and been compromised, the policyholder might want to offer the affected party credit monitoring services for the next six months to a year.

“So all of the steps that cyber cover takes in responding to the data breach will effectively pick up all of those costs and goes a fairly long way to protect the affected company’s reputation. Those are at least measurable costs that the company will incur, and hence they would be able to be covered by the policy,” says van de Coolwijk.

Risk Management After the global financial crisis of 2008, financial services had to enter crisis control to ensure their reputations could survive the subsequent fallout of recession and downturn of the market. Deloitte’s report indicates that financial services had considered reputational risk as its main concern three years ago, and it continues to be today.

“Organisations now have to focus a lot more heavily on protecting their brand, protecting market share. The impact of reputation has a far greater impact on organisation. The vulnerability of organisation is much higher right now, than possibly when it was in a bull economy and a bull market,” says Victor.

Even with the need for ensuring reputation is well regarded, the Deloitte Risk Survey report shows that while African and local companies have implemented changes in the management of reputation, the trend is one of increasing the monitoring of these channels, which is not enough. The Americas as well as Asia and the Pacific have increased the number of executives and heads of business to risk management, and over half of the American companies surveyed say that they monitor strategic risk continuously.

“There needs to be a more formalised and structured approach than what I believe is taking place; and that is both in reacting, so that something that happens is monitored and then dealt with, proactively.

To manage reputation is to consider both sides; the negative impact on the business, but also the positive impact of the brand. If you are positively driving reputation, then you are effectively increasing brand awareness and increasing value to your organisation,” explains Victor.

Moral Hazard Social media provides unmatched communication and stakeholder engagement, and it allows companies to know what their customers are saying about them, thereby bettering services. Social media, however, is temperamental in the sense that its users cannot be controlled or handled internally as with other, more traditional, operational or financial risks. This makes it responsible for being the top concern for reputational risk for companies across the globe, as it enables continuous and uninterrupted communication from the public.

“The biggest problem with reputation is that it is more of a business risk than an insurable risk. An insurable risk, to a large degree, is outside the control of the policyholder. And a lot of the actions you take do have an impact

on your reputation, so reputation is on the borderline. The problem is that it involves the human element, and often the biggest risk for many companies is the employees. People are uncontrollable,” concludes van de Coolwijk.

Cyber risk insurance is relatively new to South Africa. Risk is high, not just of the possible damage to reputation through online channels, but of cyber-attacks and data losses. Certain elements of cyber cover policies make it possible to mitigate reputational risk, and brokers should ensure they are informed of the scope of those policies currently available.

Furthermore, companies need to implement a structured strategy and dedicate more employees to monitor and, therefore reduce, the risk of reputational damage.

Advice for Brokers The South African insurance market is highly regulated, so clients’ interests are definitely protected. Factors to consider when buying a cyber-insurance policy are as follows: • Understand the company’s current insurance coverage to identify any potential gaps.

• Evaluating the need for cyber coverage is not a one-man job. Involve relevant stakeholders within the organisation (such as leaders from IT, risk management, privacy, compliance and legal departments).

• Make sure to complete the application form correctly to avoid any disputes arising at claims stage.

• Ask the insurer about the value-added services they offer and make use of these to manage risk.

• Agree with the insurer upfront on the panel of service providers to be used in the event of a breach.

• Understand how to integrate the insurance claims process with internal breach response.

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your

Practical insights for advisers Sarah Bassett

Maintaining your personal brand can set you apart as an adviser, and gain you credibility and trust, says financial adviser, WJ Rossi, a partner and brand architect at US financial planning and wealth management services firm, Koss Olinger.

Rossi was speaking at the inaugural Discovery Financial Planning Summit in Sandton.

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ou are your brand and everything you do reinforces that brand,� Rossi says, explaining that the right brand will draw in and retain clients, as well as increase the valuation of the business. “Clients should be clear about your capabilities; your brand should project the same message.�

Focus your offering and your time Clients are increasingly looking for specialists and Rossi recommends that

financial advisers find a niche. “Ask what it is that you do, what your clients value most, and focus your time on these things. Find what you’re great at doing and focus all your energy on that. You need to know what you’re doing is valued in the marketplace. That’s what your clients need and what they want.

“Often we get caught up doing urgent things and have less time for the important things. We want to delegate some lowresult activities and focus on the high-end activities,” he says. While the average adviser spent only 10 per cent of their time on their unique ability, top advisers spent 50 per cent of their time on this niche. This in turn brings them greater recognition. By spending more time on servicing clients, advisers are able to further build their brand, making it more recognisable and valuable.

Partnerships – whether formal or informal – allow advisers to specialise while still offering a comprehensive service to clients.

“The more recognisable your time is, the more valuable it is. And that brings you more results and more business,” he says.

The Wealth Navigator System Goals

Moments of truth

The Engagement and Discovery: Meet with the client to discuss their current situation, goals, areas of opportunity, areas of weakness and gather as much insight as possible. The main objective of this step is to make sure the firm and adviser fully understand the client’s goals and that the client feels comfortable with the Koss Olinger team and approach.

Business owners should identify what Rossi terms ‘moments of truth’ – particular experiences which are critical for clients – and create systems to protect them. In the hospitality industry, cleanliness is the most important moment of truth, followed by ambience and price. Price becomes less important if restaurants and hotels are able to offer unparalleled service and ambience. “The same is true for our industry,” he adds, noting that it is three times harder to get a new client than to keep an existing client.

Analysis The Critical Factors Analysis: Using the information from the discovery process, Koss Olinger will analyse the client’s current financial strengths and weaknesses, as well as the financial opportunities available to them. By combining a client’s personal information with the firm’s experience, Koss Olinger is able to recommend a plan that is unique to the client and creates the results they need and want.

Game plan The Breakthrough Game Plan: At this stage, the firm will use a comprehensive strategy customised for each client’s needs. This strategy might include retirement planning, estate planning, tax planning, business planning, risk management or asset management. The adviser educates the client on the various options available in the marketplace that may benefit them. Finally, the adviser explains the strengths and weaknesses of the options and gives recommendations in an objective unbiased manner.

Solutions Crucial to brand value is consistent and predictable results for your client base.

“While McDonald’s may not produce the world’s best burgers, the brand is tremendously valuable because customers know precisely what they’ll get every time.

Consistency builds trust and credibility and gives clients the confidence to recommend a service to others.”

Systemise According to Rossi, by systematising common steps, advisers and business owners are able to add customisation where it’s needed, while producing consistent results. Koss Olinger takes its clients through the Wealth Navigator System, a name the firm has trademarked as part of packaging its systems – increasing the visibility and perceived value of the system.

The Implementation Solution: At this stage, clients can make decisions using the information and objective advice provided to them, in alignment with their financial goals.

Rossi suggested inviting top clients to be part of a panel to assess the business strategy and customer service. “Your best clients are your cheque writers, so their opinion counts the most,” he says. This helps clients to engage in the business and could result in referral business.

To build a referral network, advisers should reach out to their top clients’ other advisers in areas such as tax, law and accounting.

Contact them to discuss the needs of mutual clients and add value. This will build your own network for referrals in future.

Rossi’s firm also carries out an anonymous annual survey with its top clients every year, in order to discover how to earn referrals; why clients chose his firm; how they could earn more business; and areas of improvement.

Critical feedback might result in hurt feelings, but it also helps the business to grow.

“Ultimately, you are your brand. It’s the relationship between you and your client.

The better your clients understand the purpose, process and reasoning behind your thinking, the more open they will be to your recommendations. Listen, be empathetic and look for ways to add value.”

Management The Wealth Manager: Koss Olinger provides ongoing advice and management of each client’s game plan. As their situation, goals or objectives change, the firm and adviser continue to provide proactive objective advice to ensure goals are successfully accomplished.

According to Rossi, the naming, packaging and scaling of particular processes, as outlined, has allowed clients to perceive greater value in the brand and helped to differentiate the firm from its competition. But, he emphasised, it is the underlying systems, rather than the package and name, which enables consistent results again and again.

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news

New concierge service from MUA MUA Insurance Acceptances has launched a value-add concierge service for the executive South African market, available immediately to all its motor policyholder clients as an optional extra.

The MUA concierge service includes picking up the client’s vehicle from their home or work to get assessed when they have a claim; picking up the client to fetch their car after it has been repaired; picking up the client to fetch their courtesy car; picking up the client to get their car dropped off for a service; having the client and their vehicle picked up should they have had one too many drinks; or any other situation where the client’s vehicle needs to be taken somewhere.

For a cost of R30 a month, MUA Concierge gives clients 12 trips a year, which they can now use not only at night, but during the day as well. The service is available within a 50-kilometre radius of city centres in Johannesburg, Pretoria, Durban, East London, Port Elizabeth, George and Cape Town.

Tracker releases smartphone telematics app Telematics provider, Tracker, has launched a mobile application enabling smartphones to operate as mobile and cost-effective telematics devices.

The app performs the task of in-vehicle information gathering that improves driver interactivity in real time and utilises smartphone-based sensors that can be used on their own or in conjunction with black-box devices used in the traditional pay-as-you-drive insurance.

The app captures trip data to establish driver behaviour, and then sorts the driver into the appropriate cover category. How many times the driver was speeding, whether he/she texted or called while driving, are all fed into the algorithm in the app and the driver is allocated a score, while also giving the insurer live, real-time data.

In the case of an accident, the telematics app allows users to take pictures of the scene and provides fields to capture details, which are uploaded immediately into the system and integrates directly into the insurer’s data. The customer can notify insurers and call for assistance immediately.

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Free Cover from Liberty Liberty Life announced it is offering R25 000 worth of free life cover for a year through the launch of its new product, Free Cover, aimed at newlyweds, new parents and new home owners. “It aims to help them adjust to these significant life-changing events and help them start their journey towards financial freedom,” the company said.

Free Cover is available for up to a year from the date of registration. According to Liberty, the traditional insurance grudge of having to fill in a multiplicity of forms and going for health screenings has been eliminated. Application can be done online and participants need to fill in a single form online and submit.

Liberty said it is challenging young adults to take the financial future of their families seriously by making insurance more understandable and accessible to a younger audience, and also by highlighting the need for risk cover at each of these critical milestones in a person’s life.

INSETA training numbers The Insurance Education and Training Authority (INSETA) increased its funded training to unemployed learners, and its training in general, in the 2013/14 financial year. “In the 2012/13 financial year we funded training to a combined total of 2 761 learners; whereas in the 2013/14 financial year we funded training to a combined number of 9 604 learners, of which 4 006 were unemployed learners and 5 598 were employed learners,” said INSETA CEO Sandra Dunn.

Dunn emphasised that an additional 1 478 unemployed youth and 3 727 workers successfully completed learning programmes that had commenced prior to the financial year under review. Some of the key INSETA-funded training and support programmes for the 2013/14 financial year included the developing of scarce and critical skills through a partnership with the South African Actuaries Development Programme, and providing scholarships.

INSETA also partnered with public universities and technical vocational education and training colleges to support unemployed learners studying towards full qualifications in areas of scarce and critical skills in the insurance sector. Various skills programmes were facilitated to support small brokers and burial societies.

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Hollard launches China desk Hollard Insurance recently announced the launch of its Johannesburg-based China desk, established to service the insurance needs of Chinese companies working in Southern Africa.

In 2007, Hollard was the first South African insurance company to open offices in China. Since then, the representative office has played a key role in providing risk

management and insurance services to Chinese businesses in Africa.

“China represents a significant investor into Africa and, while there are direct insurance opportunities in China, there is a major opportunity in facilitating cover for Chinese companies working in Southern Africa,” says Yike Shen, manager for the Southern African China desk. The initial focus of the China desk will be to support the Hollard insurance operations based in Botswana, Mozambique, Namibia and Zambia.

MH370 claims to go ahead without death certificates Death certificates will not be required when submitting life insurance claims for passengers and crew members aboard the missing Malaysia Airlines flight MH370, according to Malaysian news service Mysinchew.

All 15 insurers that had directly insured clients aboard the flight have agreed to simplify the documentation and claims processes.

All insurers are members of the General Insurance Association of Malaysia. Flight MH370, destined for Beijing had 239 people aboard, and took off from Kuala Lumpur International Airport on 8 March. The plane vanished from radar screens about an hour later while over the South China Sea. The Malaysian Department of Civil Aviation (DCA) recently released 45 pages of unprocessed data from satellite communications company Inmarsat. It displays the data used to trace the flight pattern.

The DCA said it had been working with Inmarsat to release the raw data communication logs and the technical description of the analysis. Although this has now been provided, it is difficult to decipher and there have been calls for greater clarity from the affected family members.

South African household wealth up in 2013 The Momentum UNISA Household Wealth Report reveals that the value of South African households’ net wealth increased by 10.1 per cent (R644 billion) during 2013, to R7 044 billion at the end of the fourth quarter (Q4).

The double digit percentage increase is ascribed to a combination of two factors: the value of household assets increasing at a higher rate than liabilities, and household assets being 5.44 times more than household liabilities.

Momentum/UNISA estimated the value of household assets to have increased by 9.9 per cent in Q4 2013 (compared to Q4 2012) to R8 629 billion, while their liabilities increased by 9.4 per cent to R1 585 billion.

The increase in the value of household assets was driven by financial assets, which were 11.6 per cent higher in Q4 2013 compared to a year before. The driving force behind the increase in household liabilities was the ‘other debt’ category. Other debt includes outstanding unsecured loans, which, according to the National Credit Regulator, were 7.2 per cent higher at the end of Q4 2013. It also includes secured credit such as instalment sales. Outstanding secured credit was 12.7 per cent higher at the end of 2013.

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Cape Town: SA’s most congested city The TomTom global traffic index for 2013 has revealed that Cape Town is now the most congested city in South Africa, surpassing Johannesburg which was the most congested city in 2012.

The data also showed that the traffic shortcuts drivers take to avoid congestion are actually ‘longcuts’, adding 50 per cent more travel time to journeys.

It also found South Africa to be the only country in the world to experience their worst congestion on a Monday morning while the rest of the world experiences their worst congestion most often on a Tuesday morning.

South Africa has seen an increase in congestion in all six cities monitored in the report, with Cape Town and East London’s congestion both increasing by two per cent. South Africa had a congestion level of 21 per cent in 2013.

The report determined that each South African city experiences more congestion on secondary roads than on highways. In addition, Johannesburg drivers will cut their delay time caused by congestion in half if they take the highway as opposed to a secondary road, while Capetonians will save six minutes for every hour during peak periods if they take the highway.

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newappointments Centriq Insurance

Pamella Bakuba joined Centriq as client accountant, following six years with Hollard.

MUA Insurance Acceptance MUA Insurance Acceptance has announced a reshuffling of its senior management team.

Thirusha Reddy is the new account executive Risk Finance division, for Centriq Insurance.

Louisa Rockman, who joined Centriq Insurance’s client accounting division in 2008, has been made accounting manager.

Indrani Nair

Bhekisizwe Tshabalala

Alfons van der Vyver joins Centriq as executive head of risk finance solutions from KPMG, where he was an associate director in their financial services division.

Warwick Scott-Rodger

Coface

Pamella Bakuba

Thirusha Reddy

Jacqui Jooste has been appointed interim country manager of Coface South Africa, following Coface CEO Garth de Klerk’s decision to step down as country manager.

Jooste, current Jacqui Jooste operations director of Coface South Africa, will take over as acting country manager in the interim.

Mutual & Federal Louisa Rockman

Alfons van der Vyver

Centriq Insurance has welcomed six new appointments.

Indrani Nair joins Centriq as claims specialist.

Most recently, Indrani held key positions at Investec, Santam and Guardrisk.

Bhekisizwe Tshabalala has been made reporting accountant. He joins from KPMG where he worked closely with short-term, life and reinsurance clients. This gave rise to his interest and involvement in UMAs.

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Mutual & Federal’s iWYZE business has appointed Andrew le Roux as executive of direct distribution.

He joins Mutual & Federal from Old Mutual Emerging Markets (OMEM), where he gained 20 Andrew le Roux years of experience in the group’s retail businesses, and most recently in the general management role of head of mass market business development.

As the new head of brokers, Warwick Scott-Rodger will be responsible for improving the effectiveness of broker distribution and will be integral in the implementation of more effective communication between the company and its broker network.

Lynda Brown

Lynda Brown was appointed as the new chairperson of MUA’s underwriting committee. As part of her new role, she will review and implement any necessary changes into the operation of the underwriting department, in collaboration with MUA’s legal and compliance division.

Institute of Retirement Funds Africa

Steven van Schanke

The Institute of Retirement Funds Africa has appointed Steven van Schanke as its new CEO. He completed his articles at KPMG and qualified as a chartered accountant in 2001.

He has since gained diverse finance experience in the UK, and has run his own business locally since 2006.

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events

Citadel, RBS Katz Breskal and MUA indulging passions Citadel Wealth Management, in partnership with RBS Katz Breskal, and MUA Insurance Acceptances, brought guests together for an evening of luxury and enjoyment of the finer things in life. Hosted at Crossley & Webb motoring investment service’s impressive showroom in Cape Town, guests perused luxury, vintage and super cars and fine art, while enjoying great food and boutique wines from Iona. Guests were entertained with live music from South African Just Jinjer front man, Ard Matthews. MC Simon Colman from RBS, and host Andrew Findlayson from Citadel welcomed guests who then got insights into these alternative investment classes. Phillip Powell, the energetic auctioneer, appraiser and valuation consultant, shared fascinating art insurance and valuation anecdotes – highlighting the perils of underinsurance.

Citadel’s quantitative analyst and portfolio manager, Hannes du Plessis, demystified art as an asset class, and explained the Citadel Art Price Index.

Lireas Golf Day The Lireas Golf Day (four-ball alliance) was held at the Johannesburg Country Club in Woodmead. According to those in attendance, it was a fantastic event with great prizes up for grabs, for the golf as well as the raffle. First place went to the four-ball team of David Caine, Jimmy Blake, Garth Topham and Justin McCabe with a score of 96.

Following closely in second place was the team of Andre de Waal, Gawie Nothnagel, Brett Herselman and Neil Brandt with a score of 94. Funds from the raffle were raised for charity. Lireas supports the Hearts of Hope – a charity for abandoned and homeless children. Sponsors include Garagesure, Mahogany, Hannover Re, MUA, Compass, Gem and Jewel, Netology, SA Golfing, Firedart, CTU, CIA, Envirosure, HIC, Landmark, Thatch, Transit, Camargue, Synergy and FASA.

Glacier Launch Tour 2014

Patrick Sheehy, Glacier associate director: product management.

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RISKSA was at the launch of Glacier by Sanlam’s new Investment-Linked Lifetime Income Plan, at the Table Bay hotel in Cape Town. The event was attended by over 250 intermediaries and Sanlam distribution partners. The launch took to the road with presentations planned for Port Elizabeth, East London, Durban, Pretoria and Johannesburg.

(L to R): Phoenix Risk Solution’s Pam Durrant, artist Chaz Williams (who did the Mandela portrait) and Tony Williams.

IICoGH annual charity auction lunch The wet and windy weather could not keep keep Cape Town’s insurance industry from doing their bit for charity while enjoying some of the best food and wine that Groot Constantia had to offer. The Insurance Institute of the Cape of Good Hope raised an incredible R151 150 for its nominated charities. One of the most notable items on auction was the Madiba sketch by artist, Chaz Williams, which fetched an impressive R55 500.

The five charities that benefited were: Jones Safe House in Noordhoek for abused and abandoned children; SA MAST (mass animal sterilisation) in Khayelitsha; Durbanville Children’s Orphanage; Catholic Welfare & Development which runs a number of initiatives to assist the homeless community on the Cape flats; and Fight the Fight, which uses martial arts to raise awareness and the prevention of violence against women.

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FIA Awards 2014 Christy van der Merwe

The 16th annual Financial Intermediaries Association of Southern Africa (FIA) Awards ceremony was held in Sandton on 12 June 2014, and gave heartfelt credit to product suppliers.

T

he ten glittering awards conferred at the 2014 FIA Awards are lauded as the benchmark for excellence in the offerings of product suppliers. They are a reminder of the complex relationships that must exist to ensure that financial consumers are treated fairly, and the fact that product suppliers must design solutions that perform in line with their promises.

“But these products can only fulfil the purpose for which they are designed if accompanied by relevant explanation, clarification and professional and appropriate advice,” adds FIA president Arnold van der Linde. Touching on the regulatory environment that intermediaries in the financial services industry find themselves in, van der Linde observes that the 2014 FIA

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Awards play out at a crucial juncture in the industry’s regulatory evolution: “While we celebrate the top insurance product providers we do so acknowledging the undeniable benefits that our free and competitive market system affords our joint clients.

“As we celebrate the industry’s top product suppliers we should also embrace – with all of the associated responsibilities – our task to vigorously protect the free market that makes our clients’ product choices possible. Let’s never invite nor, through irresponsible actions, force the regulator to kill our industry with excessive regulation.”

“While the FIA Awards present an ideal platform for product suppliers to be recognised

for going that extra mile, we should not lose sight of the role that valuable and reputable advice plays in assisting consumers to secure their financial futures,” reiterates FIA CEO, Justus Van Pletzen.

Van Pletzen extended heartfelt congratulations to each of the category winners. “And we offer a special word of thanks to those product suppliers who continue to back the model of intermediated distribution and consistently put their clients – our members – first.”

And the winners, as rated by South Africa’s financial and risk advisers, are: Santam – responsible for a huge turnaround in the Short-Term Insurer of the Year category,

2014 FIA winners • Short-Term Insurer of the Year: Personal Lines – Hollard • Short-Term Insurer of the Year: Commercial – Santam scooped both the Commercial and Corporate accolade.

Hollard – won all three awards in the ShortTerm category in 2013, emerged once again as the intermediaries’ choice for Short-Term Insurer of the Year: Personal lines, taking home this award for the third year running.

CIA Underwriting Managers – emerged victorious in the Underwriting Manager’s category, returning to the number one position after a three-year absence.

Discovery – bagged two awards through Discovery Life in the Long-Term Insurer of the Year: Risk category, and Discovery Health for Product Supplier of the Year: Healthcare.

Allan Gray – scooped honours in the Investment Products Single Premium category, as it did in 2013.

Liberty Life – awarded the Investment Products Recurring Premium award.

Sanlam Employee Benefits – claimed the prize as Product Supplier of the Year: Employee Benefits.

Sasria – the State-owned insurer received an Industry Recognition award for its ongoing support to FIA member brokers. Sasria, celebrating its 35th year in the special risks insurance business, protects both private and corporate insurance consumers from riot, strike, terrorism, civil commotion and public disorder losses.

The 2014 FIA Awards winners were determined through an extensive survey of FIA members, conducted independently by Bluestream Research.

The research company asked respondents to rate product providers based on product quality, service quality and relationship quality.

This year 6 417 contracts were evaluated over a 10-week period, and a staggering 24 000 telephone calls were made to finalise the interviews.

• Short-Term Insurer of the Year: Corporate – Santam • Underwriting Manager of the Year – CIA • Long-Term Insurer of the Year: Risk – Discovery • Product Supplier of the Year: Investment Products Single Premium – Allan Gray • Product Supplier of the Year: Investment Products Recurring Premium – Liberty • Product Supplier of the Year: Employee Benefits – Sanlam • Product Supplier of the Year: Healthcare – Discovery • Industry Recognition – Sasria

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Put that in your policy

and smoke it

Anton Pretorius

At an exclusive launch at the Protea Hotel in Cape Town’s Bantry Bay on 29 May, Altrisk announced its new smoking policy to brokers. As of 17 June, Altrisk will be offering better premium rates to smokers who make an effort to quit over the next two years.

The Altrisk ladies looking sharp.

T

he industry has been waiting with bated breath for the announcement which was kept under wraps until the launch.

As part of its national roadshow, Altrisk made the announcement to all its brokers and financial advisers through presentations from managing director Michael Blain, head of distribution Anton Hartman, and Professor Harry Seftel from the National Council against Smoking in South Africa.

“To quit smoking is not easy. It’s a lonely world for smokers,” says Hartman. Smokers pay substantially more for the higher risk of a claim as a result of their smoking compared to a non-smoker, but not all smokers are the same.

“Smokers have less cover, less disability and less critical illness benefits in their policy than non-smokers,” Hartman adds.

According to Altrisk statistics, 70 per cent of smokers would like to stop smoking, but alarmingly, 80 per cent of them fail. “We want to show these clients that we understand and that we care about their health,” Hartman says.

Through detailed research into the risk of smoking and how related diseases result in

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Michael Blain (MD), Prof Harry Seftel (NCAS) and Anton Hartman (head of distribution).

claims, Altrisk has developed a premium rating approach to better rate each client – giving them an immediate benefit of a lower premium on their intention to quit smoking.

life insured does not quit smoking before the second policy anniversary, the remaining half of the 10 per cent quit smoking discount is forfeited.

Access to tools to successfully quit smoking is provided to the client. Altquote includes a questionnaire to assess the unique risk of a client. The questionnaire can be completed at the time of the quote to get an illustrative adjustment immediately. Once a client has quit smoking for six months, they can benefit from non-smoker rates. Non-smoker rates are guaranteed once a client has quit for 12 months. If a client resumes smoking after six months and before 12 months, the premium will be increased from that of a non-smoker to smoker. If the life insured does not quit smoking before the first policy anniversary, half of the 10 per cent quit smoking discount is forfeited. If the

Altrisk MD Michael Blain says, “We’re not doing this alone. We want to do it in partnership with our financial advisers who understand the clients and their needs. We want to co-create a solution with you and be your risk champion.

Many people have the perception that Altrisk does only high-risk and impaired cases. But that’s all in the past. We want to be your first choice risk specialist. We want you to come to us because you know that you and your client will be treated like an individual and offered a solution that is properly designed with access to decision-making along the way,” he says.

Discovery summit

Sarah Bassett

The inaugural Discovery Financial Planning Summit drew hundreds to the Sandton Convention Centre, to hear insight from international and local thought leaders in the sector.

O

pening the summit, Discovery CEO Adrian Gore emphasised that without excellent financial planning and advice from great financial planners, most people will fail in their financial affairs in retirement.

Gore highlighted human traits which can be damaging to retirement planning, including the desire for instant gratification; people’s tendency to both underestimate their longevity; and the need to plan for a future reality. “We have a sophisticated and well-regulated financial services industry – our customers need us to work holistically.”

Financial Services Board (FSB) deputy executive officer, Jonathan Dixon, lamented that South Africa’s regulatory framework did not develop as it should have. “It became too rules based and compliance heavy, evolving along the lines of sector silos. Also, it was not clear who the customer was and product providers tended to view the intermediary adviser as their client, when it should in fact be the end consumer. And we were seeing too many examples of poor customer outcomes,” he told delegates.

“This is an exceptional time for financial regulation, both globally and in South Africa. We are seeing rapid change in regulation, driven by international developments and lessons learnt from the global financial crisis.”

“The Treating Customers Fairly (TCF) approach will require a paradigm shift,” says Dixon. “There will be an emphasis on advisers demonstrating results; we will see a re-balancing of responsibilities with increased scrutiny on the design of financial products and how to best

meet customer needs. There will be a new focus on distribution channels and marketing practices.

Ensuring fair outcomes for the client is now a joint responsibility for product providers and advisers. And we will also be looking at what is being delivered to the more vulnerable lower end of the market.”

He recommends that financial services firms and advisers prioritise embedding TCF practices into their frameworks, as there will be increasingly harsh penalties for those who do not embrace this approach.

While highlighting the flaws of the current remuneration model and how the customer is not always well served, Dixon acknowledges that advisers themselves are not always adequately remunerated for their advice. “Where customers believe advice is for free, the value of advice is undermined.”

Dixon outlined the general principle of adviser remuneration, in that it should depend on activities. “This includes advisers being properly remunerated for advice services. There should be separate charges for financial and risk planning services, up-front product advice, and ongoing advice. We do not expect there to be caps or restrictions on income, but we could possibly see some form of safe-harbour rates. And various payment forms should be negotiable, depending on whether they are flat fees, ‘trail’ fees, percentage of premium, or time based.”

Dixon adds that over the next two years, South Africa will have a financial services industry that is forward looking, risk based and outcomes focused. Other noteworthy speakers included Tom Deans, of the Détente Financial

Corp (Canada) on succession planning; a panel discussion on how elite advisers get to the top and stay there; Colin Goldman of Goldman Sachs on the state of our nation; and Matt Oechsli of the Oechsli Institute (USA) on how to acquire affluent clients and keep them.

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news international United Kingdom

Insurers expose $2.17 billion worth of fraudulent claims in 2013

Figures released by the Association of British Insurers (ABI) have shown that insurers exposed £1.3 billion worth of fraudulent claims in 2013, representing an 18 per cent rise in value on 2012.

Around 118 500 fake or overstated claims were detected during the year, working out at the equivalent of more than 2 000 a week.

Fraudulent motor insurance claims were the most expensive and common, with 59 900 dishonest claims worth £811 million detected last year.

While there was a small fall in the number of detected frauds, their value has increased.

The average fraud detected across all types of insurance products is worth £10 813. The rise

in the average value of insurance scams could be seen as a reflection of the highend nature of frauds by organised gangs that are increasingly being uncovered, the ABI said. Since 2007, the value of dishonest general insurance claims being brought to light has more than doubled, with the number detected surging by 30 per cent over the same period.

Fraud is estimated to add up to £90 to the cost of general insurance policies.

The government also plans to make it easier for insurance companies to invest in infrastructure projects, to help insurers earn better returns as they struggle with prolonged low interest rates.

Germany Regulator supports cut in insurance guarantee rate

Germany’s financial regulator supports a cut in the guaranteed rate of interest that the country’s life insurers are allowed to offer on savings policies from 2015, a

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move that would ease pressure on the sector.

The regulator, Bafin, has recommended to the German finance ministry that the guaranteed rate be cut to 1.25 per cent, from the current 1.75 per cent. Rock bottom capital market interest rates have slashed the income insurers can earn from their investments in bonds and other safe securities, making it increasingly onerous to fulfil obligations to policyholders.

Proposed rules would allow insurers to loan money to infrastructure companies that invest in Germany’s alternative energy, for example. German insurers are likely to welcome the plans, having long lobbied for easier conditions for investing in infrastructure and private-equity investments.

Solvency II rules, however, require a high capital ratio for such investments, and the German Government has not yet made clear how it plans to address that.

Global Data security breaches on the rise

A global study released by Trustwave indicates that malware is still the top method used to gain access to secure servers, while weak passwords open the door for easy intrusion. The 2014 Trustwave Global Security Report reveals and analyses data from 691 cyber breach investigations across 24 countries.

This is a 53.6 per cent increase from 2012 breach incident numbers.

The 2014 Global Security Report says 45 per cent of all data theft incidents in 2013 involved non-payment card data, although payment card data still tops the list of data compromised. Non-payment card data includes financial credentials, personally identifiable information and other customer and personal records. The report also indicates that there has been a 33 per cent increase in the theft of sensitive and confidential data.

The delivery method for most security breaches still involves criminals using e-mail to gain access. According to the report, 59 per cent of malicious spam used attachments infused with malware, while 41 per cent used malicious links.

Swiss Re updates risk framework

Global reinsurer Swiss Re updated its tools to address sustainability, political, regulatory and emerging risks, making adjustments to four of its sustainability risk framework policies.

The framework is a risk management instrument to identify sustainability risks in Swiss Re’s core re/insurance business.

The framework is applied globally to all business transactions as well as investment decisions and comprises eight policies on sensitive sectors or issues. These policies are enforced through a so-called ‘sensitive business risks process’, which works like a due diligence process for case-by-case assessment.

In 2013, a total of 210 business transactions were screened through this duediligence process, up from 170 transactions in 2012. Of these, 27 business transactions received negative recommendations and were stopped, while a further 26 transactions received positive recommendations but with certain conditions attached.

SEM acquires multi-market microinsurer and Rwandan insurance group

Sanlam Emerging Markets (SEM) has completed acquisitions of UK-based microinsurance provider, MicroEnsure Holdings Ltd (MicroEnsure), as well as an agreement to acquire a 63 per cent interest in Soras Group Limited, Rwanda’s largest life and non-life insurance company. The Rwandan acquisition is valued at $24.3 million.

MicroEnsure has a strong footprint in emerging markets that overlaps with that of SEM in Africa, India and Southeast Asia. In terms of the deal, Sanlam will take up a 22 per cent shareholding for an undisclosed amount. As at 30 April 2014, MicroEnsure had 7.6 million enrolled clients globally of which approximately 4.8 million were in Africa and 2.8 million were in Asia.

Other shareholders include companies such as Opportunity International Inc., Omidyar Network Fund Inc., International Finance Corporation and AXA SA. Werth suggested these would all provide SEM with new potential co-operation opportunities.

Korea Insurance industry grows by 27 per cent

Korean insurance companies recorded a 27.4 per cent jump in first-quarter net profit from a year earlier, buoyed by a rise in investment-related earnings, the Financial Supervisory Service (FSS) has announced.

The combined net income of 56 life and non-life insurers stood at KRW1.51 trillion in the January-March period, compared with KRW1.2 trillion the previous year.

The 25 life insurance firms reported a 29.8 per cent jump in net profit to KRW940 billion for the three-month period, while 31 non-life insurers’ net profit expanded by 23.8 per cent to KRW571.3 billion for the same period.

This was despite a decline in combined premium income which fell by 9.5 per cent to KRW43.3 trillion for the first quarter of this year.

The watchdog said the companies’ increased investment returns contributed to the strong bottom line as life insurers earned KRW5.2 trillion from investments, up by 3.4 per cent from a year earlier. Non-life insurance firms posted a 15.5 per cent increase in investment returns over the same period, with KRW1.39 trillion.

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On the open water, all men are created equal and hierarchy is determined by your skilfulness at sea. At the inaugural RISKSA Regatta in 2013, CEOs, clerks and brokers were unified under the sail of a 30-foot yacht, battling the elements and competitors alike. The objective was clear: to have fun and, of course, win the RISKSA Regatta! This year promises to be even bigger and better. We look at team rosters for 2014 and hear from some of last year’s participants.

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www.thefulcrumgroup.co.za for more info.

FULCRUM GROUP

Team Name:

Fulcrumeers At the helm of The Fulcrumeers team is Captain VJ (Vaughn Jones, Fulcrum Group CEO). They’ve guarded their team sheet with much secrecy. But if you manage to work out the clues on their website, you can win some big prizes or perhaps even an evening with a sailor. Visit

Why did you decide to enter the RISKSA Regatta?

Alongside the DAREdevil Run, it’s the best way to show the world how fun and exciting insurance can be. Also, another strong objective is to beat Andy Mark and the RISKSA team.

(Challenge accepted! -Ed) How do you rate your chances?

Let’s just say winning is a drug – one that we plan ro continue taking.

industry function? There, gees was spelt F-U-LC-R-U-M (or K-U-R-T, depending on your point of view).

What do you expect from this year’s event?

To have heaps of fun, participate in some competitive sailboat racing and to spend some quality time with other industry members.

What gees will you bring to the event?

Are you serious? Was RISKSA not at the last

What message do you have for spectators and competitors?

To the spectators and competitors alike: join us for a celebratory drink after the race – win or lose. Our industry is one to be proud of

Why did you decide to enter the RISKSA Regatta?

We love a challenge and of course, we want to win!

What do you expect from this year’s RISKSA Regatta?

We expect some fun, sunshine, good sportsmanship and hopefully, a trophy.

How do you rate your chances?

We believe anything is possible and we always set the bar high.

What message do you have for spectators and competitors?

The RISKSA Regatta is one of the best events in the South African insurance and financial services sector. You don’t want to miss it! To all our competitors, all we can say is: Good luck and bon voyage.

AON SOUTH AFRICA

Team Name:

Team Aon Aon South Africa’s team name remains a secret and will hopefully be revealed soon.

For now, we’ll just refer to them as Team Aon. Under the leadership of stalwart captain and experienced sailor, Anton Roux, Aon is always a formidable force on the water.

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What gees will you bring to the event?

Team Aon loves yachting and we are bringing everything we’ve got. At Aon, we work hard and we play hard – this is another opportunity for us to prove this.

ZENITH FOR THE ACCOMPLISHED

Team name:

Zenith Thunder Child Zenith for the Accomplished is an authorised financial services provider based in Paarl. They mean business and shouldn’t be underestimated. Thunder Child is the name of the fictional ironclad torpedo ram of the Royal Navy in H.G. Wells’ The War of the Worlds. Zenith believes this is appropriate as they team plans to be “low, fast and impenetrable”.

Why did you decide to enter the RISKSA Regatta?

We live by the Chinese proverb, ‘When the winds of change blow, some people build walls while other’s build windmills.’ This event is a wonderful opportunity for us and an exciting challenge. We value any challenge in whatever size or form.

What do you expect from this year’s RISKSA Regatta?

With all the great feedback from last year’s event, this year can only grow bigger and better. This is not only a great team building experience, but also an opportunity to rub shoulders with others in the industry. We expect to win.

How do you rate your chances?

We think our chances of a victory are excellent.

Like the winds, we like to set the trend and not follow it. Thunder Child is a Maxi and we’re aiming for line honours.

What message do you have for spectators and competitors?

We strive toward bettering ourselves by competing and building morale in an exciting and motivating manner, and the Regatta is the perfect opportunity for that. Our galeforce winds of enthusiasm will blow you away.

Come sunshine, rain, wind or storm, we will be prepared. We hope that you will be too.

What gees will you bring to the event?

Everything we do is done with enthusiasm, energy and class. That is what we are bringing – boat loads of it.

PG GLASS

Team name:

PG Pirates With a respectable fourth place finish in last year’s RISKSA Regatta, the PG Pirates are strong contenders for this year’s race.

Team sheets are kept closely under wraps, but rest assured that PG Glass is one of the most festive, and loudest, teams on the water.

Why did you decide to enter the RISKSA Regatta?

The RISKSA Regatta is an exciting new platform

for us to interact with our brokers and clients, especially those that do not play golf. This is something entirely different. It’s challenging, fun and adventurous.

How do you rate your chances?

We will get a podium finish this year!

What gees will you bring to the event?

PG Glass invented the word ‘gees’. We’ll be giving it our all. We’ll be bringing our PG gees, which is something special to witness. You’ll have to see and experience it for yourself.

What do you expect from this year’s RISKSA Regatta?

Not only do we expect great networking opportunities with brokers and clients, but we look forward to having lots of wet fun on the water.

What message do you have for spectators and competitors?

For the spectators, all we can say is keep a close eye on the PG Pirates. To the competitors, just look to the fore, that’s where we’ll be. (aargh!)

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Testimonials We hear comments from some of the key players within our industry who participated in the 2013 RISKSA Regatta.

Craig Brigg, managing director, Shackleton Risk Management Experience of the 2013 RISKSA Regatta: “This was an unforgettable experience, and not only because of the sailing. The cocktail function was the perfect rev to the competitive spirit of the weekend. The sailing was a feat we’ll never forget (and neither will our clients). The event culminated in a Shark’s victory on the final afternoon, making the spectacular evening function that much sweeter.”

The sailing?

“Most of us had never sailed before nor have experience being ‘hands-on’ on a sail boat. It was quite something to see the skill of the experienced skippers and deck hands. We all learnt a great deal and enjoyed the time on the ocean despite the strong winds and cold Atlantic spray that washed over the boats on our return to the harbour.

It was a cold and exhilarating day on the water but it was enjoyed by every single person aboard.”

Would you recommend it to first-time entrants?

“Yes, I would definitely recommend this to first-time entrants. Most of us have never sailed before and there was a certain amount of trepidation before leaving the harbour. However, we soon realised that the skippers had everything under control and we were there to assist, whilst enjoying the adventure.”

What was the gees like?

“The gees was tremendous! The spark developed throughout the sailing event with challenges and wagers and concluded in a great party at the dinner and prize-giving. What better way to experience gees than to enjoy the spirit of adventure?”

Anton Roux, CEO, AON South Africa “This year’s event should not be missed. The 2013 RISKSA Regatta was hands down the best insurance event that I attended last year.

The organisation was superb, the brand exposure fantastic, and, most importantly, it provided us with a great time to build relationships with clients. It is seldom that one has the opportunity to spend time with clients where teamwork is of the essence. Everybody was out of their comfort zones and had to rely on an experienced crew to manage the risks that we were facing, very much like a broker advising clients through the risks that they face on a day-to-day basis running a business.”

Sally Skirving, chief operations officer, ONE Financial Services “I absolutely loved RISKSA’s Regatta 2013. Everything from the anticipation, to race day itself at the Royal Cape Yacht Club, and the spectacular scenery, was an absolute privilege. The unique experience escalated from bonding with the captain and learning new skills aboard before leaving the calm harbour, to the sheer terror and exhilaration of sailing in strong winds and ducking under the boom (only just!) – only to repeat the exercise after getting soaking wet. Gees and camaraderie abounded, loudly, as we shared the exhilarating experience – foreign to us insurers. We were out of control, travelled at high speed, faced the elements and we survived! I will definitely be back in 2014.”

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A bull market

for bokkies?

Sarah Bassett

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If you had thought to buy a black impala four years ago, it would have set you back around R40 000.

Today, you could sell that same animal for close to R400 000. Had you bought a few and bred them, well, we’re talking retirement. Rare-game breeding is a rapidly growing market in South Africa, increasingly enticing savvy investors and businesspeople. But if ever there was truth to the truism ‘high risk for high reward’, this is it. RISKSA takes a look at the risks, returns and insurance options for this intriguing high-growth sector.

Munro, managing director of specialist wildlife insurer, Animalsure. “But this has shifted, with many investors buying into animals and breeding programmes in order to drive returns through breeding and reselling for profit, rather than simply to hold for trophy hunting,” Munro explains.

Roan antelopes

R

eturns for game investment over the last decade have outstripped returns on equities. In the last two years, in particular, the values of rare game animals have exploded, driving a self-perpetuating surge in interest and demand. Rare species such as buffalo, sable, roan antelope, tsessebe or Livingstone eland, and rare colour variations such as golden wildebeest and black impala, are highly sought after among game farmers, breeders and a widening pool of investors.

“The capital growth on these investments and their offspring is huge,” says Dr Gert Gry, president of Wildlife Ranching South Africa (WRSA). “At this time, it is one of the best investments you can make. It is a matter of supply and demand and the prices for certain rare species are still on the rise.”

“The nature of the market has changed tremendously, particularly in the last two years where we have started seeing massive jumps in pricing. Up until as recently as two or three years ago, the very exotic bloodlines were largely kept and traded between a few individuals and there was little broad market interest in these animals,” explains Donald

There are varied theories for what precisely has driven the shift, but most agree that increased interest from foreign buyers, coupled with increased awareness of the industry and new mechanisms for opening investment opportunities to a variety of buyers, has driven the increased demand. “Foreign buyers in particular are able to inject large sums into the market, given their currency advantage.

Four years ago, if there was a R15 million or R20 million turnover at an auction, it was considered an exceptionally successful action.

A recent auction this year saw a R150 million turnover,” Munro says.

Investment options Joining the elite inner circle of exotic game owners is now easier than you might think and does not necessarily require that you own your own farm, vehicles or employ specialist staff members. Although there are many individual buyers, for those who do not have the capital or other practical prerequisites, there are investors who syndicate by pooling investor money to buy game. Investors can also simply buy into a breeding programme on an established game farm.

“Syndication has its benefits because one can buy more or better game, but the risks are high if it is not done properly,” says Dry. WRSA advises potential buyers to make sure of the following: • Be aware of the people with whom you are dealing.

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Wildebeest

can be too much for them. This is why we place certain restrictions on animals and relocations. For instance, we do not cover oryx being moved from the Kalahari to the North West because the species does not adapt to the bushveld-type habitat. With black impala, we restrict movement to nothing beyond 200 kilometres because anything more is just too much and the animals do not adapt.”

Once an animal has made it through the first 14 days of readjustment, risks decrease significantly, at which point the standard all risk mortality policy is applied.

A further risk for investors is that of price movement, warns Smith. “The price of game has been moving up constantly in recent years across a wide range of species. There is always a possibility that supply could outstrip demand for a specific species and prices will then go down. Price risk is not an insurable risk.”

• Ensure the animals are properly looked after.

• Know where the animals are kept.

• Whether the animals are injured or diseased.

• The percentage used for management fee.

• Bloodlines, as it plays a role in quality.

The risks As with any investment that offers the possibility of significant returns, the risks are correspondingly extreme. “A prospective investor must realise that the investment is made by buying live animals and that brings about a number of risks,” notes Wehann Smith, managing director of Kuda Insurance.

These risks include death from illness, predation, poaching and theft, all of which can be included in a standard all risk policy.

“In the case of rhino specifically, poaching poses a major risk, which is insurable but at a considerable premium.”

“Cashing in on your investment in game does not merely entail calling your stockbroker and getting your price and money upon settlement being completed. When selling game you

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have to physically capture the animals and move them to auction or to the buyer’s farm.

Capture and transport causes stress to the animals which can lead to death,” he adds.

“I will never be able to give up smoking because of the risks associated with this business,” Munro chuckles. “And the reality is that the animals that promise the highest return – the ones with the unusual colour variants – are rare and valuable precisely because they are so vulnerable and high risk.” The highest risk is during the capture and transit stage. “These are not animals that come from generations of being captured by man, so it is extremely stressful for them to be captured and then transported,” he explains.

After relocation, the first 14 days in which the animal adapts to the new environment remain extremely high risk. “These two stages account for our highest risk and claims ratio and the greatest portion of the premium is allocated to these,” says Munro. “The interaction with humans is very stressful as is the acclimatisation to a new habitat, perhaps a more controlled or restricted environment,

Most valuable species to invest in “In our experience sable, buffalo and colour variants like saddleback, king wildebeest, black and white impala are most valuable and fetch the highest returns,” says Anthony Jackson, divisional manager of commercial insurance at One Insurance.

“There are a lot of new species and variants.

For instance, while a standard springbok is worth R600 to R1 000, there are now colour variants that will fetch between R300 000 to R350 000 each. In general, the most expensive animals remain rare buffalo and sable and, on average, these animals remain the main investment opportunity. The risks with these animals also tend be lower, so from an outsider’s perspective this makes them most attractive,” Munro comments.

“The animals fetching the highest prices at the moment are buffalo. The highest recorded price in South Africa paid for a buffalo bull is currently R40 million. Sable antelope are also fetching good prices with a number of sable

antelope having been sold for R10 million or more in recent years,” adds Smith.

Insuring your investment When it comes to risk, value and the calculation of premium – no two animals are ever the same. “There are no two animals in any species that are exactly the same and therefore there could not be a standard insurable value across any species,” Smith explains. “The first base used for insuring game is the prices being achieved on game auctions. Generally the insurable value is the value for which an animal was bought or sold on auction.”

“Animals can be insured only for a year or any shorter period agreed to by both parties.

When the period expires there are a number of factors taken into account if there is a request for renewal. Firstly, the average market price for similar animals would be taken into consideration. Secondly, consideration would be given as to whether the animal has risen in value because of factors such as horn growth.

Another consideration is the age of the specific animal. Age adds value to an animal up to a certain point; the animal could be in the productive breeding phase. Past this and age starts to deplete the value, as older animals

pose a higher risk of death,” he continues.

“The register has to be updated to account for the animal ages and values,” Jackson confirms. “For example, animals less than six months old are insured only against fire and lightning and only at maximum 30 per cent of the mother’s value. When they turn six months, the values are adjusted and the premium would have to be adjusted.

“We require the clients to complete a proposal form and submit their game register with any and all supporting documentation such as DNA certificates, animal profiles and identification of the animals. We will take into account the management styles of the farms; the claims and losses history; the lightning and fire risks; what species to be insured and the values. We would ascertain whether the client is a full-time breeder or a ‘weekend’ breeder.

In some cases we would appoint an assessor to evaluate the farm and the management style; the camp system; feeding and watering; and any additional risks,” Jackson explains.

assessing, brokers who are not specialists in the market or who lack knowledge on the product. This often results in incorrect information being supplied to the client via the broker,” notes Jackson.

Note to the broker

As with all form of specialist cover, brokers should be selective and rather than cover based on premium, they need to consider what cover best suits the needs of the client and their risk.

“The wildlife insurance market is definitely growing. We face a lot of issues: lack of historic knowledge, specialist support, claims

Brokers and clients need to understand the product and what the conditions are, they need to follow the claims procedures. Once an animal dies, there is a limited time to extract samples for pathology reports. The weather is also a determining factor in how long the carcass stays viable for sample collection, he cautions.

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

Moving Forward

TM

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REDEFINED

Toyota RAV4

Japan, a nation on the forefront of cuttingedge future and technology, has in recent years become less adventurous with its car designs. Toyota in particular, has been guilty of turning out cars so vanilla, you could slap it on a cone and stick a flake in it. But if it’s reliability you’re after or a car with sound performance and a pretty decent fuel bill (especially for those long-distance client calls), then you’ll be well-chuffed with Toyota’s latest SUV offering – the RAV4.

Anton Pretorius

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Engine: 2.5 litres, 132 kW, 233 Nm Fuel consumption: 8.5 litres/100 km (average) 0 – 100 km/h: 10.2 seconds Top Speed: 190 km/h Warranty: Three years/100 000 km Service plan: Five years/90 000 km Price: R410 300

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body roll. Descending down a winding mountain road (like Du Toits Kloof Pass) is done with relative ease and ascending up the mountain road can be done aggressively with full control at your fingertips.

The active 4WD system keeps things in check on a slippery road. The RAV4’s performance and handling doesn’t disappoint. She sits solidly on the stretch and turns tightly in corners.

The Toyota RAV4 offers a choice of two engines – a two-litre VVT-i petrol with 156 bhp and a 2.2-litre D-4D diesel with 148.

Personally, the petrol version makes the car feel a bit lacklustre. It has a 0-100 km/h time of 10.2 seconds and a top speed of 190 km/h. This equates to loads of usable torque, so there's enough poke to overtake comfortably and it cruises easily at high motorway speeds.

version has a bigger, more traditional look.

This new model has had 100 mm added to the wheelbase and 205 mm in overall length.

It’s much more practical and now measures up as a proper medium-sized SUV on the interior. Even its 10.6 m turning circle is considered by some as class-leading.

On the inside

F

ashion is a fickle mistress. You can try to keep up, but she’ll boot you in a flash when the next best thing walks through the door. For too long, Toyota has been the pasty geeky kid relentlessly batted by the trends of fashion. Slightly annoyed by the constant rejection, the automaker opted to go the more serious, conservative route in vehicle design. Well, that’s how I see it in my head.

Mind you, if you’re comparing price and length of every small and medium-sized 4x4 you can think of (from the Hyundai iX35 to the Audi Q5), the Toyota RAV4 lands smack bang in the middle of a fast-growing midsize SUV crossover market – a kind of sweet spot if you will. Perhaps there is method behind the mundane?

This fourth-generation RAV4 is a whole different kettle of fish compared to the original model of the 90s. While the first-generation RAV4 was renowned for its cute and compact factor, the modern day

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The interior has lots of soft-touch materials that won't rattle and squeak over time, thanks to tight and consistent panel gaps. While the cabin lacks in terms of individuality, it’s still rather roomy and well built. It could definitely do without the pleather on the steering wheel, but that’s all dependent on your personal taste. The interior boasts load room of 476 litres which is a plus point. Passengers will appreciate the large amount of space for heads and limbs, especially in the back. Boot space can be increased or decreased by simply sliding the backseats fore or aft. The old adage of substance over style is evident throughout the RAV4.

There are those who may appreciate its lack of extravagance however. It does what it has to. No frills, no fuss and no tricky gadgets.

With its low profile, the RAV4 looks like a station wagon on steroids. The RAV4 can be quite grand with keyless entry, leather finishing, seat warmers and a sound system with a touchscreen.

Performance Something that’s uniquely different from the older model is the way it drives. It absorbs bumps with comfort and there’s minimal

With enough mid-range torque to comfortably tow any caravan or trailer, one cannot help but admire its mechanical refinement. This is an easy car to drive. Performance felt bang-on the class average. Fuel economy was likewise average for the class, with a return of 8.5 litres per 100 km/h.

She’s no athlete, but doesn’t lack anything in the way of motive zest, in fact, far from it. Stocky, yet playful damper settings refers to a rolling chassis (with good spec) that’s just sitting and waiting for you to take it off the tarmac and beyond the beaten track.

Toyota pride themselves in developing ergonomic switch panels. The drive mode buttons, like its Sport and Eco modes, are hidden away, located beneath the centre panel, making it difficult to adjust or change between modes when you’re on the fly. We don’t suggest taking your eyes off the road for too long.

But if it’s ruggedness you’re looking for, look no further. The Toyota RAV4 features renowned practicality, quality and reliability. What’s more, it’s competitively priced and offers good value for money.

However, it’s definitely a more traditional SUV, and rough enough when it needs to be.

There is no denying the current RAV4 is a great car, but in growing up, has it lost some of the original spark and become a little bit forgettable? The latest RAV4 might no longer be for the young at heart, but is certainly bigger and more refined than its predecessor. This vehicle is right up the alley of the family man looking for a safe and reliable vehicle, perfect for daily use but also capable of going the distance.

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TL TRAVEL

Airport Navigation 101

OR Tambo

International Airport Anton Pretorius

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A lengthy stop over on an overseas business trip means you’ve got some time to kill. But what if the airport is unfamiliar territory to you? OR Tambo International is a hive of shops, activities and leisure facilities. Fulcrum Group’s Kurt Solomon and Antoinette Shand point out some cool facilities that even the seasoned traveler may not know about in the second installment of our Airport Navigation 101 series.

Lastminute.com • Can’t fly without a travel vaccination? Not feeling great? Need a company medical or forgot your prophylaxis prescription in the hire car? The ARWYP Airport Clinic can be found on the ground floor of the South Wing, open 24 hours a day with no appointment required. There are also two convenient Link pharmacies where you can get prescription drugs and cute travel-sized toiletries. One is located on the retail level next to Nando’s, and the other on the right hand side of Terminal A security (next to Nedbank).

• A nother nifty service is that of the South African Police Services (SAPS). If you need certified copies of documents or an affidavit, you’ll find them in terminal B in front of all the check-in counters.

• Forgot to buy a gift? If you’re looking for something for the kids, Poetry by Toys has electric trains, helicopters, fluffy dogs that bark and take themselves for a walk, and many other gadgets to keep the young ones entertained. You can’t miss the kiosk as the toys are demonstrated in the passageway close to terminal B security. For the more discerning buyer, there’s also a Ferrari pop-

up store across from Markhams that features impressive corporate gifts.

• At the South African flag souvenir store, you can pick up a rugby jersey for R740 (a bit pricey, but it’s the real deal) as a memory of South Africa for overseas clients, or even if you forgot yours and you’re on your way to Newlands for a Springbok Test match.

• If you are overweight (your bag, that is!) and need another bag to spread the load (often seems to be a problem for me), go to the Luggage and Leather area, also situated in the little passageway on the retail floor (they also have bag locks).

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Need to work?

• There is free Wi-Fi across the airport in hot spot areas. The deal is that you can get 30 minutes or 50 MB (not that much, but you can buy extra credit online). To access this, connect to ‘Always On’, click on ‘Complimentary Access,’ register and follow the prompts to fill in your information.

• If you need to do a presentation or business meeting that requires a bit of privacy – and the Mugg & Bean just won’t cut it – the Bidvest Lounge on the far side of the departures retail level (next to the Keg) is just the place. The full day session includes lunch, coffee, muffins, pens, notepads, free parking and obviously use of the boardroom

Convenience You probably would have seen Bag Port before (the guys who cling wrap your luggage) as they are dotted all over the departures area.

But what you might not know is that they also offer a storage facility for anything from bikes to documents, a lost property service, and MailandFly, which assists you when you have an item that you can’t take through security. Leave it with them and use the tracking number given to organise the delivery of it at a later date as you’re bound to be in a rush. Talking about luggage wraps, don’t forget that if you fly SA Express, this service is complimentary.

• Did you know that if you pre-book your parking you can get up to 50 per cent discount? Go to www.airports.co.za, and follow the links to the Parking and Online booking pages. It’s 50 per cent off for five days in advance, 40 per cent off for four days and so forth (with 24 hours in advance being 10 per cent off), Note that this only applies to Parkade 2 (North) and Level – 2 (Basement).

• There are also many options for valet parking

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services that will meet you at departures, collect your car, give it a clean and have it ready for you at arrivals. A few that come to mind are: Executive Carport Valet Parking, Parkvia, S.U. Parking, Mr. Parking.

• Another handy thing to remember is that the Vodacom store has a facility for ‘quick charging’ your phone, iPad or any other device. It costs R20 for 30 minutes but will be worth the cost if you’re expecting an important call (this is underneath the escalator behind terminal A security).

• Right next door to this is Levingers. Here you can have clothing dry cleaned (in 24 hours), your shoes polished for R51 (which seems a bit steep compared to the guys at domestic security who’ll do it for R20), have your trousers altered or have keys cut (while you wait).

• Need a passport photo or can’t wait to get your holiday photos printed? Capi (photo and electronics) can do this for you in less than 30 minutes. They also have dongles, flash sticks, car chargers, GoPros, binoculars and many other electronic gadgets that you might need in a hurry.

facilities, at a reasonable fee of R670 pp.

Half day includes only coffee and muffins and is R375 pp (but you can add lunch for a little extra) and hourly sessions are charged per person at R120 (with the coffee and muffins). Lelanie, the conference coordinator is incredibly helpful and bookings can be made at www.bidvestlounge.co.za.

• The best coffee is no doubt a matter of opinion, but with Illy being coffee specialists, you can’t fault them for being first choice.

Find them at the bottom of the escalators as you head to Terminal A. If you’re looking for a change of scenery, Fournos also serves Illy coffee, and for those concerned about the environment and health, the Woolworths deli serves organic coffee (on the retail level).

Serious treat

I’ve got time!

• It’s not difficult to spend some hard earned cash on ultra luxury items as O.R. Tambo caters for every need. Stogies (in the retail level passageway), has a R410 cigar, the Cohiba Siglo VI and a bottle of Johnny Walker Blue Label for a mere R2 500.

• The Ocean Basket’s champagne and oyster deal is sadly no longer available, but you can indulge in a glass of Moët or Veuve at R150 or R680 for the bottle, with an oyster platter of 12 for R129. If you’re not an oyster fan, the Mikoto sushi platter (R330), made as you watch, looks rather appetising and definitely needs to be shared.

• The viewing deck just above and between terminals A an B has a beautifully-crafted statue of O.R. Tambo himself, which was presented by Thabo Mbeki on renaming the airport. Go take a look.

• If you need a quick haircut or shave, the Adeva Barber Shop on Level B1 offers these services, but it seems that this is for men only (sorry, ladies!)

• Like most airports, O.R. Tambo has prayer facilities. The Christian chapel hosts mass every Sunday at 15h00 and can be found on the second floor in the South Wing of departures and the Muslim prayer rooms (there are separate male and female rooms) have Jumma every Friday and are located near the barber on Level B1.

• A host of places offer complimentary newspapers and magazines. The best selection can be found, surprisingly, at The Keg (both business and fashion) with Mango and SAA also handing out The Times and The New Age. Newsstands can be found scattered across the food hall.

• On the topic of The Keg, if you feel like a draft and a good old-fashioned pub grub (pot pies, bangers and mash, the works), this is the only place to go.

• Smokers have a separate cigar and smoking lounge where they also sell cigars. A Cohiba Siglo II goes for R320 and is a shorter version of the one found at Stogies (which is significantly more expensive). To compliment the cigar, the Hennesy XO cognac will go down smoothly. If you’re more of a whisky fan, they also serve Johnny Walker Blue on the rocks (or however you like it). It’s also a great place to work or have a more relaxed meeting as it offers quieter nooks away from the hustle and bustle of the food court with plug points for laptops.

• A gym workout between flights might be just what you need after or before sitting

for a long period of time. Phela-Live Wellness Centre has group classes ranging from spinning to aerobics and yoga, a gym facility as well as Camelot spa, if you’re in need of a de-stress or want to treat yourself. It’s located on the international side of the airport across the road (go to their website for contact details, www.phela-live.com.

• If you are looking for a quick nap or shower, unfortunately there is nothing on the check-in side of the airport (the lounges through security have this facility) but if you are desperate, you can get a daily rate at City Lodge for a nap and shower at around R670.

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Carel Nolte has been a passionate member of the South African insurance industry since 2000. His column aims to educate, cause a smile, instill pride and stimulate debate. He welcomes contrary views and debate and can be reached via carel@comms.co.za.

Kuier with Carel

J

uly is Insurance Conference month – that time of the year when over 1 000 of our industry stalwarts, young guns, party animals, intellectual giants and women who look extra hot in evening dresses, come together at Sun City for three days of networking, learning and having fun.

I have been going to this conference for over 10 years. Granted, not as long as SAIA CEO Barry Scott (not many people can beat Barry for longevity and staying power) but long enough to have strong views on the conference, and a few stories of days gone by. I have heard some people moan at the cost of the conference, the alleged bad presentations and the perceived lack of value. Being a subtle, goeie Afrikaanse seun, I responded, not with disdain and disgust, but rather pointing out that the Insurance Conference, like so much else in our word, is what we make of it. By coming together, David Harpur from the IISA, Justus van Pletzen from the FIA and Barry Scott from the SAIA, with their teams, have smartly combined resources and increased the pool of attendees and contributors. As such, if you are open to it, this is the premier networking opportunity. You can't but help bumping into a myriad of people to learn from, share ideas, have fun and celebrate our industry with.

Some of the presentations could do with some jazzing up, however, if one takes the time, and gulps down sufficient coffee to help support recovery of the previous night's over-indulgence, both the international and local speakers provide much food for thought. Based on personal experience, I can confidently say that if you read between the lines, you could get a good heads-up on what our industry leaders have planned. This year we have M&Fs Raimund Snyders taking the stage. Those who think that the green giant is out for the count, may get a rude awakening from Snyders who, by the way, can often be

seen running at the Conference – being a keen marathon runner. Join him for a jog and get the low down on Comrades and Old Mutual's plans with M&F. Of course, the Conference is not only about the formal learnings in the plenary sessions, as much networking and fun is had at the evening functions.

The highlight has got to be the annual Tracker Party. With the theme a closely guarded secret until Michael, Sandra and the team release it, we never know what surprises they have in store for us.

Tracker contributes so much already to our industry and this significant sponsorship is another way.

One favourite theme was four years ago when we celebrated the World Cup and Blake and Michael from RISKSA arrived with pieces of a soccer ball super glued to their bodies. Luckily they had some willing women to help rip the pieces off. They are still not sharing what else was ripped that night.

One of my favourite stories at Sun City is one at my own expense. Having proudly remembered my room number all through being ‘forced’ to party with the Genasys team, I was very frustrated to have my key not work. Much was my embarrassment when told that I had the right room number, just the wrong hotel. Subsequently, I only stay in the Cascades.

Of course, there are many other conferences in our industry, each with its own identity. SAUMA's annual half day conference at The Campus is known for its goody bags for instance. And, if you haven't yet heard, COSA, publishers of RISKSA, are hosting a number of pop-up conferences to cater to our changing world and needs. Whatever your role in our industry, try and attend as many of these as you can, and give feedback to the organisers. Be sure to share what you learn at the conferences with your family and colleagues. This is the best way to build the brand of our industry.

Please stay in touch via carel@comms.co.za, and look out for August’s column where we learn a bit about World Cup feedback and other insurance stories from Brazil.

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