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

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contents MARCH 2014

10 20

Hello sir and how are you?

The wave of current regulatory change, costly and complex though it is, may just be the best thing to happen to your call centre operations and customer relationships.

All hail

The 2013 hailstorms in Gauteng unleashed another trail of devastation and claims on insurers and subsequently reinsurers, even greater than the 2012 storms which wreaked havoc in the Highveld. RISKSA investigates whether this will put hail cover on ice going forward.

20 |

short term

20 / All hail 24 / Commercial green 36 / The sum of its parts 42 / Part of the problem

Like us on FACEBOOK / RISKSA

50 |

medical

50 / Medical malpractice under the knife?

56 |

long term

56 / Working around exclusions 60 / Moving from rule based to risk based compliance

62 / 50 is the new 20. So what about retirement?

70 | managing risk

114 |

130 |

travel

114 / State-of-the-art investment

130 / Car hire with benefits

76 / Hijack: How to deal with the crime that is not declining

120 / Buying the farm â&#x20AC;&#x201C; fractional game farm ownership

134 / The RISKSA guide to business travel in Africa (Part 2)

career

84 / Good data governance ensures compliance and competitive advantage

124 / Wunderbar â&#x20AC;&#x201C; the Mercedes E63 AMG S-model 126 / Defining thin air

88 / Investing in learners helps cut the cost of compliance 100 / News 104 / Events 106 / Barry Scott: A tale of two offices

70 / Demystifying cyber risks

84 |

ASSETS

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their existing processes and systems, or compromising their independence. Want the best of both worlds? Contact Renasa today on 0860-RENASA or visit www.renasa.co.za. 5

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Dearreader

As I write this, our country’s political parties are all jostling for position ahead of the elections. The ANC, in a spectacular display of poor PR, hosted its supporters to a lavish performance in Tembisa last weekend, which included headline musicians Uhuru, and DJs Shimza, Sbu and Black Coffee. There were Mini Cooper demonstrations and even the party’s biker club roared into the Makhulong stadium, the biggest in Tembisa. A short distance away, in the much more modest Mahlareng stadium, Julius Malema’s Economic Freedom Fighters launched their manifesto with a message to the poor that hit home. The irony of the largesse on show at the ANC event was not lost on the EFF members who lapped up every (improbable) promise made by the leadership. Here was a party that understood their plight even if their solutions might be impossible to implement.

had denounced Yanukovych and the military had promised support for the opposition, did things seem to pull back from the brink of civil war. Ordinary citizens had achieved their victory.

Halfway around the world on the same weekend, extraordinary events were unfolding in Kiev in the Ukraine, as president Viktor Yanukovych was forced into exile by rioting opposition members. Only on the Sunday, after a special sitting of parliament

Enjoy the read.

Back home our economy is faltering. The prospect of more interest rate hikes, coupled with new indirect taxes like e-tolling and a weak Rand forcing fuel prices up all point to a challenging period ahead. Service level protests are increasing in both number and violence across South Africa. We ignore our country’s poor at our peril. I’m really chuffed with our content this month, my team has really delivered across every section of the mag. Take a look at our focus on call centres; why good data matters; and why our insurers need to keep up with green.

Hello sir and how are you? Sarah Bassett

10 2

Between my cellphone service provider and the na different financial services companies I have bee phone client of over the years, I get a lot of annoying only calls. “No, I don’t need a cellphone contract, the already reason you can speak to me right now is that I Or, “As have a cellphone contract. With your company.” the car/ I told you last week, I am perfectly happy with life/household cover I have, thank you. Please not stop calling me,” I seethe, trying to remember to shoot the messenger.

nd that’s the thing, of course. When I hang up the phone, grumpy and irritated, I don’t remember the name of the sales operator. I remember the name of the company. This is why the wave of recent and ongoing regulatory change, costly and complex though it is, may just be the best thing to happen to your call centre operations and customer relationships. In the long run, it could even save you millions.

Changes on the cards The introduction of the Protection of Personal Information Act (POPI), which will come into effect this year, will have significant impact for call centres as the front end and data gathering arm of many insurance companies. “This is an extension of the pressure brought on from the Consumer Protection Act, which was the first piece of legislation that tried to reduce the amount of spam consumers receive. POPI closes the loopholes and introduces specific consequences,” says Gary Alleman, managing

director of data solutions specialist, Master Data Management. “For large insurance and financial services companies, it will cost millions to become truly compliant. Many may choose to take the risk of not being fully compliant, or may not know that they are not properly compliant. Checking that a financial company is compliant would be a massive undertaking. Ultimately, there is a limit to the act’s practical enforcement,” says Petr Havlik, managing director of CyberPro Consulting. “But where there is blatant abuse, such as unwanted direct marketing, enforcement will be straightforward,” he adds. As the front end of many insurance businesses and the portal for critical data collection, this makes compliance within the call centre a crucial starting point. Companies need to find a middle ground and decide on the extent to which it will overhaul systems for compliance, says Havlik. And while the task is costly and onerous, the benefits go beyond compliance.

centre always has permission when contacting clients, that retained data is protected, and that those who wish to opt out of databases can be deleted from the entire system immediately upon request.” “In order to implement any data governance process, companies need to understand what personal information they hold as a business and how it used. How personal information is captured, who is responsible for it and who has access to it. If a company is not clear on all these steps, it is simply taking a shot in the dark in attempting compliance,” says Allemann. Data security has been on the radar for many years for insurers, and for the most part these systems are in place, according to Havlik. But managing the other aspects of the outbound process requires a company to have one view of a client’s complete data. Instead of having data stored in multiple places and systems, the information needs to be centralised and fully integrated.

What does it take? “There is sometimes a misconception that POPI is predominantly about the storage of information and data. It is designed to govern the entire data lifecycle; from how it is captured to how it is used and stored over its lifetime,” says Allemann. “The biggest impact is, in fact, not the privacy implications, but the requirements around data quality,” he continues. “To get fully compliant is a journey,” adds Havlik. “Organisations need to decide to what level they wish to be compliant and in what time frame this needs to be completed. Then, the first step should be to fix the outbound processes; ensuring that the call

Without this, a client’s information can never be fully deleted upon request, and complete information cannot be quickly called up if a client requests the information the company holds on them. “If information is stored in multiple places, lists will be repopulated with old data every few months, and customers deleted from the contact list will creep back on to it,” he explains. (Aha! This must be why I keep having repetitive, frustrating conversations with sales operators.) The data quality requirements of the act stipulate that information cannot be kept

Data held must be accurate and must be ‘fit for purpose’. “Even technically correct data is not suitable for every purpose and business. Information which might be perfect data for marketing purposes might be poor-quality data for billing,” explains Alleman. “Insurers may need to watch that they are not holding incorrect or out-of-date information which could negatively impact a client’s premium. For example, the annual depreciation of a car’s value will need to be updated in the records each year. If out of date, this information could now be classed as bad data.” In these areas, technology in a call centre environment has tremendous power for assisting in compliance. According to Steve Symes, chief executive officer of Genasys Technologies, the administration system should be the centre that drives efficiency. “The more you use the system to automate processes and keep records of the interactions between staff and clients, the less it will cost in management overheads, lost leads, inaccurate records, compliance penalties and possible professional indemnity claims,” he adds.

Cost saving: In the traditional insurance call centre environment, the bottom line comes down to getting things sold; the more red tape an agent has to explain to a client, the less likely the sale. For this reason, critical information is often left incomplete at the sale stage. “We’ll often see ‘tba’ in the ID number category of forms and other such fundamental gaps. New systems will need to enforce data cleanliness from the start by requiring that these fields are completed and that e-mail and postal addresses are validated. While this may seem like an obstacle to sales, it will save significant expenditure. Currently, there is an entire industry just in cleaning and validating poor quality data,” Havlik says.

At O'Keeffe effe & Swartz, we're obsessed about direct marketing.

Quality data can yield savings in more obscure ways, too. “One company we worked with had invested substantially in an IT system to overhaul its billing system, but then found it didn’t solve the billing problem. The problem was the data and not the system at all,” Allermann adds. 

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These changes require a significant consulting project to put the data governance and stewardship protocols in place, to establish where all current data lives, and to build the new software processes and integrated system. While this is a costly exercise, the pay-offs for businesses are huge.

statistic, for top 100 companies, a 10 per cent increase in data access and quality will yield an average $2 billion increase in revenue,” Allemann reports. “It’s about reducing the number of e-mails sent to wrong addresses, saving on time spent correcting information, and building better relationships with clients and customers.”

GLOBA L

indefinitely. “Typically, insurance call centre systems will keep quote data forever. This needs to change to ensure this information is routinely purged,” says Havlik.

The upsides Customer relations: “Enhancing the quality of consumer data will have a substantial, positive impact on a company’s relationship with the consumer, ensuring that call centres aren’t annoying and alienating potential customers who do not wish to be contacted. Instead, centres call those who are interested, using the right information to get the most from that contact,” Havlik explains. Service differentiation: “There are definite financial spin-offs to understanding your customer base and this required the right systems,” Havlik emphasises. “It is difficult to put a specific value on these benefits, but in a market so focused on price, customer service is critical for differentiating a company. While not all companies will choose full compliance, the standard is likely to improve across the board. Companies that get left behind will be in stark contrast to those with improved systems.” Efficiency: The systems and changes required for compliance will improve profitability by increasing efficiency dramatically. “As a broad

Consequences If found to be in contravention of POPI requirements, a company could: • Suffer reputational damage. • Lose customers and fail to attract new ones. • Pay out millions in damages to a civil class action. • Be fined up to R10 million or face 10 years in jail. “The first penalties are not likely to be jail sentences for directors. There will likely be a grace period. But companies should be wary of not taking it seriously. The key is to understand it holistically and that it goes far beyond data storage. It is a data governance bill,” notes Alleman.

With over 20 years experience as an outsourced service provider we deliver superior sales results to our clients, with outstanding quality sales performance results. At O'Keeffe & Swartz we're serious about sales.

www.oks.co.za O’Keeffe & Swartz is an authorised financial services provider

Treating the customer fairly “An outbound, sales-driven call centre in the financial services arena with many hundreds of seats is one of the riskiest and often most expensive arenas to manage as far as compliance and supervision is concerned,” says Nico Barkhuizen, head of compliance at O’Keeffe and Swartz, specialist outbound sales centre. “In the United Kingdom, maintenance firm Homeserve is facing a £34.5 million fine for the wrongful selling of home insurance cover for burst pipes, broken boilers and blocked drains. Homeserve was also fined £750 000 by the British regulator in 2012 because its sales operation was guilty of harassing consumers with silent and abandoned calls. As South Africa emulates its Treating Customers Fairly (TCF) module on that of the UK, the case of Homeserve should be seen as a wake-up call by South African firms to take the legislation seriously,” warns Saya Pitham, brand and marketing manager at Envision Underwriting Managers. “In the call centre environment, the atmosphere is usually sales driven and performance is rewarded with incentives that focus on volume. This creates a conflict of interest for the business, as maintaining consistently high sales targets becomes a challenge when trying to balance quality sales with compliant sales,” notes Clive Killian, head of business development at Envision Underwriting Managers. “This talks directly to TCF, which focuses on changing the behaviour and underlying manner in which business approaches insurance sales right across the value chain and all of its processes,” Killian adds. “Technology can assist in compliance from both a system level and with some of the less tangible aspects which need to be managed through quality control and education,” says Symes. For example, Genasys SKi, an enterprise-wide insurance software platform, has several features that enable call centres to monitor and improve the quality of their operators. From a quality perspective, SKi interfaces with several call logging systems to link their call logs to specific clients and interactions, making it easier to do spot checks, compare actual policy info to telephonic interactions and more. All entries into the application are then fully auditable. “One of the biggest risks for an insurer relating to the outsourcing of call centre operations lies in the fact that the insurer does not have direct control over the call centre functionality and the operators as it would have had if it was housed within the insurer,” says Johan Henning, financial regulatory partner at Webber Wentzel.

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“Both the Binder Regulations and the Outsourcing Directive place obligations on insurers to ensure that call centres meet fit and proper standards and places an ultimate liability on the insurer for the binder and outsourcing functions performed by the call centre. The insurer is ultimately liable for the functions of the call centre operators but, in an outsourcing environment, does not have the same level of control,” Henning says. “In an environment where telesales calls are not monitored or assessed, the risk of businesses being exposed to problematic sales become much higher,” notes Delia Gross, Innovation Group’s acting managing executive for its In-Touch Contact Centre (Outbound). “One way in which call centres are able to mitigate the risk of problematic sales is the implementation of quality assurance (QA) departments. Through regular QA audits, they are able to identify any calls that appear to be border-line misleading and rectify these problems. Following on from the QA process, agents should be checked to determine if there is a trend in such behaviour or if it was an isolated occurrence,” she adds. Part of the challenge is the impersonal nature of call centre exchanges. A sales consultant has

no way of directly gauging a client’s state of mind, where they are and what they’re doing. For the client, the interaction is similarly impersonal and this can easily cause a level of irritation and mistrust between the parties. “This severely compromises free discussion and questions around a product and can easily hurry a client into a decision without fully understanding the product, without ill intent on the part of the provider,” Barkhuizen points out. “Immediate caution is called for at the initiation of any telephonic interaction with a prospective client in the current regulatory environment. This is where a properly thought through, structured and comprehensive approach to call initiation, quality monitoring, sales verification, management and overall governance speaks to its own value,” he adds. “These factors have an impact on costs and it is only the most efficient and effectively run call centres that can operate compliantly in this arena.” “Close co-operation is required between the sales floor, the compliance department and the product providers in order to ensure that all sales made are compliant sales through

a highly structured and focused process and infrastructure,” Barkhuizen continues. Integrating the pillars of TCF should not be an afterthought, notes Pitham. “With careful strategic planning and full backing from management, bringing TCF into the way we do business (internally and with our partners), will make for more sustainable sales and happy customers who stay on the book longer,” she emphasises. “As margins on products are reduced, call centre operators want to be able to diversify across products and be able to service financial services in their environments. As part of embracing the legislation, Envision highly recommends that key management are RE compliant,” Killian advises. “There are a number of reputable institutions currently catering specifically for the call centre industry. Within the insurance sector, continuous learning is required as there are always new developments in the industry. While technology and software will perform a key role in helping manage the risk, compliance and performance of a business, this needs to form one component of a broader overhaul that is necessary regarding how insurers do business,” Killian says. 

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Binder regulations and Outsourcing “One of the biggest challenges for insurers and call centre operators, especially those call centres not forming part of the operations of the insurer, relates to the payment of consideration for the services rendered by the call centres,” explains Henning. “It is common for call centres to charge insurers a fixed rate per sale which will not necessarily comply with the maximum commission allowed in terms of the Longor Short-term Insurance Acts. Claw backs will also not be applied in respect of these amounts paid,” he says. The relationship between the insurer and the call centre operator must be correctly structured to ensure that the consideration payable to the call centre by the insurer complies with the applicable legislation. “In this regard it is important that the Commission Regulations, Directive 159 dealing with outsourcing and the Binder Regulations be taken into account when structuring these relationships to ensure that the service rendered is correctly identified as either an intermediary service, outsource service or binder function, and that the correct consideration is paid taking into account that an insurer may not pay twice for the same service,” says Henning. The call centre in many instances concludes policies on behalf of insurers and performs binder functions by doing so. It is necessary to ensure that all the agreements between the insurer and the call centre meet the

requirements of the Long- or Short-term Insurance Acts and the Binder Regulations issued pursuant to the two acts. It can be particularly difficult to distinguish binder functions and incidental functions from intermediary and outsourcing functions which are relevant in a call centre environment.

service provider licence worth to my organisation and its employees? Certainly, this is true. It is refreshing, however, that in this case the benefits go far beyond simple compliance. With dramatic impacts for business efficiency, marketing efficacy and, happily, customer experience, it is well worth getting right.

In this regard, technology in a call centre environment has tremendous power in assisting in compliance, suggests Henning. â&#x20AC;&#x153;Through technology it is possible to ringfence certain portions of a call centre for dedicated use in campaigns for a specific insurer. The insurer can sign off on the scripts used for its particular campaign and the call centre operator can monitor calls to ensure that they are in compliance with the script and the requirements of the insurer. It is also possible to compile monthly reports for submission to the insurer for monitoring and compliance purposes, but specifically to meet the requirements set out in the Binder Regulations and the Outsourcing Directive in respect of agreements between insurers, and the binder holders and independent contractors,â&#x20AC;? Henning explains. Ultimately, as Barkhuizen points out, when it comes to compliance, regardless of its cost, you have to ask yourself: how much is the financial

All hail SHORT-TERM

Christy van der Merwe

20 2

The 2013 hailstorms in Gauteng unleashed another trail of devastation and claims to insurers and subsequently reinsurers, even greater than the 2012 storms which wreaked havoc in the Highveld. RISKSA investigates whether this will signal hail cover being put on ice going forward.

hen October 2013 passed by without any significant hailstorms in Gauteng, short-term insurers held their breath hoping they might be spared a repeat of the 2012 storms. However, the area was hit even harder by two major storms; one on 11 November affecting mainly the East Rand, and a second storm on 28 November, which battered the West Rand. “Inevitably, if these severe hailstorms become an established pattern, they will impact premium rates, coverage and terms for hail cover such as excesses,” says Edward Gibbens, executive head of broker distribution at Santam. He highlights that there is great uncertainty around the pace and onset of climate change impacts. What compounds the issue is the rapid urbanisation that is, and has, taken place over the last few decades and the extent to which this has magnified the vulnerability of urban areas to the perils associated with climate change, namely floods, hail, hurricanes, fires and so on. Indeed, the urban densification in Gauteng plays a major role in the constantly rising

claims. Anton Botha, head of procurement at Hollard, adds that the general view from the reinsurers seems to be that the hailstorms were not particularly unusual events. What has changed is the infrastructure development that has taken place particularly in Gauteng; more people, with more vehicles and homes, in a smaller area.

Possible exclusions? When questioned whether hail cover might be excluded or underwritten separately in future, Cloud Saungweme, chief claims officer at Zurich South Africa, affirmed that this was a possibility. “It appears as if other underwriters are reviewing their policy wordings to that effect. Some direct insurance companies exclude hail cover in their standard product and the customer needs to select additional cover for hail,” Saungweme adds. The South African Insurance Association (SAIA) notes that currently there are no discussions in this regard at an industry level, and insurance companies determine their cover and underwriting rules individually.

Botha states that Hollard’s philosophy is to provide cover against those eventualities where its policyholders require protection. “Hail is one of these occurrences and we are certainly not looking at excluding hail claims from the cover that Hollard offers and provides to our clients. Hail, flood and storm damage are priced separately in any event and, to the extent that insurers have adverse claims experience or where claims are higher than the risk that has been priced for, premium adjustments in respect of these particular risks may be required,” he reiterates. Sean Jackson, head of Auto & General Brokers, explains that on financed vehicles, the hail peril is automatically included in comprehensive cover. If a vehicle is not financed and a customer selects comprehensive insurance, the customer will be given the option to include the hail peril. A customer may therefore decide that even though he has comprehensive cover for his non-financed vehicle, he may not want to insure against hail damage. He adds that Telesure’s direct offerings follow the same principle. Auto & General has no intention of changing its position on this, he confirms. 

Gibbens notes that over and above more frequent hailstorms potentially impacting premium rates, coverage and terms for hail cover such as excesses, insurers may move to incentivise proactive risk management with benefits to policyholders who mitigate their risk through use of hail blankets and hail nets.

Proactive risk management Jackson says that insurers learnt a lot from the hailstorms that ravaged Gauteng in 2012, leaving a multimillion Rand trail of destruction. “In 2013, when Gauteng was again hit by violent storms, Auto & General was prepared. We were able to offer our customers an allround improved claims and repair experience. Our customers definitely benefited from our learnings and will continue to benefit as the hail repair process continues,” he states. Gibbens notes that the uncertainty associated with climate change and urban densification makes it impossible to know whether the industry is adequately geared. “Technology, climate science and geo-mapping are improving preparedness, but the uncertainty will almost certainly bring shocks and surprises to the insurance industry in future,” he adds. Despite these challenging conditions, Gibbens says that technological developments have generated opportunities for effective individual risk profiling like never before. This is being driven by access to data of unprecedented proportions. The opportunity lies in using this to incentivise clients to reduce their risk exposures and for this to be reflected in the pricing and terms of their insurance. “Now, more than ever before, the industry must promote risk savvy behaviour and communicate to our clients that insurance is a risk management partnership between policyholder, broker and insurer. To the extent that this partnership is successful, the cost of insurance can be contained to affordable levels,” Gibbens says. An example of Santam implementing this type of proactive risk management is the bulk-SMS system that is being used. Clients in Gauteng received SMSs warning them that a hailstorm was approaching and to move vehicles

22 4

undercover or take precautions to protect their vehicles and property as much as possible. Donald Kau, head of corporate affairs at Santam, explains that partnering with Weather Africa, Santam piloted weather alerts from the middle of September 2013 with about 55 000 policyholders concentrated mainly in Gauteng and Durban. Santam is looking to extend this to other areas. “Coupled with our brand campaign around improved risk

The losses for the industry following the two major 2012 hailstorms in Gauteng were estimated to be R1 billion and some 25 000 claims were filed across all insurers.

Taking stock

Mohamed Motala, non-life MD at reinsurer Scor Africa, notes that the volume of claims and backlogs at panel beaters following the 2012 storms have meant that not all of the 2012 claims have been settled. Scor is already paying out for the 2013 hail claims. “Reinsurers will pay,” reiterates Motala. However, he adds that pricing to insurers will be impacted going forward in 2014. The overall cost of the storms in 2013 is still being established; however, it appears to be significantly ahead of the 2012 storms. Estimates vary, but industry figures will become clearer as more players report. A muted view came from Scor, which expects the storm damage for the 2013 storms to be about R1.5 billion. Munich Re Africa estimates losses of R386 million, and R1 billion from the two storms respectively, and adds that many companies faced negative run-off from the 2012 late reported perils claims. “The bulk of the losses from the 2013 storms have been picked up by reinsurers. In South Africa, the weather perils caused serious value destroying losses for shareholders from motor and agriculture, and recovery to profits requires a sense of urgency,” says Munich Re non-life executive manager Baravand Madhav.

management, as well as a growing social media footprint that is further engaging with policyholders and the public, the feedback from our policyholders has been positive. It is worth noting that the impact of severe weather, especially hail, floods and the consumer anxiety around their continued ability to claim, makes weather alerts a valuable service to policyholders in assisting them to manage their own risk better,” says Kau.

Looking ahead, the economic parameters indicate that the difficult market environment is unlikely to change anytime soon. Therefore, all market players should exercise discipline in the forthcoming monthly individual risk renewals and treaty reinsurers in their renewals at 1 April and 1 July, and beyond, adds Munich Re nonlife executive manager Boniface Chiwota. Santam’s numbers indicate total claims costs in the region of R300 million from the hailstorms recorded in November 2013. “The total market losses are about R500 million for the 11 November storm and R1.5 billion for the 28 November storm. These storms would have meant substantial reinsurance claims for most companies because in most instances their catastrophe reinsurance treaty deductibles would have been exceeded. These vary from about R10 million to R100 million, depending on the size of the company,” adds Santam. Hollard states that the total market losses are between R800 million and R1 billion for the 11 November storm, while the 28 November loss from a market perspective is considerably larger – at R1.6 billion to R2 billion – than the 2012 loss, which was estimated to be about R1 billion. It is hoped that in gaining experience with hail catastrophes, lessons are learnt and proactive risks measures can be put in place, not only to ease claims flow and hail damage consequences, but to assist brokers and clients to prepare for the storms and avoid damage as much as possible.

Commercial

green Is commercial insurance keeping up with greening trends?

Christy van der Merwe

24 8 2

In addition to the feisty competition among commercial insurers, both through brokers and direct, the macroeconomic factors impacting business in South Africa ensure that there is never a dull moment in this field. As well as the political, economic and social risks that keep insurers on their toes, a rapidly evolving risk which could have greater insurance ramifications is that of environmental compliance – the green issue.

here are a healthy number of carrots (tax incentives, monetary savings and reputational spin-offs) and sticks (increased regulation, legislation and tax) being used to drive companies towards greener practices in South Africa. While the insurance industry puts greater focus on dealing with the impacts of climate change that are already starting to be felt globally, it should also prepare to respond to the ways in which many companies will choose to mitigate carbon dioxide emissions and climate change. It is something that the commercial insurance sector cannot afford to ignore and must respond to. As companies strive to reduce their environmental footprint, daily operations are being ‘greened’. A retailer, for example, may procure services from a logistics company which is deploying green fleets experimenting with alternative transport or biofuels. A telecoms operator may use renewable energy at remote base stations, or a bank may introduce its own wastewater treatment plant at its corporate head office. It is important to understand if changes such as these impact insurance. A particularly pertinent green impact on the commercial insurance sector, is that of green building, which is starting to play an increasing role in property development in South Africa, as companies strive to green their building portfolio to leverage green savings and benefits. 

International trends

Reasons insurers’ promote green In the US particularly, non-governmental organisation Ceres reports that hundreds of insurance initiatives, including coverage for green buildings, renewable energy, carbon risk management and officers’ liability are being offered to tackle climate change and rising weatherrelated losses in the US. It is reported that numerous insurers offer premium credits and discounts for owners of green commercial and residential buildings, rated through the US Green Building Council’s Leadership in Energy and Environmental Design (LEED) rating or Energy Star certification. This is because green buildings are viewed as more resilient and safer than conventional buildings, reduce energy use and perform better in the long run, leading to a decrease in losses and greenhouse gas emissions. For example, air conditioners or heaters which don’t operate as often are less likely to have mechanical breakdowns, and leak detection equipment could prevent substantial water damage down the line. Allianz subsidiary in the US, Fireman’s Fund, provides green insurance – a

commercial green insurance product, which has two major features: coverage developed specifically for certified green buildings, and coverage to upgrade traditional buildings with green features following a covered loss.

The Fireman’s Fund states that green features impact the critical building systems that have shown to be the most significant causes of property losses. Actuarial cause-of-loss studies demonstrate that the number one cause of loss in buildings is electrical fires.

The certified green building coverage recognises that buildings certified under the LEED rating systems (and other similar programmes) often have building features that are not fully protected by standard property policies. For example, plants on a vegetated roof are generally subject to a small sublimit and restricted coverage. Underground equipment that is part of alternative energy and water systems is usually defined as “property not covered”, as many policies restrict coverage to within 76 metres of the insured premises.

This is closely followed by plumbing leaks, building envelope issues and heating, ventilation and cooling problems. All of these building systems are made greener and safer through green building practices.

These shortcomings mean that the green building owner’s investment may not be properly protected. The certified green building coverage addresses those issues with coverage expansions. Fireman’s Fund also includes a rate credit for LEED certified and Energy Star-rated buildings, as it believes these buildings will experience fewer and smaller losses.

Furthermore, the commissioning process brings an independent third party into the building to make certain that these systems have been installed according to specifications and are functioning properly. Another correlation is that of building age and risk. Newer buildings (less than 20 years old) generate stronger underwriting results than older buildings. As buildings and their systems age, they are likely to experience an increasing frequency of severe losses. However, older buildings with newer or renovated systems (electric, plumbing and roofing) perform much more like newer buildings. Green upgrades bring new, safer systems into older properties, improving both their operating costs and risk profile. There is, of course, another side to this coin, because certain green practices have the potential to increase risk. Vegetated roofs, new and untested technologies, misapplication of proven techniques in new situations, unprotected storage of recycled material, solar photovoltaic panels, new forms of alternative energy generation and storage, and other emerging green practices present a new generation of risks that insurers need to understand. The increase in green building codes, also in South Africa, brings with it greater risks of regulatory non-compliance. 

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Local context Specifically tailored green insurance does not exist in South Africa, however, the shortterm insurance industry lauds certified green buildings as a leading indicator of best practice sustainable development. As ever, the developing South African market presents an entirely different set of circumstances to developed nations. While Green Star SA-rated buildings, which receive certification from the Green Building Council of South Africa (GBCSA) would almost certainly be less risky buildings – not all green buildings are created equal. The same concerns that exist across the board with property development, construction and engineering sectors, are emerging relating to green initiatives and technologies. Green building technologies and initiatives used in Green Star SA-rated buildings will use adequately certified products and equipment. However, it is the crooked and corrupt element that creeps in under the radar, which damages the industry as a whole. “The whole industry including underwriters, local council, architects and engineers needs to jointly take responsibility to ensure that these new green trends are correctly and adequately responded to,” says Hollard broker markets representative Nick Swart. Designers have a responsibility to ensure that what is designed, is up to specifications and constructed safely. There are increasing incentives to go green and underwriters need to be aware of and understand these. Greening initiatives introduce different risks, but they also bring in significant benefits and lower certain risks.

Local concerns Lack of skills, corruption and cutting corners are some of the standard South African issues that are particularly pertinent in this context. Concerns exist that inadequate skills transfer introduces misunderstanding of green initiatives and these technologies. These could potentially open the door for inadequately constructed structures to be signed off as safe for occupancy, when in fact they are not. This could be because the relevant authorities are not skilled in what to check with installation of green technologies, but it could leave additional risk at the foot of the insurer who assumes that they are dealing with a thoroughly inspected property. George Jennings, underwriter at Consort Technical Underwriters, explains that local authorities play a huge role in town planning and property development. There are specific

28 6

statutory regulations controlling the process of buildings and properties being signed off when they are completed. A shopping mall, commercial or private dwelling all need to have an occupancy certificate issued by the authorities which certifies that property is suitable and safe for occupancy.

investigate and establish the proximate cause of the loss,” he notes.

In the absence of any certificate prior to occupancy, the landlord, employer or principal leaves themselves exposed to prosecution in the event of death or injury to any occupant, Jennings adds. The drawback here is the corruption which takes place between local authorities and the contractors or employers. Corruption is rife in many sectors of business but it creates barricades and complexities, leading to a scenario such as the recently collapsed Tongaat Mall in KwaZulu-Natal, which killed one person and left 29 injured.

“We are seeing a large volume of goods coming from overseas (mainly Asian markets) which may not necessarily meet local building standards and regulatory criteria. Certainly, specific overseas markets have been dumping products on our shores at a fraction of the cost of the local products, which is what makes them more attractive for employers and contractors to increase their profit margins. It also allows more affordable building in the lower income sector which is why we periodically hear about problems in some of the low cost housing developments,” Jennings states.

Jennings continues: “From the insurers’ perspective, most construction policy wordings deal with breach in so far as statutory and other regulations are concerned. However, as we move into the green space, the contractual issues between the employer and contractor will be an opportunity to tighten up on statutory and regulatory issues. Moreover, during the design phase combined with the specifications laid down by the engineers and quantity surveyors, the professional indemnity exposure could become a key issue, especially to make sure that materials used in our construction industry meet certain standards. We as the insurers do lean on contract conditions to a greater degree when it comes to claims. We also make use of competent and qualified loss adjusters to

In addition to the potential for corruption, Jennings says that quality control of the products which are flooding the South African market is questioned.

Compounding these issues is the use of unskilled labour, particularly labour that may not understand or be comfortable with the implementation of green technologies, which can, at times be complex. Jennings notes that Consort Technical Underwriters is currently looking at new insurance products to address development opportunities dealing with the changing landscape of technology and the construction and engineering industry, using inhouse intellectual expertise combined with other experienced local and foreign resources. As greening initiatives continue to gain traction in South Africa, it is likely that other underwriters and insurers will move to respond to the increasing demand for specifically tailored  green products.

Environmental sticks A multitude of new and draft environmental laws, affecting industry and the public were published in 2013, and Melissa Groenink of Shepstone and Wylie’s environmental law department argues that this trend looks set to continue in 2014. The new environmental laws published in 2013 relate to a wide range of aspects and are applicable across most sectors. Practically speaking, it is the understanding, implementation and enforcement of new laws which pose the most challenges. 2014 will be an important year for industry and individuals to get to grips with what new environmental obligations have been imposed on them. Substantial penalties for non-compliance exist and could mean imprisonment, fines and shutting down of operations, which may trigger subsequent business interruption issues. Wylie notes that long-awaited amendments to the National Environmental Management Act 107 of 1998 (NEMA) came into force on 18 December. These amendments bring about a number of important changes, particularly in respect of retrospective environmental authorisations and emergency provisions. A new power has also been granted to the Minister of Water and Environmental Affairs to regulate, prohibit or control the production and trade of products considered to have a substantial detrimental effect on the environment. A number of laws published during 2013 are likely to take effect during 2014, while draft laws will be finalised and brought into force. These include regulations relating to alien and invasive species (currently the subject of High Court litigation), requirements for healthcare waste and, possibly, new requirements relating to land use and planning permission from local municipalities. Wylie cautions that recent trends show increased numbers of Environmental Management Inspectors (the Green Scorpions) and facility inspections being

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carried out. It is thus essential for industries, developers and individuals to understand the changes applicable to them, and make operational adjustments where necessary. Dr Birgit Kuschke, from the Department of Private Law at the University of Pretoria, explains that companies with operations and technologies that affect the environment, such as the nuclear industry, the oil and petroleum industries, for the liabilities of waste disposal contractors, operators of waste disposal facilities, transporters of waste, for underground or aboveground storage tanks require mandatory insurance. “Fewer persons would take out insurance for environmental damage caused out of their own free will, if it was not mandatory. The opinion is that first-party property insurance and some cover for liability insurance would be taken out by the prudent operator, yet little cover to remediate the environment would be obtained unless statutorily required,” Kuschke says. Insurers have come to the fore and offer products for pollution liability clean-up costs, environmental liability remediation cover, pollution liability third party injury or damage, through a niche environmental impairment liability offering. This is in line with international practices. 

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O B t i Remgro Millennia Park Stellenbosch

Commercial green building in South Africa

• • • • • • •

Alexander Forbes Sandton

South Africa currently has 36 officially certified, new Green Star SA rated green buildings, ranging from large banking head offices, to district municipal offices, and residential apartment buildings. The Green Building Council South Africa (GBCSA) was established in 2007, and is the official green building certification body of South Africa using the Green Star SA Rating System. The GBCSA developed this locally appropriate rating tool system for office buildings, retail centres, multi-unit residential complexes, and has a public and education building rating tool in its pilot phase. In young green building markets like South Africa, sustainable buildings generally incur a green premium above the costs of standard construction. However, once these markets mature and green building materials and practices become more prevalent, these ‘new market premiums’ decrease and green building can be done at similar costs to conventional buildings.

The comparative immaturity of the South African green building market, means there have not yet been any broad empirical studies on the capital cost impacts of green building locally. However, the local case studies documented in a report from the GBCSA (The Rands and Sense of Green Building) show that the South African property industry can expect cost premiums of a new commercial green building to be between three per cent and 10 per cent.

The majority of reported premiums in the US are between zero per cent and four per cent. In Australia, a 4-Star Green Star building is actually cheaper to build, while a 6-Star Green Star building – signifying world leadership – usually has a premium of about six per cent.

Some of the financial and environmental benefits of green buildings are lower operating costs thanks to savings on energy and water in particular; higher returns on assets and increased property values based on the lower operating costs. Green buildings are also

32 10

viewed as less risky, future-proofed buildings, which can fetch lease premiums.

Green buildings also represent responsible investing, and reduced liability and risk because they are cognisant of, and guard against increasing utility costs and supply constraints, possible carbon taxes and other potential mandatory energy disclosure and regulation. The improved environmental quality of green buildings, with more natural light and fresh air, leads to increased productivity among office staff, with various impacts on profitability. Increased comfort, occupant satisfaction and more flexible work spaces minimise the costs and impacts of churn, and attracts and retains more capable staff.

St A P

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Drive for

user-based motor insurance

Evidence to support the value of user-based motor insurance is fuelling a drive among South African providers to adopt telemetrics technology. While the take-up is still in its infancy, experts say it can help reduce costs and improve driver safety.

Laura Owings

s an information-based business centred on deep customer knowledge, user-based insurance (UBI), offers a potential route away from commodity pricing and towards individualised premiums. In the process, insurance providers see a reduction in risk and margin improvement, says Rhys Collins, head of African Operations for SSP. Calculating premiums based on telemetrics technology that compiles real-time driving data, including drive time, location and style, UBI is a move away from traditional motor premium calculations. The data paints a realistic portrait of the level of risk associated with each individual driver, giving the insurer better insight into their clients’ needs. Certain young drivers, for example, could become insurable based on their actual driving behaviour under UBI cover, while they would be excluded under old model policies. “The benefits for insurers are multiple,” says Collins. “Better understanding of risk and customer segmentation, reduced underwriting and claims fraud, and improving driver behaviour that will actually lower the cost of policy and claim servicing.” As the telemetrics technology behind UBI continues to mature,

the price of implementing and operating the systems is decreasing. With these cost-effective gains, it is understandable that the strategy is gaining acceptance in global markets. Indeed, according to an SSP study of telemetrics trends among 27 global insurers, the technology is “encouragingly starting to deliver on its promises of reliable, accurate data that can be used to design and offer usagebased insurance”. Despite the fact that most of the companies in the study reported some degree of telemetrics activity, SSP estimates take-up is still in its infancy. Collins says the next phase will focus on business processes, customer offers and commercial benefits. Some of those developments may further reduce costs through more efficient and safer journeys for drivers, while other developments will focus purely on the benefits to insurers by encouraging client retention and new recruits. “A well thought out UBI initiative can be seen as a useful retention strategy. Also, the social trend is for customers to be attracted to offerings aligned with more modern technology, and UBI does take advantage

of the latest technology out there in general use,” says Collins. “A recent study in the UK showed that 64 per cent of consumers surveyed agreed to have a UBI device installed to reduce their premiums. There is no reason to think the sentiment is different in South Africa,” he adds. As with any developing technology, telemetrics still poses challenges to businesses struggling to adapt. Typical issues include coping with the sheer volume of data on a technical level, agreeing on the ownership and use of the data within the company, choosing the right telematics software and learning to read the data in a way that contributes to the commercial success of the company. “There is no doubt that telematics creates business challenges around managing large volumes of data and concerns around which model to adapt,” says Collins. “But on the positive side, it is clear that the new data offers a wide array of potential business benefits. Telematics trailblazers are beginning to see profitable opportunities and the challenges lie mainly in the nontechnical areas,” Collins concludes.

The

sum

of its

36 8 2

parts

The pricing, supply and increased sophistication of car parts have changed significantly over recent years. As a result, both the insurance and the repair industries are watching the playing field transform; the need to adapt becomes ever clearer. Dominic Uys

urich Insurance reports that its writeoff numbers for damaged cars have increased steadily from a total of 2 991 cars in 2011 to 3 767 cars in 2013. Hollard also confirms that the company has seen a five per cent increase in its write-off frequency over the past 12 months. This is in part due to the increase in both the severity and frequency of motor accidents on South African roads. “There are far more vehicles adding pressure to already limited infrastructure with less experienced drivers. Insurers were under pressure last year because of this and also had to contend with additional storm and hail damage claims as well,” Debbie George, general manager at Infiniti Insurance comments. This is, however, not the only cause for the increased write-off rate. While downplayed by most insurers, the repair of cars, even with light damage, is becoming increasingly more complex. “Even the most basic vehicles now have air bags; if these are deployed in an accident, together with the body damage the repairs costs often exceed the 70 per cent benchmark for declaring a vehicle uneconomical to repair,” George comments. “With the influx of foreign cars on the roads and the depreciation of the Rand, acquiring parts from international markets can be costly,” adds Cloud Saungweme, chief claims officer at Zurich South Africa. As the Rand continues to struggle against foreign currencies, original equipment manufacturers’ (OEM) prices continue to go up. The outcome of this trend will be felt throughout the industry for quite a while.

Premiums on the rise According to Anton Botha, general manager at Hollard Insurance, the company’s historical data shows a significant correlation between the South African collateral protection insurance and parts prices – much more so than the correlation with other major currencies. Botha states that the timing and total direct impact of weakening currency also depends on the following: • The Rand depreciation against the countries that the parts, paint or vehicles are being manufactured in. For example, deterioration against the US Dollar may be off-set by a strengthening against another currency. • The manufacturing capacity and size of the stockpiles of parts, paint or vehicles at the manufacturers. The general rule of thumb is that the larger the stockpiles, the greater the delay in the effect of a change in exchange rates. • Supply and demand of alternative or second-hand parts through alternative parts manufacturers and save-a-car campaigns. Over the past 18 months or so, there has been a big drive towards sourcing alternative/used parts to repair vehicles that are no longer under manufacturer’s warranty. While Botha points out that an increase in parts prices has played a part in a gradual increase in policy premiums, Gari Dombo, managing director of Alexander Forbes Insurance, adds that the insurance industry cannot simply lighten its own pressures with premiums increases. “In SA it is currently estimated that only 40 per cent of cars are insured and this speaks to the consumer’s willingness or ability to pay

for insurance. To remain competitive and stay in business, insurers have to continually look for efficiencies to keep the price of insurance down,” he says. “One of the measures will likely be a move towards using quality alternative parts. These would be cheaper because they would not be branded for the vehicle manufacturer. Insurers also favour the idea of a compulsory third party property damage insurance that would move some of the insurance costs to the uninsured. Given the results over the past 24 months, I believe insurers will certainly review pricing. Most insurers are on record that they will be reviewing their pricing. Premium increases may, however, not be across the board but on selected risks with frequency of claims being a major factor,” Dombo continues.

Lead time impact The repair industry seems to be the hardest hit by the parts problem. Waiting for essential parts to arrive at the repair shop is also an underestimated component of this issue. George tells RISKSA that the South African car parc has one of the widest varieties of manufacturer makes and models in the world. “This does create problems with lead times to obtain parts as not all manufacturers keep huge supplies of stock. Lead times on part replacements has no effect on actual payouts for total loss vehicles. However, it does cause incidental increases in average cost of claims as the client will require additional services like car hire for longer periods,” says George.

Richard Green, general manager for Automagic, explains that low volume retail models are generally more difficult to source replacement parts for. Yet, more common cars can sometimes be no better in this regard. “The Toyota Yaris, which is a common car, often becomes a problem when certain parts need replacing. “Obviously most of the manufacturers and the dealers would stock the parts with predictable time frames of sale. Little widgets become a problem, though. If, for instance, we get a car in that has had a door accident, we will probably have the panel and the other major parts in stock. But if an indoor window mechanism has been broken, the entire job will stand still while we order the critical part,” Green continues. “While we strive for a turnaround time of about six working days, we

The most popular cars in South Africa Listed below are the most popular insured cars according to Alexander Forbes Insurance. The 2013 Kinsey Report gives us an indication of their parts basket prices and how that relates to the total cost of the vehicle.

Make and model

Parts basket

Percentage of car’s retail price

Opel Corsa

R102 499.99

57.46%

Honda Civic

R119 399.34

54.67%

Chev Spark

R66 843.21

54.34%

Toyota Corolla

R67 376.33

28.67%

Ford Fiesta

R71 389.06

38.24%

Volvo S60

R124 073.04

29.50%

Tata Indica

R46 426.50

44.22%

Kia Picanto

R64 549.18

58.68%

Isuzu KB 300

R86 243.45

21.01%

Renault Clio

R58 103.68

31.42%

Honda Jazz

R85 007.24

40.69%

Toyota Yaris

R71 022.75

41.80%

Mercedes Benz C Class

R147 317.32

36.83%

VW Golf

R95 384.30

38.00%

Audi A4

R108 801.55

27.90%

Land Rover Freelander

R140 971.98

31.38%

VW Polo

R45 003.32

32.85%

Fiat Punto

R57 569.68

35.98% Alexander Forbes Insurance

38 8 4

usually achieve around eight days. We would get that down substantially if we didn’t struggle to find parts. Not achieving turnaround targets due to part lead times is perhaps the single most problematic part of the repair industry,” Green adds. Not only does this contribute to frustration on the part of the policyholder, but also the cost of car rental for the insurer. Green adds that a number of insurers have started lowering their write-off values from the usual 70 per cent benchmark to values closer to 50 per cent.

Seeking cheaper repair options Green explains that the repair industry is in for a difficult time as a result. Speaking on the costing increase on parts, he comments, “The problem is that no responsibility is taken. You are dealing with a third party at arm’s length who is not prepared to sacrifice

40 8 6

its business strategy to accommodate insurance brokers, panel beaters and anybody else in that arena.” While OEMs are standing their ground on pricing their parts, insurers like Santam have already reduced their write-off value to around 50 per cent. Santam has also introduced an alternate part repair programme. Historically referred to as pirate parts, Green says that the automotive industry has started gaining new respect for non-OEM parts. “Most of the alternate parts that we produce now are of a very high standard,” he says. Green predicts that an increasing number of repairers will start taking on repair jobs on an all-in basis. “This is when the insurer sets a maximum amount for repair work. The repairer undertakes to complete the repair job by whatever

means necessary – be it the use of alternate parts or fixing components that would normally be replaced. The repairer then takes over the warranty on that car. It is not really the most desirable option, but repairers will do that if incoming work starts waning,” he explains. Green adds that large companies like Automagic will definitely be more equipped to weather the storm than smaller operations. “The industry is going to see an increase in the sale of alternate parts. We’ve been negotiating higher mark-ups on the alternate parts and we’ve adjusted the alternate mark-ups to 40 per cent from 25 per cent. On your more expensive OEM parts, the 25 per cent mark-up makes sense but the cheaper alternate parts 25 per cent mark-up is just too low. Smaller operations make a substantial portion of their profit by selling OEM parts, so the drop in demand will hurt them the most,” he concludes.

Part of the

8 2 ST 42

how the exchange rate is influencing the spare parts industry Anton Pretorius

While South Africa can stand its ground when it comes to manufacturing vehicles on home soil, the rising exchange rate has a significant impact on the price of vehicles sold domestically. This is because a substantial percentage of locally produced vehicles still use imported parts. The current exorbitant exchange rate is forcing parts prices through the roof and vehicles are sometimes written off with superficial damage. Will we see a hardening of rates in 2014?

he National Association of Automobile Manufacturers of South Africa (NAAMSA) recently said in a statement that the key factor expected to impact on domestic new vehicle sales in 2014 would be the above inflation price increases. They predicted an average new vehicle price increase of eight per cent for the year. “The weakness in the Rand during 2013 against major international currencies – a depreciation on a trade-weighted basis of over 20 per cent – has resulted in significant cost pressures in respect of imported content (used in locally manufactured vehicles and imported vehicles),” the association said. At the time of

print, the exchange rate had increased significantly compared to the same period last year. The Rand-Pound rate currently stands at R18.17 (35 per cent increase); the Rand-Dollar trades at R11.06 (23 per cent increase); and the Rand-Euro currently trades at R15.13 (28 per cent increase). It is difficult to solicit a confident prediction about the exchange rate without a whole list of assumptions, and a longer ‘but if’ list. These uncertainties include the risk of capital outflows if the SA economy and investment markets lose favour. An exchange rate of R11 to the Dollar and continued strife in oil-producing countries indicate further petrol price hikes – placing more pressure on motorists. 

43 ST

With the rise in prices, another dilemma has surfaced. Rising exchange rates are making the prices of spare parts very expensive. This has led to some panel beaters and repairers writing off vehicles with sometimes superficial damage just so they don’t have to carry the cost of the expensive imported spare parts.

Subsequently, the sharp decline in the Rand against many major currencies, paired with the frequency of severe claims over the past year is expected to have a significant impact on the personal lines short-term insurance industry resulting in increased insurance premiums.

general manager of Automagic’s coastal region, says that while the weakening exchange rate hasn’t fully impacted on the South African industry and car prices as of yet, consumers are already feeling the pinch and looking at cheaper alternatives.

A near-20 per cent drop in the strength of the Rand last year impacted on the cost of motor vehicle repairs as a result of the higher cost of spare parts. When it comes to motor vehicle parts that are imported, the cost to repair damage to a car has increased dramatically. According to an anonymous source within the automotive repair industry, there has been an increase of up to 40 per cent in the cost of repairs for certain vehicle makes and models.

“The more expensive, imported OEM (original equipment manufacturer) parts become, the more purchasers will lean towards alternate suppliers of cheaper versions. This will include insurers who drive the purchase habits of panel beaters,” Green said. He added that engine re-manufacturing will undoubtedly be most affected as most of their components are imported.

A similar trend is already in motion in Nigeria. In November last year, Minister of Finance Dr Ngozi Okonjo-Iweala released details of new duties and levies payable on imported new and used vehicles as well as imported new tyres from 2014, raising the tariff up from 20 to 70 per cent. Dealers of imported vehicles estimated that the new rate would translate into an increase of 60 per cent on imported cars. Richard Green,

ST 44

Viviene Pearson, general manager of insurance risk at the South African Insurance Association (SAIA), said that the exchange rate will always impact on vehicle spare parts. “The latest unfavourable exchange rate will have put motor insurers under further pressure. It seems obvious that more write-offs would occur, especially since other damage (such as hail and floods) have increased pressure on insurers in terms of risk and cost of claims.”

Green says he sees this kind of thing often. “What is happening in the market is that there is a double whammy effect. The insurers are lowering the percentage factor they apply to the value they are willing to pay on write-offs and the parts are becoming very expensive – so there is value shrinkage on the one side and value increase on the other side. The lower value vehicles (car park growing) are the worst affected and this can apply to a pensioner who has a Mercedes that’s in pristine condition but if it is in a relatively small accident, the vehicle gets written off.” For insurers, the cost of repair has increased substantially due to the depreciating Rand which impacts on the cost of spare parts. What’s more, most cars have advanced safety features and technology. Even entry-level cars are being fitted with expensive airbags. Even when involved in a minor fender bender, the price to replace this gadgetry is exorbitant. Already, due to these challenging market conditions, insurers have started cancelling unprofitable books of business. Consumers need to brace themselves for a possible increase in insurance premiums. Several insurers have already implemented general premium increases in order to return to profitability.

Rising in the west

Graduating with a BCom honours degree from Stellenbosch University, there were three things Jurgen Hellweg was not interested in pursuing: the legal industry, the medical industry and â&#x20AC;&#x201C; you guessed it â&#x20AC;&#x201C; insurance. But, with a great offer from a top financial services company, insurance it was. Now an industry devotee, itâ&#x20AC;&#x2122;s the people element that keeps him smitten. It is this passion that defines Western National Insurance Company, the commercial insurer making bold strides in South Africa and Namibia. Sarah Bassett

46 8 2

ounded in Namibia in 2004 by partners Joseph Fourie and Rikus Visser, Western National has grown to a team of 36, expanded into South Africa and gone from an annual premium income of R30 million to R600 million, in just 10 years. Now, with the backing of the PSG Group and Santam as shareholders, the company is poised to be a major player in the commercial insurance sector in both markets. Originally offering only contingency insurance to commercial businesses, the company saw and seized an opportunity in 2007 to expand into conventional insurance. It was at this point that CEO Jurgen Hellweg joined the company, bringing with him extensive experience in building insurance brands and business from his years with Allianz in Namibia, South Africa and Germany, and Guardrisk in Namibia. Born and raised in Windhoek, Hellweg is refreshingly frank and down to earth in his manner. Wearing a blue shirt and grey denims, he conveys an unpretentious and straightforward approach to business. Given capital and resource limitations, the Western team identified the commercial

market as the niche for its expansion. “The commercial market is less resource intensive, is the most profitable segment in short-term insurance and, since commercial businesses were already our clients, it was a natural step to offer them the complete package,” Hellweg explains. “We started the commercial side with absolutely nothing on the books,” he recalls. “We approached reinsurer Africa Re with a basic business plan and explained what we wanted to do and what our target market would be. We asked if they would give us the capacity. Had it not been for Africa Re’s faith in us, Western National would not be in the position it is today. After they gave us the capacity, it took four months before we wrote our first policies, demonstrating the huge trust they placed in us and our business. They remain our partners today. You never forget the partners that assisted in building the business.” Six months later, the business expanded to South Africa.

Growing the family “We’re adding personnel every other month now and the Western family is growing. What I really enjoy is that we get an opportunity to create something

Jurgen Hellweg different. We’ve got our own slightly unconventional culture. We’ve created an environment where we allow for mistakes, where people like to come to work and where they feel at home. For us, productivity is better if you have happy and satisfied people. In the service industry, your people are your most important

www. we s tna t. c om | Ca pe Tow n 086 193 7628 Ga u te n g 012 523 0900 Western National Insurance Company Limited is and authorised financial service provider (Juristic Representative Under FSP9465)

“The market in which we operate is not growing at the rate of insurers’ appetite and the strong relationships with our intermediaries, in addition to our thorough understanding of our clients, our products and our emphasis on risk selection and service levels are the only way to counter this,” he explains. With economic pressures and climate impacts placing ever-greater pressure on price, risk selection is critical. “If we are careful about what kind of risk we accept, we can be more generous with the cover and the price,” Hellweg comments. To balance its focus on rapid, quality service delivery with expert risk selection, Western uses a decentralised model with experienced underwriters able to quote in the intermediary’s office, if required, and discuss the details of the accounts face to face. “We constantly review and reunderwrite. We do lose some business this way, but we keep the quality. For us, it’s about quality people, quality business and quality clients. We’re not chasing quantity but quality and that has always been our philosophy,” Hellweg explains.

Powerful partners In 2013, financial services giant PSG Group took notice of Western’s growth, acquiring 100 per cent of the business. A 40 per cent stake was then sold on to Santam.

assets and if you don’t have good people, you are not going to get far.” Hellweg describes Western’s focus on personalised service and delivery as its critical differentiators. “The flexibility that we have and the way we deal with our brokers and policyholders is a competitive advantage. Large insurers lose that personal element. That’s where we’re different; personal attention is our niche and our focus,” he explains. With a relatively small broker base, growing the broker distribution channel is a key focus area for the year ahead. “Supporting this growth with the right people will further enhance our distribution strategy. We carefully select our brokers and believe in partnerships where we are able to build honest, transparent relationships,” he says. For its part, Western believes that partnering with its distribution channel is the basis of its own success. “It is not only about products; it’s the training and the partnership, the focus on rapid turnaround and service delivery. In reality, there are not many unique products;

ultimately everyone wants their claims paid quickly and without hassle. They want fair treatment. These things were part of our philosophy from day one. We look for a reason to pay a claim and not for a reason not to pay a claim. This is why we have very low client churn. It’s also why the right partners are critical,” says Hellweg. “The broker has always been our key client and it works well for us. We are able to maintain our broker partnership strategy because we are small; but as we grow, the challenge will be to find solutions that allow us to continue with this competitive advantage and not follow the impersonal approach,” he adds.

Withstanding the storm In the face of multiple challenges in today’s market, strong intermediary relationships are a key strength. Achieving an increase in profitable market share is a significant challenge, particularly in Western’s focus market, the small- to medium-sized commercial business.

“This has had a huge impact on our growth and on who we can attract as clients. These are some of the strongest partners to have as shareholders. They give us the financial clout we need in the industry. No one is concerned about financial soundness if you’ve got PSG or Santam as a shareholder,” he says.

On the horizon It is a unique feature of the Western National story that it began as and remains a Namibian company. “We are the only Namibian insurer which exports services to South Africa and we’re proud of that, because we are up against the big competitors. We are increasingly visible to our competitors and are facing stiff competition as a result. We’re geared for that and will become a more significant player in the future,” he says. With South African offices in Pretoria and Cape Town, Western National currently services these cities, the Eastern Cape, Bloemfontein and Limpopo. Expansion to the whole South African market is in the pipeline within the next few years. “For the moment, we have our hands full. When the time comes, the next step will likely be Southern Africa,” Hellweg concludes.

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short-term insurance 00

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ML MEDICAL

Medical malpractice

under the knife Mention the term â&#x20AC;&#x2DC;medical malpracticeâ&#x20AC;&#x2122; and watch how underwriters break out in sweat and quiver in their boots. Justifiably so, as medical malpractice is considered the dark horse of the insurance and professional indemnity industry. Recently, several major insurers have withdrawn capacity from medical malpractice insurance due to increasingly litigious consumers and other worrying factors. Anton Pretorius

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n June last year, a R25 million payout by the Medical Protection Society (MPS) was awarded to 11-year-old Kerri Mel O’Loughlin after several botched operations carried out by neurosurgeon Dr Minette du Preez at the Life Bay View Private Hospital in Mossel Bay left the little girl brain damaged. This payout is the highest ever recorded in South African history. O’Loughlin, originally from Ireland, was born with a bleed on the brain. When she turned five, she underwent surgery in which a shunt was inserted to drain excess cerebrospinal fluid and water. Du Preez advised the parents that the little girl needed a new shunt. The operation was unsuccessful. A further three operations followed where Du Preez attempted to put the shunt in the correct position. It was later discovered that the first two had caused brain damage. Subsequently, she suffered from a number of cognitive, memory, speech, visual and mobility problems. RISKSA has learnt that Du Preez is still employed as a medical practitioner at the Life Bay View Private Hospital. This case illustrates a rising trend in the South African healthcare sector in the form of medical malpractice litigation. David Campbell, MD of General and Professional Liability Acceptances (GPLA), an underwriting agency for Lloyd’s, warns that South Africa has caught on to the trend that has already passed through Europe, where insurers have lost hundreds of millions of Euros through ‘baby claims’. “The amounts being claimed and legal costs for baby-related claims are now outstripping the amounts collected in premiums, leaving commercial insurers with two choices: to stop functioning in that high-risk field or raise premiums to prohibitive levels,” Campbell says. It’s no secret that South Africa is experiencing a dramatic increase in the number of claims made for medical negligence. Most claims relate to obstetrics, gynaecology and orthopaedic surgery, although others such as cosmetic surgery, which are less frequent, are potentially the most expensive. Dr Graham Howarth, head of MPS’s medical services in Africa, says that the cost of claims has been especially high in obstetrics (and less so in the gynaecology part of an obstetrician and gynaecologist’s practice). “Neonatology, neurosurgery and spinal surgery are also areas where claim costs have been significant.” The MPS, an organisation that provides professional indemnity against liability, said that the cost of reported claims more than doubled over the last two years. Claims exceeding

awarded for malpractice in public health institution are commonplace and becoming more frequent. R1 million have increased by nearly 550 per cent compared with those of 10 years ago, while claims valued at over R5 million have increased by 900 per cent in the past five years. According to Howarth, the overall claims experience in South Africa has rapidly deteriorated from 2009 onwards, in both frequency and value. “Commercial sensitivity prevents us from sharing precise numbers of claims. However, recently we have seen a particular increase in the number of claims valued at R2.5 million,” he says.

Advocate Tshepo Boikanyo, chief operations officer for the Health Professions Council of South Africa (HPCSA), provided RISKSA with some worrying statistics. Over the period of 2011 to 2013, the HPCSA investigated 42 cases of medical incompetence; 85 cases of patient mismanagement; 20 cases of negligence and 16 cases of misdiagnosis. This is a 14 per cent increase in cases relating to medical malpractice compared to the period 2009 to 2011. Only negligence showed a slight decrease in numbers (38 cases reported in 2009 to 2011).

The South African Medical Journal reported in 2009/2010 that the Gauteng Department of Health and Social Development faced medical malpractice claims totalling R573 million. Since then, media reports of high damages

In 2013, the HPCSA tried and found more than 150 medical practitioners guilty of medical malpractice and unprofessional conduct. Penalties of between R5 000 and R20 000 were imposed on serious offenders.

Field day for lawyers With the implementation of the Consumer Protection Act of 2008, doctors are now liable for faulty equipment. What’s more, the Contingency Fees Act of 1997 permits lawyers to offer clients ‘free’ legal assistance in pursuing a suit against a medical practitioner if the case is expected to have a good chance of succeeding. Has this new act placed a big target on the backs of medical practitioners? “Contributing factors in the rise of negligence claims include increased advertising by lawyers, and the limits placed on the Road Traffic Accident Fund (RAF), as lawyers have looked at other types of personal injury cases,” Howarth comments. John* (not his real name), a director of a prominent law firm in Pretoria, says medical malpractice is a different ball game. “The Contingency Fees Act of 1997 provides lawyers

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with a degree of access, but only if there is a valid case and the firm is willing to carry the risk. The Act does not open the floodgates for lawyers. Due to the limitations placed on the Road Accident Fund (RAF), there has been a spurt of lawyers looking for medical malpractice cases as alternative sources of income. But it’s only temporary when they realise what they’re letting themselves in for.” Donald Dinnie, head of dispute resolution and litigation at Norton Rose Fulbright, notes that while there are excellent plaintiff lawyers who have specialist skills and years of experience doing medico-legal work, many of the newer entrants pursue malpractice claims without fully understanding the merits of each case or carefully considering the appropriate award. This leads to a greater number of speculative medical malpractice cases, where a case is pursued against the incorrect party or an unrealistically high award is demanded. In fact, he suggests that actual awards on damages are in the minority in South Africa and there are very few liability judgments made in the medico-legal space. “More often than not, parties negotiate and settle outside of court. While this avoids costly litigation, these amounts are nothing to be sniffed at and remain an area of concern for insurers,” says Dinnie.

Current state of our State hospitals Another problem in South Africa is the current state of our public sector hospitals; a combination of too many patients, a lack of human resources and equipment and a recurring shortage of supplies. Despite the efforts of many health professionals working in the public sector, the 27 million South Africans who depend on the public health service are frequently unable to access an acceptable level of healthcare. Incidents including the death of 29 neonates due to lack of basic infection control measures at East London’s Cecilia Makwane Hospital highlights this situation. Previously, journalists visited Umtata General in the Eastern Cape, where they exposed cockroaches crawling over babies, an unbearable stench, floors covered with dirt and patients forced to share beds in overfilled wards. The hospital’s budget was reportedly barely enough to pay for salaries and maintenance, leaving virtually no money for medication, and nurses were obliged to pay for stationary out of their own pockets. However, Despite this, Howarth feels there has been little change in the level of professionalism among doctors in South Africa. “Nor have we seen diminishing levels in the quality of patient care.

If anything, there has been an increase in patient awareness and willingness to raise issues, which is another reason for the rise in clinical negligence costs,” he adds.

Souster and Savage vs Santam An interesting case study is that of Tammy Souster and Michael Savage, a South African couple living in Australia; they are currently suing insurance giant Santam over its refusal to honour. The medical malpractice policy of a gynaecologist who failed to pick up that their baby had Down’s Syndrome. After winning the initial case against the gynaecologist, the couple went to the High Court in Johannesburg to fight Santam for damages amounting to R20 million. Last year, Judge Phillip Coppin found the gynaecologist, Dr Lourens Kriel, liable for damages and concluded that his negligence had occurred while he had insurance cover. Kriel failed to inform the couple that it was advisable to undergo an amniocentesis test during the 16th week of Souster’s pregnancy in 2007 to test for chromosomal abnormalities. Kriel used an ultrasound machine that may not have accurately measured the nuchal translucency of Souster’s foetus. Now it has come to light that Santam has withdrawn its capacity from medical malpractice insurance.

Where’s the capacity? John* gave us his thoughts as to why Santam decided to withdraw their capacity from the medical malpractice market. “Years back, Santam managed to attain several obstetricians and gynaecologists who came over from the MPS. But what Santam failed to realise is that one negligence claim from this group of specialists could run anywhere between R10 million and R25 million. An insurer must look at subsidising its premiums through other lower risk specialists,” he says. Dinnie notes that an award on a properly structured liability claim for a baby that contracts cerebral palsy after birth could easily be in the region of R20 million. “The risks that are posed for high-end medical practitioners mean, for example, an obstetrician should be paying around R500 000 in professional indemnity insurance premiums annually,” said Dinnie. “If you have only obstetricians, gynaecologists and other high-risk specialists on board, you’ll always be looking at paying out huge claims. Naturally, this will tap out reserves; reinsurers won’t be happy; and it won’t be profitable. This is why I think Santam has withdrawn capacity from medical malpractice,” said our anonymous attorney.

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Settling claims upfront can be a double-edged sword, particularly when insurers begin to spend money on making claims go away when these claims are not meritorious. “Insurers may elect to pay illegitimate claims due to the commercial realities of litigation. But it sends a dangerous message to malpractice attorneys, who may then view such an insurer as a soft touch,” Dinnie warns. Under Section 46 of the National Health Act, private health establishments are required to maintain “cover sufficient to indemnify a user for damages that he or she might suffer as a consequence of a wrongful act by any member of its staff or by any of its employees”. Dinnie points out that hospital management could be held liable for not ensuring that their institution had adequate professional indemnity (PI) cover, giving rise to claims on directors and officers and highlighting the need for directors’ and officers’ (D&O) insurance in this context. As it stands currently, doctors are not required by law to have PI insurance, although the

Health Professions Council of South Africa (HPCSA) has promised to re-issue draft legislation in this regard. “There are a number of doctors who do not have PI insurance, nor are they members of the MPS and are therefore significantly exposed in terms of potential claims. In addition, if there were to be legitimate claims, these doctors would have no funds to provide indemnity to their patients,” Dinnie continues.

Final word Camargue: Camargue, which provides medical malpractice insurance for establishments and practitioners and active participant in the liability underwriting arena, has reported an increase in claims in South Africa. Camargue’s assistant technical claims manager Seonita Avery says that the medical malpractice claims, for the most part, are concentrated on maternity and pregnancy claims. These include claims related to birth defects and the allegation that proper care was not given to the expectant mother during the birthing process while in the hospital, and under the care of either the midwife or the gynaecologist or attending obstetrician. “The trend in respect of medical malpractice claims has essentially remained the same, what has changed however, are the awards made by the courts in these matters. These awards are in some cases not commensurate with the actual value of the claims. This has of course set precedents resulting in the value of these types of claims being consistently overstated. It’s safe to say that medical malpractice claims have become the new pot of gold at the end of the rainbow for many attorneys who previously specialised in personal injury claims,” she says. The solution? Avery believes the resolution would be to cap the awards as introduced by the Road Accident Fund. “This will provide fair compensation to those who have legitimate claims and offer some degree of protection to the medical fraternity,” she concludes.

David Campbell: Solutions to the problem “It’s like a duck shoot. Some litigation lawyers go into a government department, bang off a summons for R10 million to 15 million and they haven’t got a cooking clue how to defend themselves against the claim. But practitioners who don’t have insurance and want to continue practising (and can protect their assets from lawsuits) would, in fact, be better off if a lawyer works on a contingency basis and there is no deep pocket to delve in, into as it might act as a deterrent to sue.”

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LONG TERM

Working around

exclusions Dominic Uys

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Whether we are talking about lump sum or income protection plans, impairment cover offered by the majority of long-term insurers is often misunderstood. A side of the industry that has historically been known for its blanket exclusions has evolved considerably over recent years. As Schalk Malan, executive director at Brightrock points out, impairment cover has improved considerably. RISKSA has a look at what the broker should know.

ot too long ago, most impairment policies contained a list of standard exclusions that disqualified a number of possible policyholders and claimants from adequate cover. Conditions such as depression and back pain were easily excluded and many policyholders were unable to cover for disorders that rightfully prevented them from earning a living. Not only policyholders, but also insurers were affected by this approach and the industry has adapted to draw in new business. “The time of outright blanket exclusions in policies is a thing of the past. The two main drivers for impairment disability have always been back and psychological conditions. By excluding those conditions outright, insurance products could be sold significantly cheaper but it wasn’t necessarily fair on the customers,” says Nicholas van der Nest, divisional director for Risk Products at Liberty Life.

Occupational disability versus impairment cover Van der Nest explains that it is important to differentiate between occupational disability and impairment cover. “Occupational disability cover pays a lump sum regardless of what is wrong with the claimant. The only important factor here is whether the claimant

ON THE

LOOSE!

is permanently unable to work as a result of his injury,” he says. “Impairment cover works according to medical definitions and that is where exclusions come into play. With impairment cover, we try to ascertain to which extent the claimant is restricted due to his injury or condition. The cover is tiered, so a claimant can receive anything between 25 per cent and 100 per cent of his payout,” Van der Nest continues. Malan adds that the client needs to be aware of the pros and cons of both options. “A client needs to understand what he gets out and what it will mean for him. Many people opt for impairment cover instead of disability because the premiums may be lower, while the payout looks the same. They don’t take into consideration that they might receive only 50 per cent of that at claim stage,” he says. “Conversely, a client could find that the lump sum disability payout does not last long enough and a recurring payment, while lower, would have lasted for the rest of his life,” Malan adds.

Psychological conditions not excluded Van der Nest points out that psychological conditions also have a place in impairment cover. “There is this general view that a

57 3

client cannot claim for depression. This is not true anymore since depression is an acknowledged psychological condition and its impacts are known,” he says. “Psychological issues are generally a bit more open-ended but we require permanence before we pay out a claim. It will have to be there for at a set amount of time and the client will have to go for psychiatric evaluation at least three or four times. Naturally, the insurer does not necessarily cover for depression if it is a pre-existing condition and exclusions may be placed on that. Alternatively, the client’s premium could be loaded to make up for that risk. It is up to the discretion of the underwriter,” he adds. Van der Nest mentions that the culture in the industry has become one of finding solutions for the client. “Where the industry used to have a very black and white approach, and this is where blanket exclusions also came in, we now deal with grey areas more often. We regularly review cases that don’t necessarily fit into the mould and try to find a solution that will help the client.” “At the same time we are mindful of what would be fair to our other policyholders, so maintaining the balance becomes an interesting exercise,” Van der Nest adds.

Risk to the client Andre Froneman, product specialist at Altrisk, tells RISKSA that there are a number of common being made when brokers sell impairment and disability cover to clients. “One of the most important things that the broker needs to be mindful of is that the information must be as accurate as possible. That means that the broker must understand exactly what his client does for a living and how much risk they are exposed to. Often a broker will create a profile of his client with the wrong information. He might, for instance, write down that the client does 100 per cent administrative work when the client actually spends a significant amount of time on the road or on high-risk sites,” he says. “That could easily become a problem at claim stage when the insurer finds that the customer profile creates a false impression of the policyholder’s actual risks and requirements,” Froneman says. While the broker possibly succeeds in getting the best premium, the clients could conceivably suffer a considerable setback when they need their claim paid out. Malan adds that over-disclosure is always better than under-disclosure. “The potential loss that a client can suffer if a claim is denied outweighs the premium every time,” he says.

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EXAMPLE 1: Occupational split The insured is a 40-year-old female. Her occupation is listed as an administrator, performing 90 per cent administrative work. Income protection benefit was for R24 000 with a 14-day waiting period. The policy was in force for 10 years. She submitted a claim for muscle spasm in her lumbar spine. At the time of the claim, the client was working as a financial adviser, spending at least 80 per cent of her time travelling. The claim was paid as it was considered valid irrespective of the occupational duties and requirements. However, if the client claimed for an injury such as a sprained ankle, the outcome would have been different. Even though the injury would undoubtedly have disrupted her work as a financial adviser (but not as an officebound administrator), a claim may well have been rejected. OUTCOME: Favourable for the claimant. However, failure to accurately describe the split between administrative, manual and travelling-related functions in terms of day-today activities could cause problems at claim stage, resulting in reduced benefit payments or repudiation of the claim.

EXAMPLE 3: Changing policies The insured is a 40-year-old male business owner (a plumber). He has income protection benefits with a primary waiting period and an insured amount of R20 000 per month. His medical history is clear at application stage. The client submitted his first claim one month after the policy commencement date for the resection and treatment of high grade large B cell lymphoma. Medical information included a four-month history of consultations for intestinal discomfort, vomiting, nausea, constipation and irritable bowel syndrome with a colonoscopy and upper endoscopy performed. These symptoms and investigation were not disclosed at policy application stage, yet are directly related to the claim. The claim was therefore repudiated. Unfortunately, this client had an income

EXAMPLE 2: Non-disclosure The insured is a 35-year-old female surgeon with an income protection benefit on a primary waiting period. The insured amount is R80 000 per month. At policy application stage, the medical history was clear. Six months after the policy commencement date, a claim was submitted for a neck problem. The claim period was three weeks. However, medical history indicated that in the six months prior to application, the client consulted a specialist complaining of heartburn and reflux. A gastroscopy was done, gastro esophagitis reflux disease was diagnosed, for which she was receiving treatment. The claim was paid as it was unrelated to the non-disclosed condition but an exclusion was then placed on the policy.

TAKE COVER

OUTCOME: In this instance, the outcome was favourable. However, it is surprising that a medical professional would deem the non-disclosed condition immaterial to her application for cover.

protection policy in place for over 10 years, with a sum insured of R10 000. He cancelled this policy two months prior to commencement of the current policy, not only resulting in a cover gap of one month but also risking his ability to claim during a period where his health was deteriorating. OUTCOME: Unfavourable. What is interesting about this case is that the client had valid income protection cover in place and was presumably advised to upgrade/increase the cover in light of the diagnosed condition. Nondisclosure on application for the new cover has severely prejudiced the client who would presumably have had a valid claim on the pre-existing policy. It would be interesting to know if this advice was provided by a financial adviser and, if so, whether the client disclosed his health status to the adviser prior to submitting the application for the new policy.

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Moving from

rule-based

to risk-based compliance

The Financial Intelligence Centre continuously reviews the Financial Intelligence Centre Act with a view to simplify compliance and ensure alignment with the revised Financial Action Task Force (FATF) standards. 60 8 2

xpected reforms will move South Africa towards a risk-based approach (RBA) to compliance, reducing identification and verification requirements, and allowing reporting institutions greater leeway in designing their own methods to ensure compliance. These steps should, in turn, relax compliance in relation to low-risk clients and promote financial inclusion.

What is an RBA? Accountable institutions, such as financial

services providers, attorneys and estate agents will be required to risk rate their clients and to implement systems and controls that are commensurate with the specific risks to mitigate the risk of money laundering and terrorist financing (ML/TF). This will allow optimal resource allocation. The principle is that resources should be directed in accordance with priorities to ensure that the greatest risks receive the highest attention. Adopting an RBA implies the adoption of a ML/ TF risk management process which

an administrative and criminal sanction being imposed for non-compliance. Some of the other advantages: • Flexible: ML/TF risks vary across jurisdictions, clients, products, delivery channels and over time. • Effective: Institutions are better equipped than legislators to effectively assess and mitigate risks they face, particularly ML/TF risks. Institutions should be able to identify and report suspicious transactions easier. • Proportionate: More attention can be given to high risk clients and less attention to low risk clients. Resources can be allocated more effectively.

How to implement an RBA? An institution’s risk framework has to be in writing, updated regularly and supported with documentation. The ML/ TF risk should be based on factors which may be relevant to a particular client profile such as: • Client type: Political exposed persons, legal entities and non-face-to-face clients are regarded as high risk. • Product type: Internet accounts, private banking, money remittals, stock brokering, annuities, insurance products, offshore services and correspondent banking are regarded as high risk. • Geographical location: Countries listed on terrorism and sanctions lists of governments and international organisations and non-members of the FATF or of an FATF-style regional body are regarded as high risk.

COMING

THIS

MAY

TO A VENUE

NEAR YOU Go to www.altrisk.co.za/takecharge

According to the FATF’s guidance on an RBA issued in June 2007, “A reasonably designed and effectively implemented RBA will provide an appropriate and effective control structure to manage identifiable ML/TF risks.

encompasses recognising the existence of risks, undertaking an assessment of the risks and developing strategies to manage and mitigate the identified risks. As ML/ TF risks increase, stronger controls will become necessary.

Why implement an RBA? Implementation of effective systems and procedures to detect, monitor and report higher risk clients and transactions may lead to a higher level of regulatory compliance with a lower probability of

However, any reasonably applied controls, including controls implemented as a result of a reasonably implemented RBA, will not identify and detect all instances of ML/TF. Therefore, regulators must take into account and give due consideration to a financial institution’s well-reasoned RBA. When financial institutions do not effectively mitigate the risks due to a failure to implement an adequate RBA or failure of a risk-based programme that was not adequate in its design, regulators should take necessary action, including imposing penalties or other appropriate enforcement or regulatory remedies,” it concludes.

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

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is the

new 20

So what about retirement? Sarah Bassett

Projections for future increases in life expectancy for developed countries vary from the relatively conservative one year per decade to more aggressive estimates of as much as three months a year. According to the latter forecast, todayâ&#x20AC;&#x2122;s typical 65-yearold client could be expected to live five years longer than that same client 20 years ago â&#x20AC;&#x201C; and this is increasing constantly. So, how can advisers ensure their clients make adequate provision for this reality? 62 8 2

or the most part, there is no magic product solution that can solve the pressure of longer lives. The reality is simply that clients are going to have get used to the idea of working far longer than their parents did, or they’re going to have to start significantly increasing the amount they save. Inflation, spiralling economic costs and a fluctuating currency place further pressure on retirement income, even for clients who saved diligently. “The approach to retirement and planning around retirement becomes one of the most important financial planning discussions between an adviser and a customer,” says Derick Ferreira, head of product management at Old Mutual. In the South African context, of course, the challenge remains getting clients to save at all. According to a new University of the Free State report, ‘Investigating retirement ability of high net worth individuals in South Africa’, more than half of South African earners holding postgraduate degrees spend more than 100 per cent of pre-retirement income while still working, with multiple studies indicating that very few South African professionals save enough to maintain their pre-retirement lifestyle during retirement. Indeed, the deteriorating position of pensioners is highlighted in the 2013 Sanlam Benchmark Survey on retirement. Of the 223 pensioners questioned on how much they receive as a pension:

11%

said they receive between R1 000 and R3 000 a month

30%

35%

between R3 000 and R6 000

between R6 000 and R10 000

17%

receive more than R20 000 a month

between R10 000 and R20 000

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The trend in the graph is clear: South Africans are living longer. But longevity and the related ageing of populations experienced around the world are problems somewhat skewed in South African statistics, mainly due to the incidence of HIV. Although HIV dramatically affects the average life expectancy at birth, the reality is that those who remain HIV free during their working lifetime have an increased life expectancy in line with many Organisation for Economic Co-operation and Development (OECD) countries, where an average person of 65 today can expect to live another 20.5 years and one in seven woman who are now 65 will reach 100.

Life expectancy of a newborn baby in South Africa Source: Stats SA, Liberty Investments

Female

Male

While retirement ages are slowly adjusting for these changes, these are not keeping pace with improvements in longevity; particularly it seems in South Africa, where the average retirement age in South Africa is 59, according to the findings of the Sanlam Benchmark survey. “This figure is substantially below the norm of 65 used in many developed countries, notes Frans Koning, UFS lecturer and author of the ‘Investigating retirement ability of high net worth individuals in South Africa’ report, points out. “The official retirement age in 34 OECD countries is 64.4 and the average actual retirement age is 71.5 and 71.4 in Mexico and Korea respectively. In the US and Australia, average retirement age is 65.2 years, and in the United Kingdom, 63.6 years,” Koning notes in the report. “By 2050, females in the OECD countries will spend almost 25 years in retirement. This group of individuals will spend longer preparing for work and in retirement than they actually will be working,” he points out.

“Most South Africans do not have sufficient retirement provisions to sustain their lifestyle after retirement. Increasing life expectancy makes it even more difficult for clients to provide for retirement income that will last throughout their lifetime,” confirms Danelle van Heerde, head of advice processes and tools at Sanlam Personal Finance. Brokers need to ensure that these clients understand their situation as well as their options for response. There are a number of other approaches that can help to manage the risk of running out of

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money in retirement, notes Van Heerde. • Delay retirement – Many clients are now scaling down their jobs, rather than permanently retiring at their planned retirement age. • Find additional income sources. Find a parttime or start a small business and opt for a lower monthly retirement income. Clients should however think very carefully before using their retirement savings to start a capital intensive business. • Use a combination of retirement income products. For example, use an increasing life annuity to meet essential living expenses (this will provide a guaranteed income

“This increase in life expectancy combined with the reduction in interest rates in recent years has resulted in significantly lower annuity payments in retirement. Financial advisers and clients have had to rely more heavily on drawdown (investment-linked) annuities which come with more risks to the client. Although these risks can be managed to an extent, drawdown annuities cannot address the increased life expectancy, and as a result leave clients at risk of outliving their capital,” notes Nico-Louis Minnie, head of investment products at Liberty Investments.

Nest egg needs For clients who still have time, what does this mean for saving requirements? According to Liberty Corporate, due to the longer expected length of retirement, the estimated required multiple of annual pre-retirement salary has increased from 8.1 in 1960, to 10.5 in 2010 for males of average retirement age. This multiple is expected to increase to around 11.3

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by 2050. For a male who delays retirement by five years, this multiple drops from 11.3 to 9.1, indicating the benefit of retiring later. “A client retiring at the age of 65 today, needs to have accumulated between 10 and 14 times their pre-retirement salary,” Ferreira confirms. “This should help you to have a retirement income that is at least 75 per cent of salary.” For those clients living beyond their means pre-retirement, or who want to comfortably allow for luxuries and perhaps travel, clients should aim for 20 times annual income in nest egg saving, suggests Warren Ingram, director at Galileo capital and winner of the 2011 Financial Planner of the Year award. Koning warns that the interconnection between longevity and the increased need for longterm care challenges the assumed 75 per cent replacement ratio. “Healthcare expenses have been found to rise significantly after retirement, and long-term frail care is commonly required by individuals who live to old ages. In turn, quality long-term care prolongs life even further,” he notes. “ This represents one of the largest uninsured financial risks facing the elderly and that in South Africa, very few financial products exist that are dedicated to saving for frail or long-term care specifically.” In addition, the number of people currently living beyond their salaries pre-retirement suggests that many may struggle to adapt to a 75 per cent limit.

Advice and advisers In the face of these pressures, the fundamentals remain true:

1. Start early. Clients need to start retirement planning as early as possible to benefit from compounding growth. 2. Regular review: “It is crucial that brokers review their clients’ retirement plans regularly, make sure that the life expectancy used in calculations is realistic and adjust plans as and when required. The life expectancy used should not only take into account general improvements in current life expectancy, but also the client’s specific circumstances such as state of health and family history,” notes Van Heerde. 3. Asset selection. Ensure clients are strategic in their selection of underlying investment funds, balancing asset class spread across equities, property and offshore. A recent JP Morgan report suggests that longer retirement time means that investors can keep higher risk equity investments for longer. “With the possibility of another 30 years of living expenses, there is ample time for longterm investments. Once a client’s basic needs are addressed, they may be more comfortable with some equity exposure for ‘wants’ and for long-term legacy goals,” says the report. Canadian Professor of Finance at Wharton School of Business in Canada, Dan Richards, suggests that the impact of longer lifespans goes beyond portfolios and investments; heralding new issues that advisers will need to become knowledgeable about in order to continue to provide their retired clients with guidance and counsel. He suggests that the three immediate areas are: 1. Part-time income options and opportunities for retired clients, as well as knowledge to help clients manage expectations in this area; potential earnings and how many years they are likely to be able to count on this in their budget before illness or age become prohibitive. 2. Options and ball park costs for assisted living accommodation and alternative offerings in this area. One of the implications of longer lifespans is that many people will spend their final years in retirement and nursing homes, needing costly healthcare. 3. The costs and options for those suffering from dementia and Alzheimer’s. The data on the escalation of Alzheimer’s suggests that many more clients will be affected, or will have to cope with the impact of an affected spouse or parent. After age 70, the risk of dementia doubles every five years. “Advisers have an obligation to raise these issues with clients and to incorporate them into retirement plans,” writes Richards. “The challenge is to have this conversation in a way that doesn’t appear negative or alarmist, and to offer suggested solutions.”

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Product design changes for retirement saving vehicles Liberty “The biggest challenge for Liberty was to introduce a product offering that can give the financial adviser the tools to manage both increased life expectancy together with the reduction in interest rates. Most conventional products can address only one of these risks at a time. We introduced a product called the Flexible Annuity. With this product a client can draw money from a drawdown annuity and therefore get exposure to asset classes that can deliver returns in excess of bonds – this addresses the lower interest and growth rates concern. A client can then add the Income Enhancer benefit, enabling them to take part in risk pooling to give them protection against living longer than expected,” explains Minnie.

Old Mutual “We introduced the Retirement Income Safety plan about two years ago. This plan allows the client to start off in a living annuity, while Old Mutual provides guidance on the drawdown rates. However, should the client’s capital reduce to a certain level (this could be due to poor market performance or even longevity), the annuity transforms to a guaranteed annuity, and thereafter continues to provide a guaranteed income for life, increasing at four per cent per annum,” says Ferreira.

Sanlam “We have focused on appropriate retirement planning that take improvements in life expectancy into account. For example, we have reviewed our guidelines with regard to maximum income levels for investment-linked pensions. With increasing life expectancy, the impact of inflation on the value of retirement income becomes ever more crucial to manage. It is important that clients have increasing retirement income streams that keep up with their growing cost of living. Last year, Sanlam launched a new CPI-linked annuity, that protects clients against both longevity and inflation risk,” Van Heerde explains, emphasising that ultimately, the most important factor remains a business plan that considers the client’s specific requirements and situation and is reviewed and adjusted regularly before and after retirement.

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Convincing your client

of the need for cover in tough times Another petrol price hike, e-tolls, interest rate increase, food inflation and unemployment; 2014 is looking increasingly tough and, for many people, maintaining liquidity is becoming a daily struggle. Thousands of South Africans also face the frightening realities of retrenchment. members should the estate be swallowed up in debt. A surviving spouse married in community of property will also be saddled with their deceased spouse’s debt.

Ryan Chegwidden, Actuarial Head, Altrisk

hen in a financial crisis, the bone-crunching reality of having to determine which monthly expenses fall into the critical category and which can be forgone is something that should be done with the guidance of a financial adviser, but seldom is. All too often life insurance policies are cancelled or lapse, with devastating consequences should the policyholder die and leave a mountain of debt. The sobering reality is that creditors can and do seek restitution of debts from deceased estates, which has serious consequences for bereaved family

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Lynette found this out the hard way, left destitute and desperate when her husband, Peter, died in a car accident. They made the decision to cancel their insurance policies a few months prior to Peter’s death to try and save on their monthly overheads. A soured business partnership coupled with a major debtor going into business rescue crippled their small family business and left them in serious financial difficulty. They had every intention of reinstating their cover as soon as they were back on their feet. They never got the chance. With an outstanding bond, maxed credit cards, store accounts and creditors hounding Lynette for payment, her life became hell. Peter’s estate was swallowed up by debt repayments and she was left with no home and no financial security. Now in her mid50s, Lynette’s troubles are insurmountable. She lives off the kindness of friends and family and her employment prospects are equally bleak. Besides having to cope with her bereavement, Lynette finds the humiliation of her situation and her dependence on others unbearable.

A fine balancing act Advising clients like Lynette and Peter about why they need life insurance when they are drowning in debt is no easy task. This is where a full and often brutal financial needs analysis comes in. Debt counsellors insist that even clients who are under debt review have a current life policy to protect the family of the insured by securing assets such as the family home, and it also provides an additional layer of protection by repaying existing debt and protecting creditors. As a financial planner, it is a mammoth balancing act as it requires that you thoroughly review your clients’ existing cover and, if necessary, attempt to find a suitable alternative possibly with a better premium for them. As Lynette found out, it’s never a good idea to discontinue life cover to reallocate those funds towards debt repayments. The need for insurance cover, even in tough financial conditions, cannot be emphasised enough to your clients. The emphasis must be on right-sizing their cover and seeking economies where they are to be found. So the next time you’re faced with a client who does not see the value of their cover given their financial woes, tell them about Lynette and Peter. Their story is the poster child for why life cover becomes even more important when finances are under pressure.

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MR MANAGING RISKS

cyber risks Demystifying

Christy van der Merwe

Cyber insurers and underwriters in South Africa are steadily carving their niche and advocating proactive solutions among cyber-underinsured South African companies. With the promulgation of the Protection of Personal Information (POPI) Act in November 2013, and commencement due in 2014, growth of expertise in this arena will gather pace.

nformation technology (IT) is a business enabler leveraged to improve operations, no matter what sector a company operates in. IT often lies outside of a companyâ&#x20AC;&#x2122;s core mandate and becomes a mystifying and threatening risk. Because is so often outsourced, the level of IT security, let alone cyber insurance within a company is not always top of the agenda at board level. A security breach or compromise of data could result in serious reputational damage, loss of revenue and ensuing litigation.

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â&#x20AC;&#x153;Many companies are under the impression that their traditional insurance products cover them against evolving cyber risks. The reality is different, because traditional insurance products generally require damages to be of a tangible nature,â&#x20AC;? says Natalie van de Coolwijk, MD of the cyber-focused UMA, CyGeist, which underwrites for Guardrisk. This lack of awareness regarding cyber perils, coupled with the fact that legislation is only now being implemented to address data and privacy risks, means that companies are underinsured against cyber

risks. These risks are difficult to quantify due to the lack of accurate or any reporting and data in South Africa. Instead of just covering the insured for any direct financial losses, cyber insurance policies cover the resultant expenses of a data or systems breach, including aspects such as investigating and recovering from a breach while implementing measures to protect the organisation and affected third parties from resultant damages. Cyber insurance in South Africa is a speciality

in its infancy, and Van de Coolwijk explains that it is not just another liability policy. She warns that brokers should not merely sit back and wait for their clients to get sued. With the pending commencement of POPI expected in 2014, this is a realistic concern. In South Africa, POPI will bring forth the establishment of a regulator, to which complaints could be sent if a person feels that a company has compromised their personal information. The regulator could pursue complaints on behalf of citizens, and fines and penalties could be levied in cases where

contraventions of the act exist. Companies will need to ensure extreme IT security and will have to appoint information officers to ensure compliance. Clients will need to be informed of any breaches where their information may have fallen into the wrong hands, whether resulting from exploitation of a weakness in a companyâ&#x20AC;&#x2122;s IT security or a matter as simple as an employee losing their tablet or laptop. Van de Coolwijk highlights that even without POPI, citizens have the right to privacy under the Constitution; however, because data breaches are not often made public, people

do not know when their information is at risk. Mandatory reporting of breaches and the regulator being able to undertake action on behalf of citizens changes the game.

Costly crime According to the 2012/3 Wolfpack Information Riskâ&#x20AC;&#x2122;s South African Cyber Threat Barometer, the estimated price tag of cybercrime to the finance, government and telecommunications sectors was R2.65 billion. With an average recovery rate of 75 per cent, this results in an actual loss

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figure estimated at R662.5 million. These are direct or monetary equivalent of losses, damage or other suffering felt by the victim as a consequence of a cybercrime. Indirect losses and defence costs are not included. It is felt that this figure is the tip of the iceberg, since so many cyber crimes are simply not being reported to law enforcement or government agencies. The Wolfpack report adds that at present financial gain is the prime motivator for cyber fraudsters. The weaknesses of digital identity management and the ability to use false identities to tap into global credit card and financial networks continues to make this type of fraud attractive to cybercriminals. Although software and security technology has improved, log on credentials are the most targeted or compromised during a cyber attack. Following this are bank account details including PINs, one time passwords, client profiles such as beneficiaries and credit card details, which continue to be a target in South Africa, despite the advancement and innovation in authentication technology. Personally identifiable information is the third most sought after information asset and highlights that privacy concerns are becoming a high priority in South Africa.

Cyber minded The Wolfpack survey highlights that cyber security skills in South Africa are definitely in short supply, with digital forensic skills topping the list in all sectors of the country. These resources should be able to examine digital media in a forensically sound manner with the aim of identifying, preserving, recovering, analysing and presenting facts and opinions about the information related to cyber crime. The second most scarce cyber security skills in South Africa are experienced incident handlers, able to respond to a variety of computer security incidents, such as unauthorised data access, inappropriate system usage, malicious code infections and denial of service attacks. Purchasing of cyber insurance coverage allows the risk of response costs to be transferred to an insurer, thus easing IT security budget pressure and enabling the policyholder to focus on prevention and detection. And indeed, focus on detection is key. Past figures show an average of almost 200 days for companies to detect a breach, with 69 per cent of affected companies being notified of the breach by an external party. “Once introduced, POPI will require mandatory breach reporting and

Classifying cyber crimes

Wolfpack notes that the overall process of reporting cybercrime to law enforcement at a station level is highly inefficient. Crimes committed using ICT and especially the Internet are also viewed as more convenient, less expensive and therefore more profitable, with a lower risk profile than crimes committed using more traditional means. The following is a non-exhaustive list of criminal activity falling into the category of cyber crime:

• Production, distribution and downloading of child abuse material. • Copyright infringement, software piracy, trademark violations. • Online harassment. • Distributed denial of service attacks/botnets. • Hacking. • Advance-fee fraud conducted over the Internet. • Identity theft and identity fraud. • Scams and online frauds. • Phishing. • Malicious software and spam. • Attacks against critical infrastructures. • Virtual world or gaming incidents.

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don’t meet the criteria, insurers can work to improve security to a point where cover could be provided. Some companies even offer ‘penetration testing’ or ethical hacking, trying to overcome a company’s IT defences to identify weak points worth bolstering.

Broker opportunity Van de Coolwijk advises that when a company is looking to buy cyber insurance, they should involve a knowledgeable broker who can explain the exact scope of coverage to ensure that the policy is fully understood. CyGeist is South Africa’s first UMA dedicated solely to cyber risks. AIG also has its CyberEdge product available in South Africa, and SHA Specialist Underwriters in 2013 launched its cyber liability offering, while Camargue Underwriting Managers has offered this as one of its niche liability products since 2001. Thanks to the rapidly developing nature of this type of cover in South Africa, Van de Coolwijk says that the opportunity exists for brokers to make cyber insurance their area of speciality and differentiate themselves in the market accordingly. Companies like CyGeist are willing to accompany brokers to clients to field questions and explain the importance of this kind of cover.

notification to affected parties. Companies will need to identify and respond to breaches quickly and effectively in order to protect their reputations. Reporting a breach 200 days after the event is never going to be easy,” warns Van de Coolwijk. Van de Coolwijk emphasises that using seasoned experts when responding to an incident offers advantages and that the effectiveness of response is pivotal in reducing the potential impact of an incident. Response interventions require specialised skills that are honed by dealing with incidents on a regular basis. For many organisations, it is simply not feasible to retain such resources on the payroll for incidents which are, hopefully, not a frequent occurrence. Insurers add value by making a panel of vetted service providers available to policyholders in the event of an incident, and managing

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their costs by pre-agreeing rates. CyGeist offers cover for potential consequences of a network security or privacy breach, including related expenses of specialists such as investigators, attorneys, forensic auditors and loss adjustors; expenses incurred to notify regulatory bodies and affected third parties of a breach; costs to restore or recover corrupt or destroyed information assets; network or business interruption; crisis management and notification expenses; and third-party claims arising from compromised systems or data. The level of IT security required in order to qualify for cover can vary greatly between organisations and depends on the level of risk, which is affected by the organisation’s turnover and the industry it operates in. Generally, a solid risk awareness and sound IT security and risk management principles are a good starting point. For clients who

To assist clients to stay ahead of the curve in terms of understanding, mitigating and responding to cyber threats, AIG has developed the CyberEdge mobile application, which can be downloaded from the iTunes app store. “The app offers users features, including a featured content list providing the latest news related to cyber threats each day. This keeps users up to date with recent news regarding security breaches, both locally and globally,” says Roxanne Moodley, underwriter or financial lines at AIG South Africa. Van de Coolwijk encourages brokers and intermediaries to be more proactive in offering cyber solutions to clients, because it opens up avenues of business for them. Companies need to develop a comprehensive cyber defence strategy that protects IT security, enterprise risk management and insurance. The opportunities here are great and is evidenced by the fact that cyber risk is edging its way to the top of almost every top 10 risks report published in 2014. “If information security and the threat of cyber-attacks are not a top-five priority on the executive board checklist, the company is seriously underestimating a major source of risk to the organisation,” concludes Van de Coolwijk.

Pertinent points on the POPI Act • POPI is not the only piece of legislation dealing with privacy; one of the others is the Promotion of Access to Information Act (PAIA) which will be overseen by the information regulator (once established). • POPI will be applicable to all organisations, including government organisations. • Companies will have to appoint an information officer and notify the regulator as to whom this person is. • POPI does not deal only with IT security issues, it is much more comprehensive and encompasses matters such as: Storage/destruction of paper documentation. Communication methods used and in which instances consent is required. Company policies dealing with privacy, IT security, etc. Whether your information goes outside of SA (particularly relevant now with cloud computing). Contracts companies have in place with other entities handling their information. Sources of information (are you obtaining your information legitimately?) and retention of information. • As a result of the previous point, POPI is not just a matter for a company’s IT department. It affects all divisions within an organisation and should be taken seriously by executives. • Consequences and penalties are not to be taken lightly and will have serious implications for an organisation’s reputation. Source: Natalie van Coolwijk, CyGeist

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Moving Forward

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HIJACK Christy van der Merwe

How to deal with the crime that is not declining

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One of our own at RISKSA experienced an attempted hijacking in Cape Town in December 2013, reminding us just how prevalent this crime is in South Africa, and prompting us to ask how people are dealing with it?

nder the ‘aggravated robbery’ subcategory, Crime Stats SA reports that 9 988 cases of carjacking took place in South Africa during 2013, with another 943 trucks hijacked in the same period. Johnny Smith, national recovery manager for Cartrack, tells RISKSA that between July 2013 and December 2013, Cartrack logged 417 reported hijackings at its operations centre. That is an average of about 70 recoveries a month, with slight monthly fluctuations. Cartrack’s vehicle recovery rate is 95 per cent. One of the hijackings over this period resulted in a fatality. “We have not seen a spiked increase in cases, but the numbers remain consistent and unacceptably high. The numbers increased significantly between 1998 and 2000, and have not gone down since then. Interventions in certain areas get results, but the hijackers just move on to different suburbs and areas,” Smith explains. Affirming the statistics, Altech Netstar MD Harry Louw says that 30 per cent of cases reported to Altech Netstar are hijacking related. “In Gauteng alone, we respond to an

average of 55 reported hijackings a month,” he adds. The company has a national recovery rate over 90 per cent across all case types. Autowatch Tracking says that of all incidents reported in the last six months, about 35 per cent were hijacking. Ben van Rooyen, executive head at Autowatch Tracking, a division of PFK Electronics, notes that to get an overview of geographic spread of hijackings, a distinction must be made between truck hijackings and vehicle hijackings. “Truck hijackings have been and still are prominent near border posts and on the entire N3 between Johannesburg and Durban. Regarding personal vehicles, the main hubs are still the urban areas; yet the thieves tend to now take the vehicles out to safe and quiet rural areas, where they remove tracking devices,” he explains. A very interesting statistic is the increase of hijacking in KwaZulu-Natal (KZN), which now makes up almost 50 per cent of all vehicle crime in KZN compared to 30 per cent in the rest of the country, adds Van Rooyen.

Keep calm and stay safe Very few hijackings result in death, Smith adds. Hijackers do not usually want to cause injury, but will not hesitate to do so should a situation spiral out of control. There is usually an order for a vehicle and most hijackers want to fulfil their ‘order’ in as business-like a manner as possible. Hijackers know specifically which vehicle they want and they will look for weak targets. Hijacking is a very different crime to stealing; it is more dangerous, well organised and is usually run as a syndicate led by a king-pin. Smith explains that a hijacking is more likely to result in death or injury if the hijacker is inexperienced and loses control of the situation, if they are high on drugs, or if they are a new member of a gang taking part in an initiation. “In our experience, in cases relating to light motor vehicles, the hijacking takes place very quickly and the driver is not harmed. In the case of truck hijackings, the drivers

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RISK SA / Aut

Most wanted in 2012 1. Toyota Hi-Ace taxi 2. Nissan 1400 3. Toyota Hilux 4. Toyota Venture 5. Toyota Corolla sedan 6. Nissan Hardbody 7. Mitsubishi Colt 8. Isuzu 280 9. Isuzu 250 10. Volkswagen City Golf Mercedes-Benz South Africa dynamic driving and hijack-prevention trainer Ebrahim Mohamed shares the top 10 most popular vehicles for hijackings in 2012. Sources agree that Toyota vehicles remain top of the list, although updated statistics are difficult to source.

are normally held hostage in order for the criminals to have enough time to dispose of the cargo. This occurrence can be minimised by installing powerful fleet management systems so that live monitoring would indicate unusual driving behaviour, such as route or schedule deviations. A number of additional security measures are available with high-end fleet management products, such as in-cab cameras,” adds Louw.

More popular vehicles are in demand from hijackers; and if the vehicle’s spare parts can be easily traded, it makes the vehicle more appealing. Very specialised, high-tech vehicles are not popular, and convertibles seem to attract too much attention so are not popular hijacking choices. Premium cars do fetch money but manufacturers are constantly improving on their technologies to deter thieves and hijackers. Gary Ronald of the Automobile Association (AA) of South Africa adds that older vehicles between seven and 21 years are at higher risk of theft, while vehicles between one and four years are the highest risk for armed robbery. He adds that entry level and cheaper vehicles are high risk, as well as vehicles with a high market volume.

Catch 22 of improved technology Louw explains that over the years there has been a steady move from vehicle theft to vehicle hijacking (armed robbery) due to the implementation and improvement in effective anti-theft devices such as alarms, coded keys and locking devices. Vehicles are thus hijacked out of necessity on the part of the criminal. Altech Netstar has, however, not noticed any significant increase in the overall number of hijackings of light commercial and passenger vehicles in recent times, which is in line with the national statistic, which indicates a 2.1 per cent increase during the 2012/13 financial year. Yet, there has been a marked increase in the number of truck and heavy vehicle hijackings, specifically for the cargo. This, too, is in line with the national statistic which indicated an increase of 14.9 per cent during the 2012/13 financial year. “We monitor trends carefully and are proactive when we identify a specific trend; for example, a spike in thefts or hijackings of a particular type of vehicle in a certain geographical area. We liaise closely with insurers and motor manufacturers in this regard,” says Louw. Clint Weston, MBSA Dynamic Driving managing member, notes that while increased telematics have great benefits when it comes to recovering stolen vehicles, they also have

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implications for hijacking. Owners of a vehicle and subsequently criminals, may not actually know where the tracking system in a vehicle is located. This means that hijackers might take their victim with them until they have reached a basement, or drop them off in an unknown township, so that they can be sure that the tracking device is not activated. That said, Weston maintains that it is absolutely worthwhile to have a tracking system, as these have unrivalled results in recovering stolen vehicles. Most vehicles that are fitted with a tracking unit are recovered, although at times they are not salvageable. Often vehicles are hijacked for use in other crimes such as cash-in-transit heists, or stripped for spare parts and abandoned.

Danger zones Smith notes that unfortunately in South Africa, hijacking could take place anywhere, however, there are certain areas and times when it is more likely to happen. Driveways in the suburbs and townships are undoubtedly the most common hot spots and will usually take place in the mornings as people head out to work or in the evenings between 17h30 and 21h00 as people return home. Weston highlights that technology is a weak point, particularly cellphones. “When we go into areas we are not familiar with, we pay more attention, but in our day-to-day routines we get very lax, and are often distracted or on the phone. People get hijacked when they are

RISK SA / Autowatch Profiler 1/27/14 2:30 PM Page 1 C

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unaware and someone is able to sneak up in a blind spot,” he adds. Van Rooyen adds that there was a big spike of recoveries, which started building momentum in the latter part of November and came into full swing through the festive period. “The reason for this is drivers tend to be less alert when they are on holiday and are also less familiar with their surroundings; drivers tend to not notice the danger signs.” Holiday periods generally see increased hijacking numbers because criminals require money over these periods.

Forewarned is forearmed Clint Weston, of MBSA Dynamic Driving programme, explains that these courses aim to make drivers aware of existing threats and how to deal with the eventuality of a hijacking should it happen. The course starts with an hour of theory to explain different forms of hijacking and what to look out for as you are driving. With insight from a repentant hijacker, the company understands what hijackers are looking for and what is going through their mind as they perpetrate the crime. In understanding the crime (why the cars are stolen and how much money changes hands), people are more able to deal with the criminals.

Mercedes-Benz South Africa (MBSA) and a number of other vehicle manufacturers in South Africa offer hijack-prevention courses as part of the larger defensive driving training programmes available.

Following the theory briefing, the course includes a practical demonstration, where participants are shown what to look out for in ‘hot-zones’ such as driveways and traffic lights, and how easily a hijacker can approach a vehicle in a blind-spot. The practical demonstration involves going into the street, perhaps a risky area or busy intersection, and observing what happens and how easily

hijackers can identify weak targets. The golden rule, explains Weston, is not to try anything funny. Insurance can cover your car, but not your life. The hijack-prevention course is available in Johannesburg and arrangements can be made for the course to be conducted in Cape Town or Durban, should a large group request it.

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Preventative behaviour • Be observant. Particularly when stopped at robots and when pulling into your driveway. • Stay in the road, not the driveway, until the gate is opened fully, so that you cannot get blocked from behind. • Once inside, keep the car on and watch the gate until it is closed. • Know your environment. If you suspect something suspicious or out of the ordinary; for example, if the dogs are not there and barking, drive around the block. • If you feel insecure in an unknown area or something feels out of place, get out of the situation. Source: Johnny Smith, Cartrack

In the event of a hijacking Don’t play the hero, speak slowly and calmly, and tell the hijacker what you are doing if you move to unclip your seatbelt, for example. Comply with instructions, and ensure that the hijacker can see your hands at all times. Hijackers already risk a prison sentence of 15 years when they attempt the hijacking, says Van Rooyen. “The best advice is to always comply with the hijackers demands. You are not the target of the crime, your vehicle is, comply with the hijackers to distance yourself from the object of their desire,” he says.

After the hijacking Ronald Gall, director at Global Choices, which offers a hijack-assist product as one of its value-added products for insurers, emphasises the value of properly dealing with the consequences of hijacking. As a previous victim of hijacking, Gall understands the intricacies of the secondary effects of this crime.

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The Global Choices product ensures that trained first responders, both medical and trauma counsellors, are sent to the scene immediately if need be. The 24-hour response centre also assists with secondary concerns in the first 48 hours following the crime, such as immediately informing the relevant tracking company of the crime and ensuring that the hijack victim is provided with a hire car if required. Often house keys and personal belongings are taken with the hijacked vehicle. Global Choices will attend to these secondary issues as well. Locksmiths can be sent to the home to change locks, motorised gates can have frequency settings changed (which means dealing with the body corporate in the case of complexes), and if an individual or family fears staying at the home before the locks are changed, there is the option to stay overnight in a hotel. The Global Choices 24-hour response centre

will also ease the bureaucratic processes following a hijacking. A package with the required application forms for identity documents and driver’s licences is available; and the call centre assists with cancelling bank cards and issuing of new cards. While many people simply refuse the counselling option or take it up only at a later stage, Gall says that an immediate debriefing can be tremendously useful, both for the victim’s mental state, and to assist with apprehending criminals. People are urged to remain calm and not make eye contact with hijackers; however, there is still a lot of information that can be very useful to authorities, such as names that may be mentioned or dialect that could be picked up. Post-trauma counselling is an invaluable service, which is not often used to its full benefit. The symptoms of post-traumatic stress disorder can sometimes manifest themselves only after a few months following

an incident and can then be worse. Counselling can be viewed as a kind of debriefing to discuss what has happened and understand the impacts. Often victims of a hijacking will change previously routine behaviours, they might be anxious to drive alone or completely avoid certain streets or driving at certain times. More severe symptoms of post-traumatic stress disorder, which can happen after a life-threatening incident such as a hijacking, include anxiety and depression, which has its own distressing symptoms. Cartrack also offers post-trauma counselling; however, Smith notes that people do not often take it up. He adds that many South Africans have a hardened view of counselling, particularly men, who feel that crime is merely a way of life in South Africa and traumatic events are accepted as the norm. Unfortunately, the subconscious does not always agree and the effects of post-trauma can impact anyone. Altech Netstar has also partnered with EuropAssistance to provide a medical response service and trauma-counselling services to

The crux The root of the problem is that a large percentage of people are unemployed and looking for ways to make money. Hijacking is viewed as a means to bring food to the table, and to be respected by their families for providing. Hijackers will usually get paid about R15 000 for fulfilling an order and delivering a hijacked vehicle to a syndicate. The other major issue is that, while many of the hijacked vehicles are used for other crimes or driven over the border, many vehicles are merely stripped for parts because demand exists and these are valuable on the spare parts black market. If buying pre-owned vehicles or spare parts, people should ensure that these are bought only from credible and authorised dealers which have run AA checks on the vehicle in question.

subscribers who become victims of these crimes. The service is initiated by the emergency control centre which connects a trauma counsellor to the subscriber as soon as possible after the incident.

The reality is that the number of hijackings are not decreasing, but intermediaries can ensure that their clients are best prepared to deal with any eventuality, through preparation and posttrauma interventions.

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CR CAREER

Good data governance ensures compliance and competitive advantage Christy van der Merwe

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he swathe of legislation governing data management, with the hopes of instilling better data management practices among companies in South Africa, shows no sign of abating and companies must be prepared for it.

Without proper management, data is just clutter that gathers dust. Data should be viewed as information that can be turned into intelligence, which can then be put into action to take a business forward and leverage a competitive advantage.

Opportunity is ripe for insurance companies to design a pragmatic and sustainable data governance approach, particularly with the anticipated Solvency and Asset Management (SAM) regulations coming into play, says Gary Allemann, MD at Master Data Management. “A company’s risk calculations are only as good as their data,” adds Allemann. SAM requires that insurers prove all risk calculations are based on quality data, since the goal of this regime is to ensure that insurance firms carry adequate capital reserves to cover a crisis, such as the damaging hailstorms in Johannesburg in November 2013, floods in the Karoo or drought in the Northern Cape. Poor data quality resulting from system errors often causes a fundamental misunderstanding of an insurer’s risk position. “In one case, a poorly documented change to how a system handled credit swap positions led to a downstream system interpreting all short positions as long positions. This resulted an incorrect material estimation of the firm’s exposure,” explains Allemann. SAM will ensure that a company knows exactly how much capital is required in order to comply with the regulation. Inadequate data management means that an insurer will more than likely maintain excess liquidity. Reducing the amount of cash that a company needs to hold, and investing it in more productive arenas, allows the company to become more competitive.

Over and above SAM Allemann explains that the majority of the company’s clients are based in the EU, which is more advanced in implementing its Solvency 2 regulations. These are similar to, but more explicit than SAM. In South Africa, the exact details of the implementation of SAM going forward are still evolving. The spirit of the regulation is to encourage companies to manage risk in a more proactive way, and the majority of progressive companies are already applying these principles in their business. Beyond merely ensuring regulatory compliance, effective data management means that operations will be run 

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What to expect from a data management intervention: Comprehensive analysis: The foundations of data governance will ask questions such as: What data are you using within the organisation? Where does the data come from? Which data is the most critical? Answering these questions will mean that data stewards identify and document business and data definition, policies and rules within the company. Data dictionaries are documented, articulating the consumption and production of data, its materiality and the data quality rules and controls.

Agreement on new data elements, policies and rules: This will require the data stewards and relevant stakeholders from the business to engage and establish these elements so that they are applicable to the entire organisation.

Establishment: The governance workflows above need to be formally established with buy-in from executives. It must be universally applied and aligned with all business stakeholders. A set of transparent processes that monitor and measure the ever-changing risks to which a company is exposed will be established. Automated alerts for data quality issues are indexed to business priority or impact, and actions are mapped in the governance policies that have been created.

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more efficiently and waste will be eliminated. Having a more transparent view of the data, which can be used as intelligence, lowers the risk, which can ultimately affect premiums and ensure that blanket premium increases are not required. Proper data management also breaks down the silos which often exist between divisions of the same company, allowing for a single view of a customer, whether it be information on their short-term insurance, life policies or medical aid. This allows a company to build a better picture of an individual. One of the pertinent issues when it comes to data management across the board is the human element, and this is no different in the insurance industry. Insurers rely on receiving accurate data from intermediaries to establish patterns and highlight important information. This is why insurers will ask intermediaries to give comprehensive and quality information about their clients. With good data management systems in place, a company will be able to track which brokers are leaving out what information and work together with those brokers to find solutions.

Fear of the unknown The amount of data required for business operation today can be overwhelming. IT systems and data management are one of the business processes that can enable significant competitive advantage, but are most often outsourced to experts in the field. Simply handing over a situation to outsiders can be a frightening prospect, as people constantly fear someone taking advantage of them and overcharging for services because they do not have an expert understanding of the issues themselves. Allemann admits that there are companies and consultancies that overcharge, with an intention to sell rather than solve, and these unscrupulous individuals tend to taint the industry as a whole. Not every project at every company will require a team of 20 people to be there for months on end, but it is important to have data-centric teams to analyse the situation and find the ‘sweet spot’. It is also important to realise that IT and data management is constantly evolving; it needs to be constantly monitored and managed, and does not always come in a oneoff project package.

The sweet spot The sweet spot comes from implementing appropriate controls to identify and prioritise data issues that are exposing the business to risk or have any other negative impacts. The controls should also ‘future proof’ the organisation as data governance regulations harden going forward. Because technology is so often intangible and immeasurable, it means that almost every case and every company is different and requires an exclusive solution, says Allemann. It is vital that the business priorities are identified and the solution must address these. Not all information and processes are equal and a balance must be found to most effectively manage the right data. Getting ready for SAM could be a relatively short one-off project or it could be an ongoing set-up – it is not prescriptive. However, ensuring compliance is not a trivial exercise and should not be left until the deadline looms. “Companies should have clarity of their data now, and start readying for compliance as soon as possible, so that the benefits beyond compliance can be realised,” concludes Allemann.

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Investing in learners helps cut the cost of compliance Laura Owings

For the heavily regulated insurance industry, the overheads of maintaining compliant and well-trained staff are constant challenges. INSETA lightens that burden by offering a number of support programmes that help employers invest in and maintain a compliant workforce. 88 8 2

at INSETA. “INSETA also provides a cash grant to all employers who have paid for employees to attend credit-bearing skills programme training, and INSETA will refund employers a portion of the money spent on training. The rebate has been welcomed due to the current economic challenges faced by the sector.” According to Singh, the drop in mandatory grant rebates, as promulgated by the minister of higher education in December 2012, has made employers much more reliant on these programmes to help grow their businesses. There is also a tax rebate for employers who take on students for learnerships and internships.

does. The learners don’t disappear the system,” Nel adds. The funding window for skills programmes will open 20 April and last until June 2014. A cash grant is also available to cover a portion of costs employers paid for employees to attend credit bearing skills training between 1 April aldn 30 March 2014. This window will open again from 20 April to 30 March 2015. INSETA also provides a continuous support line for employers or employees seeking information on where to write their RE exams and how to access learning material and training.

Learnerships run for just over one year, wherein recruits selected by the company are exposed to practical workplace and theoretical classroom training to obtain a full insurance qualification that is recognised by the FSB. Provided the employer submits both a six-month and closure report to INSETA, the organisation will reimburse training costs and learner stipends. “We give funds to companies to build up business with qualified people and give learners a chance to become qualified brokers,” says INSETA's learnership manager, Tumi Peele. However, it is believed that companies are reluctant to take advantage of the support. “A lot of employers might know about it but they see it as too much work and are not willing to spend the time on monitoring learners who may not stay with the company,” Peele says. However, Peele says that once a student has completed a learnership, they are likely to want to gain workplace experience within that same company, further building value in the training efforts and time spent on the student.

he Insurance Sector Education and Training Authority (INSETA) launched the National Skills Development Broker Network in 2013. Through this, the organisation provides its 4 500 registered members with information on learnerships, internships, skills programmes and bursaries, some of which go towards helping businesses recruit and maintain compliant staff. “As we all know, the FSB has, for many years now, asked employers to ensure that their advisers are FAIS complaint. The skills programme project aims to help people in the sector receive funding to achieve their full qualifications,” says Adeline Singh, skills planning, research and development manager

To further support that long-term investment, INSETA’s provides internship funding. It offers the employer a stipend dependent on the learner’s qualification to facilitate keeping them on and exposing them to practical work for a year. While this is available to levy paying employers only, vouchers and bursaries are available for non-levy paying insurancerelated companies. Although no funding is available for the direct costs of exam training or the exam itself, these opportunities provide qualification credits and cut costs for companies. Furthermore, employers are rewarded for nurturing and investing in learners, which can pay off for the industry as a whole by building stronger candidates in the hiring pool. “Even if these companies don’t take students from learnerships to internships, they stand a chance of getting work in the industry,” says Rene Nel, director of the Insurance Learning Academy. “What we see happening is what one company doesn’t use, the next company

Compliance hiring spree in US market Heightened regulatory sanctions and penalties have revealed a need for skilled compliance professionals in the American market. According to figures from the US Labour Department, compliance careers are on an upward swing. “Were in a battle royal for talent in the compliance space, across the board,” Cory Gunderson, who heads the risk and compliance practice of research consulting firm Protiviti, told the Wall Street Journal. In what the newspaper calls a hiring spree, companies are posting thousands of people in compliance roles, particularly in the banking sectors. HSBC Holdings added 1 600 new members to their compliance departments. JP Morgan Chase, following agreements to make billions in settlement payments, has brought in what it calls a compliance ‘SWAT Team’. “The outlook is very bright for anyone entering into compliance as a career,” Paul McDonald, senior executive director at human resources consulting firm Robert Half International told the newspaper. Further driving growth is a rise in starting salaries. According to figures from Robert Half, the average pay has grown more than 3.5 per cent a year since 2011. At the same time, US starting salaries on the whole are expected to rise 3.7 per cent in 2014.

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knowledge of the proposer. Consequently, as far back as 1880, the English courts stated that if the insured knows of any circumstance that may influence the underwriter’s opinion as to the risk he was undertaking, or the premium charge for doing so, there is an obligation to disclose this – irrespective of whether the insured thought the information was material. It is trite that an insurer has the right to avoid a contract of insurance not only if the proposer has misrepresented a material fact, but also if he has failed to disclose one. However, the burden of proving materiality lies with the party alleging a misrepresentation or non-disclosure. Section 53 of the Short Term Insurance Act 53 of 1998 sought to introduce a statutory definition of materiality in the interests of policyholder protection. Materiality was defined as “information likely to have materially affected the assessment of the risk under the policy at the time of its issue or any renewal or variation thereof”.

The duty of

disclosure in insurance law–

what are the obligations of a broker?

ontracts of insurance of insurance are contracts of uberrimae fides: the utmost good faith which creates rights, duties and obligations between the insurer and the insured. Utmost good faith implies that the proposer for insurance must disclose at the time of proposal, anything that is material even though the proposer may not appreciate its materiality.

Brian Martin, Executive Director at Renasa Insurance Company Limited

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What is material are the special facts upon which the contingent chance of an insured peril materialising is calculated. These facts most commonly lie within the

A representation or non-disclosure is to be regarded as material if a reasonably prudent person would consider that the particular information concerned should have been correctly disclosed to the insurer, so that the insurer could form its own view as to the effect of the information on the assessment of the relevant risk. This introduced an objective test to that of the notional, reasonable and prudent person. While the obligations of the insured in relation to disclosure are clear, the position of the broker – who represents the insured in the placement of business with an insurer – was historically perhaps less clear cut. When faced with a rejection of a claim and voidance of the policy, an insured often blames the broker for his or her predicament. Such a situation arose in a matter which came before the FSB Appeal Board in 2007 (Renier Reyneke Trucking CC vs Smit Garrun Brokers) where the appeal board, in an appeal against a determination of the FAIS Ombud, considered the obligations and duties of an insurance broker in relation to the insured’s duty of disclosure. The board, noting that the insured was under an obligation to disclose everything material even if its materiality was not appreciated, held that the most important duty arising from a brokerage agreement was the duty to act with reasonable care and skill. Where the insured utilises the services of a broker for the purposes of procuring insurance, it is the duty of the broker to disclose material information of which he is aware. If the broker fails to assist the insured to disclose information

when procuring insurance on behalf of the insured, the insurer may choose to avoid the policy and the broker may be liable to the insured for damages (Pickering vs Standard General Insurance Co Ltd 1980 (4) SA 326 (ZA)). The duty to disclose material facts flows from the duty to assist the insured to disclose material information. It is the duty of a broker to see that all answers accurately represent the information provided by the insured. The broker, however, is not responsible for the correctness or truth of the information provided, except where he has greater knowledge of the insured as a result of their previous dealings. The broker must caution the insured to disclose everything and to warn him of the consequences of not doing so. The appeal board also referred to the Policy Holder Protection Rules published under the Short-term Insurance Act which dictates that intermediaries conduct business honestly, fairly and with due care and diligence.

The broker’s duty also extends to pending claims against another insurer. Should the broker be aware of a pending claim, they have a duty to advise the insured to disclose all relevant material information. Failure to do so or to make appropriate enquiries would be negligent. The broker has a duty towards both the proposer and the insurer to ensure that full, complete and correct information is disclosed. It is clear that a broker cannot, when submitting a proposal for insurance cover on behalf of a client, act with what the board described as “sloppiness and shoddiness” in the Reyneke case. When an insurer accepts a proposal in circumstances where the broker is led to believe that the insurer is satisfied with the information provided and has waived the need for further risk assessment, causing the broker to believe that insurance cover was in place, then the insurer will be estopped from relying in a defence of non-disclosure. (See King’s Property Development (Pty) Ltd vs Regent Insurance Company Ltd Case No 71146/10 NGHC).

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A nation indebted by

fraud Laura Owings

Credit standing of consumers

CURRENT

37.9%

(June 2013) University of Pretoria Law Clinic

1-2 MONTHS IN ARREARS

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14.2%

3< MONTHS IN ARREARS

21.1%

ADVERSE LISTINGS

13.5%

JUDGEMENTS AND ADMINISTRATIVE ORDERS

13.3%

n late January, workers at three of the worldâ&#x20AC;&#x2122;s biggest platinum mines downed tools, initiating a strike in demand of an entry-level, monthly salary of R12 500.The action was met with a heavy police presence in Marikana, where thousands of workers stood in protest. All eyes were on both sides of the lines, as the memory of the Marikana massacre remained fresh. The August 2012 strike resulted in the death of 44 people, turning it into one of the bloodiest police operations in South African history in nearly 20 years. Those workers were protesting over poor pay at the Lonmin platinum mine. According to the Mineworkers and Construction Union, the take-home for those mineworkers was an estimated R2 000 or R3 000 per month. However, reports on how much those in the industry actually earn are confounded by the high levels of debt within the community and unscrupulous lending practices. Department of Trade and Industry Minister Rob Davies addressed the situation in a statement following the 2012 Marakana events. â&#x20AC;&#x153;When we heard that workers at Marikana were claiming to be paid a certain amount and managers claimed

Mine workers again protested in Marikana in January, demanding higher wages. However, their financial plight can be linked to pervasive problems in the lending industry, ranging from fraudulent garnishee orders to credit life insurance cons that can only be overcome with reform.

another figure, there was a massive discrepancy between the two. How is that possible? In many cases, it is attributed to high levels of debt,” Davies says.

creditor the opportunity to receive financial instalments from deductions of the debtor’s wage or salary by his or her employer before that salary is handed over.

In what Davies called the “outright preying on the vulnerabilities of low income and working people”, he told of workers whose actual pay was R9 000 but they took home only R2 000 or 3 000 after lenders served illegal garnishee orders on their employers.

They can be obtained where the debtor has consented by signing a consent to judgement, incorporating a consent to an EAO to pay the debt in specific instalments. They can also be issued in terms of a court order application.

This may be an example of abuses aimed at those in the mining community, but unscrupulous practices in garnishee orders and the debt collecting process in general are pervasive in all sectors and has an effect on thousands of South Africans, says credit ombud, Manie van Schalkwyk.

However, ineffective legislation in the Magistrates Court Act and the lack of proper interrogation by magistrates and clerks of the court contributes to abuses, says Dave Woollam, director of Summit Financial Partners and former CFO and CEO of African Bank. Thus, orders with inflated interest rates or fraudulent consent signatures are enacted, pushing those who are already financially vulnerable further into debt.

“The problems are not specific to employees in any specific industry. The cost to the consumer and the current abusive conduct of some firms represents a real moral concern because they contribute to the problem of overindebtedness,” he says.

Stolen wages The term ‘garnishee order’ is wrongly used to describe what is known as an emoluments attachment order (EAO). Dealt with in the Magistrate’s Court Act, an EAO grants the

“The perceived lack of regulatory sanction or punishment seems to be encouraging certain players to cut corners and act illegally or immorally,” says Woollam. An example of this was highlighted by the January announcement of legal action involving the largest independent microlender in the country, Atlas Finance.

The company, which has issued more than two million loans over its 20-year history, faces allegations from Summit that it served fraudulent garnishee orders to the employers of its customers. According to media reports, it was claimed that Atlas’s debt collection branch had its own court stamps and allowed employees to create false garnishee orders by forging the signature of the clerk of the court. Summit says they investigated the garnishee orders with the relevant magistrate courts and found documents supporting hundreds of garnishee orders for Atlas were missing. Atlas declined to comment on the charges, as the matter is sub judice, but a statement on its website says the allegations are fabricated. This case is just one example, according to Woollam. Of the thousands of EAOs Summit audits as part of the administration solutions they provide to South African corporations, a high percentage is found to be incorrect or illegal. “Through our efforts, we have saved our clients millions; however, we estimate that there is probably over R1 billion in overcharged EAOs out in the market.” That is not to say EAOs are all bad. They are an acceptable and legitimate form of debt collection for creditors dealing with bad faith customers, says Nichola Woodward, commercial branch head and director at WHD Attorneys. Woodward represents corporate companies and assists them with obtaining EAOs issued with proper consent. By her estimates, garnishees are uncommon, with one issued a month considered a lot. “It is typically a very long process that can take a good faith creditor years to get through,” she says, adding, “It is really the end of the road route. We loathe going the salary attachment route.” To keep the good from washing out with the bad, she suggests starting with a reform of the legal process. “Clerks are not qualified to identify the terms of these documents; they’re docking the magistrate and getting things issued, and the orders themselves are illegal. Reforming the legal process itself on how

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these orders are obtained and encouraging consumer education would probably be the easiest way to start addressing this,” Woollam says. It is difficult to provide a comprehensive solution to the complex issues around EAOs, stresses Woollam. While he would suggest amendments to the Magistrates Court Act, he recommends the implementation of independent agents who would ensure that claims are accurately calculated and comply with regulation, among other reforms. “With the financial literacy rates among consumers being very low, it is important that their rights are upheld by a strongly regulated system,” he says. A task team, headed by the credit ombud has promised to address current industry practices and establish a code of conduct for EAOs. Although their recommendations have not yet been announced, it is a sign that reform is on the horizon.

Credit life con Tighter regulation is also expected in the credit life industry, a move welcomed by insiders who claim pervasive abuses of the market, similar to EAO malpractice. Preying on low-income and working consumers, unscrupulous lenders attach exorbitant premiums to the product in order to get around limits placed on them by the National Credit Act (NCA). They then misrepresent the policy, leading consumers to think that cover package is compulsory. It is believed to be a particular problem among small lenders and furniture retailers. One of the reasons they can get away with this is because of failings in the NCA. The act dictates that lenders may charge a reasonable fee for credit life coverage, but no guidelines are given for what constitutes reasonable. “The NCA regulates interest rates and fees, yet does not cap the pricing of credit life, leaving a significant back door open for price manipulation,” says Woollam. According to him, the spread of pricing in the market is extreme. “Some players are charging nearly 20 times the premiums of the cheapest players, and it is clear that excessive profits are being made through these products by some players in the industry,” she adds. Under the current system, credit life insurance is not embedded in a loan, but sold as an add-on benefit for customers who have successfully applied for a credit facility such as a personal loan, mortgage loan or credit card. The coverage provides security in the event of a default due to unexpected events, such

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4.2 million credit-active customers in arrears

76% of disposable income pays household debt

as death, disability or retrenchment. It provides security that in such events, family members will not have to bear the financial burden. The value of credit life also extends to lenders. It contributes to unsecured lending revenue and reduces costs associated with debt recoveries. Furthermore, it facilitates the granting of credit to high risk customers, which is an important consideration in the South African market, according to Marius Botha, head of insurance at African Bank. “Credit life insurance allows higher risk customers, who would otherwise be excluded from anything but the basic short-term finance, to have access to longer credit as an alternative option, while providing a risk mitigant to deal with unexpected, insurable events. This is an important consideration in an emerging market such as ours, where lowincome customers are often excluded from

R1 billion in overcharged

EAOs in the market

access to secured financing,” he says. While the coverage may be mandatory to securing a loan, customers have the right to bring an alternative insurance policy from the one being promoted, as long as it meets the credit underwriting requirements. However, the way this is presented to customers is not always clear, or worse, they are not aware the coverage has been added at all, says Kevin Hurwitz, CEO of Wonga. com South Africa. “Many consumers are often unaware they are paying for this cover on their loans, or that they have the option to choose credit life insurance separate to that offered by the credit provider,” he says. “Credit providers do have the right to insist that credit life is taken out to ensure that loans are repaid in the event of death, but we believe the choice should be with the customer over which provider offers the credit life cover. At the very least, credit providers should be forced to be transparent about how much the consumer is being charged for credit life insurance,” Hurwtz continues.

To establish that, Woollam suggests providers embed credit life benefits into the terms of the loan, and charge a higher, tightly capped rate. “Since the benefits of the policy are always linked to a loan, and the proceeds paid to the lender, I propose the NCA be amended to cater for a different class of loan; one that has these benefits embedded into the terms of the loan as forgiveness clauses and to allow a higher rate of interest to be charged on these loans,” he says.

credit life and the product itself,” says Botha. “The industry should take the opportunity to review the scope of credit life insurance and its role in protecting customers who in good faith suffer from insurable events,” he says. “If, as an industry, we truly are interested in consumers’ well-being, we should review not just what providers are charging for credit life, but also what value is actually offered by such policies,” Botha adds. While reform efforts by lenders, the NCR and the credit ombud may be what the industry needs to make an appropriate turnaround, the results of regulatory reviews are still awaited, and abuses prevail.

The National Credit Regulator (NCR) may indeed amend the NCA to strengthen the control of credit life insurance. Recent reports suggest the regulator is reviewing the terms of fair and reasonable premium, and how to ensure minimum cover and protection.

With household indebtedness at 76 per cent of disposable income, and 4.2 million creditactive customers in arrears, over-indebtedness is quickly becoming the match to the tinder, igniting frustrations and fuelling tragedies like that in Marikana. Change in the industry that improves financial well-being will surely impact the economic and social well-being of the country as well.

“Possible amendments would address the pricing structure and practice of offering credit life products on the market. But industry does not have to wait for the regulator to weed out bad practice. By reviewing the industry themselves, banks and lenders can improve the reputation of

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market welcomes private flood insurance With some insurers withdrawing flood cover in the local market, and the tussle between government and insurers in waterlogged parts of the UK, all eyes are on the US where The Flood Insurance Agency (TFIA) has become one of the first private flood insurers to bring homeowners an alternative to costly federal coverage. Laura Owings

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FIA’s Private Market Flood, underwritten by Lloyd’s of London, was made available in Connecticut in January, following roll-outs in Florida, South Carolina, New Jersey, Pennsylvania, Virginia and Louisiana. The policy offers a less expensive, faster and more convenient alternative to the Federal Emergency Management Agency’s (FEMA) national flood insurance coverage, particularly for those whose policies have lapsed and homeowners with high premiums due to low elevations. TFIA’s market was established in response to legislation that eliminated subsidies on FEMA’s flood insurance in 2012. The government’s goal was to bring insurance rates more in line with the real risk of flooding, however, policyholders have been subsequently hit by significant rate increases. A specific consequence has been a rattling of real estate markets as potential new buyers are put off by expensive insurance premiums. Flood insurance is effectively making costs prohibitive to own property, particularly along the shoreline of the East Coast state of Connecticut. Indeed, state representative James Albis told the Associated Press in January that federal premiums on homes in his seaside district have been has high as $60 000. Premiums offered by TFIA, however, cost $2 430 a year for $200 000 in coverage. “That’s where we see our product being used the most often, to allow real estate transactions that otherwise wouldn’t occur,” CEO Evan Hecht told the AP. TIFA’s private flood insurance offering was first launched in Florida in November, where the company has already been asked to write 150 policies worth over $30 million of property coverage. In many cases, their rates were 20 per cent of the federal rate. Richard Koon, deputy commissioner of the Florida Office of Insurance Regulation, welcomed the offering. “It certainly isn't going to solve the problem with the national programme, but what it will do is provide relief for some homeowners who need to purchase flood [insurance]. It will give them a viable option,” he said. The availability has had an effect on the housing market. Century 21 realtor Dania Perry, said in a statement that the emergence of private insurance in Florida had jumpstarted the market for homes in flood zones, following an unprecedented October prior where she and many of her colleagues went without a single closing. Because the private market originally refused to cover flood disasters due to the potentially unmanageable claim loads, the US

“A specific consequence has been a rattling of real estate markets as potential new buyers are put off by expensive insurance premiums.” Government began offering flood coverage in the 1970s. The development of flood maps, risk data and computer modelling has since allowed insurers to assess the likelihood of flood damage, but they could not compete with the federal government’s subsidised rates. After Hurricane Sandy, which rocked the eastern seaboard in late 2012, policy was put into place to draw floodplain maps and eliminate artificially low rates on previously homes built, which resulted in premium rate hikes. Now, FEMA is redrawing flood maps, and potentially pushing premiums up again. That risk is fuelling a move by homeowners towards the private market. Despite these tools, Hecht told the AP the unpredictability of weather remains at the heart of insurance problems. “Predicting low probability, highly catastrophic events is pretty difficult. We believe that the past is a precursor for the future. If you have a frequent flooding risk, we are not the answer. This is for older homes, predominantly homes with basements,” Hecht said. TFIA is also a strong advocate of FEMA’s National Flood Insurance Programme, holding thousands of policyholders. It is also a two-time FEMA Agent of the Year nominee. “We take great pride in our ability to service the flood insurance needs of both individual property owners and our peers who are professionals in related industries. We realise having other professionals rely on us is a privilege and a responsibility, and we treat each of these referrals very seriously,” Hecht said in a statement. Private Market Flood does not cover homes with recent flood claims or claims in excess of $250 000. Certain commercial and multi-family properties may be eligible for coverage. The policy’s rates are not regulated or guaranteed by the government, meaning claims will not get paid if the company goes out of business. TFIA is licensed in all 50 US states, and specialises in flood insurance. Private Market Flood is open to all insurance agents in launch locations who are licensed to sell property insurance. Homeowners can also purchase the policy online.

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Crisis communications “It takes a lifetime to build a reputation and only a few seconds to destroy one.” – Unknown

t took Asiana Airlines exactly 30 seconds to have its reputation on the line subsequent to the crash of Flight 214 at San Francisco Airport on the morning of Saturday, 6 July 2013. The first tweet of the crash went out within 30 seconds of the incident happening. Passengers posted information and pictures on Facebook and Twitter almost immediately. The incident had gone global in a matter of minutes. Yet Asiana Airlines were slow to respond. Boeing and the San Francisco Airport, as well as various other organisations took on the responsibility initially to keep travellers updated. It is safe to say that Asiana Airlines did not have an effective crisis communication management strategy in place. There are few situations that test a company’s competency and ultimately its reputation as severely as a crisis. The Institute for Crisis Management (ICM) defines a crisis as “a significant business disruption that stimulates extensive news media coverage.” According to the ICM definition, the resulting public scrutiny affects the organisation’s normal operations and could also have a political, legal, financial and governmental impact on its business. ICM was founded in 1989 and is a research-based crisis

communications firm based in the USA. Crisis communication is often not positioned as an important part of an organisation’s public relations or communications strategy, because most feel that there is no real threat of an imminent crisis; the ostrich’s head-in-the-sand approach. Whether ignorance or arrogance, not taking crisis communication seriously can be the demise of an organisation and the management of a crisis is critical in maintaining a positive brand image even in times of adversity. The crisis communication plan must form an integral part of any organisation’s communication strategy and must cover all forms of communication especially social media. The various potential crises should be identified prior to any event so that holding or first response statements can be developed in advance. Relevant people within the organisation must be appointed to handle the crisis and must be adequately trained, especially frontline crisis managers and communicators who may be in contact with the media or the public. It is recommended that the most senior in a company is quoted in responses so as not to minimise the event in the eyes of the public. However, training is imperative as even senior people take strain in adverse situations. Accessibility to the right people within the organisation and to information is critical. Information must be constantly reviewed,

showing the necessary empathy for the people involved, even if there is no real update on the information. It is a good idea to appoint a public relations representative that is proficient in crisis management, especially aspects of social media, as it is a uniquely skilled form of communication management. Do mock training scenarios so that the appointed crisis management team have some experience before an actual eventuality. Remember: you only have one opportunity to do it right. It can go horribly wrong and threaten the stability of your organisation. Turn a crisis into an opportunity by managing it effectively. Crises are events that are either caused by human error or by an act of God, and it is the eventual outcome that will ensure whether your organisation is crushed or ends up being a brand hero. Don’t deny the truth or shirk responsibility, it will eventually come out. Appearing open and transparent will go a long way in maintaining positive public opinion, especially if solutions are being offered.

“If it’s going to come out eventually, better have it come out immediately.” – Henry Kissinger

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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Firedart dumps construction guarantee Following the decision to discontinue its construction guarantee division in January, Firedart has changed its name to Firedart Engineering Underwriters Managers and will continue to focus on engineering risks. Its area of focus includes contractors all risks advanced loss of profit, plant all risks, machinery breakdown, loss of profits, deterioration of stock, works damage, electronic equipment, dismantling transit and erection. Mike Tandy, managing director of Firedart, says: “Market conditions in the guarantee sector have called for us to revisit our product portfolio and to offer only engineering solutions with effect from January 2014.” He concludes: “The Firedart name is well known to our valued partners, our brokers as well as the rest of the short-term insurance industry and we look forward to continuing to bring great service and specialist advice to both our brokers and their clients.”

FirstRand‚ Barclays and Liberty invest R30 million In January, the University of Cape Town launched the African Institute of Financial Markets and Risk Management (AIFMRM) thanks to a multimillion Rand partnership with FirstRand‚ Barclays Africa Group‚ Liberty and the Western Cape Government. AIFMRM is an academic institute that conducts research and delivers education and training in financial markets and risk management. The dean of the faculty of commerce‚ Professor Don Ross, says: “AIFMRM is unique in Africa. No similar academic institute‚ aimed at creating a steady and sustainable pipeline of African university graduates with sophisticated knowledge in banking‚ insurance‚ risk management and quantitative finance‚ exists on the continent.”

Local CIS industry doubles in size in just five years The 2013 local Collective Investment Schemes (CIS) industry statistics released today by the Association for Savings and Investment South Africa (ASISA) show that over the past 10 years the industry has seen assets under management increase fivefold. Investors had almost R1.5 trillion invested with the local collective investment schemes (CIS) industry at the end of December 2013, more than double the R661 billion invested only five years ago. Leon Campher, CEO of ASISA, says while the strong run of the equity market has certainly played a role in the growth of CIS assets, unprecedented net quarterly inflows in recent years strongly bolstered assets under management. In 2013, the industry attracted net inflows of R177 billion, far exceeding the previous record net inflows of R120 billion in 2012.

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Guardrisk/MMI get Competition Tribunal approval MMI Holdings Limited (MMI) received the Competition Tribunal‘s unconditional approval to acquire specialist insurer Guardrisk. The transaction was first announced in November 2013 when MMI, a JSE-listed financial services group, was the successful bidder from a list of several investors who expressed an interest in acquiring Guardrisk from Alexander Forbes. The Guardrisk transaction enables MMI to provide a comprehensive suite of specialist insurance solutions in the alternative risk transfer space to our large corporate clients and brokers. This enhanced product offering will be complementary to the innovative product offering of Momentum Employee Benefits. The proposed transaction remains subject to approval from the Financial Services Board and the regulator in Gibraltar where Guardrisk also conducts business.

INSETA spends R4.2 million on learners The Insurance Sector Education and Training Authority (INSETA) has committed approximately R4.2 million to learnerships and bursaries for 314 learners (67 per cent of whom are unemployed youth) at further education and training (FET) colleges. Currently, the Western Cape and Gauteng have an equal number of learners supported by INSETA (total of 70 per cent), while Mpumalanga has 24 per cent of learners and the Eastern Cape has six per cent. Sandra Dunn, chief executive officer (CEO) of INSETA, says, “We are closely following the progress of our sponsored learners, with the objective of ensuring that learnerships are completed and learners are placed in suitable jobs. We also want to ensure that those receiving bursaries perform satisfactorily.”

Masekela sings Assupol’s song Assupol has recruited famous South African music icon Hugh Masekela to be the life insurer’s ambassador for its latest television advertising campaign. The new campaign consists of a three- to five-minute infomercials focusing on Assupol’s funeral plan.

Hugh Masekela

“I am excited to be a part of Assupol’s latest TV ad campaign, and am even more excited that it is continuing the good work of providing quality insurance that is affordable for all people of South Africa,” said Masekela. The advertisements feature Masekela along with testimonials from real clients. Assupol’s TV campaign appears on SABC 1 and 2 in January 2014, and will thereafter appear on various mediums and channels.

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newappointments AIG South Africa AIG South Africa announced that Jose van Rooyen has been promoted to profit centre manager Jose van Rooyen for Global Casualty at AIG South Africa. Van Rooyen joined AIG in December 2007 as upper CAP business development manager.

Raath, chief executive of Glacier, said that Essop is the perfect candidate for the role as she has in excess of 15 years’ marketing experience in investments, wealth and Zaida Essop employee benefits. Prior to joining Glacier, she was head of marketing at Momentum Investments.

Zurich

He moved to the liability team in 2009 as casualty auto manager and was promoted to casualty manager by early 2012. He has a wealth of experience in insurance spanning over 20 years which includes broking, business development and underwriting.

Zurich South Africa announced the recent appointment of Mercia Wallis as head of motor and personal lines.

Hollard Hollard has appointed Adrian Enthoven as chairman of the Hollard Insurance Company Limited and Hollard Life Assurance Adrian Enthoven Company Limited. Enthoven is the executive chairman of Yellowwoods private investment group, and has served as chairman of Hollard Holdings since 2012. He also sat on the Hollard Investments committee since 2007. Hollard CEO Nic Kohler says, “Richard has overseen a period of tremendous growth for the Hollard Group.”

Glacier by Sanlam Zaida Essop has been appointed head of marketing at Glacier by Sanlam as of 1 December last year. Essop leads an integrated marketing team that supports the sales function within Glacier. Anton

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Wallis has over 19 years’ experience in the insurance industry. Having started her career at Santam in 1994, she moved to Mutual & Federal. Mercia Wallis

She was named the Short-term Insurance Manager of the Year in 2005. Wallis was appointed risk manager: customer service and underwriting at Hollard in 2006; technical underwriting manager some 15 months later; and, in 2008, returned to the Santam fold.

ACE Group ACE Group announced its recent appointment of Lee Stacey to the role of head of casualty, South Africa, as it continues Lee Stacey to build its underwriting proposition for corporate

clients across the country. ACE will enter the casualty market providing insurance solutions for companies across a wide variety of industry sectors. As head of casualty, Stacey will increase ACE’s presence in the local insurance market focusing on public liability, products liability and pollution coverage. Reporting to Gary Jack, chief operating officer for ACE in South Africa, she will be based in ACE’s Sandton office with immediate effect.

Astute Astute has announced several management changes, including the re-appointment of Prem Govender as chairperson. Govender Prem Govender was elected chairperson as of January this year, succeeding Peter Dempsey, deputy CEO of ASISA. She has served as a non-executive director of Astute since June 2010. She is chairperson of the Financial Planning Institute (FPI), having served the organisation as a director since 2004.

SAUMA Tersia Davey has been appointed as chief executive officer of the South African Underwriting Managers Association (SAUMA), the first time that Tersia Davey the organisation has made this a full-time position. “The focus for SAUMA in 2014 will be to connect with members and interact with the market, to foster proactive relationships within the industry,” she says.

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events CIA Roadshow – D’Aria Wine Estate Building insurance specialists CIA recently entertained guests and brokers at the picturesque D’Aria Wine Estate on the Durbanville wine route in Cape Town as part of its national roadshow. After admiring the scenery and sipping on wine, managing director Andre de Waal spoke about the reasons behind modifying the policy wording and putting it into plain language. He also touched on new products launched by CIA. All and all, it turned out to be an entertaining and informative day for all brokers.

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Andre de Waal (MD CIA ) and Georgie Graham (Dir ecter at CIA)

AWII’s Mad Hatter Tea Party The Association of Women in Insurance (AWII) hosted a Mad Hatters’ Tea Party in February at the Kelvin Grove Club in Newlands, Cape Town as part of a charity auction for children with cerebral palsy. As the leading auctioneer slammed his hammer to start proceedings, the women had a wonderful choice of prizes to choose from: a hot, young stud to run errands, a weekend away or an expensive bottle of bubbly. It was a wonderful morning with prizes for the best dressed, a full breakfast and delicious cakes. An incredible R20 000 was raised for the charity.

Infiniti Insurance hosts at L’Ormarins Queen’s Plate High stakes, high fashion and the rumbling of horse hooves: this is what the L’Ormarins Queen’s Plate, one of the most anticipated equestrian events of the summer, is all about. At the end of January, Kenilworth’s Racecourse came alive with the opening of the event’s 153rd edition. Infiniti hosted guests at Kuda’s lavish box. Guests flaunted their best blue and white attire, enjoyed the incredible food and placed their bets. Some were left a little happier than others with their winnings, but it was a memorable and enjoyable day nonetheless.

A day at the races with Barry Scott

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Barry Scott:

Anton Pretorius

A tale of two offices

Barry Scott, CEO of the South African Insurance Association (SAIA), has two offices. In office number one, Barry dons a suit and tie, and chairs board meetings with luminaries of SAâ&#x20AC;&#x2122;s insurance industry. In office number two, Barry dons a racing suit and helmet and races a 1983 RALT Formula Atlantic against some of the most feared drivers on SAâ&#x20AC;&#x2122;s motor racing circuit. RISKSA staff members were in pole position when he asked us to pit crew for his team. We also took the opportunity for a quick interview. 106 8 2

hether it’s listening to the roar of tuned-up engines on the track, the strong smell of two-stroke oil lingering in your nostrils or the sight of a sexy grid girl smiling seductively, a day spent in the pits at Killarney – the home of Western Cape motorsport – is never a bad idea.

up for her to race in. Today she has expanded into the faster stuff. (Read on to find out who Barry thinks is the faster driver – Ed). The ‘faster stuff’ being the 1986 Reynard Formula 3 racing car. Capable of top-ending at 280 km/h, these cars are loud, fast and powerful and, at full lick, they sound sweeter than a summer breeze.

When SAIA CEO Barry Scott and his wife Michelle asked us to lend a hand at the track, we were elated. Hosted by the Western Cape Motorsport Club, the Passion for Speed 2014 Series was abuzz with activity as nearly 4 000 motoring enthusiasts and petrolheads from across the Cape made their way to Killarney to marvel at the myriad cars racing on the tarmac.

Fellow petrolheads, publisher Andy Mark and Land Rover AFRICA magazine’s assistant editor Ian Theron were soon up to their elbows in grease, fixing, tweaking and finetuning the mechanics of the cars.

Drawing big interest were the cars last seen at Killarney in the early 1980s known as wings and slicks which was the same division Barry and Michelle were competing in. This division conjured up old memories of the glamorous golden age of South African motorsport racing where local heroes such as Ian Scheckter, Roy Flomfaas, Tony Martin, Dave Charlton, Bernard Tilanus and Trevor van Rooyen set the track on fire in their Formula Atlantics, Chevrons, RALTs and Marchs. Barry and Michelle, who have about 15 years of racing experience between them, raced magnificently in their 1986 Reynard Formula 3 and 1983 RALT Formula Atlantic. They go together like two peas in a pod; not only do they share a love for each other, but a love for racing too. As Barry comments, they met each other “on the back of a bicycle”. He had organised a 600 km ride from Johannesburg to Durban in aid of the charity Childhood Cancer (CHOC), and a friend had invited Michelle along. She started attending racing events with Barry, helping him wherever she could and the bug soon bit. Barry Scott, CEO of SAIA does some final minute adjustments to his 1986 Formula Atlantic.

Before long, Michelle was itching to get behind the wheel. Together, the couple built a 1970 Ford Escort from the ground

A total of 199 entries turned up over the weekend to battle it out on the tarmac. And while Barry and Michelle experienced a few mechanical issues, they performed admirably and raced with heart. Barry finished in fourth position overall and Michelle, who showed tremendous guts on the track, unfortunately wasn’t classified due to her 'did not finish' (DNF) in heat one. With the adrenaline still racing through his veins, we managed to nab Barry for a quick chat about his racing background and, more importantly, the state of the South African insurance industry.

Where did your love for motorsport begin? My father was a petrolhead. Since the age of six, he took me to motor racing events at the old Roy Hesketh circuit near Pietermaritzburg. In those days, the sport was very relaxed – you could walk about the pits, chat to drivers and really have a good time. The cars which I’ve owned and raced in my life are the ones I fell in love with in those early days (the late 60s at Hesketh). In later years, Kyalami was the venue for us. Although I was a keen spectator, I never got into racing until about 10 years ago when a friend of mine suggested I purchase a 1966 Mini Cooper S and race that in the historic series. Since then, we have owned and raced 10 different race cars. 

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What’s it like when the luminaries of the SA insurance industry meet? Our board meetings are great. All the industry CEOs pull together for the good of the industry and are really supportive of the SAIA.

What are some of the major issues facing the industry this year? There are a few issues that need addressing in 2014: legislation (Twin Peaks, Treating Customers Fairly, Solvency Assessment and Management, Retail Distribution Review and more); increasing claim costs (motor crashes, cost of parts, fire, floods and poor performance in agriculture); and transformation (human capital development, enterprise development and micro-insurance). We have restructured our board committees and our management team in order to deal with the evolving changes. Our new board committees and our managers responsible for them are Suzette Strydom (governance risks), Viviene Pearson (insurance risk – motor, property, agriculture, marine, engineering), and Leila Moonda (transformation and social risks and image and reputation). ABOVE: Editor-in-chief Andy Mark fixing and fine-tuning the vehicles during sessions. BELOW: Michelle Scott looks relaxed while prepping for her big race. BELOW LEFT: Some of the Cars that raced in the Historic Sports cars division at Killarney motorsport track.

Which race really stood out for you over the years? I guess my greatest achievement was winning the historical sports car championship in 2012 in a 1971 Chevron B19, a car which I acquired only one year earlier. The most memorable single event was winning my inaugural race in that car, a one-hour race at Phakisa in Welkom, by a margin of over two laps. As a spectator, the 24 hours of Le Mans is

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without a doubt the most fabulous racing event. I have attended two and both of them were full of atmosphere, excitement and drama. I’d love to go watch the Classic Le Mans, but it’s a bit out of my price league unfortunately.

Who is quicker? You or your wife? (Laughs) Difficult question that. We have never really competed in the same cars. A couple of years ago I would have said me, but now I think we are fairly evenly matched.

What is SAIA’s outlook for 2014? 2014 will be a continuation of where we left off last year with most major pieces of legislation still under debate. The end-game is now getting close though, with Solvency Assessment and Management due to kick into full gear in 2016, with parallel runs as early as next year. Then we have the Treating Customers Fairly principles already in place, Twin Peaks looming and the Retail Distribution Review coming up. We’ll have a very busy legislative programme. With the success of our vehicle crimecombatting initiatives, we want to extend that model into road accidents through a partnership approach with all stakeholders. We will also be extending our activities and becoming far more active in the property insurance arena. Although the Financial Sector Code has been gazetted and is now in full effect, there is still much work to do. We will continue with our consumer education programme and look at ways of extending the industry’s reach in enterprise development.

Any retirement plans in the pipeline? Michelle and I would love to retire to the Cape West Coast, not too far from Cape Town so we can still enjoy the culture and vibe of the city, but also far enough to escape the hustle and bustle of the city when necessary. With regard to when, there are some financial issues to sort out first (perhaps I should sell some of my race cars), so it will not be any time in the immediate future, unless I win the Lotto of course.

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Conning. “That said, economic drivers are mostly favourable and many companies are beginning to reap the rewards of investments in technology and an increasingly analytical approach to the business.” Steve Webersen, director of research at Conning says fragmented economic growth is creating new pockets of opportunity, while challenging established markets. “As in the US, growing regulations convergence and complexity are increasingly commanding insurer attention and resources.”

Munich opens new office in Minnesota

Global reinsurer Munich Re, has expanded its operations in the US health reinsurance business with the opening of a new regional office in Minnetonka, Minnesota. The company says that its decision to launch a new office has been taken after considering the better opportunities arising from the new national health reform law known as the Affordable Care Act (ACA). Also known as Obamacare, the ACA is causing significant changes in how healthcare will be financed and delivered to the public.

USA Outlook positive for US and global insurance market

The outlook for the US insurance industry in 2014 is stable with some gradual improvements across most segments. This is according to a recent study by Conning called ‘US and Global Insurance Industry Outlook: Improving Performance amid Economic and Regulatory Challenges’. Conning, a leading investment management company, says that insurers in both the US and globally should benefit from improved operating conditions and the initiatives they have been pursuing in response to the challenges of the past few years. However, while the outlook is positive, it will be met “with increasing uncertainty brought on by economic, political or regulatory developments unfolding in the period”, says Stephan Christiansen, managing director at

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Munich Health North America president and CEO Donna Peterson says that the expansion shows the commitment of Munich Re to the health reinsurance market and to the managed care segment specifically. “Munich Re is well positioned to support its clients in evaluating and protecting their risk position as they work their way through the ACA maze,” Peterson adds. US farm bill extends crop insurance budget

The US farm bill which secures the future of the US crop insurance programme for the next five years was signed into law by President Barack Obama earlier this month, in a move expected to expand the scheme by $5.7 billion between now and 2023. More than $89 billion was allocated to the crop insurance scheme, which subsidises around 60 per cent of the farmers’ premiums. The new bill sets out the broad future shape of the programme, although pundits are still uncertain of how it will work in practice.

EUROPE European insurers paid €948 billion in claims in 2012

According to Insurance Europe’s latest annual ‘European Insurance in Figures’, the European insurance sector paid a total of €948 billion in claims to its customers in 2012. The total premiums declined slightly by 0.3 per cent to €1.09 trillion in 2012, mainly due to a 1.2 per cent fall in life premiums, which account for almost 60 per cent of all premiums. Non-life premiums, on the other hand, grew by 1.1 per cent. The investment portfolio of Europe’s insurers grew by 8.6 per cent to €8.4 trillion in 2012 and is equivalent to 58 per cent of the total GDP of the 32 European markets that are covered by Insurance Europe’s data.

UNITED KINGDOM Cyber Health Check to put cyber security on front foot

IT Governance, a cyber-security services provider, has launched a new Cyber Health Check service for small and medium-sized organisations (SME). The service delivers on-site consultancy and audit services with a remote vulnerability assessment to evaluate organisations’ cyber security posture. The results from a survey revealed in February 2014 showed that UK companies are lagging behind their US counterparts in crucial areas like levels of preparedness and attitudes towards threats. Alan Calder, founder and executive chairman of IT Governance, says, “Identifying the gaps between your targeted risk mitigation position and your current situation is a critical step in developing a business-led cyber security strategy that will ensure your future business resilience.”

GLOBAL ORIC’s new global offering to strengthen data pool

ORIC International, the global leader in collecting, standardising and reporting operational risk loss data for the insurance and reinsurance and asset management industry, announced the launch of its global offering; comprising core, global and country services. Driven by challenges relating to data scarcity within the insurance industry, ORIC International’s expansion to its core offering provides a global focus ensuring a stronger data pool and greater opportunities for benchmarking operational risk data. New members include South African insurance businesses Santam and Investment Solutions. Their participation means that ORIC has reached a critical mass in South Africa and the South African Country Service will be established first. Asia, Australia, Bermuda, Netherlands and the US have also been identified as priority markets for the creation of country services. Caroline Coombe, CEO of ORIC International, says, “By having one data consortium for the insurance industry, it means that all firms can participate. The launch of the global and country services will increase the dataset that consortium members have access to and, in turn, create greater shared value for our rapidly increasing membership.”

AFRICA Rwanda’s liquid Treasury bond to boost capital market

The Rwandan Government recently announced plans to issue a 12.5 billion RWF ($18.3 million) Treasury bond with a three-year maturity period as a move to boost the East African capital market, according to the statement issued by the Central Bank in the capital city Kigali. It is said the aim of this move is to achieve inclusive growth in a country which is aiming to reach middle income status by 2020 with an annual per capita income of 1 240 US Dollars per person. According to the statement, the Treasury bonds have been issued by the government between 2008 and 2011 and they amounted to 31 billion RWF ($45.5 million). A large portion has been paid back and a stock of only 8.5 billion RWF is not yet retired, says Rwandan Minister of Finance and Economic Planning, Claver Gatete. It is said that these Treasury bonds are expected to target especially local banks, investment groups, micro-finance institutions, co-operative banks, insurance companies and pension funds among others.

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AS ASSETS

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art State-of-the-

investment Sarah Bassett

With South African markets at record highs and expensive equities on the JSE, could art present an interesting and rewarding alternative investment asset? We chat to experts to better understand the broad brushstrokes of this complex world.

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he Merrill Lynch World Report in 2012 found that 20 per cent of high net worth individuals, globally, have allocated their investment passion Dollars to art collections. The Mei Moses World Art Index, which tracks the resale value of paintings, has outperformed US and international equity markets over the last 50 years. Locally, over the last eight years, the Citadel Art Index has outperformed the All Bond Index, SA Cash and for the last seven years, residential property. The 2013 Citadel Art Price Index looks specifically at the South African art industry and using data from auction sales, plots the top 100 selling artists, examining how quickly a certain artist sells their work and for how much. “From 1960 to 1997, the returns on South African art were flat, in part because South Africa did not participate in the international art market, resulting in a lack of exposure and recognition. Then, from 1999 on, the value of the South African art market grew exponentially and investors saw a doubling of prices for sought-after artworks at six-monthly intervals,” explains Stefan Hundt, Sanlam art curator and head of Sanlam Private Investment’s art advisory services. While it is unlikely that this rapid growth will be repeated to the same extent, Hundt points out that the market is showing no signs of collapse. There is an additional tax advantage to art assets, as they are deemed a personal use item when owned by an individual, and therefore not be subject to capital gains tax. They are also exempt from an investor’s R2 million offshore allowance should the owner take artworks to an overseas market to sell.

Buying for growth “Buying art has similarities to buying a share, as affordability is measured relative to likely



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future income that the artwork or share could generate. And with this comes risk,” explains Hundt. “Cheap-looking shares may in fact turn out to be expensive, just as expensive paintings can turn out to be complete losers in the long term,” he adds. The key for any serious art investor is to achieve a balanced portfolio. The more you can spend, the wider you spread your bets. But it is not only for the super-rich. Fine art auctioneers Strauss and Company says it is a myth that only the rich can be collectors. There are numerous famous collections which come from ordinary people who had a passion for art. Stephan Welz, managing director of Strauss & Co, suggests that investors starting a collection stick to recognised artists, in much the same way a share portfolio should be made up of blue-chip companies. The advantage from a risk perspective, according to Sarah Sinisi of specialist gallery, Graham’s Fine Art Gallery, is that the growth in the price of art can essentially be attributed to supply and demand. “The work of an established ‘blue chip’ artist, acknowledged during their lifetime both academically and for their aesthetic statement, has an absolute limit in supply. The work will increase in value as the supply of quality works decreases,” she explains. There is room for new artists in a collection, suggest Fred Scott, managing director of specialist art auctioneers, Stephan Welz and Company. “New artists create opportunity for the smaller budget collector and tremendous potential for value growth, but carry a far higher risk. This is not for novices and it is crucial to do thorough homework,” he warns. “The risk with new artists is that sometimes their prices can be overinflated because they are still to be tested in the auction environment, typically selling through galleries, and

they are harder to re-sell. There is also no scarcity if the artist is still producing,” Welz explains. Ultimately an investment in a new artist takes a long time to materialise. But when it does, the pay-off can be significant. Buying into the blue-chip league requires a starting investment of R50 000, according to Welz, while a new artist investment could start at half that amount. Hundt, however, suggests that it is investors at around the R1 million level that are seeing the most reliable returns. “There are very different markets in the South African art market all pitched at different levels and with a strategy that takes into account the nature of the art world in South Africa, there are always ways to identify pockets of value. But it does take a lot of time, research and searching,” suggests Scott. “Diversification into other areas besides fine art such as Chinese porcelain, coins, stamps, antiques and designer furniture is also wise,” Scott continues. As with any unique asset, there are particular characteristics of the art market which investors need to become familiar with.

Independen

t advice

New investor s need to en sure they ge independent t good, advice or lear n by doing th research and eir own gleaning info rmation from of sources in a diversity the art world . “Every deal auctioneer w er, agent or ill promote th eir own wares truly independ , which mak ent advice ra es re,” Hundt w not mean th arns. “This do at a good de es aler won’t pr good advice ovide you with , but keep in mind where it comes from .”

Record sales of SA artists • In November 2013, a sculpture by contemporary South African artist Jane Alexander, Untitled, sold for R5.5 million, breaking records for both South African sculpture and contemporary art. • In 2011, Irma Stern’s Arab Priest sold on auction in London for R34 million, breaking the record for the sale of a South African artwork. • Also in 2011, another Stern work, Two Arabs, set the record price for a painting sold in South Africa, at R21.166 million.

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The determinants of future value “I am often approached with comments such as: ‘Why does this painting sell for so much? It’s not even beautiful and looks like a child could do it.’ This confuses art with so-called beautiful pictures,” says Hundt, explaining that there is something more required, something which it seems is hard to fully define, but requires that a work will maintain historical significance over time.

“Presently, there are thousands of artists who can successfully emulate the style and technique of Van Gogh or Van Rijn and produce variations on similar themes. These are eagerly purchased and hung admiringly in homes, but none of these skilfully executed paintings could be considered art, and they would be of no interest to serious collectors or art museums,” he adds.

ding

Watching what’s tren

egulated and illiquid. t, the art market is unr Unlike the stock marke acts speculators from attr ncy in pricing and it are nsp tra e littl is ere “Th s skill, a sensitive ating this market require all walks of life. Navig fashionable trends for sales talk, and an eye ear for marketing and bser, Boonzaier, Lau for er eth wh erations, that sweep through gen or incorrect artist t rec est young politically cor Tretchikoff or the new ation can dictate loc ty, per pro like lery. Much promoted in a swish gal s Hundt. exceptional prices,” say a piece of art before ample information on Investors should have g on having an art istin ins ist, art ch on the investing. Doing resear investment advice is g purchasing, and seekin ore bef ed uat val ce pie key, adds Scott.

Protecting your masterpiece “While most short-term insurance provides cover for depreciating assets, an art work is distinct in that is an appreciating asset for which there is no warehouse of replacements available. This requires a different mentality and specialist approach,” explains Gordon Massie, managing director of specialist art insurer, Artinsure. In the event of a total loss, Artinsure will payout in full in accordance with an agreed value schedule. In the case of a partial loss the process is more complex and requires specialist expertise. “We have specialist restorers and valuers to restore and revalue the work. A

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partial payout ensures the client is returned to their previous position. Alternatively, the owner can have the painting declared a total loss and receive full payout,” he explains. The claims most frequently received are for accidental damage, Massie reports. This is covered regardless of the circumstances of damage. Individual storage conditions are accounted for at the underwriting stages with no specific requirements in the terms of cover. From a security standpoint, Massie says that for most private collectors, the security in place in their homes is usually more than sufficient to protect the artwork.

Auction or dealer? Each has advantages and drawbacks. “A reliable dealer with integrity will have the patience to find a suitable work for a client who is in it for the long term and will in every circumstance be prepared to resell works and or take them back for at least at the value that the work was sold for,” says Hundt. “There are no guarantees of exponential returns, much like any credible investment. If there are promises of high returns; beware.” Buying at auction provides the opportunity to acquire works at what we could consider the market value, because they are based on willingness to pay. However, auctions take place at a certain time and place and conditions could make works sell for much more than they should, notes Hundt. Transaction costs are high in the art market and can impinge negatively on the value of the work. These can vary from as little as 10 per cent plus VAT to as much as 26 per cent plus VAT. Auction houses provide no guarantees of the authenticity or condition of an item sold and require the buyer to satisfy themselves as to these issues. However, a reputable auction house will be as accurate and reliable as possible to ensure continued business.

Investing in an

artist is meanin

gless

“Every artwork is a unique piece, a unique expres particular artist sion by a who has produc ed many unique differing quality, expressions of ” says Hundt. “Y ou are not buyin therefore buying g the artist and an Irma Stern or a William Kentr meaningless. Ea idge is quite ch work needs to be judged on its merits to assess own specific whether it is a go od quality piece not. A name or by the artist or signature alone is no guarantee about the Stern . Everyone know painting that so s ld here for R21 Tretchikoff that so million or the ld for R15 millio n, but we rarely how many paint see reports of ings by the same artist at the same even get a bid clo auction didn’t se to the low es timate and rema in unsold.”

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Buying

the farm fractional game farm ownership Dominic Uys

120 96 8 2

Financial services is not for sissies. Onerous legislation, cutthroat competition and dealing with the vagaries of clients who are, let’s say, less than loyal, takes it out of any intermediary. It is little wonder then that three of the folk I recently spoke with mentioned that they longed for the opportunity to get away from it all and head to ‘the bush’. Which got me thinking, what would it take to own a spot in the wild? Fractional ownership makes the exercise surprisingly affordable. But only if you do your homework.

Broad definition Acquiring fractional ownership of a property like a holiday home or game lodge is quite different from buying into timeshare. Fractional ownership means that the buyer takes ownership of a fraction of a property and receives a title deed.

he game lodge experience, especially in a country like South Africa, is beyond compare. Whether you are a hunter, nature enthusiast or seeker of solace, game lodges definitely have major appeal. It is, therefore, little wonder that most of us know at least one person who either owns a game farm, or is working towards that objective. If you share the dream, read on. Of course, a convincing case could definitely be made for acquiring a game lodge of your own. Apart from personal use, a place to entertain colleagues or clients could certainly be invaluable. Sadly, since game farms go for around R90 million, the cost alone is enough to scuttle this vision for most of us. There are also a host of other things to consider around managing a property like this. This does not leave us without options, however. A fractional ownership title would still allow you to utilise the game lodge as you need it and possibly offer a number of advantages that full ownership might lack. RISKSA takes a look at how fractional ownership of a game lodge works.

RISKSA has covered the concept of fractional ownership in our previous issue and, where movable assets are concerned, it is relatively straightforward. Conveyance attorney, Martin Oosthuizen cautions that fractional ownership of a fixed property is not easily defined. “Where your game farm is concerned, fractional ownership is something of an umbrella term for different things. Unlike timeshare, a fractional ownership of property is not clearly defined or regulated under any single act of South African law. It can therefore refer to anything from owning an actual section of land to owning shares in the business side of the farm. You are not necessarily entitled to usage rights either,” he continues. According to Oosthuizen, the pliability of fractional ownership could indeed have its downside. Conversely, there may also be opportunities. “The property developer sets up the rules of the fractional ownership titles and can do anything he chooses within the perimeter of the deeds registry. An unscrupulous developer could exploit buyers,” he says. Conversely, fractional ownership’s flexibility also means that a buyer can find a scheme tailored to his particular requirements.

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Protecting your investment As with any asset, making sure that it is protected is key. Donald Kau, spokesperson for Santam says, from an insurance perspective, the title holder must understand how the legal entity has been set up. He should then ensure that sufficient insurance protection has been taken out to cover the entire unit, not only his financial stake. It should be clear to all members of the fractional ownership what their financial and insurable risks are. “The insurance should be that of a typical home owner. That means covering your bases like insuring any buildings as well as their contents for fire, storm, lightning and other related perils. Theft cover is of particular importance, and the title holders should make sure that their insurance company is aware if the unit is left unoccupied for a number of days. Most insurers allow for 30 to 60 days of nonoccupancy, but this must be stipulated in the

Which option is better? A quick search reveals hundreds of game farms, lodges and nature reserves offering sectional ownership. Dinokeng Game Reserve consists of both privately and government-owned land. Each fractional owner’s share is connected to a section of land, catering to buyers who prefer to develop their own property. Joe Marincowitz sells fractional titles for Hunter’s Pride, a sectional title within Dinokeng Game Reserve. He states that each shareholder traverses and develops only his section of land. A number of development and maintenance rules apply to each owner. The land owners in the reserve also sign

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participating agreements not to put up any fences and to drop existing fences. With empty lots going for between R1.3 million and R1.5 million, buyers are subject to strict rules regarding land development and building contractors. Marincowitz adds that owners are free to profit from their investments as well. “Fractional share owners sometimes buy two slots and place one slot in a letting pool to earn interest on their investment. Present letting in Dinokeng for weekends is close to a 100 per cent occupation rate,” he says. The alternative of acquiring shares in the business carries its own advantages. Simon Espley of Limpopo-Lipadi Game Lodge explains that while fractional owners in this venture do not own land, shares in the game lodge itself still allows the owner a number

benefits, including usage rights. “There are 500 shares available, of which we have already sold about half,” Espley starts. “The shareholders jointly own the company that possesses the title deed. The risk is the same as it is for any equity holder. Shareholders face no personal risk beyond their investment into the shares,” Ensley continues. Buying in at around R117 029 a share, shareholders commit to paying levies but beyond that they have no responsibility. According to Espley, many of LimpopoLipadi’s shareholders have also chosen a greater degree of commitment by taking up voluntary research and community projects. “We have a full-time management team on the ground that looks after the reserve and caters to shareholders when they spend time at the reserve,” he says.

policy. If the unit is rented out for financial gain, the lost rental income should also be considered,” Kau continues. He adds that title owners should be clear about what potential liabilities may arise if third parties suffer personal injury or property damage. “This is a particularly high risk if the premises are rented out to someone other than an owner. The injured party might sue the title owners in their personal capacity or as a partnership. Title holders should ensure that the insurance policy takes the many different scenarios into account,” he says. Marincowitz also has a number of points for a buyer: • Make sure that the building plans have been approved. This will be an indication that all approvals are in place. • Conduct a deeds office search. Make sure that no bonds are registered on the property and that the property is registered in the name of the share block company. • Do not buy into a scheme if the purchase agreement acknowledges a bond over the property. Income from the share sale has to be paid off against the bond. There have been recent cases where developers did not use their profits to pay bonds.

• Look at the growth potential of the area in which the property is situated. For example, Dinokeng is a new game reserve close to the city with potential to expand in future. • Make sure that the reserve has a proper game management plan • If possible, speak to existing title holders. • Ask for a balance sheet of the share block company to check the running cost and income structure. • Ask for the latest rates and taxes account to ensure that it is not in arrears. Outstanding amounts could lead to a special levy for the shareholder.

Oosthuizen, Marincowitz and Kau all emphasise one essential rule. An experienced attorney needs to read the purchase agreement to make sure it contains all the information and provisions required. Espley concludes with, “There is a high degree of lifestyle and enjoyment element to investment into a game reserve or lodge. I cannot think of any other non-depreciable asset that gives as much enjoyment and satisfaction.”

Forever your's - Holiday Spot A No Risk - Properly Managed - Wildlife Estate A safe, legally structured, fractional or full ownership development, buy direct from the developer in a 18500ha Big 5 game reserve, only 40 km North of Pretoria - The ever growing investment

Another development by the J.R. Marincowitz Group of Companies Sales office: 076 231 3324 sales@hunterspride.co.za www.hunterspride.co.za

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Wunderbar – the Mercedes E63 AMG S-model

The latest high-performance Mercedes AMG sedan arguably has no direct rival in the executive saloon car market. It’s a formidable combination of a highly tuned 5.5-litre V8 bi-turbo engine, a seven-speed automatic transmission, extraordinary suspension, lavish cabin and a 41-year pedigree of high-powered Mercedes sedans. But for the broker exec, would you consider this a good choice of wheels? And do these features justify the R1.3 million price tag? Editor Andy Marks finds out. Andy Mark

t first glance, the Mercedes-Benz’s new E63 AMG S-model comes across as a vehicle with a severe case of schizophrenia. With loads of room and 450 litres of boot space, it’s capable of carrying kids, schoolbags, sports gear and the monthly supply of groceries. But with a 0 – 100 km/h time of 3.7 seconds, I wondered if the E63 would rather be mom’s taxi or more at home along with the other speedsters in the executive’s garage? I’m glad to report that the E63 can double up as both. There is something hugely appealing about stealthy super wagons; and in gunmetal silver, super-slick lines, 19-inch alloys and those massive red AMG callipers lurking behind, you won’t be sweating about the car’s lack of aesthetic appeal.

Interior The interior of the E63 AMG S-model embodies exclusive sportiness. It ensconces the occupants in high-quality materials that

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packages innovative technology in dynamic style. Supple leather, fine woods and a pinch of extravagance characterise every detail – visually and emotionally. The cabin is absolutely delightful. Its active seats feature a huge seat base unlike any other car – dramatically increasing comfort and support from the moment you sink your tush into that perforated leather. The stitched leather of the dashboard, the low-sheen metallic accents on every knob and the IWC clock face all work together to seal the deal. If there is a more inviting and comfortable supercar cabin, I have yet to experience it. The vehicle features active parking assist (including PARKTRONIC), front door sill panels with white LED illumination, AMGbrushed stainless steel sport pedals with rubberstuds, heated seats, sport seats with enhanced lateral support, and even an automatic child seat recognition (ACSR) in the passenger seat with transponder for the family-conscious driver.

Handling and performance If that doesn’t tickle your fancy, she’s got enough performance features to make a grown man cry. Mercedes-Benz’s uberlord large saloon – the E63 AMG SL – packs a whopping 5.5-litre bi-turbo V8 with 410 kW output and 720 N.m of torque. The fat quad pipes crammed into the rear diffuser and the NASCAR roar when you wake the V8 might appeal to your inner petrol head. There’s no better example of the AMG magic than the twin-turbocharged V8 engine. With a full aluminium crankcase, piezo injectors delivering spray-guided direct fuel injection, four-valve technology with camshaft adjustment, generator management, auto start/stop and air/water intercooling for the turbochargers – well state of the art seems an understatement. If you deploy all 557 bhp in one go, you’ll get a completely loony acceleration spec and a top speed of 299 km/h (we’ve, err, heard from a source). Look, we’re not lawbreakers but

slamming down the acceleration on a short stretch really had our pulses racing. The house that speed built claims that the E63 does 0 – 100 km/h in under four seconds, which we do not dispute whatsoever. The only drawback was that the steering seemed light. Although she has bum-soft cruising ability, it felt slightly vague pressing through turns and corners. I missed my Beemer’s steering response, especially when pressing on through the twisty bits. I would’ve liked to see a tad more feedback through the E63’s steering. Nevertheless, she’s a raging beast. I would’ve loved to test the capabilities of her sound system, too, but the noise of the exhaust was so sweet I quite honestly never turned it on; the sound of the big V8 with its auto-blip when changing down was all the music I needed. The 2014 Mercedes-Benz E63 AMG has finally escaped the doldrums of quad-oval lights and messy body kits. The E63 now wears the trendy

sheet metal to challenge even the sportiest of vehicles, including the Audi RS7 and BMW M6. Understated appeal has always been an AMG E-Class feature, but the new styling enhancements mean that the E63 is extremely serious, attention-grabbing and highly entertaining to enjoy up close. The vehicle also boasts the best emission figures compared to the rest of the fleet. At 242 g/km of CO2 emissions, she’s perfect for those who want to put foot without having to worry about harming the environment.

Affordable? What does it take for the average broker to get their bum into the seat of a MercedesBenz E63 AMG S-model? Seriously, if you’re asking the price on the E63 AMG S-model, you really can’t afford it. We have it from a credible source that a monthly instalment for this vehicle will cost in the region of 26 000 smackeroos. You work out how much commission you need to earn.

At a glance Engine: V8 bi-turbo Displacement: 5461 cc Output: 410 kW at 5 500 rpm Torque: 720 N.m Top speed: 299 km/h 0 – 100 km/h: 3.7 seconds Price: R1.3 million

Car courtesy of Mercedes-Benz Western Cape



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Defining 126 8 2

thin air

Andy Mark

I have written extensively on the iPad before; is it a toy or is it a tool? I have found that, especially with the later model iPads, the benefits in terms of productivity are clear. The iPad Air, which hit the South African market at the end of 2013, is no exception. If you need to be connected with your work all the time, then this little tablet will impress.

hen my daughter, Claire, needed a tablet for school, I saw it as the perfect excuse to upgrade to a newer model. I gave her my old iPad 4 and ordered myself the 32 Gig iPad Air with cellular and Wi-Fi. Switching it on, my first impression of the Air was mediocre; at first glance, the only difference from the previous model is that it is quite a bit thinner. In terms of the user interface, there are no real surprises. Just like the iPad 4 and iPad Mini, the Air runs on the iOS 7 operating system and it is essentially the same tablet where functionality is concerned. That said, I was seriously captivated with the Air after playing around with it for a couple of days. It quickly becomes clear that the processing speed of the Air is phenomenal. Apps on the tablet load almost instantaneously and connection speed, both on the cellular and Wi-Fi, is twice as fast as the previous model.

The processing power of the tablet has made client presentations a breeze. I am also able to swiftly open a website or grab a document from the iCloud while in a meeting, without having to deal with a slow connection. There is myriad apps available that allows you to remotely access your office computer online and I can recommend that you look into these. I still had the keyboard from my previous iPad, which made using the Air as my primary business tool even more practical. My laptop has been made all but obsolete and I now run my office solely from my iPad when Iâ&#x20AC;&#x2122;m out. While the Air has been criticised for taking substantially longer to charge, the battery life is remarkable and I have yet to have any trouble with a dead tablet when I need it. Running the office is of course not the only benefit that the Air affords me. Having recently spent a week away from home, I whiled away my free time connecting with my

family. My daughter and I regularly play online games against each other, Scrabble being one of our favourites. Once again, the connection and processing speeds of the Air are notable. I can fault the iPad Air on only two fronts. Firstly, it is missing one important function that I would have expected on the new Apple tablet. The Touch ID, which the iPhone 5 sports, would have been a great addition, especially if it expects to be taken seriously as a business tool. Secondly, while the Air is a great device to take into client meetings, you may run into problems if you want to run and display spreadsheets, especially if you intend to use bespoke software. iDevices do not support Flash products or plugins. Apple made that decision years ago and it is unlikely to change anytime soon. All in all, my experience of the iPad Air has been positive. If the overall speed of the iPad 4 leaves you wanting, I can earnestly recommend an upgrade to the Air.

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Some tricks for your iPad Here are a couple of handy tips to help you take full advantage of the iOS 7 operating system on your iPad Air.

Wipe your iPad In addition to helping you find your iPad, if it is lost or has been stolen, the iCloud will let you remotely set a passcode and allow you to erase all your data. Be careful though; if you wipe it, you can’t use the previous function to find it again.

Create your own short-hand Programme your own abbreviations that the iPad will automatically convert into real words as you type. ‘BW’ can become ‘best wishes’ and ‘OMW’ will become ‘on my way’. Perfect for anyone battling against the scourge of text speak.

Splitting the keyboard If the on-screen virtual keyboard is not working for you, you may be more comfortable typing with your thumbs while holding the iPad. Try it out by splitting the keyboard. Touch and hold on either side of the virtual keyboard and swipe out towards the edges of the screen. You can bring it back together by holding each side and swiping into the middle.

Shake to undo

Find your iPad If you are one of those people who constantly forget where they leave their portable technology, then this feature is for you. Turn it on via the iCloud settings. Next time your iPad vanishes, log in to the iCloud on your nearest computer or phone with your iTunes details. Ask your iPad to display a message telling any potential finder how to return it to you. You can also ask the iPad to play a sound that overrides any volume and mute settings.

Multi-touch gestures Go to Settings > General and turn Multitasking Gestures on. If you swipe left or right with four fingers you’ll be able to switch from your current app to other recently used apps. You can also swipe up from the bottom of the screen with four fingers to open the Multitasking tray, and swipe down again with four fingers to close it. Pinching with four fingers closes your current app.

If you make a mistake that you quickly want to undo, get physical. Pick up the iPad and give it an enthusiastic shake. A box will flash up on the screen asking if you would like to undo your last action.

The specs The Air weighs 478 grams and is only 7.5 mm thick, making it about 22 per cent lighter than its predecessors. It has a 9.7 inch, 2048 x 1536 retina display, just like the previous iPad model. It also has improved cameras, both front and back, capable of recording video in

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720 p under almost any light conditions. The tablet runs on the 64-bit Apple A7 chip, which is clocked at 1.4 gigahertz and has one gigabyte of RAM – more than enough to run any app. Apple has also managed to squeeze an 8820

mAh battery into the Air’s thin case. While the specs sheet lists the battery life at 10 hours, this is clearly a modest estimation. Using mine regularly over the past two weeks, I’ve found that it comfortably manages a life of around 10 hours between charges.

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CAR

TRAVEL

hire with benefits Dominic Uys

For most regular travellers, the car hire dealership at the airport is usually the first stop after walking through the arrivals gate.

hile they are an essential part of business travel, a recent survey shows that most hire car users do not have particular preferences when it comes to car hire brands; instead choosing the dealership with the shortest queues on their day of arrival. The lion's share of the major car hire companies in South Africa offer loyalty programmes, RISKSA was surprised to discover that not

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all of the major names in the industry followed suit. That said, these rewards programmes vary considerably and the options on offer at the various companies suit every possible type of business traveller, from occasional to frequent. The next time you travel, keep in mind that the quickest option may not simply be to slip into the dealership located closest to the arrivals gate. RISKSA had a closer look at the loyalty programmes on offer.

First Car Rental Categories

Avis Car Hire

First Club White, Avis Presidents Club available to individual clients. Small Corporates and Individuals Gold and Platinum programmes cards for corporate Avis Wizard Card renters. Show&Go Black and Platinum cards are for individuals within a company.

Tempest Car Hire

Hertz Car Rental

The company does not offer loyalty cards but links in with the benefits programmes of its partner companies.

Gold profile, Five Star and President Circle for corporate and leisure users.

No requirements

Customers are awarded on rentals done.

Europcar Privilege Club Privilege Executive Privilege Elite

Platinum by invitation only.

Avis Club Red Avis Preferred Service Frequent flier programmes with all major airlines

Requirements

First Club – none Show&Go – The renter’s company agrees to First’s master rental agreement.

Avis Presidents Club By Invitation only Small corporates and individuals programmes –15 rental days to qualify for a free rental day

Gold: 1 – 6 rentals per annum Five Star: 7 – 19 rentals per annum

Avis Wizard Card – Free

President Circle: 20+ rentals per annum

Avis Club Red – Free and the agent earns roses for each qualifying rental. The roses can be redeemed for e-Bucks

Privilege Club Clients complete a My Europcar application online. After their first hire, clients become a member. Privilege Executive 10- or 40-day rentals a year. Privilege Elite 25- or 85-day rentals a year. Clients’ yearly activity needs to remain within these levels or above for continued membership.

Avis Preferred Service – Free Frequent flier programmes with all major airlines – Only on qualifying rental rates

Loyalty card

Every customer gets a paper card on their first rental and should they rent again, they automatically receive a plastic credit-card type First Club loyalty card.

A card is awarded to customers on successful application of the Avis Wizard, Avis Preferred, and Avis President’s Club programmes.

No loyalty card

Travellers can earn points by renting with Avis vehicles. The points entitle the client to various benefits depending on their category.

No points system

Cards are issued for Five Star and President Circle.

A loyalty card is sent to clients via post, upon completion of the online application.

Printable Gold Cards are available online for the entry level programme.

Show&Go members receive a barcoded card.

Earning points

No points system

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First Car Rental Benefits

Avis Car Hire

First Club White: Members’ cards are scanned at the branch and their check out is fast-tracked.

Avis Presidents Club: Guaranteed reservations on key car groups; vehicle upgrades; preferred parking of vehicles at rental location; First Club Gold: One waiver upgrades; class vehicle upgrade. rental discounts; global recognition; First Club Platinum: signed master rental Two class vehicle agreement; preferred upgrade service counter; renter profile in Avis Wizard Show&Go members system; e-invoicing and bypass the branch statements. and go directly to their vehicles. They are checked out by a handheld mobile checkout agent. No paperwork, signatures or branch queues. Show&Go members also receive free upgrades, dependent on what is available at the branch on the day.

Avis Preferred Service: Rental discounts; global recognition; signed master rental agreement; preferred service counter; renter profile in Avis Wizard system; e-invoicing and statements.

Avis Wizard Card: Rental discounts; renter profile in Avis Wizard system; e-invoicing and statements.

Avis Club Red: Avis Roses that can be redeemed via e-Bucks.

Small corporates and individuals programmes: Free rental days; renter profile in Avis Wizard system; preferred service counter; signed master rental agreement; global recognition; rental discounts

Frequent flier programmes with all major airlines: Airline frequent flier miles. Clients can also get benefits from Avis’ major airline partners such as South African Airways and British Airways.

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Tempest Car Hire

Hertz Car Rental

Clients are entitled to discounts as part of their benefits from loyalty programmes with companies like Mango.

Gold: First additional driver free; 25% discount on child seats; best available rate of the day; an additional 100 km free per day added. Five Star: One car class upgrade subject to fleet availability; free rental day voucher after 10 rentals in a calendar year; first additional driver free; 25% discount on child seats; best available rate of the day; an additional 100 km free per day.

Europcar Privilege Club: 10% discount on all leisure hires; express car hire pickup service; guaranteed reservation; special rates at Accor hotels and access to Le Club Accor hotels Silver card; dedicated express counter service. Privilege Executive: 20% discount on all leisure hires; free car upgrade; direct access to Le Club Accor hotels Gold card.

Privilege Elite: 30% discount on all leisure hires; free weekend car hire; free additional President Circle: driver cover; direct Free rental day access to Le Club Accor voucher after 10 hotels Gold card; 200 rentals in a calendar year; first additional Le Club Accor hotels bonus points on first stay driver free; in Accor hotels. guaranteed one car class upgrade; guaranteed vehicle availability; dedicated; President Circle parking bays; 25% discount on child seats; best available rate of the day; an additional 100 km free per day.

Did you know? Minimal rental days â&#x20AC;&#x201C; First Car Rentalâ&#x20AC;&#x2122;s replacement team micro-manage communications with repairers to ensure rental days are kept to a minimum. Since implementing this procedure, we have managed to reduce rental days on average from 24 to 17.

First Car Rental - providing the competitive edge to short-term insurers

Contact Sarah Scholefield, Sales Replacement Manager on sarahs@cmh.co.za or call 072 221 0897

0861 1ST CAR | 0861 178 227

www.firstcarrental.co.za

RISKSA's guide TO

business

travel in

Africa

With all its difficulties and peculiarities, Africa can be challenging and frightening for business travellers. If the language barrier doesnâ&#x20AC;&#x2122;t prove difficult enough, diseases and other health risks (intensified by poor infrastructure), and safety and security are big concerns. Being adequately prepared can save you some trouble. RISKSA offers business travellers a guide to seven key markets in Africa. Hereâ&#x20AC;&#x2122;s everything you need to know when travelling for business into Nigeria and Ghana.

Sarah Bassett & Nick Krige

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nigeria

s the continent’s largest oil producer, it is little surprise that the petroleum industry is the country’s primary income generator, with exports accounting for 65 per cent of national revenues. Nigeria’s annual economic growth rate for 2013 is 7.3 per cent. Recent sectors of economic growth include hotel and restaurant services, telecommunications, agriculture and the wholesale and retail trade.

The Radisson Blu Anchorage Hotel This five-star business hotel is managed by an international chain. It has a business executive lounge as well as fully equipped conference rooms. Complimentary wireless Internet access is available throughout the hotel.

The port city of Lagos (is the country’s business hub), with Victoria Island’s high-rise central business district. Because business travel is dominated by international oil company executives and staff, prices for hotels, meals and internal flights are at a level fit for multinational oil companies.

Where to stay The Wheatbaker The Wheatbaker Hotel is situated near the business district in Lagos. It provides airport shuttle and car rental services on request. The business centre boasts a full range of services including a number of on-site meeting areas. Complimentary Internet connectivity is stable and fast throughout the hotel. Federal Palace Hotel The Federal Palace Hotel and Casino is a five-star hotel overlooking the beach. The hotel hosts a business centre with full business service amenities, boardrooms for meetings and assistance with organising transfers, as well as local transport. The rooms all have Internet access.

Federal Palace Hotel

Safety

Vaccinations

Electronics

Airports

Nigeria is a fairly dangerous destination. Crime levels are high, particularly in Lagos. Be wary of travelling by road outside of the cities at night due to the risk of armed robbery. Lagos and southern Nigeria still appear to be the epicentre of identity-related and financial crimes targeting Nigerians, expatriates and American citizens and companies.

A yellow fever vaccination is recommended, but not required for entry. Hepatitis A, B and typhoid vaccinations are also recommended. Malaria prophylaxis is recommended for all areas.

Nigeria uses type D plugs, with three round, large pins in a triangular formation.

Murtala Muhammed International Airport in Lagos is the main gateway for the country. It is 22 kilometres north of Lagos and is chaotic to navigate. The journey into the city can take a couple of hours, depending on the city’s notorious traffic. International and domestic flights also serve Nigeria’s second-largest airport, Abuja’s Nnamdi Azikiwe International. Port Harcourt International Airport offers proximity to the centre of the oil industry.

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Time zone GMT + 1

Language English is spoken throughout urban areas and is the official language of business, government and education. Other major languages spoken are Yoruba, Hausa, Igbo, Fulfulde, Kanuri and Ibibio.

Visas

Getting around A private car and driver are essential in Nigeria. If not organised in advance, local hotels and car hire agencies can arrange this. Taxis are plentiful in Lagos and Abuja, but be sure to negotiate the fare upfront and avoid hailing a taxi on the street at night. The traffic jams in Lagos are legendary, so choose a hotel close to your meetings.

All business visa applications and payment of fees must be made through the Nigeria immigrations website at immigration.gov.ng. Documents required for a business visa include: • Current passport (with at least six months validity) • Completed visa application form • Confirmation of online payment • Two passport size pictures • Letter of invitation from host company in Nigeria, accepting full immigration and financial responsibility, as well as stating purpose of visit and duration of stay • Letter of introduction from applicant’s company or organisation • Copy of airline ticket or flight itinerary.

Currency and money Currency is the Nigerian Naira. US Dollars, Euros and Pounds are widely accepted. For a short business trip, it is possible to avoid changing currency to the local Naira. American Express is not widely accepted in Nigeria; Visa or MasterCard credit cards are recommended. While the government has announced an aspiration to move to a cashless economy, many transactions in restaurants, shops, taxis and hotels are still conducted in cash.

TELECOMS Mobile telecommunication is sophisticated in Nigeria. The major cellphone operators in Nigeria are MTN, Glo, Etisalat and Airtel. All four come recommended for local calling needs. The cost of a SIM card is usually less than $10 and these can be purchased at the airport or most hotels.

Ghana

ccra is the commercial and cultural heart of this rapidly growing West African country. The city stretches along the Atlantic coast and extends north into Ghana’s interior. Originally built around a port, Accra has transitioned into a modern metropolis; the city’s architecture reflects its history, ranging from 19th century architecture to modern skyscrapers and apartment blocks.

Where to stay Movenpick Ambassador Hotel Accra Situated near the airport, this luxury hotel is close to the Accra International Conference Centre and Ghana State House. Amenities include complimentary wireless and high-speed Internet access. The hotel offers a roundtrip airport shuttle. La Palm Royal Beach Hotel Situated near the beach in the city centre, this hotel offers complimentary wireless Internet access, air conditioning and laptopcompatible safes.

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La Palm Royal Beach Hotel

Getting around

Visa requirements

The best method of transportation for travellers is hiring a car and driver, which is relatively inexpensive. Hotels arrange this paid service for guests, and this will ensure an air-conditioned car and a safe driver. Hiring a rental car and driving yourself is a viable option. Navigating the city is fairly simple.

Nationals of the Economic Community of West African States (Ecowas), along with citizens of Kenya and Egypt, do not require a visa to visit Ghana. Citizens of Malawi, Lesotho, Botswana, Zimbabwe, Tanzania, Uganda and Swaziland are able to receive a free visa on arrival in Ghana. All other nationalities require a visa before entry.

Telecommunication

Qualifying for a business visa requires a letter from the employer or sponsoring

company; on the company’s letterhead; introducing the applicant; indicating the applicant’s employment status or position; and clearly stating the purpose of visit to Ghana. The business letter must also indicate who will be financially responsible for the applicant and must provide detailed contact information in Ghana.

Time zone GMT

The major cellphone operators in Ghana are MTN, Vodafone, Tigo and Airtel. All four come recommended for local calling needs.

Etiquette Formal titles are important and should be used when addressing business counterparts. Punctuality is crucial and lateness is taken as a sign of disrespect.

Language English is both the official language and the lingua franca. English speakers will have no trouble communicating their needs anywhere in the country.

Internet

Safety

With a recent ICT boom in the country’s urban areas, you’re never too far away from an Internet café. Many hotels also boast broadband access via wireless hotspots.

Ghana is considered a very safe, stable country with low crime levels. Take sensible precautions and avoid walking long distances on foot, particularly in tourist hot spot areas where muggings or pickpocketing is most likely to occur. Avoid using mobile phones in plain sight.

Airports

Currency & cash

Vaccinations

Electrical

All international flights arrive at Kotoka International Airport, 12 kilometres from the centre of Accra. From Kotoka, a handful of commercial airlines serve domestic destinations.

Credit cards are widely accepted, but you should assume that most transactions, other than hotels, will be in cash. Credit card fraud is rife, so avoid use outside of hotels. The local currency is Cedi and is preferred throughout the country, but US Dollars are also widely accepted.

A yellow fever vaccination is required for entry into Ghana. Hepatitis A, typhoid and diphtheria vaccinations are recommended. Malaria prophylaxis is recommended for all travellers to Ghana.

Ghana mostly uses type D plugs, with three round, large pins. However, both type D and G (British three-pin, rectangular blade plug) outlets are common at hotels.

Make sure you catch part III in the April 2014 issue, where we’ll feature all the necessary travel information required for Namibia and Zambia.

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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

eing a member of our industry and still saying that insurance is a grudge purchase is about as outdated as thinking that ‘black tie’ at our Sun City conference means that men must wear tuxedos (just think Brad Edwards from Scintilla and his spectacular pants a few years back. It was even more interesting than his golf attire). Bottom line, insurance is an honourable profession, forming the bedrock of the world’s economy and most people know it. Since the industry isn’t great at shouting our worth from the rooftops, I thought it would be interesting to look at an aspect of the industry that gives us our best (and worst) PR: claims.

Many of us would know about Eyjafjallajökull; that in fact the Icelandic volcano lead to one of the biggest insurance payouts in years, as air traffic was disrupted for days due to the ash cloud. Some of us may also know that Rowan Atkinson (better known as Mr Bean, Blackaddder or a dead ringer for the weird IT guy at Mutual & Federal) was the cause of one of the biggest motor claims to the tune of £900 000. Atkinson crashed his McLaren F1 for the second time and the 240 mph supercar spent more than a year in McLaren’s workshop. But how many of us know about the biggest claim in our local industry? What does ‘biggest claim’ even mean? We have easy examples: the fires in St Francis, where former IIG president Natasha Blok and her team from Thatch Risk Acceptances did such a sterling job; or the Aspen claim, where claims manager Kobus de Klerk from Etana managed to bring over 30 years’ experience to bear; or our excellent industry leader Santam paying out massive fire claims in KZN in 2013. In short, all of us know our industry pays out billions each year in

legitimate claims – some bizarre, some funny, some controversial, some straightforward, some highly technical and some with a helping hand from insurance legal experts like Livingstone Crichton, who has been serving the industry for a century. We would all do well by bragging a bit more about these.

I count myself fortunate to have grown up in the insurance industry on the knees of legend underwriters like retired Michael McCann from Mutual & Federal; Nan McLennan who passed away a few years ago (originally one of the crowd from Commercial Union whose team still fill the industry today; one other example is Nic Kohler, current CEO of Hollard, who also started at CU). Learning from these underwriting gurus taught me the basics of insurance: underwrite with diligence using your experience; do what you say you are going to do; and have fun with people you build strong relationships with. If you follow those basics, paying claims is a joy as clarity prevails. Of course, my broker bias comes into play here. If you have a good FIA member broker, then claims stage is even more seamless. And it is not just our big brokers based in main commercial centres like Seamus Casserly who ensure clients get served brilliantly, but also strong regional brokers like Ian Attree from Border Insurance Brokers in East London – he has been driving the dodgy Transkei roads for years ensuring clients have their claims sorted in record time. Claims people are often easy to spot. They keep funny claim forms. One claimant noted he had not drunk since 1976 when asked if he had consumed any alcohol. One drew a picture of dogs mating to indicate the distraction which caused him to swerve and hit a pole. And it is

our claims colleagues who use their noses, gut and experience to ensure valid claims get paid and fraudsters get prosecuted. I encourage you to say a simple thank you the next time you pass one of them in the office or an industry function. I end with two of my favourite claims stories: one I personally experienced, the other I came across online. Steven Bennett – a livestock farmer in Devon, UK (not the former Hollard Select broker claims guru now running his own entrepreneurial insurance business) – claimed that his phone disappeared inside the back end of one of his cows. It wasn’t that he had any perverse or deviant obsessions; he’d simply been using the torch on his iPhone while assisting the cow during calving in the middle of a particularly dark night. The phone later re-emerged but was not in full working condition so his insurer paid out the claim. Finally, the cherry on top, or in this case, the wife on top… A number of years ago, a close and dear colleague wanted advice from me. Quite simply, her medical insurance claim had been repudiated owing to the claims manager thinking she was trying to be funny (if not dishonest). However, Mrs Woodie (not her real name) had told the simple truth: while having sex with her husband in their garage – they couldn’t use the house as his mother was visiting and they were not quietly amorous – she happened to fracture a few of his ribs. It seems that insurance is not only the bedrock of our economy, but it also helps keep the loving coming. Go to the RISKSA Facebook page, hit the Like button and e-mail me with your bizarre claims story. A bottle of Louis Roederer champagne is up for grabs!

Look out for April's column where we will be chatting about where retired insurers head to.

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