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Understanding Africa’s new elite

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Feature writers Anton Pretorius Christy van der Merwe Dominic Uys Laura Owings Neesa Moodley-Isaacs Sarah Bassett

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contents May 2014

10 Insuring Africaâ&#x20AC;&#x2122;s elite

Africa is often tagged as a hopeless case, with images of starving children, people traversing barren landscapes and negative sentiment outweighing positive messages. But there is a flip side to this reality â&#x20AC;&#x201C; a champagne-swilling, diamond-encrusted, luxury cardriving side to Africa â&#x20AC;&#x201C; which is on the rise.

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short term

20 / In the money: Upscale insurance in SA 32 / Proof of life: The value of kidnap and ransom insurance 40 / Widening the third party pool 48 / Leaning on the model

56 |

medical

56 / Medical mayhem 60 / Wearable wellness

64 |

long term

64 / Retirement and the changing landscape

70 / Fraud: shifting demographics 74 / Doing harm: Assessing the impact of suicide on life insurance

78 | managing risk

78 / Growing concern 82 / The need for effective business risk planning highlighted 86 / Mind the gap – underinsurance in SA

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career

148|

92 / In a bind 98 / Call for cool heads on intermediary fees 112 / Basel III: Coming to a bank near you….

152 / Privacy in the palm of your hands

122 / Social media a must-have 126 / Top employers offer top benefits 134 / News 142 / Events

148 / Cold as ice: cold storage facility for vehicles

116 / It’s a deal: M&A in the insurance industry

ASSETS

156 |

travel

156 / Park it: Airport valet parking services 160 /The RISKSA guide to business travel in Africa (Part 4)

With our ever-expanding national footprint, Renasa is probably closer than you think. And we donâ&#x20AC;&#x2122;t fob you off on a call centre, or even expect you to queue at our door. Renasa still treats brokers like brokers with 4 Astronauts-210x275.indd 1

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Astronauts

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personal service around claims and the fastest turnaround on commercial underwriting decisions. Want to meet us in person? Weâ&#x20AC;&#x2122;ll come to you. Contact Renasa today on 0860-renasa or visit www.renasa.co.za 5 Astronauts-210x275.indd 2

2013/06/04 8:09 PM

Dearreader In this month’s issue, we open conversations around the challenges of insuring high net worth individuals and what that means in the current landscape. While we’re looking at high net worth insurance, we also take a peek at the business of insuring Africa’s elite and the dreadful business of kidnap and ransom which seems to be more prolific than many of us imagine. At the time of writing, politics is showing us its ugly underbelly ahead of the elections; so it was with great pleasure that I stumbled across tourism statistics for Africa while researching a piece for our sister publication, Hotelier International. The stats allowed me to shrug off some of the more chilling (and stupid) rhetoric which we are bombarded with from the newspapers and airwaves. For instance, did you know that according to a November 2013 report by the New York University’s Africa House, overall tourism in Africa has grown from 37 million visitors in 2003 to 63.6 million in 2012? Or that revenue, just from tourism, was worth a staggering $43.6 billion in 2012? Morocco, South Africa, Egypt, the Seychelles and Madagascar all showed double digit growth in arrivals during 2012. Trends on our continent are showing that many African countries are bypassing the arduous growth curve of traditional infrastructure development and skipping straight to easy-to-implement tech industries which will soon make silicone valley in the USA so last year in terms of capacity. Africa is growing and it is my fervent hope that we will soon see a time where the governments of this great continent are filled with forward-thinking leaders who care more about growth than racial, cultural and religious division. In the meantime, let’s vote and build inclusive industries that take us forward, with or without our so-called leaders. Binder agreements are also in focus in this issue and, for all our nouveau riche HNW clients and broker readers, we take a look at how you can keep your car collection fresh … in a fridge (well sort-of). Enjoy the read.

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INSURING A

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G AFRICA’S ELITE Christy van der Merwe

Africa is often tagged as a hopeless case, with images of starving children, people traversing barren landscapes and negative sentiment outweighing positive messages. But there is a flip side to this reality – a champagne-swilling, diamondencrusted, luxury car-driving side to Africa – which is on the rise. 11

eports and statistics vary on the exact percentages, but the overall growth of wealthy individuals in Africa most certainly shows an upward trend. The number of multimillionaires in Africa is predicted to grow faster than anywhere else in the world over the next 10 years, according to UK-based wealth intelligence monitor WealthInsight. WealthInsight says that the number of ultrahigh net worth individuals (UHNWI) – those with $30 million or more in net assets – across the world has grown by 59 per cent since 2003, but in Africa the increase has been 130 per cent. This compares to 89 per cent in Asia, 116 per cent in the Middle East and 44 per cent in Europe. It is anticipated that by 2023 the number of ultra-rich people will further increase by 53 per cent, taking the number of UHNWIs in Africa to 2 858. Nairobi will lead the way with a 78 per cent increase, followed by Marrakesh (60 per cent), Johannesburg (41 per cent) and Cape Town (37 per cent). In 2003, Forbes listed only two billionaires in Africa, namely Nicky Oppenheimer, and Johann Rupert. Today the list is substantially longer. “Africa’s potential for wealth creation should not be underestimated, given the amount of foreign investment, including social investment, it has received and is likely to receive in the future,” says Ouliana Vlasova, head of content at WealthInsight. “Economic growth is a major factor in wealth creation. However, it takes time for GDP growth to create wealth growth. Wealth growth is heavily dependent on the strength of the local banking system. For instance, in countries such as Cote d’Ivoire and Ethiopia, strong GDP growth has not yet translated into UHNWI numbers due to a weak banking system,” highlights Vlasova. The economic outlook and prospective growth for sub-Saharan Africa is tipped to be ahead of most developed nations; however, concerns over infrastructure bottlenecks exist, as these could dampen growth. Between 2008 and 2013, Standard Bank’s Private Clients business in Africa grew by 51 per cent in terms of new clients, and 123 per cent in assets under management, according to Margaret Nienaber, global head of Standard Bank’s Private Clients business. And South Africa follows the African trend. “Between 2007/8 and 2013, worldwide we saw a decline in the number of HNWIs, but in South Africa there was a 14 per cent increase. Kenya experienced a 24 per cent increase,” Nienaber told How we made it in Africa.

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Where the money goes The 2014 Wealth Report from real estate consultancy Knight Frank reveals that for the majority of wealthy individuals, residential property is the biggest item of discretionary spending. Almost 30 per cent of their wealth is accounted for by their main residence and any second homes, of which they own an average 2.4, according to Knight Frank’s ‘Attitudes Survey’ in the report. Cities are the most popular locations in which to live, with almost three-quarters owning a townhouse. Just under 30 per cent own a rural retreat, 22 per cent a waterfront property and 13 per cent a ski chalet or apartment. Outside of property, equities are said to be back in favour as the most popular asset class for Africans, offshore equities in particular. Investments of passion – collectables such as art and classic cars – also feature high on the shopping list of many super wealthy people. Jewellery is the most widely collected on a global level, particularly in emerging markets, followed by art, watches and wine. Worldwide, art has had the biggest jump in popularity, with the wealthy in emerging markets once again setting the pace, according to the report. Large boats and yachts are said to be dwindling in popularity. This is for many reasons, including that depreciation of these assets happens at a rapid rate, and mooring, fuelling and maintenance costs are very high. With the creation of UHNWIs comes a predicted increase in spending on luxury goods, and it is in Africa where the greatest growth is anticipated. Knight Frank identifies the areas of growth for luxury brands over the next 10 years, and Ghana, South Africa, Nigeria, Kenya and Zimbabwe all appear in the top 10. Other than assets, philanthropy, charitable work and education are also areas where a significant portion of the money goes. Nienaber notes that travel and lifestyle also remain key interests, and a lot of Standard Bank’s clients are interested in banking products that are linked to air miles and airport lounge access, for example.

Insuring this market All involved agree that this is a market in a growth phase, with assurances that the market in South Africa is large enough for the number of players in operation in the HNW insurance market. Current players in the market include Aquarius Underwriting Managers underwritten

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Top 10 richest South Africans (name, total invested, prevalent sector) 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

Christo Wiese Patrice Motsepe Stephen Saad Desmond Sacco Rembrandt Trust; Rupert family John Whittaker Royal Bafokeng Consortium Koos Bekker Lakshmi Mittal Laurie Dippenaar

R27.45 billion R22.59 billion R10.52 billion R10.34 billion R8.45 billion R8.09 billion R7.17 billion R7.14 billion R6.59 billion R5.28 billion

Retail Mining Pharmaceuticals Mining Luxury goods Property Mining Media Steel mining and manufacture Financial services

Source: Sunday Times Rich List, December 2013

by Hollard; Echelon, underwritten by Santam; Execuline Motor Insurance Underwriters, underwritten by Hollard; MUA Insurance Acceptances, underwritten by Auto & General; Vantage, underwritten by Absa/ One Insurance; Vertex, underwritten by CIB Insurance Administrators; and Zenith, underwritten by Hollard. In 2013, the spending power of South Africa’s black middle class was reported to have surpassed that of the white middle class by R80 billion. According to a survey by the University of Cape Town’s Unilever Institute of Strategic Marketing, the rising black middle class has about R400 billion to spend, compared to the R320 billion from the country’s white middle class. This market is also important for high net worth insurers, because often it is not only ultra-

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wealthy individuals insured, but also couples and families who have significant assets worth insuring. Entry levels for HNW insurance are usually a minimum R3.5 million buildings and contents combined, or at least R1 million worth of contents. While theoretically it makes sense for ultrawealthy clients to have some form of selfinsurance, in practice it is not happening. “Some of our top clients spend as much as R1.6 million a year on comprehensive insurance cover. They have the financial ability to self-insure, but due to a lack of innovative products this is not happening,” affirms MUA Insurance Acceptances MD, Christelle Fourie. Ultimately, these individuals want the same as everyone – great service at the right price. “HNW clients prefer to deal with a broker or within their private banking environment. They expect to be treated as VIPs, thereby expecting

service delivery. They value the opinion of their consultants and also look at the proper backing and paper of the insurer. They want a simple and user-friendly product, and they are prepared to pay for the correct cover and benefits,” reiterates Aquarius Underwriting Managers CEO, Drew Schnehage. One of South Africa’s top HNW insurance brokers, Rory Mitchell of G van Cuyck Insurance Consultants, explains that this discerning market’s concern with service levels and breadth of cover is most evident at the claims stage. “Our clients pay more, so naturally they expect more. And this is why it is critical for brokers to have solid relationships with their product providers; know them well and be able to get the issues solved quickly,” he says. Because HNW insurance policies are so specifically tailored, and customised in each

YOUR CLIENT’S CAR HAS BEEN PERSONALLY CUSTOMISED. WE’D LIKE TO DO THE SAME FOR THEIR INSURANCE.

We are delighted to announce that MUA will start underwriting on behalf of Auto & General Insurance from 1 April 2014. For more information on this exciting partnership, please contact Christelle Fourie at cfourie@mua.co.za. MUA Insurance Acceptances (Pty) Ltd is an authorised Financial Services Provider (FSP No. 37947) underwriting on behalf of Auto & General Insurance Company Limited, an authorised financial service provider (FSP No. 16354)

case, one of the requirements for HNW cover is a pre-claim survey or valuation. The products also have minimum requirements, such as linked alarms. This also prevents fraud. “In the HNW market you cannot afford to underwrite at claims stage. In taking a proactive risk management approach by doing property valuations, the areas that need attention are identified. We ensure that certificates of authenticity, proof of purchase and so on are available. Most importantly, the client is insured for the correct replacement values, which again prevents unnecessary conflict at the claims stage,” explains Fourie. Darrel Dawson, head of UMA Echelon, explains that the company adopts strict underwriting criteria aimed at insuring the individual’s lifestyle first, which sometimes results in requirements such as tracking devices and home alarms. “We have a dedicated and professional base of independent intermediaries who also perform first-screening of their clients – a value-added intervention, which has the benefit of pre-qualifying a risk for our assessment and pricing.” “Conventional policies don’t meet the specific needs of owners of fine homes and possessions in South Africa,” says Schnehage, and outlines a few requirements that the clients have, namely: policies designed to offer clients total flexibility and choice; that all assets can be fully protected under one policy; that each policy is tailored to individual needs;

e-business solutions that will provide risk management; and assistance with policy management. This is why the role of the broker in this market segment is firmly entrenched.

Shifting demographics open opportunity The changing demographics of wealthy people in South Africa mean that there are significant opportunities for young black insurance brokers in this market. There are certainly more young successful black professionals in, or approaching the HNW category; and the best people to serve this segment are representatives from this sector. The increasing black middle class in South Africa make for good clients for insurers, as they are conscious of what they own. Lack of education and understanding on how insurance works, however, is a challenge that must be overcome. Valuations, proof of purchase requirements and so on must be explained, as well as the fact that insurance can be denied or cancelled if a client has a bad claims track record.

Y N

Y • • • • • •

There are simply not enough black brokers in South Africa – a fact that is bemoaned by all in the industry time and again. Savvy, up-and-coming black brokers would be well positioned to service this untapped market and could certainly make a name for themselves in this arena.

Top 12 richest Africans 1. 2. 3.

Name Aliko Dangote (Nigeria) Johann Rupert and family (SA) Nicky Oppenheimer and family (SA)

Net worth $20.8 billion $7.9 billion $6.6 billion

Prevalent sector Cement and food Luxury goods Mining

4. 5. 6. 7. 8. 9. 10. 11. 12.

Nassef Sawiris (Egypt) Mike Adenuga (Nigeria) Christo Wiese (SA) Isabel do Santos (Angola) Issad Rebrab (Algeria) Mohamed Mansour (Egypt) Othman Benjelloun (Morocco) Patrice Motsepe (SA) Naguib Sawiris (Egypt)

$5.9 billion $4.6 billion $3.8 billion $3.5 billion $3.2 billion $3.1 billion $2.8 billion $2.7 billion $2.7 billion

Construction Telecoms and oil Retail Investments Food Construction machinery Banking and insurance Mining Telecoms

Source: Forbes, November 2013.

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said for good old-fashioned ‘broker’s intuition’, but unfortunately this is not an exact science. A growing concern in South Africa’s HNW insurance market is the prevalence of organised crime, with unsavoury characters making South Africa their home and seeking insurance. Insurers could unwittingly be taking on very undesirable risks.

Brokers and insurers should protect their good clients, and not use them to subsidise loss-making portions of the book, says Adriaan Louw, CEO of Vantage Insurance Acceptances, which officially launched the company’s full personal lines HNW product in April 2014. He asserts that the industry already accommodates too many bad risks, which require high excesses and high premiums, because these clients tend to abuse insurance and do not value and care for their possessions. The HNW market, more so than any other, must differentiate between good and bad risks through cover, price and selection.

While there is increasing use of technology and actuarial behaviour-based monitoring used to determine whether clients are good or bad risks, there is also something to be

“The impact of organised crime on insurance in South Africa is underestimated,” says Fourie. This is both in terms of crime syndicates targeting HNW individuals and ordinary South Africans, as well as the potential for insurers to insure these individuals. Other emerging risks for HNW clients, which result in an increased uptake in cover by clients, or product development on the part of insurers and UMAs, include kidnap and ransom; director’s and officer’s liability; identity theft; and cyber-crime. The demanding and jet-set pace of this market ensures that there is never a dull moment for brokers servicing this market, and the growth of this market in Africa particularly, opens up exciting scope for business development.

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Good risks vs bad risks

Schnehage labels good risks as HNW individuals who take care to protect their assets. “These are clients with high asset values, who have a regard for the management of their own risk, resulting in a favourable loss ratio to ensure profitability of the portfolio. Big spenders like to buy jewellery and fast cars. More conservative spenders buy vintage vehicles, property and spend time as collectors of art. The conservative spenders are the ones we target through our lifestyle grading. Big spenders don’t attach value to assets and tend to be high risk,” she adds.

The high life in Nigeria According to WealthInsight analyst Oliver Williams, there is great potential for the luxury market in Nigeria. “Nigeria already has Africa’s largest private jet market, champagne consumption and one of its biggest art markets. “Nigerian millionaires have been keen buyers of luxury goods in London and other European capitals, so it will be only a matter of time before luxury retailers start opening outlets in Lagos or Abuja. There is enormous potential for the private banks in Nigeria: Nigerian millionaires are collectively worth $90 billion, a figure that is expected to rise 27 per cent to $123 billion by 2018,” says Williams. “With figures like these, many private

bankers and wealth managers are setting up shop in this West African nation.” However, there is already competition on the ground. Bob Diamond announced last year that he was planning a $250 million cash shell targeting the West African banking sector and many seem to be emulating him. South Africa’s First National Bank recently announced plans to expand in Nigeria; and while Credit Suisse has retracted its African operations, Barclays Africa Group and UBS are rushing in to fill the gap, in hot competition with Nigeria’s own private lenders such as Zenith and Diamond Bank.

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ST SHORT-TERM

In the

money Upscale insurance in SA Christy van der Merwe

20 8 4

The high-net-worth (HNW) insurance market in South Africa is a very competitive space, and there are an increasing number of product providers seeking to gain a share of this lucrative and growing market. 21

competitive, due to competitions trying to get market share. The discounted pricing is very inconsistent amongst competitiors, which ineritably leads to price increases as the rating isn't sustanable. By and large, role players in this market agree that it would be short-sighted to fight on price, and assert that management is key, as is having the right partners. “We are seeing premiums increased as a blanket approach. This does not work and you will simply chase away your good clients. There have been some players in the industry who chased bad business in the hopes of getting a critical mass of clients. Chasing volumes does not work for this market,” emphasises Lourens Kirsten, MD of Hollard’s HNW underwriter, Zenith Product Design. Adriaan Louw, CEO of Vantage Insurance Acceptances, agrees that blanket adjustments are not good, and policies should be refined for individuals in this market, but on the other hand, he maintains that volumes do play a role in the domestic market, because if you don’t have some critical mass, “one large client with a huge claim could blow you away.”

s more South Africans move into the upper classes of society, the number of HNW clients in South Africa increases, and providers in this space agree that there is enough business for all players to thrive. This does not make it any less competitive; and in a market where product, as a commoditised concept can be easily copied, it is pricing and service levels where the competition is hottest. New entrants in the market have been said to undercut on pricing in order to gain a foothold in the market, which is viewed as unsustainable. There have also been calls for more consistent approaches to pricing in this segment of the market. “I think all pricing of insurance, across all lines is too low. It is becoming harder for insurers to write a profitable book,” says Rory Mitchell, of G van Cuyk Insurance Consultants, and one of South Africa’s top HNW insurance brokers. He also tells RISKSA that limits should be higher so that the value of the product is not diluted.

“We are seeing rate increases in the industry and we haven’t seen an end to the hardening of the market,” says Christelle Fourie, MD of MUA Insurance Acceptances. She adds that all classes of business need adjustment, largely due to the impact of the Rand’s decline, as well as the increase in frequency and severity of natural disasters. “The market of HNW product providers is overtraded and the price war continues. It is not so much the clients who are price sensitive, but rather the product providers that are competing on price. We need to see players rising above the others to offer products that are truly bespoke and not just wider cover with lower premiums. Because there are too many players in this market, the order of the day is price cutting and loading of premiums on existing clients. This is not a sustainable model and certain players don’t understand that we don’t have to go in cut-throat, because there is more than enough on the table for everyone to eat,” says Drew Schnehage, CEO of Aquarius Underwriting Managers. Jonjon Smit, director of CIB Insurance Administrators, says that the HNW market has seen instances where pricing is extremely

Vantage is one of the newest players in the personal lines HNW market, with its product launched in April. Louw, who spent 14 years with MUA Insurance, established Vantage five years ago and underwrites for Absa/ One Insurance. He says that it is good to be able to offer the broader product, after high demand from the company’s traditional broker network. He explains that the HNW product will leverage off the company’s existing books, and he certainly believes that it will satisfy the needs of this demanding client base. “We have the right relationships with our existing clients – we have earned our stripes over the last five years,” he adds. If underwriting management agencies (UMAs) do not have the access to resources to assist in accurate pricing, the impact of the negative effects will be great. The volatility of the exchange rate and its impact on cost of repairs, especially in motor insurance, can have a severe and sudden impact on a UMA’s underwriting profitability. Looking ahead, Fourie says that there could very well be further change and consolidation in the market, as UMAs seek the correct partners to help weather the storm of declining underwriting margins in certain lines of business, as well as the ever-increasing regulatory change. “In the long term, we could see consolidation in the market, unless prices are lifted to ensure sustainability,” agrees Kirsten.

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“I do believe that there will be consolidation and alignment with insurance partners, because the HNW market is volatile, especially due to unpredictable catastrophe losses. We need to turn profits and the trend at the moment is predicting a disaster unless there is serious intervention,” predicts Schnehage.

Trends Schnehage adds that product providers that are aligning closer to their insurance partners, will rise above their peers. “Their focus will be to establish a walk-away price through actuarial pricing models that will create a more consistent approach in this market segment.” Indeed, there is increasing use of more scientific underwriting methods, and use of technology such as telematics to monitor client behaviour and enable more precise risk management. MUA’s new partnership with Telesure from the start of April will give the agency access to an array of new technology. “Our new partnership allows us access to world-class actuarial support and, as of May, we will be launching a behavioural-based pricing approach,” says Fourie. Already, the exact behaviour of individuals can be tracked through telematics, by monitoring

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how fast drivers go around corners, or what time of day or night the vehicles are being used, as well as where the vehicles are parked. In addition, other demographics such as age, gender and marital status of drivers will be considered. The future of mobile applications is important to alert and send weather-related warnings to clients, says Schnehage. She adds that the industry should be more proactive in constantly highlighting the pitfalls to clients, and reminding them of safety features they could implement in their homes and while driving their vehicles. Clients can be made aware of their surroundings and the issues faced every day on crime and weather spikes, for example. In terms of new risks that are emerging, requirements among HNW individuals and families for kidnapping and ransom, as well as director’s and officer’s insurance is increasing. Identity theft is also a growing concern, as is online crime. In the past three years, HNW underwriting management agency Echelon Private Clients notes that it has seen an increased exposure to financial loss for the target market to new crimes like identity theft and cyber-crime.

“Ongoing research on existing and new emerging risks to our clients allow us to keep our commitment to new product development each year – where the needs of our broker and client communities can be addressed,” says Echelon executive director, Darrel Dawson. He adds that Echelon also introduced safety solutions for policyholders in October 2013 in the event that they pursue outdoor activities away from their home or vehicle, where traditional assistance services are positioned. This gap in safety services has been addressed by the Help Plus benefit to focus on policyholder activities, ranging from cycling and mountain biking to golf, boating and running. These have been incredibly well received, he says.

Steadfast concerns Conventional crime, and the weather are big issues, says Kirsten. “How do you price for global warming? It does not seem fair to punish clients for these issues, which are becoming more intense and worrying." He also notes that Gauteng is generally viewed as riskier, and because of the lifestyle and the weather, there is a higher prevalence of motor claims. Declining infrastructure also remains a problem nationally.

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Adverse weather and exchange rate depreciation have impacted profitability and this issue is top of mind for the industry, requiring intervention beyond pricing strategies, says Dawson. “In order to balance stakeholder interests, we have seen that clients can get better value if we apply a greater focus on quality and a more selective and exclusive approach to suppliers and providers, who themselves need to consistently deliver on what Echelon clients and brokers expect. “With prolonged bouts of bad weather, we have seen consequential damage for clients arising from poor infrastructure and little maintenance – also extending into questionable personal asset maintenance by the individual. A proactive risk mitigation strategy would have to address these issues,” adds Dawson. The currency fluctuations are a constant headache in this market, which cannot be ignored. CIB urges brokers to keep this in mind, particularly at renewal stage, where inflationary increases are critical, as average is always a concern. CIB offers free valuations upfront to mitigate this impact for the first 12 months, and it is up to the client to ensure that values are kept market related in conjunction with their broker. “This segment of the market is most exposed to currency fluctuations through importation of luxury goods, collectables and cars, and any repair or replacement exposes you to the volatility of the currency. Hopefully things will be more stable after the elections,” says Louw.

Louw adds that the insurance industry should be more diligent in linking up with the repair and replacement industry, to add value, build relationships and get benefits back for clients. The insurance industry has been quite fragmented in dealing with the motor industry, and different companies are often, intentionally or unintentionally, working against each other.

database of fraudulent individuals or cases, this could prevent other companies from inadvertently taking on bad risks.

In some cases the sum total of the parts can be between six and 10 times the overall value of the car. When a bumper bashing costs R60 000, this is completely disproportionate. However, the insurance industry and the repair industry seem to be at a stalemate, where neither side will budge, adds Kirsten.

Louw adds that unfortunately a trend is emerging where the goodwill and trust is not coming in at the same level. “People are abusing the products, which is why it is ever more important to differentiate between risks, through cover, price and selection,” he says.

Motor manufacturers such as BMW and Mercedes have their own branded financial products and push these, with a major selling point being warranties and motor plans. However, the service levels with these products are said to be lacking, because the people selling them do not have the right intermediary know-how. Pricing is very volatile, and sometimes the first year’s insurance is offered free, but come the second year when payments are required, these can be almost twice as expensive. Motor lines are truly still a big headache for insurers and accurate pricing models from actuarial to procurement must be applied. With regard to age-old concerns and new emerging risks, Louw feels that it would be advantageous if companies could share knowledge or facts on claims. If there were a

Schnehage admits that Aquarius has noticed an increase of fraud and inflation of claims. “We’ve had three incidents in the last five months where we are proceeding to lay criminal charges and prosecution.”

Business development It is felt that too many prospective HNW clients are still insuring with direct insurers. All the HNW insurers are said to be focusing on the same distribution model. A challenge exists in finding ways to write new business outside of the ordinary distribution model. Another relatively untapped market is the increasing black middle class. More black brokers are required to serve this segment of the population. Everyone, including all intermediaries and insurers, must review the distribution channels. Brokers need to be at the point of sale as much as possible, says Louw. For example, in Mitchell’s case, Porsche is the stepping stone. His passion for and knowledge of the product makes him best

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placed to broker insurance on these vehicles. Once a client gets a good rate on the vehicle, they might enquire for a quote on a second vehicle, home insurance or even commercial business cover. The ideal is to have one client with many policies. There are also young professionals who do not fall into the HNW category right now, but will eventually get there, and this is a potentially fruitful market. The younger market is certainly more active on social media, and often use these networks as a

way to seek advice or get recommendations for products and services.

Top tips for brokers in the HNW market

“Brokers can start to generate business through Twitter. Here they can meet people they wouldn’t ordinarily interact with, but who are looking for business,” says Mitchell.

Build strong relationships with one or two underwriting management agencies, rather than trying to feed all the mouths. More solid relationships with a few UMASs will serve you well when it comes to the claims stage. – Rory Mitchell

In this rapidly evolving and competitive market, brokers will certainly need to employ innovative thinking to gain new business, while effectively taking care of their existing clients.

Minimise the number of products you provide to the market; know a few really well, ask questions, understand your risk provider, and reinsurance. Build a good solid base of clients. – Christelle Fourie

Brokers must boost their product knowledge and experience because this will be tested by prestige clientele. You cannot hide behind the small print. – Adriaan Louw

Go where you get consistency and choose your clients carefully. To predict the future, look at the past. – Lourens Kirsten

HNW clients expect utmost value for money and efficient turnaround during claims settlement. They want tailored solutions giving flexibility and choice, and e-business solutions that can provide risk management. – Drew Schnehage

Look at the rating of the carrier – as an intermediary you want the comfort of adequate solvency when your client claims. – Darrel Dawson

Don’t sell price; sell the product and the value adds, and assist the client with risk management as this is an important part of maintaining low premium increases year on year. – Jonjon Smit

Ensure that communications lines between broker and client are always open; and brokers, urge your clients to let you know if they acquire more insurable items, and remind them to retain proof of purchase. – Christelle Fourie

Remember that existing clients are the most important – make sure they are taken care of before seeking and developing new business. – Rory Mitchell

Don’t be shy to sell yourself as a professional. – Adriaan Louw

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Settling into the

upper Echelon niche Christy van der Merwe

After experiencing a stellar average growth rate of 101 per cent over the past three years, growth at Echelon Private Clients is steadying. The company expects its expansion to taper off this year, with early estimates pointing to a portfolio growth rate approaching 50 per cent in 2014.

chelon Private Clients executive director, Darrel Dawson, attributes the continued growth at the high-net-worth underwriter and Santam subsidiary, to three factors: firstly, support from its select and exclusive intermediary partners; secondly, Echelon’s compelling value proposition; and lastly, professional and experienced staff members who execute personalised private bank-styled insurance service every day.

Sustainability and quality standards a priority “While the industry offers clients more choice than ever, we have watched with interest as insurers have reported their results in the past few months. Adverse weather and exchange rate depreciation have impacted profitability and this issue is top of mind for the industry, requiring intervention beyond pricing strategies in our view,” he says.

Darrel Dawson

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Echelon’s value proposition is three-pronged and focused on: solvency, with backing from South Africa’s largest short-term insurer

Santam; solutions based on safety and innovative insurance benefits; and service, with skilled staff using world-class systems to deliver great service. Dawson affirms that Echelon seeks to cater to the interests of its contracted intermediaries and its policyholder community consistently “at another level”. In order to satisfy these stakeholders, Echelon has seen that clients have benefited from improved quality via better scrutiny and management of providers in their supply chain, who in turn comply with Echelon quality standards. The weak Rand in the fourth quarter of 2013 and early 2014 has been well publicised and, in the high-net-worth market segment, has contributed to increased claims costs. Echelon’s pricing models are examined frequently, relative to the market and for the purpose of securing sustainability and certainty for clients and intermediaries, emphasises Dawson. The impact of recent currency depreciation is evident in the nature of assets replaced

and repaired following claims – luxury goods denominated in Euros or Dollars cost more now than they did a year ago – excluding the effects of inflation. But currency depreciation is more pervasive than that and extends into the broader insurance market inclusive of the highnet-worth segment. One example is drawn from Echelon’s data where the Echelon ‘parts basket’ is used to monitor price changes in vehicle parts across brands and their annual price movements. “We have evidence that certain parts baskets have increased as much as 70 per cent in a year, while our ‘basket’ of 12 vehicle parts across brands saw an average increase of 22 per cent year on year.”

Weighing risk

There have been significant refinements in risk selection and management at Echelon over the years. New risk management techniques have been introduced into underwriting and claims adjudication, and their effectiveness is constantly monitored. Data has provided Echelon with compelling evidence, for example, that 17 per cent of its policyholder population contributed to 81 per cent of claims spend in 2013. Consequently, the company is able, via a predictive model, to identify which client attributes are better risks and should enjoy better pricing, and vice versa.

Insurance is very often a balancing act of meeting the client’s interest in financial security and quality, the intermediary's interest in protecting their reputation through good service, and insurer shareholders’ expectations for sustainable profitability and growth. Because of this, Echelon adopts strict underwriting criteria aimed at insuring the individual’s lifestyle first. This often results in implementing upfront risk mitigation initiatives such as tracking devices and home alarms.

Product evolution

“We have a dedicated and professional base of independent intermediaries who also perform ‘first screening’ of their clients – a value-added intervention which has the benefit of prequalifying a risk for our assessment and pricing. Then, together with our underwriting matrix, we apply our rating factors to point to the palatable risks for Echelon to bear,” adds Dawson.

This gap in safety services was addressed through Echelon’s new Help Plus benefit to focus on policyholder activities, ranging from cycling and mountain biking to golf, boating and running. “These have been incredibly well received and allow us to provide insurance for your assets and safety solutions for your family,” says Dawson.

The company is constantly innovating, and is currently researching options that it expects to be ready to launch to intermediary partners in October 2014. In late 2013, Echelon introduced safety solutions for its policyholders in the event that they pursue outdoor activities away from their home or vehicle, where traditional assistance services are normally positioned.

He adds that ongoing research on existing and new emerging risks to Echelon clients allows the company to keep its commitment to new product development each year – where the needs of Echelon’s intermediary and client communities can be addressed. For example, in the past three years, there has been an increased exposure to financial loss for the target market through new crimes like identity theft and cybercrime. Keeping abreast of emerging threats such as these allows Echelon to convey risk mitigation advice to its clients and develop products covering these. As well as the many challenges and opportunities of doing business in South Africa, there is also the rapidly changing regulatory environment in South Africa to consider. In order to keep up to speed with these changes as they emerge, operational impacts on staff training and Echelon’s processes are carefully considered. That is when Echelon is able to leverage its people and solvency assets quickly. However, the business mantra remains “deliver service at another level”, emphasises Dawson. “We also acknowledge every day is a test for us to provide the best products with the best service to keep relevant in an increasingly competitive space.”

Proof of life

The value of kidnap and ransom insurance

Christy van der Merwe

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Discussing the existence of kidnap and ransom insurance could invite the unwanted attention of potential kidnappers, which is why a strict requirement of such a policy is that people do not know it is in place, or do not disclose its existence. The role of the broker is vital in this instance.

he value of a broker is evident more than ever when it comes to kidnap and ransom insurance because this cover is not something that can be marketed or spoken about widely, and yet clients need to remain protected. The risk exists that if it is well known that this type of cover is protecting a client, it could be exploited, and insurers do not want to create the perception of fuelling this crime by offering a product for it, which is why non-disclosure agreements play a big role in this type of cover.

incorporating numerous extensions that respond to evolving elements of threat and hostage situations and injury involved with this crime. Indeed, policies are evolving to take cognisance of the fact that kidnap victims can at times be held for months or even years. This means that a company would need to consider salary replacements for the time that the executive is not there, as well as consider loss of earnings for the company or the family. An event such as kidnapping could also trigger certain business interruption concerns.

Because many brokers are offering this cover to their commercial or high net worth clients, yet it is not often openly discussed, they should be very sure of what the policy covers and what extensions are available. Each policy is bespoke and underwriting concerns – such as which countries are most often visited, and how often, as well as which industry an executive works in – play a role.

While not strictly linked to kidnapping, there is an emerging risk of potential emergency political evacuation of employees that a company could be required to carry out. The issue of disappearance, without ransom, is another one that companies should consider, for which there is cover currently available.

It is important for brokers to make clear to their clients that the policy is one of reimbursement. Ransom funds would need to be initially paid by the family or company, explains Andrew Munro, director of underwriting management agency Praesidio Risk Managers.

While it is difficult to determine if there are more kidnappings than before, because often the crimes are not made public, the truth is that as the emerging market boom takes hold, and travelling into Africa on business has become more commonplace, people are increasingly putting themselves in risky situations.

Cover could also include a number of additional services beyond ransom reimbursement and consultancy fees, such as post-event care, family liaison, public relations liaison and other services, adds Munro. Dani Ettridge, from Aon South Africa, says that this is a developing type of cover, and not all policies are equal. Since the ‘pure’ kidnap and ransom insurance products were launched some 20 years ago, policies have started

A crime on the rise?

This is why the cover works best at the corporate level. In South Africa, there is a larger number of high net worth individuals who are getting this type of cover for themselves and their families. It also means that brokers need to stay proactive and, rather than just selling travel insurance policies, they should be aware of where and when their clients are travelling and what the particular risks for that area may be. 

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Where the hot zones are; and why? Nigeria – Boko Haram (terrorists want funding for arms), Oil and Gas workers. Mali – Islamic militants. Mexico – largely due to gang-related drug wars Mozambique – low-intensity conflict between the army and fighters from revived rebel group Renamo, and a lot more mining activity attracting wealthier individuals. Middle East, particularly Yemen – insurgency from armed groups linked to Al-Qaeda.

Munro says that the demand for kidnap and ransom insurance is escalating due to the increasing threat of this crime, and growing awareness of product availability. In South Africa, AIG offers kidnap and extortion insurance, as does Guardrisk, and Aon also uses the London market for products in this niche. “Awareness of the dangers of kidnapping, hijacking, hostage crises and detentions has increased, and large scale events can make front page news. For businesses operating overseas in high risk environments, this cover is seen as good corporate governance now. In the wake of events like the Arab Spring and the ongoing conflicts in the Middle East and North Africa, we have seen a marked increase in the number of enquiries from corporations and individuals operating in these territories,” explains Munro.

Duty of care Companies have a duty of care to employees, and this is driving the purchase of policies, says Ettridge. With an increasing trend towards litigation, particularly in the Western world, there is a risk that kidnap victims or victim’s

34 8 6

families will try to sue companies following an incident. Companies need to protect themselves and ensure that nobody could prove negligence on their part, says Ettridge. She explains that this means that companies must be able to prove that they have done all that they can, within reason, to ensure the safety of their employees travelling to risky areas.

and of wilfully ignoring warning signs that abductions were a threat to foreigners.

This includes a company ensuring that it has a crisis response plan in place; that this is updated and audited; and is recognised by the relevant staff. It should provide assistance beyond mere travel advice, not only for highflying executives, but all employees who travel overseas for business.

Organisations should conduct risk vulnerability assessments of their locations, and of higher than normal risk environments, and corporate leadership should provide educational programmes that train their executives and key employees how to recognise and deal with potential dangers. These include any necessary steps that would allow their employees to identify and specifically avoid these situations.

The crisis plan should include communications procedures, so that if a call comes into a firm, the right people know how to react and deal with it. In 2011, Reuters reported that a US aid worker sued the non-governmental organisation that sent her to work in the Darfur region of the Sudan. Flavia Wagner spent 105 days in captivity before being freed, and accused Samaritan’s Purse of failing to train its security personnel adequately

Because lawsuits involving corporate liability or culpability in the cases of kidnapping and abduction are said to be increasing, corporations are realising the intrinsic value of pre-emptive threat avoidance.

Training should include detailed techniques that will increase the odds of survival should anyone become a hostage, and employees should be reminded of this information before each trip.

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in the assistance it provides to a family or company in the event of a kidnapping, or abduction situation, explains Ettridge. There is a ransom element to the cover (as this will be repaid, although the company or family must source it upfront), but people are also buying the cover because it gives them access to response consultants, who are trained in dealing with highly emotive situations, more so than the family of a kidnapping victim. The consultants are based worldwide, and would be able to get to the relevant country as quickly as possible. Munro explains that the negotiation procedure and particularly the first 24 hours

of a case are fundamental to the outcome of the situation. “A quick payment to kidnappers with little or no negotiation structure may result in the victim not being released and the kidnappers demanding higher ransom or the kidnappers coming back in the knowledge that the victim’s family or employers are prepared to pay.

Because of the sensitive nature of kidnappings, and to avoid exploitation, response consultants do not communicate directly with kidnappers to avoid suspicions of third party assistance. The negotiations would be done by a family member of a trusted member of the company, with the consultant providing advice on what to say and what not to say.

Experts in this area have vast experience in dealing with these events and are fully equipped to deal with various types of cases,” he says.

The ultimate aim is to achieve the safe and timely release of the victim while remaining within the law. These response consultants do not launch rescue missions as these often result in the death or injury of individuals involved. Kidnapping is usually a very sophisticated crime, and well organised by syndicates or organisations. It is not a completely opportunistic crime, there is a lot of thought that goes into it, which is why travellers into high-risk areas should remain alert and aware of potentially dangerous situations.

The negotiation process is also extremely intense and has to be handled by trained professionals. When a client purchases kidnap and ransom cover, they are provided with an emergency crisis response number to the insurer’s specialist response consultants. In an event, the client would call this line immediately at which time they would be provided with immediate telephone advice. A ‘hand holder’ in the country of event would be deployed to the client to assist the family or company for the first 24 hours. During this time, a response consultant would make their way either to the country of incident, the company, or home, to begin or continue the negotiation procedure.

If a company buys this type of cover, it is accompanied by non-disclosure agreements, and often the person insured is unaware of the cover. The risks are linked to an individual’s net worth and travel patterns, and premiums are calculated accordingly. As with all insurance, it is a final measure arising from an unwanted situation, and brokers should encourage their clients to employ adequate upfront risk mitigation.

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Case study 1: Potentially perilous pick-up James Michael Anderson (*not his real name), who simply goes by his middle name Mike, was travelling to Kenya and went through the usual passport checks and delays after arrival at the airport. After a particularly laborious journey through passport control, he noticed a man holding up the usual A4-sized name placard, reading â&#x20AC;&#x153;James Andersonâ&#x20AC;?. He immediately knew that nobody from his company would have arranged anything using the name James, and walked straight past the person. By doing this, he potentially avoided the risk of being kidnapped, or at the very least avoided an unscrupulous taxi driver scam trying to intervene and steal fares from legitimately arranged transport companies.

Case study 2: The old switcheroo Andrew Pretorius (*not his real name), was

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visiting Nigeria on business for the first time, and while there, was scheduled to meet a number of Nigerian business counterparts. While enjoying a drink at the bar on the evening of his arrival, and before any meetings took place, he left his belongings, including his scheduled itinerary in his room upstairs in the hotel. The next morning, he got a call from reception 30 minutes earlier than expected, saying that his driver was ready and waiting downstairs to take him to his first meeting at company XYZ. Somewhat annoyed at the early pick-up, but not wanting to delay or

offend anyone, he rushed to get ready and hurried downstairs into the cab. Unfortunately, Pretorius was not taken to his first meeting, and was in fact kidnapped. Members of a criminal organisation had gained access to his hotel room the night before and looked at his schedule containing all relevant details, and saw where the opportunity was to intercept and abduct Pretorius. This highlights the need to be completely vigilant and keep your vital information safe, and on your person at all times.

Widening the t Dominic Uys

The South African insurance industry has been lobbying the Department of Transport to institute compulsory third party insurance for all users. While there have been many good arguments in its favour, the situation seems to be at a stalemate. 40 8 4

t has been argued many times that making third party motor insurance compulsory to all of South Africaâ&#x20AC;&#x2122;s road users makes practical sense on all levels. Along with encouraging overall road safety, the private insurance industry has stated on more than one occasion that motor insurance premiums could be reduced across the board, as a result. It is estimated that around 65 per cent of South African drivers do not currently have third party liability insurance, which presents a vast market for the whole insurance industry. That is, if the industry can get this proposal off the ground.

The politics of it The political aspect of the third party insurance issue is one of the major obstacles in the debate. To name but one challenge, the different legislations for each of the key role-players makes this a battle that needs to be fought on more than one front.

e third party pool The National Department of Transport, provincial government and municipal government all have certain powers and responsibilities in terms of the law. And on the ground, municipalities are the ones that issue fines. Each municipality also has its own method of managing its responsibilities in this regard. The compulsory insurance debate therefore requires buy-in from a host of key players.

An example of how difficult this can become, can be found by looking at the Administrative Adjudication of Road Traffic Offences (AARTO) Act. While it was already enacted in 1998, aspects such as the demerit system outlined in the act have yet to be put into action on a national scale. Coupled with the fact that getting buy-in from ministers who serve relatively short terms and are wary of pushing any new law that would hint at becoming as unpopular as the Gauteng e-toll system, the private sector finds itself

having to start the whole process from squareone every time a new face joins the department.

claim becomes tricky and the insurance pool takes the strain of this.

Asking the right questions

“Firstly, I think we need to understand the dynamics that drive the insurance industry. Then we can figure out exactly who and what to legislate in order to make sure that third party insurance remains mandatory,” Watson says.

The private sector may also need to change its tactics. Dr Eugene Watson, CEO of the Road Accident Fund (RAF), tells RISKSA that the insurance sector’s desire to make third party insurance mandatory is understandable. He states that there are a few important questions that need to be asked of the insurance industry. “Each year the insurance pool is shrinking. There are more cars on the road each year and with that, more claims. The only relief for the insurance industry to stabilise their price to product ratio would be to have a larger insurance pool,” he says. One of the biggest challenges for the insurance industry is when an uninsured driver is involved in a collision with an insured driver. Recovering costs after paying a

According to Watson, the way in which the system will work and how premiums will be collected is one of the first questions that need to be answered. “At the moment the information is quite vague on that and I believe that it is important for the industry to put forward a practical solution. “More importantly, we need to find out who benefits. What are the broader social economic benefits of the scheme at large and what are the demographics? This is one area where industry should make the arguments a little clearer, I think,” Watson says. He adds that, in principal, there is

a place for both the RAF and the private insurance industry in the picture.

industry has the potential to lighten the burden on government,” Watson says.

“The RAF mandate is threefold. The first is to indemnify the victim, secondly it is to compensate, and then to rehabilitate. In terms of compensation, we get involved on four main fronts: we cover loss of earnings, medical claims, funeral claims and general damages. Where we focus on the impact of the crash on the person, the short-term insurer covers the property damage and assets. So we don't necessarily step on each other’s toes and I do think that the insurance

“Again, I think there are good discussions that can be had about what the industry is trying to achieve and the broader benefit to society. Where it becomes quite interesting is when you start asking how far this insurance will extend under this mandatory third party system.

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The RAF covers users of South Africa’s roads, be they drivers or pedestrians and cyclists. We should figure out how the mandatory third party insurance system will protect the latter

and assist in recovery, when these individuals are not necessarily contributors to the insurance pool. It comes back to my central point of what are we trying to do with this system and for whom,” Watson adds. Watson adds that he believes the transition to compulsory third party insurance is likely to happen in steps. “I don't think we want to see our short-term insurance industry becoming unstable because of suddenly having to carry the whole of the driving population. We also wouldn’t want a situation where premiums become so high that people cannot pay. We

One of the concerns is naturally how this extra cost could impact the low income earner and if we take into account that licensing fees under this model would jump by at least R600, these concerns are not unfounded. “Our point of view is that we need to take into account that there is already a lot of cost to the economy. Road accidents, low road safety numbers and roadworthiness issues are all particular problems in South Africa. If all cars in South Africa are insured, the chances that they will be repaired and maintained by reputable repairers will improve significantly,” Pearson says.

will need to see what happens in situations where policies lapse, for instance. An incremental process may probably be the best way to introduce it and investigate problems in the system as they arise.”

How will it work? Watson rightly emphasises the fact that more clarity is needed from the private sector on how the mandatory third party system would work. Vivienne Pearson, general manager of insurance risk at the South African Insurance Association (SAIA), tells RISKSA that the process is not yet at a stage where a definite framework can be pinned down. “As an industry we did not want to dictate what it should be like. We rather motivated for it and indicated that this would only be a first step. We need an agreement between the industry all the relevant role players. After that we need to sit together and do research into how it should be done."

The benefit to the economy also means that insurance premiums could reduce and the impact on the low income earner could be less than one would expect. “We believe that if about 6.5 million more cars are insured, it would create a lot of work opportunities for businesses down the line. Most of these 6.5 million cars are most likely out of warranty and may present an opportunity for smaller and emerging businesses to render services. In that respect, it will assist greatly with the sustainability of the system, as well as in transforming the industry.” With the trickle-down effect of the proposed system, other players in the insurance game are also expressing their desire to add value to the structure. Peter Atkinson, national technical portfolio manager at the Financial Intermediaries Association of South Africa (FIA), says that one of the biggest benefits that the private insurance industry can bring to the table is an improvement in claims turnaround times.

“In the motivation document that we completed in 2010, we did explore a number of options, based on examples in other countries. The models ranged from ones where the motorist is expected to find his own insurance, to one where the insurance is paid as part of a vehicle’s licence fees,” she continues.

“If you look at the claims that are currently being submitted to the RAF, you’ll see that the waiting period could be anything up to 18 months. From our side, we are very keen to see mandatory third party insurance implemented. Obviously the broker market would then be able to get more involved and give more potential clients some good insurance advice and advice about what is going on in the system,” he says.

From an administrative point of view, Pearson states that the latter may be the least costly option. “When we calculated a possible fee, we had to make an informal estimation, since our members did not want to participate in an actuarial study. In 2010, we estimated the price to be around R50 a month, based on an average of the insurance industry and premiums at the time. The Actuarial Society informed us, however, this figure might be too low,” Pearson explains.

Once again, SAIA has renewed its efforts to communicate with the Department of Transport and Pearson remains hopeful that the coming years may see greater strides being made in the sector’s campaign. “Our members certainly believe that they have the capacity to take on the vast number of new potential policyholders and we will continue to try and make inroads for the industry to get its chance,” Pearson concludes.

Brokers warned of creative new

vehicle heist tactics A

fter a spate of vehicle heists from motor body repairers’ premises, particularly in Gauteng, insurers and brokers are urged to liaise with motor body repairers and ensure that they confirm with clients before releasing vehicles to a third party. The South African Insurance Crime Bureau (SAICB) has issued vehicle crime alerts drawing attention to this increasing trend, particularly among high value vehicles, which are currently being targeted by vehicle criminals at vehicle dealerships and especially auto body repair companies. The modus operandi of the criminals is to call the repairer, pretending to be a family member or colleague, and inform the repairer that they have been instructed to collect the vehicle on behalf of the client. The suspects obtain details of a specific vehicle at the repairer, including the amount outstanding that must be paid as excess. This

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amount is then paid into the account of the repairer and the suspects collect the vehicle ‘on behalf of the client’ or have it delivered to an address for the client, explains the SAICB. The SAICB said it was aware of nine instances thus far; two vehicles were recovered and three arrests made. Service providers must ensure that the correct owners/clients take delivery of these vehicles, and insurers should alert auto body repairers to this situation to prevent such crimes from taking place. “We suggest that you advise your preferred panel of repairers to request identification from the insured before handing over their vehicle,” the SAICB recommends. One insurer stated that it has had five SUVs and a luxury sports car stolen in this manner, while a vehicle tracking company confirmed five similar cases reported in April.

On a different note, the SAICB highlighted another emerging crime; several instances have been reported where people have been drugged and robbed of vehicles or home contents. “Ladies met with clients at different News Cafés in Gauteng, casinos and the Blue Room in Pretoria city centre. These ladies meet men and go with them to their homes or hotel rooms, allegedly ‘spike’ their drinks and take their vehicles, personal belongings or house contents. These clients can provide only minimal detail about the events after they have arrived at the hotel room or at their homes. None of the clients could give a proper description or other details of the ladies responsible,” said the SAICB. One of the stolen vehicles was recovered at the Botswana border and the other one in Soshanguve near Pretoria.

Welcome to Our World of Care Services

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Europ Assistance South Africa has been providing South Africans with assistance services for almost thirty years, offering help and support in all of life’s circumstances. Karlien Joseph, Marketing Manager, says “We are the respected market leader in terms of our relevant service offerings, broad client base and innovative approach to product development”.

Home & Family,OurAutomotive, Medical &OnTravel, Professional & Outsourcing the consumer financial wellness side, our Credit Assist Joseph continues,” ‘you live, we care’Health philosophy is the

service offering that assists consumers with the managedriver behind our recent brand repositioning platform of ment and improvement of their financial statuses has been World of Care Services. Under this banner, Europ AssisOn the consumer financial wellness side, our Credit Assist Joseph continues,” Our ‘you live, we care’ philosophy is the well received. From a lifestyle point of view, our Concierge tance SA is committed to offering a wide range of lifestyle service offering that assists consumers with the managedriver behind our recent brand repositioning platform of and virtual Mall service adds enormous value with benefits services that make life simpler, safer and healthier”. Our ment and improvement of their financial statuses has been World of Care Services. Under this banner, Europ Assisas discounts, customised packages and access to new business strategy ensures a holistic approach to being well such received. From a lifestyle point of view, our Concierge tance SA is committed to offering a wide range of lifestyle unbeatable stock offerings from the world's leading brands top of that mind with clients a healthier”. one-stop-shop Mall service adds enormous value with benefits services make lifeour simpler, saferasand Our ofand virtual – all designed to save our clients time and money. tailor-made solutions in the following four key care areas such as discounts, customised packages and access toWe also new business strategy ensures a holistic approach to being providestock thousands of employees with brands organisational Home Family, Health, Medical & Travel unbeatable offerings from the world's leading top of & mind with Automotive, our clients as a one-stop-shop of through our as well assolutions Professional & Outsourcing. Within – all wellness designed tosolutions save our clients time andhealthcare money. We professional also tailor-made in the following four key care areasthese network. business areas, we have a partnership arrangement thousands of employees with organisational Home & Family, Automotive, Health, Medical & Travelwithprovide as as Professional Outsourcing. Withinof these fivewell subsidiary businesses&that provide a range solutionswellness solutions through our healthcare professional network. business a partnership arrangement with Our clients enjoy complete peace of mind via telephonic tailored areas, to suitwe ourhave many markets. Through this comprefive subsidiary businesses that provide a range of solutions advice, digital communication, on-hand assistance and hensive network, we have an external service grid of enjoy complete peace of mind telephonic tailored manyproviders, markets. all Through this compreconsultation. The majority of our care via services are available around to 18 suit 000our service dedicated to providingOur clients advice, digital communication, on-hand assistance and hensive network, we have an external service grid of 24/7, managed by a world class telephony infrastructure exceptional and quality service delivery. consultation. The majority of our care services are available around 18 000 service providers, all dedicated to providing that handles around 20 million inbound calls per month on 24/7, managed by a world class telephony infrastructure exceptional and quality service delivery. 540 incoming lines. Our clients can expect assistance in all Managing Director Rouxle van Molendorff confirms, “Our that handles around 20 million inbound calls per month on 11 official languages. We recently introduced a progressive business is built on a solid foundation of traditional assis540 incoming lines. Our clients can expect assistance in all Managing Director Rouxle van Molendorff confirms, “Our new delivery channel called “Call Me”, a mobile solution tance services and these remain a vital part of our 11 official languages. We recently introduced a progressive business is built on a solid foundation of traditional assisfacilitates secure convenient activation business. We are of our emergency new which delivery channel simple, called “Call Me”,and a mobile solution tance services and very theseproud remain a vital part of medical our of the Europ Assistance SA service range via a mobile services, roadside assistance, accident management, which facilitates simple, secure and convenient activation business. We are very proud of our emergency medical device. home assist and legal solutions. However, we are defined of the Europ Assistance SA service range via a mobile services, roadside assistance, accident management, by ourassist ability think innovatively, constantly developingdevice. home andtolegal solutions. However, we are defined Currently some 8 million families in South Africa are taking new and services thatconstantly provide developing real, tangible by our products ability to think innovatively, advantage our families World ofin South Care Services, services in a dynamic market place”. Currently some 8of million Africa are through taking their new products and services that provide real, tangible advantage of our with Worldcorporates, of Care Services, services in a dynamic market place”. relationship brokers,through clubs, their medical aid withemployers corporates, brokers, medical aidservices funds and that utilise clubs, our value added A case in point is Europ Assistance SA’s evolving designat-relationship funds and employers that utilise our value added services Aedcase in point is Europ Assistance SA’s evolving designatand benefits . driver service, Take Me Home. Over and above this ed driverwe service, Take aMe Home. help Overline andfor above this andand benefits . service also have 24-hour prompt service we also have a home 24-hourmaintenance help line for solutions prompt and With a global presence in 32 countries, the Europ Assisprofessional ordinary called a global presence in 32 countries, professional ordinary home maintenance solutions name is synonymous around the the Europ worldAssiswith leading On The House. We also offer our clients a geysercalled replace-Withtance tance name is synonymous around the world with leading On The House. We also offer our clients a geyser replacecare services for all your lifestyle needs. To find out more ment service as well as a range of solar water heating care services for all your lifestyle needs. To find out more ment service as well as a range of solar water heating about our product offering visit our website www.europassolutions. For motorists, our World of Care services now about our product offering visit our website www.europassolutions. For motorists, our World of Care services now include auto and flat glass repair and replacements, along sistance.co.za include auto and flat glass repair and replacements, along sistance.co.za side the sourcing of all vehicle related goods and services.

Joseph continues,” Our ‘you live, we care’ philosophy is the driver behind our recent brand repositioning platform of World of Care Services. Under this banner, Europ Assistance SA is committed to offering a wide range of lifestyle services that make life simpler, safer and healthier”. Our new business strategy ensures a holistic approach to being top of mind with our clients as a one-stop-shop of tailor-made solutions in the following four key care areas Home & Family, Automotive, Health, Medical & Travel as well as Professional & Outsourcing. Within these business areas, we have a partnership arrangement with five subsidiary businesses that provide a range of solutions tailored to suit our many markets. Through this comprehensive network, we have an external service grid of side the sourcing of all vehicle related goods and services. around 18 000 service providers, all dedicated to providing exceptional and quality service delivery.

On the consumer financial wellness side, our Credit Assist service offering that assists consumers with the management and improvement of their financial statuses has been well received. From a lifestyle point of view, our Concierge and virtual Mall service adds enormous value with benefits such as discounts, customised packages and access to unbeatable stock offerings from the world's leading brands – all designed to save our clients time and money. We also provide thousands of employees with organisational wellness solutions through our healthcare professional network.

Our clients enjoy complete peace of mind via telephonic advice, digital communication, on-hand assistance and consultation. The majority of our care services are available 24/7, managed by a world class telephony infrastructure that handles around 20 million inbound calls per month on Managing Director Rouxle van Molendorff confirms, “Our 540 incoming lines. Our clients can expect assistance in all business is built on a solid foundation of traditional assis- 11 official languages. We recently introduced a progressive

LEANING ON

THE MODEL Dominic Uys

One international company recently voiced its concern over the possibility that the industry may be starting to rely too heavily on computer modelling and not enough on experience and knowledge. Could they be correct?

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loyd’s of London recently expressed its concern that the insurance industry may have become too reliant on catastrophe models. The question, according to Lloyd’s, has warranted a study into the dangers of an industry that has become too dependent upon possibly flawed computer models. Earlier this year, Amlin and Oxford University began research into the risks involved in relying on computer modelling, which has been used in the industry since the 1990s. The three-year study also aims to find ways of stemming the potential systemic risk linked to modelling inaccuracies. While insurers spends millions each year on making the computer modelling of potential catastrophes as accurate as possible, the fact is that a generation of young underwriters have emerged that have never worked without computer modelling. The losses arising from recent catastrophes worldwide have been an unexpected blow for insurers across the board and the latest financial results from most of the major insurers reflect this. The question has been asked whether the industry has stopped questioning the modelled expectations of risk, even when they do not reflect the reality of the situation. In short, the concern is that experience has taken a backseat to the technology of our age. Andre van der Walt, Hollard’s head of Agri, points out that the notion of experience taking a back seat in the insurance industry in terms of importance is still not true. “The industry has been improved significantly by technology and new learning. It is, however, no substitute for proper experience and, especially in our market, we place a high value on underwriters who know their industry from the ground up and have the years under the belt to back that up,” he says.

Instinct versus modelling Recently Santam’s head of commercial underwriting, Shehnaz Somers and Marius Neethling, head of personal underwriting, commented that there has been a decrease in the number of specialists in the industry. “There is a need for solid, on-the-ground, specialist underwriters. But the industry is seeing an increase in underwriters that don’t specialise but can do a bit of everything,” Neethling comments. He indicates that the younger generation’s reliance on established models has, to some extent reduced the demand for specialists. Yet, Santam recently appointed a specialist

engineering underwriter into its own company. Somers points out that the company has stayed ahead by continuing to consult with industry specialists. Paul Turner, executive director of reinsurance at JLT SA, maintains that the industry has become significantly stronger over the years. “The rating tools that reinsurers have developed are based on global trends they are exposed to. This will give an idea of the global benchmark per class. Armed with this, underwriters can compare apples with bananas and see where the local pricing stacks up compared to the global standard. I would say that reinsurers profits today are far superior to 20 or 30 years ago and they have been able to expand their portfolios into areas not thought of then, areas that are proving to be lucrative. Couple that with more capacity than they had and they are all doing rather well,” he says. It is important to note that the reinsurers know and understand their business better today, as technology has given them the power to make informed commercial decisions. Turner posits that this does not necessarily mean that the need for the human element when determining risk has been eliminated entirely. “Of course, there is no human element on a system-driven platform, but the gut feel and instinct is still there,” he says. “We need to bear in mind that market circumstances have evolved over the last 15 years. Back when the reinsurers used to do their mates favours, legislation and regulatory issues were not as stringent as today, internal audits were more of a spellcheck, shareholders were not as involved and the term ‘return on investment’ had a different connotation,” Turner says. He points out that the global changes experienced have affected underwriters’ instincts simply because they have to conform to certain rules. “But if you ever disagree with one of the underwriters, you can pick up the phone or go see them – that is when gut and instinct takes over,” he says. The insurance industry continues to search for more reliable models. This year also saw the launch of an open-source modelling project, which is being backed by 22 insurance groups, including Allianz, Zurich and Lloyd’s, known as the Oasis initiative. It is said that the only constant is change and computer modelling in the industry may be in for some interesting times.

Global insured catastrophe losses

total $45 billion

he global insured losses from natural catastrophes and manmade disasters in 2013 totalled $45 billion, according to a sigma study released by Swiss Re. The majority was attributed to flooding and hail events. Total economic losses for the year stand at $140 billion and around 26 000 lives were lost. Last year’s global insured losses decreased significantly from 2012, when losses passed the $80 billion mark. The study explained that this was mainly due to a very quiet hurricane season in the US. Asia stood out as the hardest hit by natural catastrophes in

terms of economic losses and victims. “Typhoon Haiyan in the Philippines brought some of the strongest winds ever recorded, alongside heavy rains and storm surges,” the report said. “The second biggest humanitarian disaster of 2013 was the June flooding in the state of Uttarakhand in India, which claimed some 6 000 lives.” Europe also suffered the two most expensive natural disaster events in 2013. Massive flooding in central and eastern Europe in May and June, after four days of heavy rain. Total economic losses totalled $16.5

billion, with insured loss reaching $4.1 billion. Parts of Germany and France were also hit by severe hailstorms. The storms struck populated areas in Germany, which generated most of the insured loss total of $3.8 billion, the largest ever from a hail event, according to the study. With insurance penetration greater than anywhere else, the US still had the biggest insured loss total last year. The report stated that the single largest loss-event in North America was extensive flooding in Canada area after six days of torrential rain. The economic loss was $4.7 billion and the insured loss was $1.9 billion.

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Cost of insuring

infrastructure on the rise

he cost of insuring public infrastructure projects in South Africa increased by 100 per cent between 2011 and 2014, according to data from Lion of Africa Insurance. The rise is due to a combination of vandalism, theft and poor workmanship by unqualified contractors. “The issue of vandalism, theft and underperformance by contractors should be tackled head-on. Municipalities should work closer with their insurers to implement risk management strategies that will lead to cost savings on maintenance and reduced insurance rates,” says Pride Choruma, local authorities manager at Lion of Africa Insurance. Unless government introduces stricter

procurement processes and quality control measures for contractors, Choruma estimates the cost of insuring public infrastructure projects could triple over the next two years. “The biggest risk lies in appointing unqualified contractors that expose municipalities to financial and liability risks, due to delays in completing projects and poor workmanship.” He explains that contractors are required to take out a contractors all risks (CAR) insurance policy when working on large construction and infrastructure projects. However, when contractors default and abandon projects, the municipality is often held responsible for any liabilities incurred by the contractors. “As a result, many construction and infrastructure projects get delayed and

additional funds are required to sustain the projects. For example, if a contractor has defaulted on insurance and a citizen gets injured due to equipment failure and poor safety hazards, the municipality will be held liable,” he says. To circumvent this, municipalities need a principally controlled CAR policy when a contractor is appointed. This allows municipalities to take out insurance on behalf of the contractor by deducting the amount in their contract. “The implementation of stricter procurement processes and quality control measures for contractors will go a long way in ensuring the effective delivery of infrastructure development projects,” he concludes.

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turns to use their own vehicles, and will be responsible for the petrol and maintenance of their vehicles. Fare-paying is when passengers are paying for transport in instances such as a taxi service or public transport. Traditionally a personal shortterm insurance policy will not cover this type of risk as the owner of the vehicle is deriving an income from the use of the vehicle. Farepaying cover can be obtained through a commercial policy.

What to do if carpooling Contact your insurance provider or your insurance adviser immediately to inform them that you are carpooling. Mutual & Federal motor policies include carpooling, but they recommend that policyholders inform them of this activity. When taking out a policy, most clients will have to stipulate the use of the vehicle so when the use changes, it has to be disclosed to the insurer to avoid future claims being rejected.

Carpooling

and insurance

Cash-strapped South Africans are seeking ways to save money, and with the continual strain on fuel prices, carpooling is an increasingly attractive option for many.

owever, brokers should ensure that their clients and policyholders understand the differences between carpooling and fare-paying and the insurance ramifications of these activities.

The difference between carpooling and fare-paying Hannes Smith, head of Old Mutual collaboration, personal lines at Mutual & Federal, explains that most insurance policies include carpooling. Carpooling is providing lifts to passengers as part of a vehicle-sharing agreement for social or commuting purposes with no profit gained. For example, if there are four people travelling together, each of these individuals will take

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Does carpooling change premiums? Most short-term insurance companies are using or have moved to a risk-based pricing model where each individual is priced according to their own risk. Some factors that the insurers will take into consideration are: • Whether you are deriving a profit by receiving payment from your passengers. • The regular driver of your vehicle. • The number of people being transported regularly as part of your carpool and imposed liability – your passengers should be aware that in an event such as an accident they will be able to claim from you for bodily injury subject to the terms and conditions as stated in the policy. As the need to carpool increases, it is imperative that short-term insurance providers are contacted and kept up-to-date on policy changes with regard to carpooling. It is also important that passengers and drivers understand the insurance implications of travelling together. By having more people using one vehicle, carpooling reduces each person’s travel costs for fuel, maintenance, tolls and it relieves the stress of driving. Carpooling is seen as a more environmentally friendly and sustainable way to travel as sharing journeys reduces carbon emissions, traffic congestion on the roads and the need for parking spaces.

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ML MEDICAL

Medical Sarah Bassett

Healthcare claims fraud is an acknowledged problem worldwide and is reported to be on the rise in South Africa.

t is estimated to cost South African healthcare funders between R3 billion and R15 billion a year. With fraud committed by both insured individuals and services providers, and increasingly by syndicates, the industry is focusing on how to develop a pre-emptive approach to managing this everpresent risk, instead of reacting after fraud has taken place. Despite much progress in raising awareness and tackling fraud, current approaches often do remain a response, rather than continuous prevention, confirms Lynette Swanepoel, manager of the Board of Healthcare Funders of Southern Africa’s (BHF) Healthcare Forensic Management Unit (HFMU). “There are certainly other countries which have had more success with this than South Africa; we have a memorandum of understanding in place with our international counterparts and will host the Global Fraud Prevention Summit later this year so that we can learn how to do this better,” says Swanepoel. “To date, our greatest achievement in forming the HFMU has been the co-ordination and sharing of information on unethical activities and investigations among the various medical

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schemes who are our members. This has gone a long way to enable our members to mitigate risk and to achieve a unified approach to the fight against white collar crime in the healthcare space.”

Swindling the system “The common trends will always be the same as long as we have a fee for service system,” says Swanepoel. “Many medical scheme members think of the medical aid card as a free for all that can be lent to friends and family members who are not registered as dependants, in order to obtain treatment. Members also feel they are entitled to spend their medical scheme benefits on whatever they like or want, such as baby products, toiletries and other commodities. Healthcare providers have capitalised on this mindset, and though it is a small percentage, some will stop at nothing to enrich themselves unduly,” says Swanepoel, stressing that it is a small percentage of healthcare providers who taint the image of the profession in this way. KPMG’s Medical Schemes Anti-Fraud Survey, published in 2012, reveals that service provider fraud is on the increase, with code manipulation the most common category investigated, followed by services not rendered.

Examples detailed in a recent report from the Health Profession Council of South Africa (HPCSA) include a physiotherapist who was caught billing one medical aid scheme for 93 appointments and another for 100 appointments, both on the same day. Another doctor billed for 107 two-hour appointments in one day, making it a 214-hour working day. The HPCSA’s professional misconduct report states that of approximately 1 830 reviewed cases in the 2013 financial year, 734 were completed. Of these, 200 doctors were referred to the HPCSA’s Professional Conduct Committee and found guilty of professional misconduct. A breakdown of the offences ranged from theft and fraud; providing insufficient care or treatment and mismanaging patients; overcharging patients or charging for services not rendered; negligence; and bringing the profession into disrepute.

Diagnosing the doctors In response to escalating service provider fraud, medical schemes are sending investigators as probes into doctor’s rooms to collect evidence. Two people wired with sound recorders will pretend to be patients with particular symptoms to see what the doctor prescribes. In some

mayhem of these cases, doctors have been caught dispensing or administering cheaper drugs than what they claim for on the bill, or loading their bill with additional codes (code manipulation) for procedures they haven’t undertaken.

admission or treatment by a doctor. • Members collude with doctors, hospitals and/or pharmacies, submitting claims for false hospital admissions or treatment or medication.

Often, patients do not understand these codes or simply don’t think to question what the doctor asserts, notes Dr Graham Howarth, head of Medical Services, Africa at the Medical Protection Society (MPS).

Fraud by healthcare professionals and services providers: • Pharmacies dispensing generic medication and claiming for expensive brand-name medication. • Pharmacies selling cosmetics and other nonmedical items to medical scheme members, and submitting claims for medicines to the scheme. • Healthcare professionals and service providers submitting claims for services or treatments that have not been rendered to patients. For example: claiming for consultations that never took place, or for a counselling session with an unconscious patient. • Healthcare professionals colluding with patients in card sharing. • Providing fraudulent sick notes to patients and then claiming for the consultation. • Performing cosmetic surgery on a patient, while claiming for a medical procedure. • Changing the diagnosis of a patient to access a specific benefit.

Fraud from every corner Jonathan Broomberg, CEO of Discovery Health, identifies the key trends of healthcare claims fraud perpetuated against South African medical aid schemes. Fraud by scheme members: • Claims submitted for services rendered by healthcare professionals, which were never rendered. • Members ordering high-cost equipment from a supplier – a wheelchair for example – submitting the claims and obtaining the reimbursement, but without paying the supplier or collecting the equipment. • Members share their medical scheme cards with non-members who require hospital

• Claiming for materials not used. • Fraud by other individuals and syndicates • Submission of false membership applications and fraudulent claims on those memberships. • Admission of healthy members to hospital in order to benefit from hospital cash-back insurance. • Brokers providing the scheme with false details for medical scheme membership applications in order to avoid waiting periods and late joiner penalties being imposed.

Technology and the power of prevention “From an analytical point of view, fraud is often a small intersection between two or more very large data-sets,” explains Estiaan Steenberg, actuary at Discovery Health. Advanced analytics and big data technologies have enabled the medical scheme giant to recover R250 million a year in fraudulent claims. “We now have the tools we need to identify even the tiniest anomalies and trace suspicious transactions back to their source. For example, Discovery can compare drug prescriptions collected by pharmacies across the country with healthcare providers’ records. If a prescription seems to have been issued by a provider, but

the person fulfilling it has not recently visited that provider, it is a strong indicator that the prescription may be fraudulent,â&#x20AC;? Steenberg adds. The accelerated analytics system built by Discovery Health, in partnership with BITanium, enables the company to run three years of data through complex statistical models to deliver actionable insights in a matter of minutes. It allows for more accurate predictors for chronic conditions, helping Discovery initiate better preventative programmes; it identifies possible â&#x20AC;&#x2DC;phantom drugâ&#x20AC;&#x2122; prescriptions by mining data from pharmacies and health providers and cuts development time for predictive models. Critically, the accelerated analytics system has significantly improved fraudulent claims

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recovery and allows Discovery to control the costs of its services.

records has been widespread since 2011 among the largest insurers in the country.

Swanepoel confirms that predictive analytics systems are a key strategy for many HFMU members in working to become more preemptive in their approach to fraud.

Last year, two of the largest medical schemes in Namibia implemented a biometric identification technology system designed to combat fraud and increase administrative efficiencies. The system was developed in a partnership between technology developers LifePoint and Muvoni Biometric and Smartcard Solutions (MBSS).

SA lagging behind? While such advances are significant, in many ways South Africa is moving more slowly than some of its African neighbours in the use of technology to combat fraud. In Kenya, where high levels of fraud and the astonishingly high cost of private healthcare have seen insurers routinely make large losses on health lines, the use of smart cards and biometric technology to track identity and maintain

Biometrics refers to technologies that measure and analyse human body characteristics, such as DNA, fingerprints, eye retinas and irises, voice patterns, facial patterns and hand measurements, for authentication purposes. According to MBSS managing director, Stan

Khan, 30 per cent of all medical insurance claims are estimated to be fraudulent, or contain administrative errors. “The biometric system ensures that members cannot abuse their card by lending it to non-members. A fingerprint reading is used to identify the member at the point of service. This immediately links, through a cloud-based server, to the patient’s correct medical records and history. All treatment and follow-up information can be added direct to these records, significantly aiding administrative efficiency and accuracy and ensuring that the service provider and the medical scheme has surety in the identity of the patient.” In practical terms, the system requires that all service providers have a digital fingerprint reader device. In Namibia, relatively low-cost USB devices are in place. Launched in October last year, two of Namibia’s four largest medical schemes are currently on the system, with approximately 38 per cent of all transactions already being processed through the system. “Ongoing enrolment drives are in process, and so far the feedback we’ve received has been very positive,” say Khan. “Currently, we know of one or two pilot projects in South Africa, but no schemes are yet to implement anything at any substantial level. The market here is very different from Namibia, of course. For one thing, the industry here is very fragmented. In Namibia, schemes have co-operated with each other in implementing the system, but that is much less the approach here, with schemes waiting to see who will move first,” he explains. There are other factors which make implementation in less-developed markets easier than in our own, including the lack of existing, out-of-date legacy systems to integrate with. “It’s the phenomenon of leapfrogging – these markets are jumping to advanced technological solutions very quickly,

without the need to adapt antiquated systems, because in many cases there were no systems at all.” There has been serious discussion of such technology adoption for the proposed National Health Insurance, with many recognising that given the volume of people on the system, the room for taking advantage of the scheme would be tremendous. With South Africa moving towards a smartcard system for identity documents, it may be possible that the same document could be used for medical scheme identification too, but how realistic this is remains unclear. “If there are attempts to put multiple sets of system data all on the same card, there will be a number of further challenges to this, and there will be a limit to how many systems can be integrated. A further challenge is the integration of systems across various sectors where the current maturity of systems is very different.” South African insurers and medical schemes are considering this technology, however. And in future, its potential for pre-empting fraudulent claims activity may expand. “We do believe this technology has a role to play in monitoring service providers as well members. Already it plays a role in non-repudiation, ensuring that service providers cannot reject responsibility for bills or records issued. This could be expanded to include a broader range of service providers such as dentists, optometrists and pharmacists, ensuring that for all these areas of service and treatment, there must be a legitimate patient present for claims made. There is also potential for signature verification technology that will confirm that both the patient and doctor’s signatures are genuine.

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Wearable

wellness Laura Owings

New, wearable tech gadgets that monitor and track health data may help improve wellness and reduce the cost of care. While still in their infancy, experts are optimistic about the direction digital developments may take medical aid. 60 4 8

everything from blood oxygen levels to heart rate. Other products, like glucose monitors that link to smartphones and pill bottles that remind you to take your meds, move beyond the fitness focus to keeping health in check. Tech fans are abuzz with this healthcare trend, but they aren’t the only ones. An Accenture survey of local consumers found that the interest in wearable tech is going mainstream, with 65 per cent of respondents saying they were interested in the products. Polar watch

“In the past year, wearable technologies have emerged as the next big consumer electronics market category, particularly for health and wellness,” says Mattias Lewren, global managing director for Accenture’s Electronics and High-Tech industry group. “Every consumer is a digital consumer, and the keen interest in wearable technology proves further evidence of that.” That consumer interest isn’t lost on health insurance providers either. Indeed, some have already embraced aspects of technology with incentive programmes that reward members for tracking and sharing their fitness data, such as the Discovery Vitality programme and the Multiply initiative from Momentum.

Sensoria fitness socks.

Others encourage gadget-driven fitness by supplying members with pedometers. As the technology market grows to include more ambitious healthcare products, experts say it could affect the medical aid industry. “Within just a few years, we can expect wearable technology to introduce profound changes into health and related systems. This trend comes just in time to radically improve quality of life and reduce the cost of care,” says Len Deacon, CEO of Len Deacon and Associates, which provides strategic services to the healthcare market locally and internationally.

Intel smart earbuds

He explains, “Medical technology could be extremely helpful for NHI and improving the health of the nation. Using the technology creatively we can get people to exercise, monitor their vitals and take timeous action when the signs are negative.”

earable medical technology is the most talked about development in the new gadget market. At the Mobile World Congress in Madrid in March and the Consumer Electronics Show in Las Vegas at the start of the year, technology makers debuted high-tech health products that they said improve the tracking and monitoring of wellness.

For that to be achieved, however, there has to be confidence that these products work and that the information collected is used accurately. “As insurers, wearable technology has an important role to play. Helping consumers become better empowered to look after their health, and being rewarded for that behaviour can potentially improve health outcomes and quality of life,” says Craig Nossel, head of Discovery Vitality Wellness.

Among the smart showstoppers were socks, watches, vests and even earbuds that monitor

However, he warns, “We must ensure that the technology is supported by credible

research so that we use quality devices that accurately track our health metrics.” The same principle applies for the consideration of tech gadgets in the life insurance industry, says Dr Adela Osman, chief medical officer at Momentum Retail. “The application of these products and the monitoring of their effectiveness should be the main concern. We must be sure that any method we utilise is scientifically based,” she says. If the healthcare industry can find enough evidence to support these technologies, medical aid programmes may be able to give clients further discounts. Patients may also see the cost of their care lowered through reduced office visits and better compliance. In this way, new technologies that help to motivate good behaviour or identify issues early on prove the most beneficial. Considering diabetes patients, for example, technology that encourages them to monitor and track their blood sugar helps paint a picture of what lifestyle activities, times of day and dietary choices affect their condition. That information not only encourages them to make different choices towards improving their condition, but gives their doctors a better picture of their out-of-office risks. “If the technologies help make it easier for patients to monitor their condition, and if doctors and other healthcare professionals have access to this information, the quality of healthcare will certainly improve. Doctors will have a much better picture of their patients which includes lifestyle behaviours,” says Nossel. “The patient will also become more empowered to manage their health. We are even seeing gaming forming part of patient management,” he adds. In this way, medical technology should be used to complement traditional medicine. Whether patients are monitoring a known condition, or if something of concern is identified, they must know when to take action and speak to a medical professional. Otherwise, there is the risk patients will misread data, and drive up healthcare costs with unnecessary doctor visits, for example. “Consumers need to be sure that they utilise and interpret the information from the products properly, so that they aren’t making their own medical decisions, but rather know when to seek appropriate medical advice,” Nossel says. According to Peter Jordan, principal officer at Fedhealth, this is a market worth watching. “The technology is still in its infancy, but in the foreseeable future this may be the key to how we manage health,” he says.

The doctor will phone you now Laura Owings

An innovative new insurance company, Oscar, has launched in New York City, giving patients access to round-the-clock phone and e-services. The concept is part of a growing telemedicine trend in the US that experts say has value for the South African market.

scar bills itself “simple, intuitive and fun”. The start-up health insurance company, available to New York residents since October 2013, uses digital savvy and telemedicine to lure new customers. The brainchild of three technology entrepreneurs, it is the state’s first new health insurer in 15 years. Oscar’s innovative approach is founded on the concept that patients can start their care with the insurer, rather than come to them just

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for payment submission. The heart of this is based on providing clients with user-friendly mobile and browser access and free calls with doctors 24 hours a day. According to the company, a doctor is provided by phone within 20 minutes of a request, with no co-pay requirements. Customers still pay premiums and deductibles for in-person visits, but they may apply for free generic drugs and online price comparisons. Oscar also has incentive programmes like the ’10 for 10’ initiative

where patients receive $10 for answering 10 questions about their health and preferences. Based on these offerings, the company says it can establish proactive healthcare, and make upgrades based on what users want. There are also plans to bring on registered nurses and nurse practitioners to provide in-home follow-up visits. This is specifically targeted at in-need patients and new mothers. Giving clients access to round-the-clock phone and e-services, founders say it promotes

coverage under the policy with a high-tech, high-engagement approach, Oscar has overcome many of the challenges government healthcare marketing has seen, particularly for younger clients. Indeed, it is one of the reasons American media call the company the insurance provider of the millennial generation. For this market in particular, among which are many first-time healthcare subscribers, Oscar’s approach is seen as a move away from the hierarchy of traditional insurance models. For example, it collects metrics on medical professionals to be used for performance reviews and customer recommendations. Also, using Oscar’s web front-end, consumers can see whether individual doctors predominantly treat patients in their 20s or 30s, what language the doctors speak, and other specifics. healthier customers and reduces health spending. “In many cases, the doctor will advise you to stay at home for a few days and you should be fine,” says Mario Schlosser, Oscar co-founder and co-chief executive. “Or, the doctor may advise you to get your condition checked out.”

Oscar says it has had “tens of thousands” enrol since its inception, with an average age group slightly below that of the state health exchange. Significantly, it has reported a 90 per cent bill payment rate, compared to the 30 per cent of unpaid new members’ claims reported by other insurance carriers.

Such a goal is in line with the Affordable Care Act (ACA), popularly known as Obamacare. The act makes doctors and hospitals more accountable by moving medical care providers away from fee-for-service medicine, where physicians are paid on volume of services, to reimbursement based on the value of the care they provide. With the launch of the ACA, Oscar’s founders saw an opening in the market for their model. “The Affordable Care Act was an opportunity to sell something different than the usual consumer products offered to individuals,” says CEO Josh Kushner.

Though Oscar is the first of its kind insurance provider, the telemedicine services central to the company are not new. Twenty states and the District of Columbia have passed parity laws requiring some private health insurance companies to cover telemedicine services, a number that’s nearly doubled since 2012, according to the American Telemedicine Association. A further 13 states currently have similar legislation in the works.

Targeting those purchasing healthcare

State Medicaid insurance programmes for the poor and federal Medicare health insurance programmes for the elderly are also encouraging a telemedicine approach.

“Telehealth has been limited in its growth potential in the past due to low reimbursement, lack of physician support and poor cases of implementation,” explained Roeen Roashan, HIS analyst for consumer medical devices and digital health in a Forbes story on the US telehealth market. “However, we are witnessing changes in the regulatory environment that will increase reimbursement; also more physicians are supporting the idea behind telehealth. In doing so, there are many examples of best practice implementations.” According to experts in South Africa, telemedicine holds great promise. In the opinion piece, ‘Telemedicine can lower healthcare costs in Africa’, Professor Maurice Mars from the Department of Telemedicine at the University of KwaZuluNatal and Dr Louwrence Erasmus from the Department of Engineering and Technology Management at the University of Pretoria, reflect on international telemedicine trends and their applicability. Finding the innovative approach can improve access to healthcare in rural areas; provide e-learning opportunities for professionals; and overcome challenges posed by a shortage of doctors. They conclude telemedicine could be the answer to Africa’s healthcare woes. However, they note telemedicine has yet to be embraced on the continent. “What is needed now is a telemedicine awareness campaign among health workers in Africa and international support for low-bandwidth clinical telemedicine across borders,” they say. “It will require an international effort to resolve issues related to licensing and liability. Furthermore, we should not lose sight of the necessary skills to manage and maintain the technology that enables the successful functioning of telemedicine.”

LONG TERM

Retirement

and the changing landscape Dominic Uys

For most, the long-standing retirement model â&#x20AC;&#x201C; a combination of early starts and age-appropriate investment â&#x20AC;&#x201C; remains the norm even though the changing economic and social landscapes are making this increasingly more difficult. With individuals needing to take a more active role in saving for their own retirement, it may be time to consider a new approach. 64 8 4

he issue of inadequate saving for retirement is no new phenomenon and it is estimated that only around 30 per cent of pensioners today have saved enough to support themselves for the rest of their lives. Increases in life expectancy and the tough economic times of the present day also play their part in increasing the danger that more and more pensioners of the future may outlive their pensions.

A generation-based approach

While brokers will always have the responsibility of reminding both clients and potential clients to start saving more money earlier, it may also be time to reconsider the retirement model.

A recent study by the US-based Pew Charitable Trusts, however, suggests that these considerations may be less important than understanding when the individual was born.

Total cost of ownership While it is easy to say that most people saving for retirement tend to miss the boat by not setting enough money aside or starting on their retirement funds too late in life, even following those rules may not be enough. CEO of 10X Investments, Stephen Nathan says that the total cost of the investment could end up damaging the client’s pension fund. “Most people have no idea what their retirement funds cost and they also don’t know the long-term impact of these costs. Between advisers, administration, investment managers, performance fees and the others, many of those fees aren’t disclosed and the client does not really know what he is paying. If the client is paying one per cent to two per cent in fees, it doesn’t sound too bad since the fund’s expected rate of return may stand at around 10 per cent. From the beginning, this is a misleading number because after inflation, the actual return is closer to five per cent or six per cent per year,” Nathan says.

Most financial analysts present the same answer when asked about retirement savings; the individual needs to consider factors such as their asset base and savings rate, the amount of time they have left to invest, an evaluation of their overall health and an estimation of their life expectancy.

In the ’Retirement Security Across Generations Report’, the company proclaims that following the economic recession between 2007 and 2009, people born between 1966 and 1975 are the least likely of all preceding generations to maintain their quality of life once they retire. The study states that older generations more keenly aware of the Great Depression, tend to approach their finances more conservatively. As a result, they are less likely to be weighed down by debt. And younger generations are viewed as having longer investment horizons, and consequently more time to recover from the recent economic downturn. Pew indicates that the 1966 to 1975 generation finds itself somewhere in the middle and the study

estimates that in the US, these individuals will replace on average only about 50 per cent of their pre-retirement income, as opposed to the recommended 70 per cent. According to Nick Battersby, CEO of PPS Investments, the South African market can also learn from the study. He points out that there is an overall lack of savings and wealth accumulation in the US-based 38- to 47year-old age group. He explains that this trend is also a valid observation for a significant portion of this age group in South Africa. “In previous generations, most employees would automatically have gained membership to a pension fund from which employers committed to pay a set percentage of an employee’s final salary prior to retirement as retirement funding.” The employee was assured a comfortable retirement payout regardless of how the employee, company or investment markets were performing. The employee was in a fine position, but Battersby adds that the employer was subject to significant investment risk. “In many cases, it lead to near-fatal liabilities as financing these schemes became increasingly challenging,” he says. “As a result, defined benefit pension funds have all but been replaced with defined contribution pension funds, where an

“So if your client is paying a one per cent fee, it is actually one fifth of his total return. Over time this number compounds and every one per cent lost to fees, actually equates to 30 per cent less pay out for the client,” Nathan explains. While the perception persists that fees are regulated, he points out that they are neither particularly well controlled nor adequately disclosed. “To the best of our knowledge 10X is the only administrator that does disclose in full.” The client or the adviser therefore has a responsibility to ask and insist on full disclosure in terms of fees to determine total cost of ownership. “Once you find out what your real costs are, you often discover that this can also become a negotiation for lower rates,” Nathan continues.

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generation has at least 18 years left to save towards their retirement,” he says. In addition to planning, there will also be an increased need for budgeting.

The employee is therefore no longer in a position where he can simply make his monthly contribution and forget about his retirement fund until he turns 65. The biggest challenge in this regard is, of course, the generally low levels of financial education and heightened pressure on South African consumers.

A broker’s advice to his client should therefore not only cover minimum monthly amounts and where to invest, but also include a fair amount of advice on which behaviours will need to change.

Nathan agrees, emphasising that an individual now needs to play a more active role in managing this and the need for self-empowerment is certainly becoming increasingly important. As mentioned, there is the fact that the age group in question is also the most likely to increase debt levels as they maintain mortgages, pay educational expenses and car loans in addition to building assets for the future, which points to an increasing reliance on debt in general, which eats into the income that was supposed to go towards retirement. The assessment so far may seem bleak for the 38- to 47- year-old crowd, but Battersby remains optimistic. He indicates there is still some room to manoeuvre. “Assuming a retirement age of 65, the eldest sector in this

“Monthly budgets will need to be revisited to see where excess spending can be curbed and amounts can be reallocated to retirement investments. Debt – especially relating to credit card or retail account purchases – will need to be managed more carefully and large luxury purchases should ideally be saved for in advance. Most importantly, retirement savings should be deemed untouchable until retirement becomes a reality,” Battersby explains.

Managing fund costs Of course, no discussions of the changing landscape for retirement funds would be complete without coming back to the 2014 Budget Speech delivered by Finance Minister Pravin Gordhan, where National Treasury’s intention to encourage saving through retirement reform was made clear. Gordhan proclaimed that the tax-free lifetime retirement lump sum amount would be raised from R315 000 to R500 000. Furthermore, the intention to implement a mandatory system of retirement saving for all employed workers was also proposed. Overall, this has been hailed as good news by many in the industry, but it also brings an increased responsibility for employers, who once again may start to face investment risks.

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Arno Loots, head of umbrella fund solutions at Liberty Corporate, points out that this may be the umbrella fund’s time to shine. “If retirement reform is shaped as we expect, as reinforced in the 2014 Budget Speech, we may see a greater degree of participation in employer-sponsored retirement plans through umbrella funds. We believe the aim of the retirement reform proposals is improved governance, simplified solutions, greater savings and lower costs, which imply that umbrella fund solutions will be the natural choice.” On the reduction of retirement savings costs, Loots also adds that umbrella funds provide cost efficient solutions through the combination of employer schemes in one fund. “Umbrella schemes tend to increase the consolidation of membership and assets across multiple employers, and provide lower cost, more efficient risk benefit and administration structures due to economies of scale.” The result may well be that larger service providers with a number of unconsolidated schemes, could seek ways to accelerate the consolidation of smaller retirement funds into umbrella environments. With that said, Nathan concludes that it doesn’t take many mistakes to jeopardise one’s retirement fund. “Even if the individual is saving 15 per cent over 40 years but he is paying too much in fees or investing in the wrong place, the chances are that he will end up underfunded. Without a doubt, this is happening more and more often, so retirement will have to be managed a lot more carefully over the coming years.”

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employee’s ultimate retirement income is dependent on how much is saved, how these savings are invested and for how long they remain invested,” Battersby continues.

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Fraud shifting

demographics Dominic Uys

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Fraud in the long-term insurance industry is an ongoing concern and, while there have been great strides in preventing fraud throughout the industry, the numbers are on the increase. However, the nature of the fraudulent claims is changing.

ecently, the Office of the Long-term Insurance Ombudsman released its annual report in which it stated that it had received a record number of complaints in 2013. The complaints relating to fraud were numerous and the ombud concluded that instances of fraud, in the longterm insurance industry at least, remained high. The latest statistics from the South African Insurance Crime Bureau corroborate this assertion, stating that around 30 per cent of insurance claims (long- and short-term) for 2013, were fraudulent. The most recent report by the Association for Savings and Investment South Africa (ASISA) also seems to support the observation. Even though the ASISA report covers incidents only for the year of 2012, Peter Dempsey, deputy CEO of ASISA, points out that it does paint a good picture of where the industry is going. “Our data on fraud takes a long time to collate because often we have to wait for the results of lengthy investigations. The survey results for 2013 will be available at the end of this year,” explains Dempsey. “Life insurance companies uncovered 5 466 fraudulent and dishonest insurance claims in 2012 to a value of R669.9 million. This marks an increase in cases of 157 from 2011, when the value of fraudulent and dishonest claims detected was R599.7 million,” the report starts.

Numbers rising ASISA’s report made a marked distinction between dishonest claims, stating that the

number of death, funeral, disability, health and hospital as well as retrenchment claims deemed dishonest as a result of either misrepresentation or material non-disclosure by policyholders, was around 4 939 in 2012 and totalled R620.1 million. This was up from 4 675 claims in 2011. Fraudulent claims, involving forged documents and syndicate activity, sat at 264 claims, costing the industry about R31.4 million. However, this was down from the numbers recorded in 2011, when the total number was 455 to a value of R125.1 million. Dempsey tells RISKSA that an interesting trend is emerging from this. “We should go back to the statistics for 2010, which is the point where fraudulent and dishonest claims in the industry peaked. By 2011, these numbers had dropped by about 12 to 13 per cent. There was again a smaller increase in 2012,” he says. “The industry knows that generally when economic times are tough, people resort to making dishonest claims. There is the criminal element where the syndicates operate but this is clearly reducing year on year because the industry is getting better at shutting them down,” Dempsey continues. While the more serious crimes are down, Dempsey points out that simple non-disclosure and misrepresentation at application phase is on the rise. “Things like adding a child to a policy that isn’t actually your child, or non-disclosure of life threatening and material conditions such as diabetes or heart conditions.” Dempsey adds that he believes this dishonesty to be intentional in the vast majority of cases. “Typically the application forms are quite thorough and it would be difficult for a person to argue ignorance.” Even though he agrees that the industry has become better at detecting dishonest behaviour, he dismisses the notion that this has caused a perceived increase in the actual instances of fraud that are occurring.

Communicating fraud Some interesting observations about fraud trends in life insurance have been noticed by the ombud’s office over the last few years. While ASISA maintains that syndicate fraud has been on the decline, the ombud’s database indicates otherwise. Jennifer Preiss, deputy ombudsman for long-term insurance, indicates a marked

increase in the number of unscrupulous administrators, funeral parlours or intermediaries that did not pay over premiums collected from clients. These operators would take advantage of group policies designed by insurers so that the policyholder does not necessarily need to be the actual life insured or member of the group policy. Instead the administrator in question would act as policyholder, insuring and collecting premiums from his clients. When the insurer terminates the policy because of non-payment, the scheme is simply moved to another insurer. To stay ahead, the administrator could move the scheme up to three times a year, all the while collecting premiums from clients who are essentially uninsured. While this is just one of a myriad examples of fraud in the industry, Preiss indicates that this outlines a significant flaw in the insurance industry that has yet to be adequately addressed. “The reason why these administrators keep getting away with it is because insurers aren’t communicating with one another when they notice this practice being implemented.” “We are, however, only able to look at the industry through the complaints that are submitted to the office. We are, in effect, looking at the broader picture through a keyhole. The picture that we are getting is quite important to relay to the industry,” Preiss adds. “The ombud’s office has mentioned this to the insurance community and suggested that it makes more of an effort to do its due diligence when taking on group policies,” Preiss says. The ombud’s office is doing its part in making the names of unscrupulous administrators public and Preiss says that the ombud is continually handing names of these operators over to the FSB. Dempsey notes that the flow of information is definitely happening. “I think that the general trend towards more available information and insurers keeping more complete databases is definitely tightening the noose on fraudulent behaviour. It will, however, always be a part of the industry and we will always encounter people who try to manipulate the system,” Dempsey concludes.

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Does your preferred insurance product provider go above and beyond to do the right thing for their clients, or are they hamstrung by red tape, small print and legalese?

How much do you know about an insurer’s

claim settlement ethos? I

f your client missed out on the notification period to lodge a claim, but all aspects of their claim documentation has confirmed its validity, are you convinced that the insurer would do the right thing and pay the claim? Over and above the black and white of solvency ratios and other accounting terminologies which provide some insight into an insurer’s financial stability, their claims ethos should never be taken for granted.

Susan Gonnerman Head of Claims at Altrisk

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Studying the final determination reports from the Ombudsman for Long-term Insurance is hardly as riveting as Raymond Reddington’s covert shenanigans in The Blacklist, but it’s no

less crucial when you consider that your client’s, and in fact your livelihood, could potentially depend on how the policy responds under certain claim conditions. One such area that is often neglected is what insurers call a notification period – and missing it has been the basis of many repudiations.

What is a notification period? A notification period is the amount of time that a policyholder has to report a claim. All insurance companies implement a notification period, during which you must notify the

Towards the end of that same year, Shane overdid it in the gym and ended up with a rotator cuff injury – essentially a tear of the shoulder muscles requiring corrective surgery and six weeks of recovery time. He was off work for weeks and, being selfemployed, this meant that his ability to service his clients and earn an income was negatively impacted. However, it never crossed Shane’s mind to claim for his injury under his disability policy, and the notification period came and went, by four years in fact. It was only after a motorbike accident towards the end of 2013 that he realised – while submitting the paperwork for his accident claim – he could have claimed for his rotator cuff injury four years earlier. He had without a doubt suffered a loss of income as a result and his medical records were sound. Without having any expectations as the notification period had amply been and gone, and more out of morbid curiosity as to how hard he should be kicking himself, Shane enquired whether such a claim would still be considered. The claim assessor looked into it, found the paperwork and medical evidence to be sufficient and advised him to complete a claim form. Shane’s four-year-old shoulder injury claim was settled along with his new accident claim without a quibble, years after the notification period had expired.

company that you have a claim. While the average notification period is about six months, different insurers apply different periods, and these may even vary per benefit.

So what does that mean for your client?

How does your insurer apply notification periods? All insurers apply notification periods to their benefits. How stringently these are applied will vary from one insurer to another. Claims need to be handled efficiently and with delicacy, because they invariably occur at a stressful and emotional time.

It depends entirely on how strict the insurer is in applying the notification period cut-off. Some insurers have strict policies in place that stipulate that should a claim be submitted after the notification period has elapsed, no payment will be made.

Straightforward claims are the easy part. But when it comes to more challenging ones, the question to ask is whether the claims policy is based on fairness and solid ethics, and whether claims assessors make every effort to pay claims?

Other insurers may still consider the merits of the claim after the notification period has passed as long as the relevant information and medical evidence to support a claim is still available for review by the claims assessors.

The golden rule – treat the customer fairly

When applying a notification period to a late claim, is the information sufficient at the time to assess the claim as the claims assessor would have at the time of the incident? If so, why not pay it? It would be easy to go by the book and decline a claim on the basis that it has not met the notification period requirements, and any insurer would be justified in doing so.

This is exactly what happened to Shane Bennitt, a business owner based in Pietermaritzburg. Shane took out an Altrisk lump sum disability policy with a built-in income protection benefit, with a one-month waiting period in 2009.

However, the burning question when assessing any risk product provider is whether its claims ethic is defined by what the book of rules tells them to do, or doing what is morally right.

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2014/03/26 4:33 PM

Doing harm Assessing the impact of suicide on life insurance Christy van der Merwe

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Although suicide is often brushed off as a relatively insignificant portion of claims for life insurers, globally, worrying trends are emerging, and suicide is the second highest cause of unnatural death in men aged 15 to 44. In South Africa, it is the third greatest cause of unnatural death.

SO HOLD

owever, the reported rates may not be a true reflection of the situation. Overall, it can be difficult to prove suicide. When evidence is not clear cut, unnatural death is usually assumed an accident, and within the two-year exclusion period, the onus is on the insurer to prove suicide.

up, where the number of accidents should remain fairly constant.

Addressing delegates at the RGA Reinsurance ‘Tracking trends’ seminar in Cape Town, Jared Godwin, RGA’s Africa business development actuary, discussed the intricacies of suicide and the challenges it poses to the life insurance industry, particularly since it is felt to be more prevalent than immediately evident.

This is concerning, particularly in South Africa, where the rate of motor vehicle accidents is very high. It is questioned whether South Africa could be misstating the suicide rate and attributing this to motor accidents, particularly as many of the accidents are single-occupant accidents.

Suicide is said to total between five and 15 per cent of claims amounts; however, this could potentially be closer to 30 per cent, although this is difficult to prove as suicides could be misclassified. It is important to understand the impacts of this on the insurance industry.

At times insurers are concerned with the bad market image of rejected claims, and where evidence is not clear cut, an accident will be presumed.

Suicide vs accident

An even bigger concern is that for every completed suicide, there are about 20 attempted suicides that take place. This could mean that suicide attempts are increasing disability claims incidences, if the intentional act could not be proved by the insurer. This is a particular trend among women, who prefer less violent, often unsuccessful, methods such as ingesting poison, compared with men, who favour use of firearms.

An interesting study conducted in Australia has highlighted the potential ability to disguise suicide as an accident, presumably to ensure that a life insurance claim would be paid. The Moyle information services for law enforcement on suicide investigation has stated that the intentional traffic accident is probably the most common means of suicide that is typically misclassified. Godwin says that RGA has looked at some of its own data, and paid attention to the incidences of suicide, compared with the incidences of motor vehicle accidents. While claims related to suicide are expected to spike after the two-year exclusion period, accidents should be fairly uniform because they are random events. However, claims data (see graph) from two companies between 1999 and 2010 shows that after two years, the number of accidents goes down and the number of suicides goes

YOUR BREATH

This could indicate that there are a substantial number of accidents that are actually suicides, committed by desperate people seeking to end their lives within the two-year exclusion period.

We’re unmasking the killer at our roadshow.

Changing the trend

There is an industry-wide recognition that cover for suicide is needed, to an extent, but the balance between providing complete coverage and protecting against antiselection is important for the insurer. Suicide exclusion clauses are in favour of the insured. Godwin explains that the aim is to pay valid claims, but avoid unnecessary claims, and for this reason, lengthening the exclusion period may help to reduce the number of insured deaths due to suicide, giving the insured more time to reconsider their actions and seek help.

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The industry could also perhaps look at ways in which to prevent suicides to some degree. It could be helpful to institute more pre-claim counselling, particularly when additional cover is taken for little or no reason, or among clients with mental illness impairments (mental impairment is a good indicator of suicide risk), or those working in high risk occupations where suicide incidence is higher than average. Godwin adds that it could be worth engaging with consumers and clients around the two-year mark, and also engaging more in recessionary periods, because statistics have shown higher incidence of suicide during financial crises.

Global rates of suicide are increasing Although stats vary by country and year. There are about one million reported suicides a year, and the World Health Organisation predicts that this will increase to 1.53 million suicides a year by 2020. South Africa had the eighth highest rate of suicide in the world in 2010. Between 6 000 and 8 000 people commit suicide a year, making it the third greatest cause of unnatural death in the country,

after homicide and unintentional causes. For underwriting purposes, the precipitating factors in suicide in South Africa are academic-related problems; interpersonal or family problems; family history; past or present physical of sexual trauma; mental health problems; and high levels of stress and inability to cope. About 88 per cent of suicide cases were reported after the 24-month exclusion period.

Suicide risk factors in insurance: • Larger sums assured • Age group 15 to 44 • Males (death); females (disability) • Certain occupations, such as anaesthesiologists, dentists, pharmacists and medical practitioners, veterinarians, police workers, farm workers, construction workers • Duration less than 36 months • Mental illness impairment • Recession.

www. wes 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)

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NOW AT A VENUE NEAR YOU

Grindrod Bank

To book your place go to altriskroadshow2014.co.za

launches smart beta ETFs

rindrod Bank has launched two additional low-cost equity exchange traded funds (ETF) under the exclusive licence of S&P Dow Jones Indices, with which Grindrod Bank has recently aligned. The Grindrod S&P SA Low Volatility ETF and the S&P SA Dividend Aristocrats ETF are both based on ‘smart beta’ themes, which apply investment strategies that do not use conventional market capitalisation weights which, at times, have delivered sub-optimal returns by overweighting overvalued stocks and underweighting undervalued ones. The Low Volatility ETF (share code LVLTRX) will track the 40 least volatile stocks on the JSE. “Low volatility strategies present a conservative or low-risk approach to equity investing, but the performance figures tend to remarkably outperform higher-risk equity strategies,” says Gareth Stobie, Grindrod Bank’s head of capital markets. “This is a common phenomenon around the world.” According to Stobie, the Low Volatility Index

returned 27.7 per cent per annum, while the FTSE/JSE Shareholder Weighted Index (SWIX) returned 24.9 per cent on a back-tested basis for the five years to 28 February 2014. In addition, the returns of the Low Volatility Index were more than 34 per cent less volatile than those of the SWIX. The Grindrod Dividend Aristocrats ETF (share code DIVTRX) will track companies that have achieved consistent or growing dividend streams over the past five years. “The merits of dividend investing are well founded,” says Stobie. “One of the key benefits is access to companies that have a proven ability to generate cash.” He said the ETF will aim to provide a reliable dividend income and will differ from conventional dividend indices that do not have the same historical quality filter. On a back-tested basis for the five years to 28 February 2014, the Dividend Aristocrats Index returned 25.9 per cent a year, compared to returns of 22.9 per cent a year from the FTSE/JSE Dividend Plus Index.

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

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MR MANAGING RISKS

Growing concern Dominic Uys

The agricultural sector in South Africa is not only deeply rooted in the economy, but also in all of the countryâ&#x20AC;&#x2122;s cultures. Insuring the agricultural sector is becoming increasingly complex and, as the industry insiders point out, on the verge of changing.

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ost in the industry will tell you that it is a tough market and insurance companies often undergo significant losses. In September of last year, one of the major reinsurers in South Africa withdrew from the agricultural crop reinsurance market for just those reasons, after spending over 20 years in the business. Munich Re cited large weather-related losses, high claims ratios and concerns over the sustainability of crop insurance as the reasons for its exit. Repeated poor market results in seasons with adverse weather patterns, such as drought and hail, led to high claims ratios and the company’s market crop portfolio showed consistent negative results year on year. By last year, Munich Re had had enough and withdrew from the game completely. It may be easy to say that climate change and adverse weather are to blame; catastrophic weather makes up for at least 80 per cent of claims, after all. However, industry experts indicate that weather may not be the root of the problem, but rather that there are flaws inherent in the entire system. An agricultural sector not fully supported by insurers is an alarming thought, because the threat of food scarcity in an already strained economy could bring the country to its knees.

industry is meeting with government to find a way of making the sector more sustainable, and a number of problems have already been outlined.

A claims culture Jaco de Jager, director at Mooirivier Makelaars, starts by pointing out that brokers tend to like the agricultural sector because commissions are generally high. “Insurers compete fiercely for business, and there are a lot of opportunities for insurers to burn their fingers,” he says. And insurers have indeed experienced a few blows over the years. “Often, as soon as a farmer’s premiums go up with one insurer, he starts looking around for a cheaper deal. With insurers competing for the same business, you find a lot of brokers and insurers willing to cut their premium price significantly,” De Jager adds.

Changing weather versus farmer's knowledge "Crop insurance has become extremely expensive. It can be as much as seven per cent of the insured value. So what is happening now, is that some farmers under

financial pressure, are using generations of experience and gambling by only insuring the specific geographic areas on their farms that have the highest historical risk of crop losses. This has an obvious impact on the insurance industry," says André van der Walt, head of Agri at Hollard. "But the agricultural industry is also being impacted as a result. When you add unpredictable weather patterns, which have become more severe, the situation has become somewhat like a game of Russian Roulette for the farmers and great crop losses are occurring as they never did before. However, in certain areas where harsh rains were expected to produce losses, the reverse is predicted," he says. Van der Walt says that a situation has developed where premiums are not covering the crop losses. "We are of course looking into how to mitigate this issue. The health of the agricultural industry is important to us because we exist to serve them. Answers need to be found and perhaps a more effective solution may be to extend the

With one major player already bowing out of crop reinsurance, the rest of the insurance

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“We tend to see a farmer as someone with many acres of land and a certain amount of production in a year. But many people who grow food in their backyards plus everyone else on the spectrum in between, can be viewed as one. The most important thing is still to encourage food production in South Africa, since I and many others believe that the rest of the continent is set to become reliant on our country for a lot of its food,” Van der Walt continues.

The major flaw with MPCI, however, lies in the fact that, where drought is more widespread, only about 28 per cent of the country receives more than 600 millimetres of rain. Flooding is not only less common and restricted to a smaller portion of the country, but drought and flooding occur in completely separate areas. In the last 20 years, South Africa has witnessed over 130 major and widespread droughts, resulting in some massive claims.

minimum contract period with the farmer from one year to something closer to five years. I believe that this could result in a more equally distributed premium income over a longer period of time and result in a win-win situation," he adds. This proposal is however some way from being implemented and Van der Walt indicates that it will require buy-in from all of the major role players in the industry.

Catastrophic weather: new model sought Van der Walt starts by pointing out that the major sources of claims, when it comes to crop insurance, are hail, flooding and drought. While generally viewed as a grudge purchase, multi-peril crop insurance (MPCI) is relatively common. The policy is based on the potential yield of the land and covers the farmer for most forms of catastrophic weather, droughts and flooding included. MPCI is however often confused with the disaster management plans enacted by the local government after catastrophic events. As a result, many farmers do not purchase MPCI. “These two go hand in hand and people need to keep in mind that a disaster management plan’s main concern is to rehabilitate and save infrastructure and give basic aid to people, so the farmer will definitely not recover his crop losses that way,” he says.

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Van der Walt states that, while MPCI premiums are the same for farmers in both kinds of areas, you inevitably have farmers in certain regions continually carrying farmers in other areas through their premiums as a result of repeating weather patterns in certain areas every year. Increasing premiums also has a negative impact since the market penetration of an already small insurance pool may decrease further. When compared to other, more directed types of disaster cover like hail insurance, the results demonstrate that the claims ratio for MPCI has reached unsustainable levels. Where hail insurance on occasion may reach a 100 per cent claims ratio, MPCI often shoots up to the 400 per cent mark. “It is clear that MPCI is not sustainable in its current form without resorting to abnormally high premium increases. The government needs to get involed in this via subsidies or some other platform,” Van der Walt says.

Empowering upcoming farmers Van der Walt also states that the industry’s responsibility to empower and assist small scale farmers also takes on an interesting characteristic in the South African context. “While there is certainly a drive from government and from the industry to encourage small scale farmers, we as an insurance industry still need to figure out who these farmers are. In South Africa, every culture has a different definition of what a farmer is supposed to be.”

He points out that one of the industry’s biggest responsibilities is therefore to find means of insuring every kind of producer all the way from the new small farmer to the large commercial and corporates.

Moving towards risk mitigation As with most other sectors, the industry needs to start taking steps towards a culture of risk mitigation. “One example is how farmers already engage in a lot of risk mitigating behaviour by burning sections of land to avoid out of control fires during hot seasons. And there have been a few weather analysing services worldwide that are supporting farmers and experimenting with early warning systems,” Van der Walt says. "I look forward to being part of a meeting including major insurers and the Department of Agriculture in May of this year with the purpose of coming up with solutions to the challenges that face South Africa's agricultural industry,” he concludes. Major changes are expected and RISKSA will keep a close eye on what happens.

Our Corporate and Business Insurance sets the standard when it comes to: • Property • Commercial • Vehicle and Asset Finance • Marine • Guarantees • Agriculture • Corporate Call us on 0860 999 334

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already been over 20 serious aviation accidents according to the South African Civil Aviation Authority (SACAA), with the vast majority of these having been attributed to the weather. To put this into perspective, an average of around 40 serious aviation accidents are reported each year in South Africa. This was not only felt locally, but also internationally as Swiss Re’s research into the issue reflected. The global insured losses from natural catastrophes and man-made disasters in 2013 totalled $45 billion, according to a sigma study released by the company. The majority of which was attributed to flooding and hail events. Total economic losses for the year stood at $140 billion and around 26 000 lives were lost, according to the study.

The need for effective business risk planning highlighted Dominic Uys

There is no doubt that extreme weather events are becoming more common. Since the start of the year there have been numerous reports indicating the huge amount of strain that insurers across the board are experiencing as a result.

n January of this year, Hollard Insurance reported a substantial increase in vehicle and property claims following the severe rains and widespread flooding that hit the city of Johannesburg. General manager at Hollard Insurance, Anton Botha, told RISKSA that the company saw a significant spike in

claims for vehicle damages. While this was par for the course according to Botha, property claims resulting from the flooding over that same period were particularly high. The aviation sector was also hard hit. Within the first three months of 2014 there had

Property damage aside, of equal concern is business interruption, which inevitably results from the catastrophic weather. The heavy rain in Johannesburg, to name but one example, brought business in the city to a standstill. According to John Kerby, corporate accounts director at RBS, these erratic weather patterns highlight the need for businesses across the country to implement stringent risk management policies. Kerby stated that many business owners suffered millions of Rand worth of loss as a result of damage to property, loss of income due to business interruption and vehicle and fleet damage. As recent events have alarmingly proven, even areas lucky enough to enjoy fair weather, are still at risk. Earlier this year South Africa’s national power utility Eskom declared a state of emergency when incessant rains rendered the company’s coal supplies in the Limpopo Province unfit for use in power plants. The result, as most of us know, was the first wave of rolling blackouts in over six years. Businesses countrywide were brought to a grinding halt as power was unexpectedly interrupted for hours at a time. While this lasted for only one day, the loss of productivity on a national scale was considerable. “Should these businesses not have the correct cover in place, it is unlikely that they are able to survive these losses. The recent unexpected and extreme weather patterns also highlighted the range of risks businesses are exposed to daily. These risks are extremely diverse and specialised, depending on the sector in which a business operates in. Such incidences have resulted in the term ‘risk management’ taking on a significantly new level of importance, especially as the country continues to witness changing weather patterns,” he says. The Gauteng Province is naturally not the only region that may have a difficult year. Kerby pointed out that, as the winter rains approach, businesses in the Western Cape should also expect punishing weather conditions. “It is of

utmost importance for businesses in the area to review insurance and risk management policies, in order to avoid the extreme losses that their counterparts in Gauteng recently encountered,” he adds.

Analysing unknown risks According to Kerby there are some instances where a business is unable to manage or predict the risks over a period of time. “This calls for the business to cover every possible eventuality, which includes considering the focus and depth of the cover needed,” he says. A case in point is the recent announcement by Sun International in March of this year. The ongoing rain and flash floods at Sun City had caused extensive structural damage to the Gary Player Country Club and the Lost City Golf Course. It was decided that these two facilities would close for seven days. “In the case of a golf course, there would be a loss of revenue from having to both refund players for games booked that week, as well as not being able to accept new business. There could also be knock-on losses for associated facilities, such as for the establishment’s accommodation and food and beverage departments. The establishment would also face the cost of

having to repair property damage sustained by the weather,” Kerby explains.

need to review their risk management, Patrick Bracher, director at Norton Rose Fulbright, added that brokers need to take heed of the rising tide.

Regardless of the industry, poor risk management policies may leave an organisation vulnerable to major longterm setbacks, or even worse, insolvency and bankruptcy. “Incorrectly structured policies and incorrect business interruption calculations could mean the business is underinsured; it is advised that businesses consult an expert when putting these policies in place,” Kerby continues.

Bracher says that one of an insurance broker’s duties is to see that the client has not under-insured. The stated or unstated terms of a broker’s mandate require a broker to explain to a commercial client the need for business interruption insurance, how the loss is calculated, which information is needed to enable the broker to insure the loss, and the consequences of under-insurance.

He notes that while a business may manage to survive an initial loss as a result of business interruption, continued loss of revenue from the second or perhaps third interruption could be detrimental to revenues. “It is crucial that the correct policies are put in place by businesses, regardless of the sector they operate in or size of business, and that the correct calculations are done in terms of depth and focus to ensure that the business is sufficiently covered,” concludes Kerby.

Broker responsibility While Kerby correctly states that business owners

The responsibilities of the broker in this regard could have some major consequences if their client remains uninformed. As an example, Bracher held up the case of PFC Foods CC vs Three Peaks Management. The broker in this instance had left the company’s business interruption cover at R600 000 for years, when the sum insured should have grown to R1.8 million. This left a shortfall of over R350 000 because average was applied. “In addition, the FAIS Act requires the advice given by the broker to the client to be diligently recorded. Anything that the broker is not willing or able to do for the client must be carefully explained and noted,” he concludes

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Mind the

gap

Underinsurance in SA Anton Pretorius

The calculations just donâ&#x20AC;&#x2122;t add up. Your client experienced a break-in where R75 000 worth of goods were stolen, but only R50 000 was insured. This resulted in a lot of unpleasantness. When considering the correct amount to insure the contents of a home or business, consumers should not think about price but rather what it will cost them to replace these items. Your job as a broker is to communicate this to your client.

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lients are told that establishing the correct sums insured is their responsibility – until a claim arises. That’s when the insurers suddenly take over to see whether they can save money by applying average. Is this reasonable? With regard to homeowners’ insurance, most finance houses will offer insurance through their own insurance companies which use bank valuators to determine the replacement value of the property on behalf of the insurer. Although the role of the valuator is to establish the value of the property, they are not qualified to determine defects in the design or construction or to identify problems associated with poor maintenance of the property. Many farm owners have been told that they were underinsured after natural disasters like floods and hailstorms. This is a concern for policyholders, short-term insurers and brokers.

home contents insurance policy in place, they will be covered in the event of a break-in or their possessions are lost, stolen or damaged. The same applies to farmers who have insured their farming equipment.What they don’t realise is that if their possessions are not insured at their replacement value, they may have to cough up even if they have been paying their monthly premiums diligently. Some years ago, CIB Insurance Solutions estimated that the replacement value of farming equipment, combined with a failure to regularly review their policies, meant that the percentage of underinsured SA farmers could be as high as 70 per cent. The South African commercial sector is traditionally underinsured, and it gets worse during tough economic times. On the basis of this ongoing risk assessment, Santam believes that underinsurance is one of the most worrying challenges facing South African businesses.

Many South Africans assume that if they have a Commercial insurance continues to come under pressure due to the slow recovery of the economy as well as the fact that commercial clients remain wary when buying new assets such as vehicles, plant and machinery. According to a Santam press release, underinsurance is a key challenge for South African businesses. Policyholders often fall into a trap of underinsurance because they are unaware of the repercussions. If your equipment is worth R500 000 and you insure it only for R400 000, only 80 per cent of your

loss will be paid out when you claim. The last thing you need is to have to outlay additional funds following a loss during soft economic times, so it is critical to ensure that the value of your possessions is updated regularly. When an Internet cable broke, a South African company lost bandwidth as well as time and money. The company’s broker was aware of the client’s needs and understood that this could possibly affect the business. He was able to negotiate sufficient cover with the underwriter, so that in such an event, his client would be properly covered. Sharon Paterson, CEO of Infiniti Insurance, states her reasons for some for the dire insurance levels in the country. She says that the South African economy has not been buoyant over the last few years and most people are feeling the pinch. When money is tight, people look at where they can save and short-term insurance is often the place they choose. “Most clients struggle to understand that although their lounge suite is not likely to be stolen, it must be insured, and more importantly, the insurer has factored into the rating that a lounge suite is unlikely to be stolen. The client does not understand that if he does not insure everything in his house, average will apply,” says Paterson. In respect of commercial insurance, average is also an issue. “Fire sums insured are often cut to save costs and a partial loss can be devastating for a business when average is applied.” While underinsurance remains a huge problem among South African businesses, a large insurer recently had a claim where the client’s building was underinsured by a staggering 50 per cent. This was despite regular communication via newsletters about the dangers of underinsurance and references to underinsurance in renewal letters. Francois Engels, divisional director of construction and engineering at Hollard Broker Markets, believes that the state of the economy can drive insurance purchases when a short-term view focused on financial survival takes over. “If there is a squeeze on profit margins, one of the first casualties of distraction is ineffective risk management. Cutting back on insurance is also seen as a

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short-term solution. In trying to cover only the bare essentials, business owners often end up being underinsured.” However, this is where category expertise can play a vital role. “Through expert underwriting, specialist re-evaluation and finding policies that include vital cover at no extra cost, businesses can often find ways of cutting costs without leaving themselves vulnerable.” One of the most common areas of underinsurance, according to Paterson, is business interruption (BI) on a commercial policy. “Sometimes this is because clients don’t understand that gross profit includes their cost of working and confuse it with net profit and therefore underinsure. At other times, they simply need to save costs or underestimate the time it will take to get back up and running after a loss. “When I was broking, I always advised my clients to save costs by not insuring things like laptops and cellphones which, while they are likely to be lost, damaged or stolen, can easily be replaced by the company rather than to underinsure and then find that you don’t have sufficient cover when you need it – to keep your business solvent.” Engels believes that expertise and category specialist knowledge is the foundation. A client can’t be expected to value the purpose of risk cover – it is up to brokers and insurers to explain, convince and deliver effective cover at affordable prices, with wording created to make the claiming process easy and streamlined for the client, should the worst scenario come to pass. At the very beginning, the claiming

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process must be in view because that is key to customer loyalty. He emphasises that it is the duty of an experienced broker, in partnership with a specialist insurer and underwriter, to clearly inform clients so that they can value the purpose of risk cover. “Broker experience and objectivity is vital in analysing the obvious, as well as hidden, risks and explain the facts clearly to the clients. A frequent mistake is to forget that each client’s needs are different and there is no such thing as a one-size-fits-all solution,” says Engels.

with experienced professionals to confirm valuations is the wiser option. “It is far better to be correctly insured than to try and rectify it after the loss. The broker may also be exposed in the area of professional indemnity (PI),” Engels says.

The broker’s role “An incorrect value can be the result of not employing a professional valuator to assess assets such as properties or machinery, sometimes because of costs involved. However, there are two sides. This cost-cutting can also cause over-insurance. This means the client pays more premiums which will not be compensated at claims time when professional assessment will be called for” says Paterson Paterson adds that brokers need to understand their client’s business and make sure that their portfolio is structured accordingly. “Working closely with the company accountant will assist the broker to ensure that all assets are covered in line with the asset register (amended to reflect replacement value). A good broker should walk around the client’s premises rather than meeting the client in his office; this will assist him in noticing any new developments that require insuring,” says Paterson. “Do not rely on guesswork or assumptions,” says Engels. Convincing your clients to consult

Case study The levels of underinsurance in South Africa are of huge concern to all insurers not only because of the trauma at claims stage, but because insurers are routinely collecting less premiums as a result. Paterson says: “I do recall a client being 50 per cent underinsured in one instance. Fortunately for all of us concerned in the case, except the client, the loss was a total one and we ended up paying the client the sum insured less the excess. Sadly what he received from us could not replace what he had lost. The broker had questioned the sum insured the week before the fire during a routine visit to the premises and was told that most of the stock was being moved the following day and the sum insured should stay as it was. Clearly very little was moved in the week before the fire.”

Proceed

with intelligence Christy van der Merwe

You wouldn’t go into a meeting without having done any research or preparation. And yet, emergency responders so often go head-first into situations without useful information to assist them in doing their jobs. Forewarned is forearmed and, if you know what awaits you, you are prepared to react efficiently – no nasty surprises. The technology enabling police, security officers, paramedics and firefighters to effectively respond to risks is out there, it is just a matter of implementing it.

odern day information overload means that useful information is often hidden in the masses of data generated every second. Ensuring data becomes useful information allows decision-makers to deploy resources for maximum effect and improve the lives of citizens living in cities around the world. New technologies revolutionise the gathering and analysis of data regarding environmental, geopolitical, economic, technological and

criminal risks, and provide sophisticated intelligence tools to turn that data into information law enforcement agencies can use to create safer cities in South Africa. “There’s a huge amount of information flowing between citizens, responders and agencies. By turning noise into information, information into intelligence, and intelligence into actionable insight, public safety agencies can do the absolute most with less – building safer cities in the process,” says Vikela Rankin, MD of

Motorola Solutions South Africa. “It’s all about sharing information with those who need it the most, when they need it the most,” he affirms. Rankin was discussing the equipment and high-tech public safety solutions that make this possible at a Motorola Solutions demonstration day in Cape Town. He explained that we live in the era of the connected police officer, the real-time crime centre, the next-generation patrol vehicle, the integrated multimedia communications centre, and the rapidly dwindling criminal. The solutions include integrated command and control systems that allow law enforcement agencies to deal with complex situations in a proactive and efficient manner; and video surveillance systems that allow sharing of information with the relevant people in real time. “Our new communications and data technologies provide real-time data to and from the field; sophisticated intelligence tools for processing it, thereby enabling information to be shared with responders and key decision-makers. This helps to improve decision-making and can have a direct effect on the efficiency of public safety units and the security of the population,” says Peter Goulding, Motorola Solutions’ public safety specialist, and former chief superintendent at London’s Metropolitan Police. Goulding explains that currently, 99 per cent of all recorded video surveillance is not being used in real time, or not being used at all. Hours of footage will generally be waded through after an incident is reported and evidence is needed. “New technologies are revolutionising the way surveillance video from the field is used. These technologies transform videos to valuable assets for qualitative and accurate decision-making,” he says. Video analytics can automatically analyse video to detect and determine events not based on a single image, but can build in functionalities such as identification and facial recognition, behaviour, movement and detection, patterns and trends, or situational awareness. This helps to manage real-time and retrospective activity for control centre operators. Once alerted to an issue, the right critical responders can react to a situation, knowing exactly what they will be required to do. For example, if an unidentified package is left on a train platform, decisions can be made whether to send the bomb squad in to assess the situation, as well as paramedics or perhaps just a nearby security official. First responders armed with smart devices could also be made aware of more useful information when responding to an incident, as well as sending more useful information to officials

Turning noise into information, and that information into intelligence, that spurs actionable insight allowing public safety responders to do more, faster.

Currently 99 per cent of all recorded video surveillance is not used in real time, or at all. New technologies are revolutionising the way surveillance video from the field is used.

down the line. For example, a paramedic could convey critical patient information via e-mail with images on to the hospital, which could then decide which doctor would be best placed to treat the incoming patient. Police and city officials could be armed with communications devices that are so much more than simple walky-talkies, but could actually take pictures of crime scenes or accidents, capture documents, or provide GPS-mapping information. Using mobile communications, with public safety optimised devices that allow for voice and data transmission, highlights the fact that effective prosecution begins the moment the first officer arrives on the scene. Effective data collection reduces the time to bring criminals to court and reduces investigation costs. It allows law enforcement officers to do in-field database checks, in-field electronic citations, automatic licence plate recognition, and in-field reporting. Rankin said today’s public safety and enterprise professionals need communication solutions that help translate information from multiple sources into intelligence, thus ensuring safer cities. However, technology investments in public safety today must be long-lasting, integrated and easy to deploy and use. The technologies needed to build smart public safety solutions are here now and action needs to be taken to implement them and create

smart, viable, stable, prosperous and growing cities of the future. The City of Cape Town is said to be a good model as it is increasingly integrating municipal functions such as electricity, disaster management, metro police, parks board and transport information to improve overall city management. Gauteng is also increasingly integrating more agencies into its network. Rankin told RISKSA that the immediacy of information available today, particularly through social media, is pushing citizens to demand more from companies and governments alike. The Kenyan Westgate Mall tragedy highlighted the need for rapid communication as victims of the terrorist attack were able to relay useful information to loved ones and authorities via social networks. Public safety needs to catch up with this communication evolution. A greater awareness of the available solutions is required, because while there may be financial challenges, these are not insurmountable, and skills challenges are easily overcome through training. Process inefficiencies, such as delays arising during the tender process, are also challenges that require interventions. Having a world of information at your fingertips is only as useful as your ability to process and act on the information, but this is entirely possible for cities today.

CR CAREER

IN A Laura Owings & Dominic Uys

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The new Retail Distribution Review, to be presented by the Financial Services Board in May of this year, could bring some significant changes to the way brokers earn their fees in future. RISKSA chats to the FSB’s Caroline da Silva to understand the regulator’s challenges in ensuring that consumers remain properly aware, while brokers are properly awarded for their advisory role, but not conflicted in their advice.

BIND T

he fees paid to short-term insurance industry brokers have been under the microscope of the Financial Services Board (FSB) for the last few years. The most recent suggestions from the regulatory body have the broker market reaching boiling point.

Binder fees, payable under the Binder Regulations published by the FSB in January 2013, were put in place to regulate the relationship between insurers and the brokers who hold binder agreements with them. These agreements enable brokers to write business on the insurer’s behalf. In return, brokers earn a fee over and above commission directly from the insurer for the function performed on its behalf. While it is possible for insurers and brokers to work in remote areas through traditional intermediary models and without binder arrangements, the binder model has worked well for insurers and brokers alike, especially in the countryside and remote areas, where the potential for business exists, but where the insurers may not have a direct presence. The binder holder (intermediary) essentially performs functions as if it were the insurer when interacting with consumers, such as entering into or renewing a policy, determining

the premium or paying a claim. With this system already operating for a number of years, the FSB recently started addressing a number of flaws that it had identified. “The FSB would like to take a more proactive approach to change incentives and relationships in the market where we believe that any existing arrangements don’t deliver good outcomes for consumers. The Retail Distribution Review (RDR) forms part this proactive approach,” says deputy executive officer for Financial Advisory and Intermediary Services (FAIS) at the FSB, Caroline da Silva. She states that more steps need to be taken to manage potential conflict in the intermediated environment where brokers act on behalf of their clients, but are remunerated by the insurance companies whose products they sell. Da Silva explains that potential for conflict becomes more acute in situations where independent brokers have binder relationships with insurance companies, where they act as the agent for the insurer and this may require heightened control or rules by the regulator. “Firstly, we should be making sure that these structures are properly disclosed to customers. At the same time we feel that there is a need for brokers to be appropriately rewarded according to the function that they perform, but not to be

tempted to direct advice and sales based on where they are able to negotiate the highest binder or outsourced fee” Da Silva says. With this in mind, the FSB has announced that it intends to publish a new set of guidelines for brokers in this year, as part of the RDR. While, at the time of writing, none of these guidelines had been set in stone, the possibility of capping the fees that brokers earn from binder agreements has been put forward. As one would expect, the broker and insurance community’s reaction to this suggestion has been heated.

The Retail Distribution Review and FSB intentions The RDR, which will be presented by the FSB in May of this year, intends to form a safer environment for consumers through the interaction between local interventions, TCF and the Twin Peaks model of regulation. In terms of the Treating Customers Fairly (TCF) outcomes, one of the ways of ensuring a safer environment for consumers is to manage conflicts of interest relating to how intermediaries are remunerated, according to Da Silva. “The principle of RDR is to promote appropriate, affordable, fair advice and distribution and a number of intermediaries

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have expressed some concern that the RDR will impact negatively on the broker channel and take away broker income.

and proposals to mitigate the risk of unfair customer outcomes are reasonable and should be explored.

It has even been said that the FSB does not support independent brokers, which is as far from the truth as one could get. We have seen that independent brokers are particularly desirable to many customers,” Da Silva explains.

“The FSB recently finalised its first thematic onsite binder compliance visits with some insurers with binder arrangements, which include binder agreements with brokers and underwriting managers. The SAIA will shortly be meeting with the FSB to discuss lessons learnt and common themes following this process to assist its members in their compliance to the Binder Regulations,” Strydom explains.

“The current binder model presents some questions around the need for heightened control. In addition to binder arrangements, brokers may have ‘white labelling’, joint venture or franchise agreements with the insurer while still acting on behalf of the client,” she continues, and indicates that the FSB needs to look at these structures to make sure that they are properly disclosed to the consumers and that at the same time brokers are properly rewarded for the function they perform, but not conflicted in their advice.

“The most likely outcome of the RDR is for advice to be carved from the definition of intermediary services and remunerated separately; the enhancement of current disclosures by intermediaries, specifically the disclosure of the nature of the relationship with product suppliers, for rigorous up-front and ongoing disclosure standards; and for a clear delineation between intermediation (selling) from other outsourced product supplier (insurer) services. Inevitably the current commission caps will have to be reviewed,” she continues.

Treating brokers fairly On the subject of proper broker remuneration, Da Silva maintains that the current commission regulation environment does not properly recognise the professionalisation of the market. “You could have a broker who is highly skilled and qualified providing financial advice and the best personal service, potentially being remunerated exactly the same amount as an intermediary who simply sells the insurance product, such as a call centre agent,” she says. “There is something fundamentally wrong with this and it begs the question whether brokers should be able to charge for their advice over and above the commission that they earn. And, if so, how will this be managed?” Da Silva questions. We believe that this advisory role is a function that the intermediary performs for the customer and should be an arrangement between broker and customer. The customer should be fully aware of any advice fees and be able to agree to or cancel these services if they are not getting ongoing service from the broker.

The binder fee debate Naturally, the item on the agenda that has raised the most hairs is the binder fee issue. While the conflict of interest debate is one aspect, the perception that the FSB intends to limit the broker’s potential for making an income makes for a lot more controversy. “Binder and outsource arrangements with brokers were supposed to be structured in such a way that the broker is remunerated commensurately with the cost of performing that function. What we are seeing, however, is not only a continuing increase in fees paid by insurers to brokers but also various interpretations as to what may be paid for,

A broker’s perspective One industry insider who did not wish to be named told RISKSA that the FSB’s desire to regulate binder fees is a good idea in principle. “I think it is good that clients understand what kind of remuneration a broker gets from the insurer whose products they sell. There definitely needs to be clarity with the consumer whether he is dealing with a non-mandated broker or a binder holder,” he says.

which results in a duplication of fees, or fees being paid for services that are incidental to a binder or covered under commission. So much so that one could argue in many cases, they are not commensurate,” states Da Silva. In some cases this leads to unnecessary outsourcing in order for intermediaries to access more income. “If this continues, the FSB may have to consider capping these inflating fees.” Along with this, Da Silva adds that intermediaries should not be able to be remunerated twice for the same service. This would be where an insurer pays a broker a binder or an outsource fee for an intermediary service that is remunerated under commission. These examples are in many cases simply an incorrect interpretation of the binder rules.

The industry can benefit from increased transparency. He adds that brokers also need to understand their own roles. “If you view yourself as a broker, it means that you advise your client and find the best insurance product for him, irrespective of the company that you get it from. “If you have a binder agreement, you are no longer impartial and you should view yourself as an agent. Just like there is a place for direct insurers, there is definitely place in the market for these agents and brokers. I believe that increased transparency will help both independent brokers and binder holders find the clients who specifically want their services.”

SAIA weighs in

According to him, the FSB’s concerns about conflicts of interest are also understandable. “I believe, however, that there isn’t a conflict of interest as long as the broker markets only one company’s products while under a binder agreement.” One pertinent problem with the principle of binder fee capping is that creates an unfair situation between direct insurers and insurance intermediaries.

Suzette Strydom, general manager of governance risks at the South African Insurance Association (SAIA), agrees that reasonable interventions, including heightened regulation

“A broker who operates under a binder agreement performs a marketing function for the insurer’s products and the fee that the insurer

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remuneration structures specified in terms of various laws apply specific tests for what is fair. As long as the intermediaries keep within those requirements, the charges are not unethical. The problem is that there are so many different bases for remuneration that it is difficult to monitor and keep in check. This process does need to be rationalised,” Bracher states.

pays should be viewed as a marketing fee. If the regulator decides to cap binder agreement fees, it would only be fair that the FSB starts placing those same regulations on the marketing spend of direct insurers”, he says. “This is, of course, an absurd scenario because at the end of the day, it is the consumer who decides which service provider he pays. This broker is merely a marketing channel and whether the insurer wants to pay that broker five per cent or 50 per cent, I do not see the problem. The insurer still needs to be able to turn a profit while pricing his product competitively, otherwise the consumer wouldn’t buy it,” he concludes.

The market’s best interest at heart Director at Norton Rose Fulbright, Patrick Bracher indicates that the potential for regulation to better the market should be taken into account. “No one would object to improved market conduct that treats customers fairly. The need is to get the balance right between avoiding over-regulation that stifles growth, creativity and job creation on the one hand and a totally free-for-all on the other,” he says. “To start, advertising should clearly not be misleading. But whether it needs to go to the point of saying that the name of the insurer has to have equal prominence to the name of, for instance, an underwriting manager goes too far. In our view, as long as it is clear who the underwriter is, it is adequate. People deal with major brands in which they have confidence and this does not always have to be pre-eminently the brand of the insurer.” The need for agents to avoid conflicts of interest with their principals is also a fundamental part of the law. Bracher points out, however, that intermediaries need to be incentivised for the expertise they apply to their work and the responsibilities they bear. “The real solution is to ensure full disclosure of all income and any potential conflict. This is already part of the FAIS law and we don’t need more laws to this effect. It is self-evident that nobody should be entitled to apply unethical remuneration structures. Current

B F

On the insurer’s responsibility pertaining to its intermediaries, Bracher points out that a principal is always responsible for what the agent does on the principal’s behalf. “However, where the intermediary acts as an independent intermediary representing not only the interests of the insurer, but also the insured, there are limits on this responsibility. There is also a limit to which an insurer can monitor and control and take responsibility for the day-to-day conduct (as opposed to legal consequences of their acts) of an intermediary,” Bracher states. He warns that no principal should knowingly ignore the activities of an agent nor turn a blind eye to things which they should be aware of. “Beyond that they cannot be responsible for all the behaviour of independently accredited financial services providers.” RISKSA should add that RDR is not a new concept and, while the FSB’s intended version is based on the South African market’s trends and requirements, there are case studies in the international community that one can look to. Bracher points out that legislation is becoming significantly more complex on the international stage as well. “Compliance is rigorous in most jurisdictions where we would usually turn to for guidance. There is no doubt that increased legislated contracts will have an impact on the local industry. If compliance becomes so onerous and difficult that smaller brokers give up their brokerage, there will be more direct insurance or insurance company-controlled intermediaries with a loss of independent advice,” Bracher says. “There is little prospect of job creation through the establishment of small brokers because they are not able to cope with the mass of compliance affecting them. It is well known that this tends to centralise economic control in the hands of the bigger players and that this is not the way to grow an entrepreneurial economy and to create jobs that are not simply employment by big business,” he concludes. With this in mind, the broker market waits with bated breath as the FSB deliberates its options. One thing is certain; the debate is far from over and opinions, even within the broker market, will continue to be divided.

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Call for cool h

on intermediary f Christy van der Merwe

Reports on the release of the Financial Services Board’s (FSB) benchmark guidelines on binder fees, which were expected by April 2014, but were delayed to May, have elicited concern among intermediaries fearing that engagement with industry role-players is lacking, and that independent advice is under threat.

he FSB has previously made clear its concern over binder fees, worried that not all binders have been implemented optimally and that in some instances the market has not aligned with its carefully negotiated principles.

ensuring fair remuneration for advice and intermediary services and that, based on our interaction with the FSB, there is no intention of ridding the industry of either quality financial advice or intermediated services,” FIA CEO Justus van Pletzen affirms.

Hence the FSB’s investigation to determine the true costs of binder fees, and publish benchmark guidelines to try and address these issues. The guidelines would be published alongside the Retail Distribution Review (RDR) discussion paper.

The FSB has stated on record that it regards independent advice as an indispensable part of the financial services industry. Speaking at the Norton Rose Fulbright insurance management forum in early March, Caroline da Silva, FSB deputy executive officer for the Financial Advisory and Intermediary Services Act (FIAS) highlighted the FSB’s shifting approach to greater regulatory pressure on insurance product providers to take responsibility for the conduct of their intermediaries. She said that the FSB was keeping a watchful eye on fees, ultimately to ensure that South African consumers are not being exploited. She emphasised that the FSB wanted to take a more proactive approach to the changing incentives and relationships in the market.

The Financial Intermediaries Association of Southern Africa (FIA) has moved to assure brokers that the issues are being negotiated and that the FIA is representing intermediaries. The organisation has expressed concern that some FIA members interpret the regulator’s comments as prejudgment and a death knell for independent advice. According to the FIA, the regulator’s comments should not be misinterpreted. They do not signal the end of independent advice nor indicate an inevitable migration from independents to so-called tied agency forces. Rather, the intention is to ensure that insurers take responsibility and are held accountable for products and product failures while intermediaries carry the can for their role in the advice and distribution process. “We can confirm that the FIA is committed to

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The event was heavily reported on, and following a number of articles, the FIA was inundated with comments and queries from concerned FIA members. The FIA met with the FSB on 7 April to gain clarity on the regulator’s stance. The FSB said many of the issues raised during the Norton Rose Fulbright address would be highlighted and dealt with in the RDR discussion paper.

“The outcomes from the RDR process will be crucial for FIA members and as such we are active participants in the RDR discussion process,” says Van Pletzen. “We will continually engage with the FSB to ensure that concepts such as advice versus intermediation and independent versus tied advice are adequately and appropriately defined.” Aon – a large FIA member – was among the concerned brokers that responded. Terence Williams, chief broking officer at Aon South Africa, said that Aon had welcomed the FSB’s RDR initiative and supported the six principles espoused in the Treating Customers Fairly framework (TCF). The group is also fully committed to the fundamental objectives of the RDR, namely to: • Promote appropriate, affordable and fair advice and intermediary services. • Support a sustainable business model for financial advice. “These objectives recognise the value of advice and are supportive of the intermediary industry and are seen to provide the guiding principles for the entire RDR process,” says Williams. “The challenge going forward is to ensure that these principles are better understood in the context of a complex industry remuneration model that has evolved over many years.” To date the FSB has adopted a ‘staged’ approach to regulatory reform. The decision

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to introduce new insurer outsourcing and binder regulations followed by a review of key industry definitions such as advice and intermediary services has been largely welcomed by the industry. And all agree that it is easier to implement new regulation with broad consensus from all industry stakeholders, reiterated Aon. The FSB has encouraged dialogue as far back as November 2011. Aon was part of the FIA

workgroup that prepared the intermediaries’ response to these proposals in March 2012. The FIA response was materially in line with that provided by the South African Insurance Association (SAIA) confirming an in-principle alignment between insurers and intermediaries. “Based on the FSB’s initial response to industry feedback at an Insurance Regulatory Seminar in November 2012 and again during an RDR presentation at a similar event a year later, we believed the industry had reached a good starting point for further detailed discussions,” says Williams. “Our member brokers are comfortable with the framework for regulatory change and the process being followed by the FSB,” adds Van

Pletzen. “So any inferences that intermediaries have engineered remuneration models, to profit from improper practices at the expense of policyholders or insurers, strikes a sore chord.” The FSB’s question whether fees were in the customer’s interest or just aimed at getting additional income to brokers is seen by FIA members to undermine and discredit the positive steps taken by the FSB in the RDR process to date. Williams says that Aon’s customers know what

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He highlighted that aggrieved insurance consumers had many channels through which they could voice concerns over unfair treatment at the hand of brokers or insurers including the insurers’ internal dispute resolution mechanisms, industry bodies such as the FIA or SAIA and the various industry ombudsman schemes. “Insurers put pressure on intermediaries to develop fair and sustainable relationships, declining propositions that are considered unfair or unsustainable,” he says. “If there are brokers who have received remuneration for functions or services not delivered – brokers that have been remunerated more than once for the same service or at a level way in excess of the cost – or brokers who have failed to make the necessary client disclosures, they must be identified and taken to task.”

Binder clarity required Issues arising from Da Silva’s address stem from the industry’s adoption of the new binder regulations and the interpretation by various stakeholders of terms such as ‘binder holder’ and ‘outsource arrangement’.

“From our discussions it is clear that the industry still has to get to grips with some of these terms and that until we understand them it will be difficult to communicate sensibly to stakeholders,” notes Van Pletzen. It is not just the intermediary or broker, but each and every stakeholder in the short-term industry that is learning the ropes where binder regulations are concerned. “As FIA members we must also accept that there are still practices and behaviours taking place at present that neither reflect the letter nor intention as set out in the binder regulations, despite these being agreed and formulated by way of lengthy negotiations between all affected stakeholders.” When the binders were negotiated, the regulator took a principle-based approach in the hope that the industry would reach a sensible competitive solution with regard to the costs levied for services carried out under the binder arrangements. Early feedback is that not all binders have been implemented optimally and that, in some instances, the market has not aligned with these principles. The FSB, in consultation with the FIA and other industry stakeholders, will revisit these principles when the ‘improved’ binder guidelines are published. “Much of what Da Silva said during her recent presentation has been said before by Dixon during his various regulatory workshops and feedback sessions,” says Van Pletzen.

“We do not believe that our members should become alarmed by a message that is for all intents and purposes already common knowledge. Our only request to the regulator is that it continues to remain open in the way it conducts its reviews and refrains from tarring everyone in the industry with the same brush. It should instead identify specific issues and address these with the transgressing parties as appropriate,” he concludes.

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they are looking for and have specific-product and service demands – and that both customers and insurers that conducted business with the group appreciated the value proposition of the intermediated distribution model.

Aon notes that value to the consumer is at the heart of the intermediary model and is entrenched in the FIA Code of Conduct. “The intermediary value proposition is as strong as ever and the majority of the insuring public will continue to recognise this as the industry evolves,” says Williams. He adds that the group looks forward to the release of the FSB’s RDR discussion paper and remained committed to engaging positively to ensure an appropriate, affordable, fair and sustainable model for advice and intermediary services.

Unpacking the terminology To ensure we distinguished between these two elements of the broader fees and costs issue, RISKSA asked Peter Atkinson, FIA national technical portfolio manager, to shed some light on these important distinctions that need to be made: RDR (Retail Distribution Review) – the process being undertaken by the FSB with the primary objective of ensuring that the definitions of intermediary services and related remuneration structures in the insurance sector: • Promote appropriate, affordable and fair advice and services to potential and existing policyholders. • Support a sustainable business model for financial advice. • The next step in the RDR process is the release of the RDR discussion paper, expected end-May 2014. Binder Regulations – the Regulations to Section 48 of the Short-term Insurance Act which deals with binder agreements, which may be the form of a formal regulation, a notice or a directive. Binder guidelines – several guideline documents (some called guidelines, others called letters) issued by the FSB to clarify the understanding of the application of the Binder Regulations. Binder agreement – a signed document (agreement) between an insurer and a binder holder in which the binder holder agrees to undertake certain functions that are accepted as binder functions on behalf of the insurer, in return for an agreed payment.

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2014/03/14 8:43 AM

Building on solid

foundations Christy van der Merwe

In a rapidly changing environment, the ability of financial advisers and intermediaries to stand tall and set themselves apart as knowledgeable service providers is vital for survival. The support and backing of a steadfast financial services company can make all the difference. Rikus Visser, CEO PSG Insure

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here are a number of uncertainties in the insurance market causing intermediaries to feel that the ground is shaking beneath their feet: regulatory compliance, the cost to service clients, and the ability of traditional intermediated insurers to compete with the direct market are merely a few of the top concerns. â&#x20AC;&#x153;At PSG we have centralised our administrative capabilities to reduce the cost to service clients and to ensure high level regulatory compliance. We have segmented our client base and focus on clients who require quality advice and tailored solutions, which are not readily available in some of the standardised products available from direct insurers,â&#x20AC;? PSG Insure CEO, Rikus Visser, tells RISKSA.

PSG Insure maintains that it is continuously working to address the myriad of issues plaguing the industry, and PSG’s administration platform is an integral part of the solution. “Our platform allows us to deliver quality advice in a cost-effective manner across most of the LSM categories. The platform also enables us to be quick to market when we roll out solutions or need to react swiftly to changes,” notes Visser. In recognition of this, PSG Insure recently received the Santam Portfolio Administration Award for Performance Excellence 2013, as well as the National Broker Award for Performance Excellence in the personal lines category for topquality service offering in 2013. The awards recognise business growth, volumes of business achieved, retention percentages, claims ratio and quality. Visser adds that the wave of regulatory changes impacting the industry provides those who can embrace and adapt to these changes the opportunity to leverage a competitive advantage. The constantly evolving market has resulted in a large amount of consolidation across the industry, throughout most value chains, including product providers. “As an integrated business, PSG Insure is well positioned to provide excellent service, and choice products to clients.” The threat of direct insurers is a constant challenge for advisers and intermediaries. Visser says advisers will have to be able to adapt and develop workable solutions and offerings, all within the ever-increasing

regulatory environment. This will ultimately lead to more consolidation of advisers. “At PSG Insure we are able to provide the necessary support to our adviser network, ensuring they can focus on business, and knowing they have the support required from a regulatory perspective,” affirms Visser. This support extends to PSG ensuring that it has specialised solutions in most lines of business, including commercial and business insurance, cover for educational and religious institutions, engineering, aviation, marine and GIT, specialised liabilities, agriculture, heavy commercial vehicles and more. At present the personal lines business is a cause for concern throughout the industry, because of the general public’s current price sensitivity, and the cost to service the lower end of the market. It is a well-known fact that insurers across the board have experienced increased loss ratios in the personal lines business, especially motor. Visser notes that PSG Insure is continuously improving its product offering and is partnering with some of the largest financial services institutions to develop solutions, including its own in-house insurer, Western. Through the acquisition of Western, PSG Insure completed the planned vertical integration of its insurance activities, participating in all levels of the insurance value chain. This has also enhanced PSG Insure’s product offering to clients,

both through its adviser network and its administration platform. These products have a specific focus on commercial solutions which is in line with PSG Insure’s commercial led strategy. The benefits and solutions being implemented by PSG in response to the numerous challenges facing the industry will be addressed at the annual PSG conference taking place at Sun City on 7 and 8 May, 2014. The gathering will also include perspectives from some of South Africa’s most prominent financial institutions, discussed on an interactive, engaging basis. Intermediaries will be encouraged to share their views, enabling PSG to further enhance the competitiveness of its adviser network and improve the ease with which they do business.

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Inco

Broker viewed as extension of insurance brand

Alr

____________________________________

esults from the South African customer satisfaction index (SAcsi) on customer perceptions of the short-term and life insurance industries in South Africa highlighted that there was no significant difference in overall customer satisfaction between groups of customers that interacted directly with the insurers, or indirectly through a broker or financial adviser. “Consumers dealing with intermediaries perceive their broker or adviser as a natural extension of the insurance brand and, therefore, it remains vital for insurers to maintain good relationships with intermediaries who sell insurance products on their behalf,” explains Professor Adré Schreuder, founder and chairperson of SAcsi. The report also showed that consumer satisfaction with the short-term and life insurance industries increased slightly compared with 2013, showing overall satisfaction with these industries. The index measured the satisfaction of randomly selected customers of well-known short-term and life insurers by market share and compared this against the results released a year ago. The 2014 survey involved a sample of 2 665 customers in the life insurance industry, represented by Discovery Life, Liberty Life, Metropolitan, Momentum, Old Mutual and Sanlam Life and a category called ‘other’ which included smaller insurers. SAcsi also surveyed 3 559 customers in the short-term insurance

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industry which included customers of Hollard, Mutual & Federal, Outsurance, Santam and a collection of smaller insurers. In the short-term insurance industry, the 2014 index again identified Santam as the industry leader. Santam’s score showed marginal changes from last year and thus the company retained its title as the industry leader by scoring 2.2 per cent above the industry average. Last year’s joint leader, Mutual & Federal, reported a slightly lower score this year (dropping 0.6 per cent), bringing it on par with the industry average. Outsurance reported an increase of 3.6 per cent in its satisfaction score from last year and is on par with this year’s industry average. Hollard, at 3.4 per cent below industry par, has also shown the most significant increase (up 5.2 per cent) when compared to last year’s score, which was 6.6 per cent below industry average. “Santam’s customers have the highest expectations relative to expectations of the other brands measured in the industry, and it has managed to maintain its high satisfaction score by consistently meeting these high expectations. Hollard has shown good improvement and with continued efforts, the company is poised to move out of its ‘below par’ ranking,” comments Schreuder. In the life insurance industry, the 2014 scores were all on par with the industry average. Sanlam Life was named as the industry leader in

2013, and its score declined slightly by 1.9 per cent in 2014. “Liberty Life and Discovery Life reported customer satisfaction scores that improved by 7.1 per cent and 4.8 per cent respectively, effectively bringing them on par with the industry when compared to their below par scores of 2013,” notes SAcsi.

____________________________________

Momentum (up one per cent) and Old Mutual (down 0.3 per cent) maintained their industry par positions since 2013 with marginal changes in their scores. “When viewing the life insurance industry results for this year in isolation, they indicate that no single industry player scored significantly higher or lower than the industry average. This indicates that consumers do not differentiate among life insurers,” says Schreuder. “However, when looking at the results in comparison to last year, it is clear that there have been many changes in the industry. Liberty Life improved its customer satisfaction by a substantial margin, as did Discovery Life. All of the companies are now on an even playing field, so differentiation in the industry is fair game for whichever company takes the initiative or maintains the improvement trends that we have seen for some in 2013,” he adds. The SAcsi is an independent national benchmark of customer satisfaction of the quality of products and services available to household consumers.

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Legislation and liability Back to Basics W Brought to you by

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ith ongoing regulatory transformations, the South African risk landscape is in constant flux. In such an environment, the spotlight is thrown on professional indemnity and director’s and officer’s liability risk products and the need for brokers and insurers to fully grasp the grey area between. Add to that the Treating Customers Fairly requirements and changes in practice resulting from the Protection of Personal Information Act (POPI), and navigating the needs of clients grows even more difficult. Enter the 2014 Insurance Bootcamp Back to Basics programme. The first of three information sessions that kicked-off in March, the workshop zeroed in on the legislation and liability issues that brokers need to know in order to be prepared going forward. Hosted in Cape Town, Durban and Johannesburg, and with a special live webcast from RISKSA TV, the biggest thinkers in the field joined in one room to unpack the role,

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risks and best practices of brokers in the liability landscape.

Breaking down liability

Bringing liability policy back to its roots, Tiaan Erasmus, liabilities specialist at Hollard Insurance, focused on financial risks not transferable to broadform liability coverage. His concentration was on the differences between an injury loss versus a financial loss across the general, professional and management liability framework. Risk management is the identification, assessment and prioritisation of risks, insurable if it meets the criteria for efficient insurance. The nature of such losses must be definite and financially measurable. Thus, Erasmus notes, liability insurance is part of the general insurance system of risk financing, purchased to protect the insured from the risks of liabilities imposed by lawsuits and similar claims. “It protects the insured in the event they are sued for claims that come within the coverage of the insurance policy,” said Erasmus.

In this way, the importance of interdependence between managing a client’s expectations and risk is accentuated and the value of determining the right risk transfer solution for a client is essential. Furthermore, Erasmus explained that not all risks are transferrable, but as an industry collective, brokers have a responsibility to do their best to protect a client’s well-being while keeping in mind that liability policies insure a legal liability, not a moral obligation.

State of the market Insurers and underwriting mangers have a huge capacity, with soft pricing, wide wordings and low levels of litigation. Warwick Goldie, divisional head of Hollard Specialist Risks asks that considering this, is South Africa’s market part of worldwide liability trends? According to him, professionals, irrespective of whether or not they are required to do so by statute or whether or not their governing bodies require it, should have professional indemnity coverage. This includes companies, individuals or service providers, who offer services, advice

or guidance to third parties. Goldie added that considering the legal defense costs and claims management, “Professional indemnity should be seen as a comfort purchase.” In line with that same thinking, Goldie addressed director’s and officer’s liability insurance with the top 10 reasons why high ranking corporate clients should buy the cover including increased exposure and accountability, personal and criminal liability, employment disputes and peace of mind for legal costs. Referencing a landmark ruling, where the court sentenced the managing director of a mining firm to five years in prison for causing damage to the environment, Goldie underscored the value of D&O liability cover. It was the first such case where a sentence was imposed on a director and there was no option of a fine.

Practicalities of the market Supporting the sweeping need for professionals to invest in liability cover, Simon Colman of RBS Insurance Brokers (also known as the Liability Guy), told attendees, “If you design, advise, guide or assess, you should be looking for some kind of cover.”

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Addressing cover at work, Coleman gave a full picture of the challenges of the field, particularly those arising in the client-brokerinsurer relationship. According to him, brokers must lay down the groundwork for how their clients interpret coverage from the get-go. In particular, they should make it clear that professional indemnity processes are not a guarantee of work, nor a legal pursuit policy or a business relationship protection policy. Extending that to D&O coverage, clients must understand it is not a way for businesses to recover trading losses or a surety policy or financial guarantee. Why this is so important is highlighted in a first-hand example detailed by Coleman. In a fastmoving claim from 2012, he identified key complications encountered including lack of communication, rapidly accumulating legal fees, media interference and emotionality of clients. Using this as a basis, he addressed moving forward with an emphasis on broker, client and insurer co-operation, clear division of fees and preparedness for media interaction.

POPI preparation Norton-Rose Fulbright rounded out the workshop with a breakdown of POPI policy and the direct effect it will have on the insurance industry. The primary purpose of POPI is to regulate the processing of professional information belonging to individuals by outside parties; as such, it will have an effect on all areas of business including employees, clients, suppliers and any information held on behalf of third parties. “Personal information is widely defined and includes almost all information relating to an identifiable living person and juristic person,” explained the experts from Norton-Rose Fulbright. Under POPI, only processing of personal information entered into a ‘record’ by or on behalf of an individual is covered. Special personal information, such as that pertaining to children, health, religion or race may be processed only in limited circumstances and only by certain persons. Norton-Rose Fulbright’s advice is to act now to ensure compliance when POPI comes into effect; conduct gap analyses, draft privacy policies and internal rules for handling information, and mitigate the risks of security breaches.

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What makes a

good press release and how do you get it published? Michelle Camps

press release clearly indicates what the announcement is about and the journalist should be able to decipher what the point of the release is within the first paragraph. You should indicate at the top of the release whether there is a timing restriction or whether the release is for immediate publication. Ensure that the press release has well-constructed sentences, with clear facts and no spelling errors. Keep to the point and donâ&#x20AC;&#x2122;t waffle. Use double spacing as this presents the release more clearly.

irstly you need to understand what a press release is: a written communication that is distributed to the media sharing something newsworthy. It can also be termed as a media release, a news release or a press statement. Newsworthy being the key word. Clients often want to include the entire history of a company and promote as many products or services in what they feel is justified as a press release. There is often no point to the release other than being a glorified advertisement for the company. In which case, itâ&#x20AC;&#x2122;s a good idea to place an advert or advertorial at a price and receive guaranteed coverage. The key aspect that differentiates a press release from any other marketing communication is

It is essential to ensure that whoever is quoted in the release has the necessary media training to cope with an interview as they may be asked for a more in-depth interview. The release should end correctly and have the relevant contact person and all their contact details so that the journalist can get hold of them. whether there is any news value to the story, bearing in mind that a journalist will not cover anything that is not newsworthy. Coverage of a press release by a reputable journalist usually makes for more credible endorsement of your announcement. If a picture is included, if it is covered in full colour or if it is positioned favourably in the publication adds value to your media coverage. It is critical to build strong relations with the relevant media so you know whom to target when sending out the press release. Media are more favourable to PR consultants who have a reputation for delivering well-written newsworthy press releases. The structure of a press release is very important. Ensure that the heading of your

Gillian Jones, the financial services editor at Business Day, Financial Mail, has received many press releases over the years. The best advice she can offer is to keep it short, sharp and relevant. Tell a story, rather than try to sell a product. She adds that whoever you choose to put as the contact at the end of the media release should be available on the day you send it out, to respond to queries. There is nothing more frustrating than trying to follow up on a release only to find out you cannot reach the designated person. Donâ&#x20AC;&#x2122;t assume that just because you sent a press release, the announcement will be covered. Make use of a PR person or agency which have experience in constructing good press releases and sound relations with the media, especially within your industry sector.

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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Tips to improve client service

What really works

Neal Engelbrecht

Regional Manager – Western Cape at Renasa Insurance Company Ltd

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Short-term insurance, like almost every other industry, is experiencing increasing competition and growing client demands. Both intensify the pressure on companies to provide exceptional service and create unprecedented customer value. It is important that businesses understand the interrelated behaviour and needs of their clients, employees and investors.

t may be a cliché, but it’s undoubtedly true that a company’s biggest asset is its clients. They help you to grow by continuing to do business with you and also by recommending your services to others. Client service must be an integral part of everyone’s job and not just an extension of it. However, if companies focus only on service and neglect to satisfy employees and investors, they can create unsustainable service strategies that overlook opportunities to increase top-line growth and profits. All three key constituencies – clients, employees and investors – need to work together to achieve sustainable results. It is therefore important that we understand how to develop exceptional service models that can enable employees, owners and customers to thrive simultaneously.

What is expected from us to provide excellent service? Listen to your clients. Do not make assumptions. Listen carefully to your clients in order to truly understand their requirements. If necessary, ask them to clarify things that might be ambiguous. Be a good listener. Provide regular feedback. Keep your client posted on all relevant matters. Even if you are waiting for someone else’s answer, let them know. Procrastination in response to a client does not help anyone, because ultimately you do have to respond and the quicker you do it, the better. Empathise with your clients. Remember, your client may just have had a traumatic experience and deserves to be treated with care. Make them feel important and that you truly care for them. But don’t just go through the motions. Clients can tell whether or not you’re sincere. Treat them as you would like to be treated. Walk the extra mile. Give your clients the unexpected. It is those small extra things that don’t cost significant time and money that differentiate between simply adequate and truly great when it comes to customer satisfaction. A client that rates you as great will be a client for life, and will be your best marketing ambassador to others. Apologise and correct mistakes. We are all human and make mistakes. How we act on our mistakes is what makes the difference. When you make one, simply admit you were at fault and outline what measure you have taken to fix it and ensure it won’t happen again. Keep your promises. We all know the saying: “Do not over promise and under deliver, rather under promise and over deliver.” Keep your promises. If you know you are going to need more time, make sure you inform your customers in advance and not after the deadline. Communicate clearly. Make sure you explain the product or problem in terms that the client will understand and without making the client feel stupid. And avoid using insurance industry jargon. Know your product/market. You are a professional and an expert on the subject of insurance. And you need to stay on top, so keep track of what is available in the market. Always be prepared when interfacing with your clients. These are the hallmarks of professional advice. Value the client. Many will tell you that insurance is a grudge purchase, which might be true. Nonetheless, you are still in the business of servicing the genuine needs of clients. And they pay you only if they value that service. So you need to value them because without clients you have nothing.

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Respect the employees. The employees in your company are your internal clients and it is also important to keep them happy and motivated if you want to win in the team sport of insurance. Recognise their work and treat them fairly. Support them where necessary. The higher the morale of your staff, the better they will look after your external clients. I hope these tips will help you to retain more of your clients, grow their portfolios, and generate more new clients for your business. Sure, some of these tips may seem obvious, but too often we only pay them lip service. It’s always valuable to remind ourselves what really works.

W W W .I NNOS Y S .C O.ZA

+ 27 11 532 8300 | info@innosys.co.za

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Basel III

coming to a bank near you

Is the South African banking industry ready for Basel III?

Neesa Moodley

112 8 4

he global financial crisis in 2008 revealed inherent deficiencies in banking and financial regulation. To address this, Basel III, an international regulatory framework, is aimed at strengthening regulation, supervision and risk management in the banking sector.

What is Basel III all about? Basel III basically prescribes two minimum standards for funding liquidity. The first standard is the Liquidity Coverage Ratio (LCR), which is expected to become effective at the beginning of 2015 and aims to ensure that banks maintain an adequate level of what is referred to as high-quality liquid assets. This level and type of assets is designed to cover a bank’s liquidity needs for a 30-calendar-day period under a severe stress scenario. The second standard is a Net Stable Funding Ratio (NSFR), with an expected implementation date of early 2018. This looks to promote the medium and long-term funding of a bank’s assets and activities. “Both these standards will have a massive impact on the type and nature of the assets a bank holds with regard to ratings and duration. The upshot is that it will be costly for banks to implement and maintain,” says Brian Anderson, the head of business development for South Africa at Sungard Financial Systems. Jitendra Sharma, partner-in-charge of financial risk management practice at KPMG, says Basel III aims to correct the following: • Build up of excessive on and off-balance sheet leverage by the banking sector along with a decrease in the level and quality of the capital base. • Significant contraction of liquidity and credit availability resulting from the spread of the banking crisis through the rest of the financial sector. • Interconnectedness of systemic financial institutions through various complex transactions. • The use of short-term and wholesale funding, used by the financial sector as a cause of deleveraging and flight to quality.

The credit implications Basel III will certainly change the way that credit is granted in South Africa, even if you consider only the fact that liquidity is needed to cover short-term loans. Anderson says this is now an area to be identified and managed under the terms of the LCR standard. Banks are expected to experience increased pressure on their return on equity (RoE) due to increased capital and liquidity costs, which will in turn put pressure on margins across all segments. This could result in higher margins on rates or less favourable terms on certain short-term loans.

Regulatory pressure According to a Sungard study titled the ‘Regulatory Pressure Cooker’, banks are moving beyond checking the box. The study reflects that financial services businesses understand the need for cultural change but are struggling to achieve it. With reference to banking in particular, Sungard found that 40 per cent of respondents were finding it challenging to move from a check-the-box approach to compliance to a regulatory approach that is ingrained throughout the culture of their organisations. However, despite concerns that the degree of regulatory change is overblown, most firms accept the need for change. “Given these stresses and pressures, it is not surprising that more than a third of companies believe that the regulatory response to the financial crisis has been overblown and that changes are being made too quickly. However, in most cases, they are getting on with their response to regulatory change rather than trying to rein in or rescind reforms,” the study says.

It’s all about the timing Systematically important financial institutions (SIFI) are institutions whose eventual default may pose systemic risks to the economy. The Basel III framework indicates that SIFIs may be subject to enhanced capital requirements. “I think the Basel focus has gone broader; issues around liquidity and long-term funding and then the SIFI has been brought into the equation. The regulators are trying to make the global banking system safer and more comfortable for the man in the street,” states David Danilowitz, a banking analyst at Nedbank Capital. “The regulators internationally are trying to discourage the banks from getting into more risky business lines. South African banks were much more conservative in how they were regulated,” he adds. Cas Coovadia, managing director of the Banking Association of South Africa says, “Some countries have infrastructure challenges, particularly telecommunications, which is important for the banking sector. I think there are a number of issues, regulatory and infrastructure in particular, that we are sensitive to and where we can assist other jurisdictions with experience gains in South Africa.” The development of the reform proposals under Basel III has taken place over a very tight timescale. Sharma says individual national agencies in Europe along with the EU are currently in the process of translating the proposals into domestic legislation, even as core details on systemic risk are still evolving. “Implementation is designed to begin in 2013 and despite the fact that some fundamental issues are yet to be resolved, banks cannot  afford to be idle,” he says.

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Anderson says the implementation of Basel III will seriously challenge banks and their balance sheets through its range of new and more severe regulations. He puts this down to several reasons: • The new liquidity standards • The increased risk coverage ratios • Higher capital requirements (including the new leverage ratio) • A combination of these different requirements.

afford to be idle,” he says.

Are South African banks ready? Coovadia points out that the World Competitive Report 2013/14 rated South African banks third in the world for the soundness of its banking industry. The industry was also ranked second in financial market development for the availability of financial services. “However, Basel III’s liquidity requirements could potentially exacerbate elements of South Africa’s banking sector. From a liquidity point of view, we have

raised concerns because of the mismatch between deposits that banks pull in, and the way the financial system is structured; banks in South Africa don’t have access to too much long-term funding,” he says. “We’ve been working closely with the banking registrar on Basel III. We have consistently indicated that, while from a capital point of view, our banks are well capitalised but depending on what sort of buffers are needed, we need to keep an eye on that.”

Anderson points out that the combined effect of the Basel III requirements will vary from bank to bank based on the lending books and the construction of the underlying instruments in their balance sheets. So implementation will take longer for some banks than others. “However, the South African banking industry is always cognisant of international changes and is generally well prepared to address them. So as long as banks have started on their plans to meet the long-dated deadlines, I believe they will be ready,” he says.

The following areas are recommended for action: 1. Increased quality, consistency and transparency of the capital base. Banks are expected to improve the consistency of their common equity component of Tier 1 capital as regulatory adjustments will generally be applied to this component. Additionally, Tier 2 capital is to be simplified and Tier 3 eliminated. The goal is to improve the transparency of capital, with all elements of a bank’s capital to be disclosed. Some banks are already adjusting their balance sheets; however, raising new capital and retaining more earnings will continue to be challenging and impose a double strain on shareholders who will see dividends constrained alongside calls for additional capital. 2. Reduced on and off-balance sheet leverage. Banks need to constrain build up of excessive on and off-balance sheet leverage to avoid destabilising their deleveraging processes. Accordingly, banks will be expected to reinforce their risk-base capital requirements with a backstop measure based on gross exposure to be incorporated into Pillar 1. This backstop measure is designed to prevent the build-up of excessive leverage in the banking system. The implications are as yet unclear, in particular as to how individual institutions will be impacted. It could lead to reduced lending or it could incentivise banks to focus on high-risk/higher-return lending. Ironically,

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this raises the wider issue of shadow banking. There have been a number of notable public comments from the FSB on this issue. As banks deleverage it is likely that a public policy response will follow that will bring these assets back within the scope of regulation. 3. Short-term liquidity As a result of the crisis, global regulators and policymakers have realised that liquidity is potentially as significant as solvency for the stability of the financial system. The Basel Committee has strengthened its liquidity framework by developing new minimum standards for funding liquidity. Sharma says because the introduction of the LCR will require banks to hold significantly more liquid, low-yielding assets, there will be a correspondingly negative impact on profitability. 4. Long-term funding Partly as a result of liquidity requirements, banks may tend to change their funding profile, with a demand for additional long-term funding. The NSFR is designed to encourage banks to use stable funding sources and reduce their dependence on short-term funding. The NSFR compares available funding with required funding, using weighting factors to reflect the stability of the funding available and the duration of the asset. Banks will need to increase the proportion of wholesale deposits with

maturities greater than one year; this is likely to lead to higher funding costs. Stronger banks with a higher NSFR will be able to influence the market price of assets, while weaker banks will see their competitiveness reduced. While this could be read as a description of one of the core objectives of Basel III, it also implies that competition may in fact decrease as a result. 5. Counterparty risk management Significant strengthening of the framework for trading book and securitisation risk was introduced in July 2009 as part of Basel 2.5. Basel III will introduce further changes to the treatment of exposure to financial institutions and counter-party risk on derivative exposures. In addition, the Basel Committee will be imposing greater pressure to drive standardised derivative trading onto regulated exchanges. Basel III represents more than just another set of regulatory requirements for financial institutions across the globe. “The policy makers are trying to find a balance between financial stability and economic growth. For management, the proposals will have fundamental impacts on capital allocation, pricing of products for customers and the wider business model and the returns to shareholders,” Sharma says. He notes that banks with a vision to excel in a post-crisis world are taking action now to address Basel III requirements and strengthen their profit-making capacity.

POPI C

ertain sections of the Protection of Personal Information Act (POPI), namely the establishment of the information regulator, which would oversee much of the implementation of the Act, have been promulgated. Law firm DLA Cliffe Dekker Hofmeyr noted that establishment of the office of the Information Regulator, including its powers, duties and functions have, on proclamation by the president, come into effect as of April 2014. Advisory services firm KPMG highlighted that this means companies cannot rest on a belief that the establishment of the regulator will cause further delays with regard to POPI implementation. DLA Cliffe Dekker Hofmeyr explains that the Information Regulator is the body which will be responsible for monitoring and enforcing compliance with the act, handling data subjects’ complaints regarding alleged violations to their personal information and

information regulator established

facilitating cross border co-operation in the enforcement of privacy laws. “This move by government will hopefully serve to ensure that the office of the Information Regulator is operational and ready to govern, manage and ultimately ensure compliance with the provisions of the act once the balance comes into effect and is also indicative of progress in this regard,” said the law firm. Companies and public organisations have been urged to assess their level of compliance with POPI provisions, and consider implementing any compliance processes, procedures and policies which may need to be established and implemented. POPI gives a one-year compliance transition period (with a possibility of that being extended for up to three years); however, the obligations imposed by the act are extensive and far-reaching and anyone involved with the processing of personal information should become acquainted with the provisions

of, and their obligations under the act, creating awareness of POPI and its potential implications in their organisations and take appropriate steps towards compliance, says the law firm. POPI aims to give effect to the constitutional right to privacy of consumers by introducing measures to ensure that organisations process personal information in a fair, responsible and secure manner. The legislation covers why and how they collect, use, disclose and store personal information belonging to natural and juristic persons, explained KMPG. POPI was promulgated in November 2013, and commencement has been outlined for 2014. Growth of expertise among cyber insurers and underwriters in South Africa, who are steadily carving out their niche and advocating proactive solutions among cyber-underinsured South African companies, is expected to gather pace following these announcements.

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Moving Forward

115 7

Itâ&#x20AC;&#x2122;s a M&A in the insurance industry 116 114 8

deal

Christy van der Merwe

The South African insurance industry has seen an uptick in mergers and acquisitions (M&A), and this has also highlighted that good deals can degenerate into bad ones that erode value if challenges and conflicts arise in the combined business. RISKSA delves into the local M&A landscape, and gets insight on how to ensure successful takeovers.

&A is a risky growth strategy, with threats lying beyond just the financials. The success of many deals relies on cultural fit and winning over the hearts and minds of people from both organisations. Research shows that the most successful deal-makers are, in fact, those who can look at a transaction objectively and walk away if it doesn’t make sense. This is according to global professional services firm Towers Watson in its survey report, ‘Surviving the perfect storm: The outlook for insurance M&A in EMEA’. While still far off the pre-crisis peak in 2007, deal-making in the Europe, Middle East and Africa (EMEA) insurance sector has been steadily increasing over the past four years by both volume and value. The results of the Towers Watson survey suggest the trend for increasing activity will continue

and even accelerate, with 69 per cent of respondents indicating their company plans for some type of acquisition activity over the next three years. A successful deal lets a company gain access to new customer segments, distribution capabilities or expertise, and all of these factors support long-term, organic growth.

These opportunities are often available only through the selective acquisition of existing niche providers. While an increase in acquisitions is seen across insurance sub-sectors, the key motivation for dealmaking varies by company type, says Towers Watson. For life insurers, general economies of scale are rated as the most important driver. In contrast, for short-term, composite

TOP CHALLENGES OF M&A

Before closing the deal • Establishing a valuation that is acceptable to both parties • Finding a quality target • Getting the buy-in of management of the target company • Dealing with regulatory/antitrust implications • Assessing company financial position • Assessing feasibility of company forecasts • Appraising quality of management and staff.

After closing the deal • Realising the predicted financials • Differences in corporate culture • Aligning strategy of acquired company • Retention of talented employees from the acquired company • Getting the buy-in of the workforce of the acquired company • Securing the customer base • Incompatibility of IT and systems.

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Drivers of acquisitions: • General economies of scale • Strategic intention to expand to new geographies/sectors • Difficulty of organic growth given depressed economy • Opportunities afforded from market exits due to core consolidation strategies • Opportunities afforded from distressed/forced sellers • Opportunities afforded from new regulations • Attractive prices (from distressed/forced sellers) • Low-cost financing (or perceived need to utilise cash resources).

and reinsurance firms, expansion into new territories and sectors is vital for diversification by product type, geography and greater returns. Multinational insurers are expected to push harder to acquire attractive assets in developing markets that provide a promise of growth and increased (but arguably riskier) returns. The Asia-Pacific region is said to be the most attractive to insurers, followed by opportunities in Africa. The average minimum return on capital required by respondents when assessing an acquisition is relatively high at around 14 to 17 per cent. “We think that this hurdle rate could prove an obstacle to some deals, as a lot of potential targets are unlikely to generate this level of return. This is particularly the case when looking at consolidation in developed markets, and achieving this level of return will generally require large expense savings or other synergies to be delivered. Such operationalsaving projects carry significant risk and could struggle to generate this level of return, particularly if actual future growth does not match expectations,” says Towers Watson. South African insurers have been making acquisitions in the rest of Africa to take advantage of the low penetration rates in these emerging markets. Activity in Nigeria leads, particularly since regulation there necessitated the separation of certain financial services such as banking and insurance. Kenya, Mozambique and Uganda are also attractive markets to insurers.

Domestic market Closer to home, M&A activity is also heating up, and MD of the newly formed Hollard Broker Markets, Paolo Cavalieri, envisages that the trend for increased M&A activity in the South

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African market will continue. “There has been a lot of activity in the broker market, and this will continue, largely driven by regulatory changes. In the insurance segment, results from insurers have shown losses and the market simply cannot sustain itself at those levels,” he adds. Hollard, South Africa’s largest privately owned insurer, announced approval of its acquisition of Etana in September 2013. And bedding down of this merger has continued to now. On the Hollard Etana merge, Cavalieri notes that so far all is going well. He says that the regulatory process has been smooth, although getting through the red tape still takes too long, and can erode value. “The two teams being brought together as one has worked well. What really helped was that Hollard had a brand refresh on the cards, and this was postponed until after the merge, so that everyone felt a part of an entirely new, vibrant and refreshed brand. There was also an entire week dedicated to bringing all the teams together; staff took part in events that allowed them to properly get to know their colleagues through strategy events and also just getting to know each other socially. The week culminated in the brand relaunch and everyone feels a part of a new entity.”

In November, Infiniti Insurance announced its acquisition of Legal Sense, and Jardine Lloyd Thompson (JLT) announced that it had acquired Eluleka Consulting, a South Africanbased employee benefits and healthcare broker consultant.

The deal has seen six businesses being incorporated within Hollard, namely Etana, Hollard Select Brokers, Hollard Group Schemes, Hollard Corporate Markets, Astra Maritime and Scintilla. Four of these were already located on the campus, and movement of the other two is under discussion. This process is expected to run smoothly thanks to the lessons learnt from the integration to date. “Now we focus on going to market as one big team, and our foot is on the accelerator in that regard,” affirms Cavalieri.

Cavalieri, who has experience acquiring companies in his previous role as Hollard as CEO, then Etana chairman, reiterates that even when M&A is good news, there are people involved and this requires special attention. Sometimes any element of uncertainty or change can be met with resistance, and active campaigns must clearly communicate what has happened, any changes in structure, and operational processes going forward.

In other local deals over the past few months, in October, Zurich announced its 100 per cent acquisition of specialist underwriter BnB Sure.

In February 2014, Old Mutual Private Equity (OMPE) acquired a 20 per cent stake in retirement fund administrator and investment manager 10X Investments. “There is a lot of M&A activity in the industry. The reasons are largely increasing regulation; ageing principals; and increasing competition and operating costs. This trend is likely to continue,” says Brian van Flymen, managing director of Johannesburg-based brokerage Van Flymen and Associates. He adds that the business is always open to suitable purchases.

Sage advice RISKSA chatted to a couple of local insurance industry veterans, with experience on how to successfully assimilate companies. As with most things, they explain that the devil is in the details.

Van Flymen, whose brokerage Van Flymen & Associates has acquired a number of firms over the years and has experience with assimilating companies, says that one must be absolutely sure that the culture of the businesses that

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Telephone: +27 11 459 1640 Professional indemnity stuart sinclair stuart@leppard.co.za

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www.leppard.co.za Chartered Accountants Sherelle Horsfield sherelle@leppard.co.za

Underwritten on behalf of lombard insurance company limited (Fsp no. 1596)

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• are to be combined are compatible. “Our brokerage has acquired a number of practices over the years and the single most important issue when it comes to retention of the client base is that the brokerages share a common culture. This ensures sustainability and reduces the possibility that customers wish to move their account. Obviously the vendor must be satisfied that the clientele will not be alienated by the sale,” says Van Flymen. There are different formulae that may be applied when purchasing a brokerage, based either on a multiple of gross commissions or, in the case of larger transactions, on net profit before tax, explains Van Flymen. “The return we seek when acquiring is a return of 20 to 25 per cent on the purchase price,” he adds. Cavalieri says that while consultants can often play an important role when it comes to due diligence, and drawing up a framework for managing the merge when it comes to the softer issues of a merger, they are not best placed to manage these. “Employees want to deal with people they know or the new people they will be working with; you can’t delegate this to a third party. Ultimately the merging parties determine the success or the failure of the partnership.” Van Flymen emphasises a successful acquisition is generally dependent on work put in prior to conclusion of the deal and revolves around four main issues: • The vendor must operate in a similar market with regard to client profile. • The brokerage’s product suppliers used must be common as this makes due diligence easy and the take-on of data simple. • The vendor must have an acceptable reason for selling, so as not to become a competitor after the restraint expires. • The seller or marketers must remain with the acquirer for a period long enough to ensure a smooth handover, or if not practical, a downward adjustment of the price is necessary to compensate for a likely loss of custom. Cavalieri says that often the toughest part of

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Biggest impediments slowing acquisition: • Volatile economic environment • Price expectation gap between sellers and buyers • More attractive opportunities in other regions • Soft consumer demand • Concerns about capital adequacy • Regulatory uncertainty • Difficulty getting funding • Other strategic priorities • Pressure to instead return funds to shareholders through buybacks and dividends.

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a merge is that while all of the introspection is going on, business as usual needs to continue, and the company must remain present in the market and operate and deliver. “Here the risk of ‘eye off the ball’ happening is high, therefore you need a team looking after the integration.” He reiterates that people need to understand their roles, know what is happening and be prepared. They also need to open their minds to change. Change management is a well-known term, but the reality of it is important, and people need to prepare for what is coming and be open to new ideas and challenges – which is what people should be doing anyway. Cavalieri says that when managing the softer issues of a merge once all the paperwork has been done, there are four key things to keep top of mind: • Over-communicate. It is an absolute minimum to ensure people know what is going on and remind them that it is a positive thing. • Timing. The quicker you can get the physical relocation and intertwining done, the better. The longer the change and uncertainty prevails or is drawn out, the edgier people get. Unfortunately because the regulatory hurdles can take a while to get

finalised, this can be a major negative and devalue the merge. • Somebody needs to lead. Mergers are more difficult than acquisitions, because there is always a lead player in an acquisition. In a merger of perceived equals, people may stand back due to perceived sensitivities, but someone needs to take control and push the move so that it happens fast and successfully. You can’t both look at the ball and stand back waiting for someone else to play it. • Prepare. The preparatory work upfront needs to be done by both sides, and everyone needs constant reminders of the deal and why it is positive. Because business needs to continue as usual, people forget the information they have heard often and don’t grasp the reality of a merge until it hits them. Constant reminders of why the deal is being done are required. Stay close to the teams involved with managing the actual merge. Ultimately, M&A definitely catalyses opportunities to ring in positive change. It is just a matter of properly managing this change to ensure that staff remain informed, and feel safe and comfortable, and hopefully even enthused about the new possibilities that lie ahead.

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Lightbulb.pdf 1 18/03/2014 11:17:12 AM

NEW PRODUCT INNOVATIONS FOR THE FUTURE-READY INSURER Innovation Group is leading the way, in offering full service business process outsourcing to insurance providers and other risk carriers. Staying true to continuous improvement and innovation, we are pleased to announce the launch of three new service offerings/products to our insurance portfolio:

MOBI ASSIST AND LIFESTYLE APP

MOTOR GLASS SOLUTION

The Innovation Group Mobi Assist and Lifestyle App provides access to:

Through our Motor Glass Solution we alleviate the administrative burden of carrying high overhead costs and risks, by drawing on over 30 years worth of back office administration and supply chain management experience to offer an integrated and fully customisable solution to suit unique business requirements.

• Fully Customisable in your own branding! • A built-in panic button with access to 24-hour emergency services including emergency medical assist access, roadside assist, emergency home assist, appliance assist, home drive and legal assist. • Access to emergency location based services i.e. hospitals, police stations etc. • Real-time claim lodging and processing with the ability to upload incident-specific images. • Personal information can be updated for underwriting. • Access to news, weather and traffic. • Lifestyle and Loyalty programmes. • Allows for quoting on other insurance products and access to policy information. • App is available across all Mobi platforms (iOS , Android, Windows, Blackberry).

CMY

Through our customisable and fully impartial Motor Glass Solution, we are able to offer clients the following benefits: • Substantial reduction of overall glass claims cost. • Reduction of administration fees through a fixed price fee. • System integration functionality. • Multiple vendor bordereaux functionality which is easily customisable. • MIS reporting for your exact requirements. • Fully automated claims process including SMS functionality and unique workflows. • Integrated call centre capabilities.

ABANDONED RECOVERIES SOLUTION Innovation Group’s Abandoned Recoveries services is the latest addition to our Claims and Administration solution set and provides Insurers with a viable solution through which to recoup losses which have since been written off. The realisable benefits of Innovation Group’s Abandoned Recoveries service include: • • • •

No risk to Insurer after takeover. No upfront or continuous fees payable. No more tracer and or any other fees to be paid on a regular basis as the cost of all expenses are carried by Innovation Group. The administration to the client is kept to a minimum since no accounts will be rendered for payment as Innovation Group does this on risk and a percentage fee is only levied upon successful recovery.

Our offer is simple – partner with Innovation Group and we will provide you with an insurance specific software and services platform that will enable your business to change and respond, both now and into the future.

INNOVATION GROUP (PTY) LTD

Innovation House, 192 Bram Fischer Drive, Randburg, South Africa Private Bag x99, Bryanston, 2021, South Africa T: +27 (0) 11 790 5200, F: +27 (0) 11 790 5299 E: info@za.innovation-group.com, www.innovation-group.com/sa Innovation Group is an authorised Financial Services Provider

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Social media a must-have Anton Pretorius

Gone are the days when an organisation could tell people what they want and need through media advertising (print, radio, television and billboards). With customers becoming ever more tech-savvy, having an active social media account is no longer a nice-to-have but rather a must-have. RISKSA looks at the impact of social media on the insurance sector. 122

Traditional websites now need to be complemented by healthy and approachable social pages. Consider the following: marketers, who spent six hours a week or more using social media and engaging/sharing content on it, saw 52 per cent more leads than those who did not. Companies that use Twitter average double the amount of leads per month than those who don’t. This is according to Michael Stelzner’s ‘Social Media Marketing Industry 2013 report.’ Facebook is, according to ‘South Africa’s Social Media Landscape 2014’ – a study done by Fuseware and World Wide Worx – the most popular social media platform in South Africa. The top 50 corporations in South Africa average 58 000 followers each.

With the use of social media, we have the ease of searching conversation, the ability to set alerts to help us monitor our names, the constant availability of learning opportunities and more ways to communicate and interact with clients. With all of these tools , social media has given us great ways to protect and build digital reputations. Although PG Glass’s social network has some way to go, it has definitely seen the benefit of utilising it to the advantage of the company. According to PG Glass marketing manager Hulde Jones, social media has definitely been added to the company’s marketing budget. “It allows us to interact with our brokers and our clients (the man in the street) on a more personal level. The traditional media schedule needed a boost and social media offers our clients the opportunity to express their opinions and it gives us the opportunity to engage with our clients in an informal and casual manner.” Jones says that this strategy is not to dictate to PG Glass’s clients, but rather to educate and encourage engagement. “It is easy to be liked but equally easy to be unliked. We endeavour to entertain and inform at the same time.” She continues, “Social media has become very important as it forms part of our strategy to deliver trusted, convenient and excellent

TWITTER Background: Twitter, considered the SMS of the Internet was one of the 10 most-visited websites in 2013 and recorded 500 million registered users in 2012 who posted 340 million tweets a day. Twitter was launched in July 2006 by Jack Dorsey, Evan Williams, Biz Stone and Noah Glass. Why Twitter? If you’re hesitant to join Twitter, we encourage you to give it a shot. Set up an account, follow people and learn things. Yes, you’ll be spending time you don’t really have, but you will also learn things that will make you more valuable, smarter and informed.

At O'Keeffe effe ffe & Swartz, S bsessed bses sed about we're obsessed direc re marketing. insurance & dir direct

It’s important to get a handle and follow others. A good way to get your company involved in the Twitter-sphere is to get others to discuss and reference you. You can use Twitter to provide links to your blog post or company website, media events, reviews and videos. But refrain from posting too much about yourself. No one enjoys a 24/7 advertisement. A good rule of thumb is to have a four to one ratio for self-promotion.

FACEBOOK Background: Facebook is probably the most popular online social networking service in the world. Founded in February 2004 by Mark Zuckerberg, Eduardo Saverin, Andrew McCollum, Dustin Moskovitz and Chris Hughes, Facebook has over one billion active users worldwide. Why Facebook? Facebook has created a community of savvy consumers, connecting with friends, family, co-workers and acquaintances to share advice, information and recommendations. More than 30 billion pieces of content (web links, news stories, blog posts, notes and photo albums) are shared each month. Engaging on Facebook allows you to be closer to your existing and prospective clients. But how do you make your business come alive on Facebook? As you post updates, photos and more, think about what your customers find interesting and inspiring. How will you talk to them? What do you want to consistently communicate about your business? Experiment with different kinds of posts. Does your audience love photos, videos or prefer when you share useful links? What’s great about Facebook is that you can use the Page Insights function to see which posts are performing best. But above all, be authentic, responsive and consistent and turn successful posts into successful promotions. 

LTI AWARD MU

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The report highlights the intensified use of social media by South African corporations, revealing that 93 per cent of major brands use Facebook; 79 per cent use Twitter; 58 per cent YouTube; 46 per cent LinkedIn; and 28 per cent Pinterest. Less than one in 10 use Mxit, Foursquare or Instagram.

customer experience. Social media assists with a modern, yet caring image.”

GLOBA L

hile social media is still a relatively new phenomenon, it forms an important part of any business marketing plan and client base development platform. Having a flexible and well-managed presence in each of the ‘big three’ (Facebook, Twitter and Google+) has become a must for any business looking to get a foothold in the digital marketplace.

With over 20 years experience as an insurance outsourced service provider we deliver superior sales results to our clients, with outstanding quality sales performance.

At O'Keeffe & Swartz we're serious about sales. For more information contact Claire Weston: Tel: +27 11 777 6000 claire.weston@oks.co.za

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

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GOOGLE+ Background: Google+ has been established since the beginning of 2013 as the second largest social network in the world with over 500 million users. Why Google+? Google+ is by no means a replacement of Twitter and Facebook. G+ is a completely different experience, which is part of a bigger plan and process launched by Google, in order to evolve the way we relate to one another and how we communicate with the world and with our own personal world. What really makes the difference is that you can take advantage of the fact that G+ is promoted by the biggest technology platform on the planet. Everything you post in G+ is immediately indexed by Google, affecting and influencing favourably the results of the search

engine which is paramount for companies and professionals. It combines information, people and context. If you’re interested in building loyalty and keeping your audience active, you can create a community that’s truly relevant and important to them. Not only does this resource allow you to create ‘engagement’, but it also helps you position your brand in the social network and in the search engine; don’t forget that everything you share with the members of your community or circles will probably be appreciated and shared by them.

How the insurance sector compares: Today, social media has become a battlefield where clients can state their insurance problems, instead of phoning a call centre or branch. The insurance industry has a large presence in the social-sphere. RISKSA

SANTAM Facebook: Twitter: Google+: YouTube:

9 475 likes 2 353 followers 86 followers (68 699 views) 24 subscribers

HOLLARD Facebook: Twitter: Google+: YouTube:

6 433 likes 2 353 followers 86 followers (68 699 views) 24 subscribers

PG GLASS Facebook: 2 048 likes Twitter: 148 followers Google+: 5 followers (68 699 views)

MOMENTUM Facebook: 5 581 likes Twitter: 4 648 followers Google+: 5 followers (607 views) YouTube: 57 subscribers

OLD MUTUAL Facebook: 14 905 likes Twitter: 3 005 followers Google+: 75 followers (270 909 views) YouTube: 114 subscribers

AIG Facebook: Twitter: Google+: views) YouTube:

14 037 international likes 17 800 followers 527 followers (174 138 2 040 subscribers

FEDGROUP Facebook: 9 581 likes Twitter: 615 followers Google+: 2 followers (322 views) YouTube: 15 subscribers

AON SOUTH AFRICA Facebook: 580 likes Twitter: 977 followers Google+: 4 followers

ZURICH Facebook: 27 136 international likes Twitter: 13 600 followers YouTube: 420 subscribers

DELOITTE SOUTH AFRICA Facebook: 192 000 (international) likes Twitter: 8 600 followers Google+: 2 followers YouTube: 18 subscribers

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Top employers offer

Neesa Moodley

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top benefits

Employee benefits are the cornerstone of keeping your employees happy and a major factor in attracting high-calibre employees and retaining them. We look at the common denominators among three of the top employers in South Africa: Old Mutual, Flight Centre and Cashbuild.

ommon themes that emerged included share incentive schemes, flexible working conditions and aggressive training and development. Old Mutual was ranked Top Employer in South Africa in both the financial services and insurance categories, by the Top Employer Institute’s 2014 certification programme. The company also improved its overall ranking by moving up two places to fourth position and was again certified a Top Employer in Africa. Anisha Archary, human resources director of Old Mutual’s emerging markets division says, “The fact that this is the third year running that we are ranked number one in the financial services category is a clear indication that making Old Mutual a great place to work is now entrenched in our business. The public recognition by the Top Employer Institute strengthens our ability to attract, develop and retain the best talent. This award is proof of the years of work that have gone into continuously improving our employee value proposition.” “At Old Mutual, we value both individual skill and teamwork that’s inspired and supported by integrity, transparency and

performance excellence. As South Africa’s leading financial services and insurance brand, we understand the value and power of investing in people in order to enable a brighter future for all the people of our nation,” Archary adds. According to the Top Employers’ Institute, common themes include integration processes for new employees, development programmes, effective communication channels, flexible working conditions and initiatives to encourage networking among staff. Interestingly, financial benefits such as group life cover and leave benefits were classed as secondary benefits. Integration processes ranged from induction programmes to a follow-up meeting one year after joining the company. A survey earlier this year by Regus showed that 82 per cent of South African business employees considered flexible working hours a make or break condition of employment. The survey, canvassing the opinions of more than 20 000 senior executives and business owners across 95 countries, confirms that in South Africa flexible working can be used to avoid employee churn (and the consequent expense of recruitment agencies) as 75 per cent of respondents point to flexible working as a perk that attracts top talent.

The research also found that: • Seventy-four per cent of respondents say offering flexible working makes employees more loyal. • Fifty-nine per cent of workers would actually turn down a job that ruled out flexible working. • Sixty-two per cent say they would have stayed longer in their last position had flexible working been an option.

This is what the top three companies offer their employees. OLD MUTUAL Learning and development: This financial services giant invests almost R200 million in developing its own people every year. The Old Mutual Business School (OMBUS) is the corporate university of Old Mutual and focuses on developing employees’ core management and personal excellence. Some business units also have their own learning or training departments that offer technical training to business unit staff. Old Mutual offers a number of mentorship and coaching opportunities to its employees. These programmes give staff the opportunity to both be  mentored and to be a mentor.

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CSA RiskS

Notable examples are the Old Mutual Senior Women’s mentorship programme, where a group of Old Mutual’s most senior women mentor emerging leaders for a year. Employees are invited to mentor students from the Tsiba College in Pinelands. Tsiba College is sponsored by the Old Mutual Foundation and offers students from disadvantaged backgrounds the opportunity to attain a degree in business administration. The Old Mutual Business School offers a selection of career-paths and related courses, which have been tailored to address current business challenges such as change leadership and diversity, while recognising the need for personal development. Talented managers are supported through study loans for qualifications such as business administration (MBA) and management, conducted in collaboration with UCT’s Graduate School of Business. Coaching is provided through a database of registered coaches, who can be contracted in to provide individuals with performance and life coaching as part of an integrated development plan. Talent pools focus on key groups of people with potential talent are identified and their development is supported by the central human resources team. Pools could include executive assistant roles, leadership potential groups and top talent recruitment groups. Talent development initiatives include the

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mentorship networking forum and executive coaching. These initiatives assist with fasttracking development. Skills transfer programme focuses on key people that will be leaving the organisation within the next few years due to retirement or early retirement and ensures a support process to effect skills transfer. The performance of Old Mutual employees is assessed regularly and the performance management process provides the vehicle through which OMSA business strategy is executed and the objectives and goals of the organisation are met. Performance management is the way in which organisational critical success measures are translated into individual performance measures and provides a platform for the measurement of delivery and for consequential progression of individual development and growth. Facilities: Mutual Park in Cape Town offers employees a broad range of facilities. These include a shopping mall, a number of restaurants, a post office, a medical suite and a hairdresser. Staff also have access to a gym which includes a heated training pool, personal trainers, nutritionists and sports therapists. Other sports facilities include squash courts, hockey fields, tennis courts and soccer fields. There is a crèche and play school at the Cape Town office called the Green School. Remuneration: Old Mutual offers competitive, market-related salaries and a flexible

remuneration package and incentive structure. This enables employees to tailor their salaries and bonuses to suit their specific financial and other requirements. Life and health benefits: Old Mutual staff have access to a subsidised medical aid scheme administered by Lethimvula Healthcare. Employees can choose from a range of options from basic hospital cover to a comprehensive plan. Employees are offered life assurance which includes both death and disability cover. The retirement fund offers flexible contribution options within certain parameters. Annual leave is typically 22 days and can be structured by the employee to meet their personal needs. There is an option to either reduce or increase leave between 17 and 27 days by adjusting the salary package. Women with at least one year’s service may apply for up to six months partly paid maternity leave. Employee well-being: Old Mutual also has excellent preventive health and birth control plans offering access to a comprehensive programme that strives to offer employees across the board access to the tools and support they need to lead rewarding and fulfilling lives. The programme provides access to confidential professional counselling on a range of issues such as: • Marital or family distress • Emotional difficulties • Alcohol and drug abuse • Difficulties with a child • Stress overload

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Fast facts Old Mutual fast facts:

Cashbuild fast facts

Flight Centre fast facts

• Established in 1845 – 169 years old. • Total number of staff employed in SA: 19 333 • Women employees: 57 per cent • Male employees: 43 per cent • Offices in Cape Town, Durban, Gauteng with regional offices across the country. • Average employee age: 36 • Old Mutual Group operates in 34 countries across Europe, the United Kingdom, the United States, Latin America, Southern Africa and Asia Pacific.

• Cashbuild is the largest retailer of building materials and associated products, selling directly to cashpaying customers. • 210 (and growing) stores in South Africa, Namibia, Lesotho, Botswana, Swaziland and Malawi. • Number of employees: more than 4 500 • Cashbuild shares have been listed on the JSE since 1986.

• Footprint: More than 2 500 retail stores across 11 countries including Australia, New Zealand, South Africa, the United Kingdom, the United States, Canada, India and China. • Employees: More than 15 000 internationally and more than 800 in South Africa. • South Africa: Entered the SA market in 1995.

Staff share scheme: Cashbuild has established a staff empowerment trust, which is part of a share incentive scheme.

means there is a lot of room for career growth. There are future team leaders and team leaders in each store. The initial novice training programme is two weeks long and heavily focused on mastering the basic systems used to book travel. In the first few months of employment, staff attend additional backup training and online web seminars.

• HIV status. Confidentially is guaranteed and this service is also extended to family members. Staff share scheme: Old Mutual believes that ownership promotes accountability. For this reason it has a generous staff share scheme with particular emphasis on attracting and retaining quality managers.

CASHBUILD Learning and development: A progressive human resources practice which promotes a challenging and productive working environment. The company aims to ensure that all employees develop to their full potential and are recognised and rewarded for outstanding performances. The philosophy of the company is that employees are employed locally and then trained by Cashbuild. The company is committed to the development of all its employees and encourages selfmotivation and initiative. A job done well is acknowledged and exceptional performance is rewarded. Employees are nominated by their colleagues for the Employee of the Month Award in each store. Exceptional individual performance is recognised at an annual award ceremony known as the Hall of Fame Banquet. Candidates are nominated by their colleagues and selected by an elected committee. Employees receive bonuses for exceptional performances.

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FLIGHT CENTRE Extended healthcare: Medical and dental coverage. Employees pay into this programme for their first two years of employment. Employee assistance plan: Counselling and coaching for wellness at work, home and in life. Paid holidays: Two weeks in year one, three weeks in year two and four weeks from year three. Discounted travel with travel agent card (after six months industry experience):To help agents become more familiar with destinations, they get an additional week of paid leave per year. Moneywise: In house financial adviser. Healthwise: Promotes personal health and well-being. Careerwise: One-on-one career coaching to help employees in their current position and help them identify future opportunities within the business. Training and development: Ninety-five per cent of promotions are internal which

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Dress for success Whether its business casual or a tailored suit, brokers work hard to look good inside and out of the office. RISKSA speaks to fashion trend and buying manager Georgina Simone Rawden on the dos and donâ&#x20AC;&#x2122;ts of workplace fashion. Laura Owings

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Who is your business style icon? I have to say Tom Ford for always being impeccably dressed. Despite working at the forefront of fashion and pushing the boundaries in his work, his own look is always classic, simple and elegant. He really knows how to pull off a suit.

What are SA’s biggest workwear trends? When it comes to office attire, there is far more choice and scope for individuality nowadays. With more international brands filtering into South Africa and showcasing trends, consumers are learning to be less conservative in their work clothing, incorporating their own personal style. Colour and prints are big trends for both men and women and corporate clothing is no longer restricted to black, white or grey. You can still keep your look professional with neutrals, but by adding a printed blouse or touch of colour such as navy, red or even yellow, allows for a more fashionable and individual look.

Who is your business

Business workers tend to wear a lot of suits. What tips do you have for showing personality? When it comes to suits, you can never go wrong with a really good quality, well-cut, white shirt. It’s worth investing in the best you can afford. Not only will it keep well, but a good shirt in beautiful fabric always stands out. Another option is to add a touch of colour, print or texture. For example, pastel colours work really well in the workplace and you can add your personal touch with printed shirts or blouses, the use of accessories such as cufflinks, patterned socks, scarves and jewellery. The key is not to overdo it to keep it professional.

Professionals often attend night affairs. How should they dress for out of office functions? At a work function, you definitely want to keep it smart but also bring through your own style. Not only are you an ambassador for your company, but it’s a great opportunity to showcase your personal brand. To get the balance – unless it is a black tie event – apply the smart casual approach. Men should wear a blazer or smart jacket with chinos, trousers (you could even get away with dark indigo jeans if your industry is more creative), a good belt and leather shoes. A suit is always appropriate, but I would stay away from grey as it is dreadfully dull and a sure sign that you’ve come straight from the office. For ladies, you can never go wrong with a desk-to-dinner dress. If you come straight from the office, add heels and an evening bag or clutch to smarten up a dress, blouse and skirt or trousers. Keep accessories classy and avoid showing too much flesh to give a great impression.

As we head into the next season, what should shoppers look for? What is the biggest workwear faux pas? Dressing too sexy for the office is the biggest faux pas. No matter what industry you work in, showing too much skin or cleavage is a big no-no and sends the wrong impression, especially if your role involves presenting or is client-facing. I’ve seen it time and time again with younger colleagues, and it’s not just the males in the office who find it hard to concentrate when there is too much on show.

With the onset of winter, our wardrobes do tend to get darker, but instead of falling back on black and grey, work other autumnal colours in such as charcoal, navy, tobacco, burgundy and shades of deep green and blue. Checks are big for winter for both men and women and work well in the workplace, especially in shirts, skirts and jackets. Invest in a good coat or jacket, good boots and add colour through knitwear and accessories like scarves or belts.

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news

Marsh congratulates the FIA Award nominees As a long-standing partner of the Financial Intermediaries Association of Southern Africa (FIA), Marsh wishes to congratulate all the nominees of the FIA Awards on a year of excellent service, and wishes them luck. “Over the last five years, through the incorporation of Alexander Forbes Risk Services, Marsh has been proud to partner with the FIA and their professional indemnity scheme for its members. We have the expertise, experience and skillset required to assist and partner with the FIA in achieving its objective to provide the best solution for the professional indemnity requirements of the FIA and all of its members,” says Jonathan Healy, divisional executive at Marsh Africa. Marsh has negotiated a competitive rating structure for all member categories and with the addition of new aggregate limit of indemnity options, members will continue to benefit from the widest cover available and the excellent levels of service they have become accustomed to, at competitive rates. Members are individually rated according to their risk profile based on the underwriting information and needs analysis obtained. “We believe that advisers also require financial peace of mind and this how we support the top professionals in this industry,” Healy adds.

Hospital cash plan fraud levels remain high The Office of the Long-term Insurance Ombudsman reports that incidents of excessive claims under hospital cash plans have still shown no signs of decrease during the course of 2013, compared to previous years. “Unfortunately, we cannot report that there was any improvement in 2013. The office continues to receive complaints involving such claims, despite the fact that we uphold the insurers in almost all of the complaints,” the ombud stated in its annual report. “A lot of people are admitted to hospital with conditions that don’t require an overnight stay for more than a day or two, at most. They then spend anything from five to 20 days in hospital and complain to us when the insurers don’t pay the full claim,” explains Jennifer Preiss, deputy ombudsman for long-term insurance. “We always ask for the clients’ medical documents in such cases and it is alarming to see that the same medical institutions and doctors’ names keep appearing. We have made the FSB aware of our findings and it is investigating. However, there doesn’t seem to be any real success in catching the gatekeepers who allow these kinds of arrangements,” she says. “About 92 per cent of the complaints that we have received come out of KwaZulu-Natal. This has been the case for the last few years and, in the ombud’s office, we are still not witnessing any drop in the numbers. We are also seeing a few more of these kinds of cases coming out of the Western Cape,” Preiss adds.

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Aon downgrades South Africa’s risk rating Aon Risk Solutions today released its 2014 Political Risk Map, revealing an increased risk rating for South Africa along with all four fellow BRICS nations. “Countries representing a large share of global output experienced a broadbased increase in political risk including political violence, government interference and sovereign non-payment risk,” the global risk manager reported in a statement. The map measures political risk in 163 countries and territories, in order to help companies assess and analyse their exposure to exchange transfer, legal and regulatory risk, political interference, political violence, sovereign non-payment and supply chain disruption. According to Aon, despite having strong political institutions, South Africa is struggling from recurrent strikes, which have become the major means of wage setting, and which weaken the outlook for business and raise financing costs. South Africa’s rating was downgraded from medium-low risk to medium. The remaining BRICS countries were all downgraded from medium to mediumhigh risk.

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Credit insurance claims increase by 119 per cent Credit insurance claims have soared in 2013 with South Africa’s largest credit insurer, Credit Guarantee reporting a 119 per cent increase in claims paid in 2013 compared with 2012. On the back of this, Statistics SA data released in March 2014 paints a bleak picture as liquidations rose to 171 for February 2014 compared with 132 in January. Most liquidations were voluntary and sectors most affected were community, social and personal services, transport, storage and communications, financing, real estate and business services. Credit Guarantee also reported that the number of its clients seeking formal business rescue climbed from 137 in 2012 to 202 in 2013, an increase of almost 50 per cent. It’s number of potential claims notifications - essentially warnings from insured clients that their debtors are falling behind in payment obligations – also increased by 91 per cent compared with the same time a year ago. “Operating conditions are extremely tough at present with challenges facing business on many fronts," says Luke Doig, senior manager of investments and economic services at Credit Guarantee. "It could be argued that the economy is all but at stalling speed. Our experience certainly does not reflect the 41.3 per cent fall in liquidations reported by Stats SA for the first two months of this year. We also need to highlight a trend that began last year that while the number of defaults has not increased markedly, the monetary values involved certainly have. Large-scale liquidations have become the norm and we do not see a catalyst that will cause a reversal hereof in the short-term,” he says.

Getting it right RISKSA works hard to get things right. In our April 2014 issue, in an article entitled ‘Reinsurance and the year ahead’, an editing error led us to mistakenly indicate that new market entrant, Infiniti Re, intends to grow its income from its then R5.5 million to around R10 billion or R12 billion by June of this year. We meant to say that Infiniti Re was aiming to end June 2014 with an income of around R10 million to R12 million. In the same piece, it was implied that Infiniti Re executive director, Paul Ray, had suggested that larger South African insurance companies could be hesitant to support Infiniti Re because of the company’s rating. This was not his suggestion. In the same issue, the article entitled ‘Asian tigers eye Africa’ incorrectly referred to Paul Ray as chief executive of Infiniti. Paul Ray is the executive director at Infiniti Re. We apologise for any confusion and regret these errors.

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Record number of ombudsman complaints in 2014 A record number of complaints were received by the ombudsman for long-term insurance in 2013. The annual report reveals that 10 028 cases were filed last year, 4 496 of these finalised. “Not all of the complaints that we received were carried over into full cases. A number of them fall outside of our jurisdiction,” says Jennifer Preiss, deputy ombudsman for long-term insurance. She states that the ombud’s closure rate should be measured against the 4 238 full cases and the 1 045 transfers handled by the office. The report speculates that the rise in complaints was driven by the increase in policies sold as well as a greater awareness of the ombudsman’s work. Roughly R103.8 million in lump sums was recovered for complainants in 2013 and a further R343 741 in compensation was awarded. According to the report, 33 per cent of cases were resolved wholly or partially in favour of complainants, which is a one per cent decline from 2012. The ombudsman’s office this year adopted a new business model in accordance with international practice. A complaint against an insurer will now only be accepted after the insurer has had an opportunity to resolve it.

Liberty launches online tool In a move that demystifies the overwhelming barrage of statistics available, life insurer Liberty has launched an interactive online tool allowing users to see Liberty’s claim statistics for particular groups, uncovering how such statistics affect individual consumers. Liberty’s Claims Explorer allows users to see the percentage of Liberty’s overall claims that are accounted for by the selected group; the main types of insurance claimed for in this group such as life cover, loss of income protection or critical illness; the leading causes of claims within each type of insurance; and case studies of actual claims where personal information is de-identified. “This makes the statistics much more meaningful and personal to the individual and, as a result, helps them understand the reality of the risks they face. Knowing your risks means positive action can be taken to ensure financial preparedness in the event of the unfortunate occurrence,” explains Ryan Switala, head of risk product development at Liberty. Advisers can also use the tool when engaging with their clients, reiterating who needs what cover and why, and allowing customers to better understand what they are purchasing.

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New UMA for the taxi industry RMB Structured Insurance Limited (RMBSI) has announced the launch of Commuter and General Underwriting Managers, catering specifically to the South African taxi industry. The UMA was formed by Derek Vermeulen, who brings 29 years’ experience providing insurance options to the taxi industry. “A large portion of taxis on our roads are not insured. At best approximately 50 000 of the 200 000 units that we see every day remain insured for any meaningful period during the operating life of the vehicle. This creates an undesirable situation in which taxi owners are assuming risk as they are no less vulnerable to vehicle theft, damage or liability to third parties through daily use. We aim to bring a suitable, innovative product to the market that will address this vital shortcoming,” says Vermeulen. “Commuter and General will offer brokers policy options that can be tailored in a meaningful way to meet a taxi owner’s needs,” Steve Smith, head of RMBSI’s UMA division adds.

newappointments Europ Assistance

Rouxlé van Molendorff has been appointed CEO of Europ Assistance in South Africa. She takes over from departing CEO, Gys Steyn. In her new role, Van Molendorff will assume Rouxlé van Molendorff responsibility for all the activities of the Europ Assistance Group in the country, and will join the group council. Van Molendorff has a history of leadership within Europ Assistance South Africa, which she joined in 2000 as a GM of marketing, and later as GM of operations. The appointment sees Van Molendorff moving on from her role as MD of the company.

Indwe Broker Holdings Indwe Broker Holdings CEO, Giel Muller, will hand over the leadership baton to Peter Olyott, who will take over responsibilities as of 1 May, in addition to his current role of MD at Indwe Risk Services. “I reflect with pride on an amazing career that started on 3 January 1980 at Prestasi’s only

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office in Rissik Street, Johannesburg. What a ride it was,” enthused Muller in his farewell letter to stakeholders.

Muller paid tribute to the company’s clients, management and staff, board Peter Olyott members and business partners. “My greatest farewell gift is respect and amazement at what people can achieve when they believe in themselves. I wish Peter and all members of the management and staff every success on the road ahead,” Muller concluded.

RMBSI’s existing UMA partners, and drive the strategy on new business going forward.

He has 35 years’ experience in the insurance industry and considerable senior experience in the reinsurance market which saw him hold the position of managing director at Flagstone Reinsurance Africa for six years.

Glacier by Sanlam appoints Andre Tuck has been appointed investment account manager at Glacier by Sanlam. He will service the Cape Town City Bowl and Southern Suburbs regions.

RMB Structured Insurance RMB Structured Insurance has appointed Steve Smith as a member of the executive management team and will take responsibility of the UMA business pillar. This will include business Steve Smith development as well the management of strategic relationships with

Andre has over 20 years’ sales experience within investments, gained from a number of financial services companies including Old Mutual, Plexus and, most recently, Absa Investment Management Services. Andre Tuck

He holds a financial management qualification from Unisa, a BML from the University of the Free State, and is a Certified Financial Planner.

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news international

Ghana No-premium, no-cover approach to be implemented

Following Nigeria’s successful move to a no-premium, no-cover policy, the National Insurance Commission (NIC) of Ghana is set to implement a similar approach, prohibiting the sale of insurance policies on a credit basis. The decision comes in the wake of poor management and the inability of companies to pay their claims in a fair and prompt manner. The new approach will better enable insurance companies to invest funds appropriately, make adequate provisions for claims and fulfill the promises they make to policyholders. “Insurance companies are to collect their outstanding premiums from policyholders or write them off as bad debt before 31 December 2014,” comments CEO of the NIC, Lydia Bawa.

Nigeria Demand for telecoms-linked microinsurance soars

Roughly 100 000 MTN and Airtel network subscribers have bought microinsurance products every month since the launch of a new platform in October last year. This is according to Leo Lekan, deputy director of authorisation and policy at Nigeria’s National Insurance Commission (NAICOM). The number of new microinsurance policies sold to telecoms subscribers since October of 2013 now stands at 600 000. Since the release of its microinsurance guidelines at the start of 2013, NAICOM has made the sector a key focus in a drive to increase insurance penetration in the market, while ensuring that set minimum standards protect the consumer and establishing the general features of microinsurance products. Airtel currently offers an airtime-based microinsurance product called Padi4Life in partnership with FBN Insurance, while MTN is offering its own insurance service with Mansard Insurance called MTN Y’ello Cover.

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Kenya Britam becomes East Africa’s largest panAfrican insurer

Kenya’s second largest insurer and investment house, British-American Investments Company (Britam), recently announced the approval of its 99 per cent shareholding acquisition of Real Insurance Company, cementing the merged entity as the largest pan-African insurer in the East and Central Africa regions. In addition to Kenya, Britam has operations in Uganda, Rwanda and South Sudan. The acquisition expands this footprint to Tanzania,

Malawi and Mozambique. The acquisition is in line with the group’s key strategy for regional expansion and a five-year strategic plan which includes expansion into the real estate market. Britam director of marketing and corporate affairs, Muthoga Ngera, says that national expansion in Kenya remains a key priority for the group. The insurer aims to have a branch or franchise in each of the country’s 47 provinces within the next five years. In March, the group recorded a 12 per cent increase in profits for the year ended 31 December, with a profit before tax of Ksh3.2 billion ($37 million).

China China to boost crop insurance

China will intensify efforts to promote crop insurance, with insured farm produce to cover 60 per cent of the country’s cultivated land by 2020, the country’s top insurance regulator reports. The country will improve its crop insurance mechanism, especially services for animal husbandry and planting sector, in a bid to guarantee food security, says Wang Zuji, deputy head of the China Insurance Regulatory Commission. Insurers will be encouraged to cover farm produce prices, rural houses and infrastructure. The bureau is also considering subsidies for insurers to promote agriculturerelated business. China had 74 million hectares of crops insured last year, accounting for 45 per cent of the country’s seeded area. A total of 33.67 million rural households received combined compensation worth CNY 20.9 billion (R35.3 billion).

Global Willis launches cargo insurance with political risk cover

Willis has launched a new insurance facility, called Undercover, to protect cargo in transit and in store against all types of political violence, terrorism and war risks. The policy wraps up the coverage provided by these different policies under a single facility, eliminating gaps in coverage and reducing premium costs by removing duplication of cover. There is currently no other such facility available in the market. Heightened levels of political unrest and uncertainty have highlighted a significant gap in coverage for cargo risks around the world. Standard all-risks cargo insurance policies may not respond to losses arising from various types of violent unrest, according to Willis. For example, traditional cargo insurance policies typically exclude certain losses, such as those arising from civil war, insurrection, rebellion and terrorism for goods in store. Meanwhile, political violence policies, which typically respond to these types of risk, usually exclude transit exposures and cover fixed assets rather than stock. In recent years, cargo losses worth more than $100 million have not been recovered under traditional cargo insurance policies due to critical exposures being excluded, warns Willis Group Holdings, the global risk adviser, insurance and reinsurance broker. “With all the unrest currently sweeping across the world, it can be difficult for companies to be assured that they have the right cover in place, particularly when the definition of violent acts is open to interpretation. The violence in Syria, for example, has been inconsistently reported as a civil war, a rebellion and an insurrection. And yet how these events are defined has a critical bearing on whether or not insurance policies will respond,” says Trevor McGarry, executive director of Willis’s marine insurance business. Ace unveils global cyber division

Global insurer Ace Group has launched its Global Cyber Risk Practice, established to address growing risks as legislation and exposures for privacy and network security evolve around the world and customer demands for cyber risk insurance and risk management solutions grow. The launch of the Global Cyber Risk Practice follows recent research on both sides of the Atlantic that suggests cyber risk is now a top concern for corporate risk managers. A study published in December 2013 by Ace in Europe indicates that cyber risk was a top-three emerging risk issue for businesses based in the region, with 40 per cent of companies surveyed believing that it is one of the emerging risks most likely to have a significant financial impact on their business over the next two years. Ace’s privacy and network security offerings help businesses mitigate the financial and reputational risks associated with privacy breaches, covering first-party expenses and providing access to a suite of data breach specialists and other important benefits. Ace’s data breach professionals, combined with one of the company’s data breach endorsement options, bridges the gap between risk transfer and purchased loss control, creating a comprehensive risk management program for privacy, data breach and network security risk.

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events

IICoGH Golf Day 2014 During April, RISKSA attended the IICOGH annual Golf Day at the prestigious Westlake Golf Club situated near Tokai. With spectacular conditions overhead, the stage was set for a great day of golf with some fancy prizes up for grabs. With sponsors manning the holes, and some even displaying interesting exhibitions, it was a day enjoyed by all. Sponsors on the day included Zurich, MUA, Santam, Hollard, AIG, Lion of Africa and many more.

his putt while Ian Smith Grant Cooper from Proloss sinks watches on. of Tri-Marine Acceptances casually

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(Left to Right) Vaughn Williams (Phoenix Risk Solutions), James Peters, Bradley Matthews (Hollard Broker Markets) and Evan Jacobs (Marsh Insurance Brokers).

FMI Roadshow – Life benefit launch As part of its national roadshow, income protection specialist FMI announced the launch of its innovative life benefit product at the lavish Feathers Lodge in Durbanville. This product is set to change the way clients, and their families, benefit from their life cover. A first for South Africa, FMI Life Benefit will provide both a lump sum payment and a future income stream on the death of the life insured, to ensure that beneficiaries are taken care of.

IIG Business Seminar

FPI Conferenc 2014: Chester the Puppet and his associate Conrad Koch entertained delegates at the IIG’s recent breakfast seminar.

We keep you covered

The venue at Melrose Arch was the place to be during the Insurance Institute of Gauteng (IIG)’s recent breakfast seminar. The theme, as coined by one of the speakers, was “how to worry properly”. Attended by 184 members of the insurance industry, the focus of the seminar was largely on the upcoming general elections (7 May 2014). Justice Malala, Chester the Puppet, and his associate Conrad Koch, were invited by the IIG to present an overview of the elections and to talk about the preceding events before the elections.

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IIEC Inaugural Breakfast The Insurance Institute of the Eastern Cape (IIEC) held its inaugural breakfast at Elizabeth Place in Port Elizabeth during April. A special mention and thanks was given to SASRIA for the generous sponsorship of this event. A big thanks was also given to outgoing president Carole Schulz. Incoming president Matthew Kethro says he looks forward to planning and executing the annual events – both educational and social – together with IIEC’s eight council members.

(Left to right) Ntsoane Selela (SASRIA customer relations manager), Matthew Kethro (IIEC president) and Nico Knop (SASRIA marketing manager).

With regard to educational matters, the IIEC will be working closely with AIG as well as Charmaine Koch of the Insurance Institute of South Africa (IISA) to bring the education of short-term product lines to members. This will carry CPD points (now recognised by IISA which is a SAQA-recognised body). Michelle Brown, owner of Brown’s Public Relations and chairwomen of the Business Women’s Association of South Africa’s PE branch, was the guest speaker. Her talk was entitled, ‘Lessons learnt from being in my own business for 26 years’. “The insurance industry will need to keep abreast with every opportunity on educational matters as we enter and maintain the ‘survival of the fittest’ mode,” Kethro says.

0/2011 IIEC president), (Left to right) Trevor Daniels (201 dent) and Carole Schulz presi IIEC ent (curr ro Keth Matthew . dent) presi IIEC 13 (2012/20

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Cold as ice Cold storage facility for vehicles

High earning brokers who own classic cars are faced with a dilemma. You’ve made the moola to buy your childhood dream car, but now you’ve nowhere to keep it. What about a fridge? Well, not really a fridge, more like cold-storage for your classic wheels. Let me explain…

Anton Pretorius

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imple storage just isn’t going to cut it for your pristine 1965 Mustang you’ve named Christine (after your high school sweetheart). If you own a vintage or classic car (think Ferrari Barchetta), we know you wouldn’t dare leave it to mildew under a tarp in your yard.

your friends or family to drive your baby. The term ‘vehicular cold storage’ doesn’t mean your vehicle gets chucked into the freezer and defrosted years later. No, cold storage refers to a group of professionals that understands the needs of your vintage car, and takes meticulous and methodical care of it.

Storage isn’t kind to vehicles. Corrosion and decay takes its toll on the vehicle’s engine, body and interior. Time itself can ruin tyres and even a car stored inside a garage can attract some unwanted furry friends.

Jason Furness, owner of RockStarCars, in association with Crossley and Webb, are specialists in cold storage and the upkeep of vintage and classic cars. Originally from the United Kingdom, Furness decided to move to South Africa after years of travelling. He and his wife, Charlotte, started RockStarCars almost by chance.

You’ll need a responsible adult to drive the car every two to three weeks to keep the drivetrain lubricated and the battery charged. An engine that doesn’t run regularly collects moisture and internal rust, especially on the portions of the cylinder walls not covered by the pistons, valves, camshafts and valve springs. The same goes for the brake discs, which are made from easy-to-rust cast iron. A car that’s driven far enough to get completely warm and remain that way for an hour or more will drive off the moisture, coat any lubricated surfaces with oil, and sweep the rust off the discs before they start to pit. But what do you do? Your investment is too precious to part with and you don’t trust

Furness had been an avid classic car collector and motorsport enthusiast all his life (his first ever car was a Triumph Herald at the tender age of 15). From hiking all the way to the South of France to watch the Grand Prix in Monaco to winning the world kite-buggy championship, he eventually settled in Cape Town and started RockStarCars in 2000. “Our client base is usually made up of high-end customers, mostly South Africans. These are people who might have property in Johannesburg or Cape Town, and some of them have more than one classic car. It’s not that they want to get rid of their cars. In fact, most of them absolutely adore their vehicles and it’s a space issue for them,” he says.

Furness has some impressive vehicles on his shop floor. Included in the glass box is a Bentley Brooklyn, Bentley Continental, Mercedes-Benz 280 SL, FF Ferrari 4-wheel drive and a 458 Italia. “We offer our more high-end clients total peace of mind. They can simply drop off their vehicle, and they know it’ll be left in good hands and taken care of,” he adds. RockStarCars, in association with Crossley and Webb, provides the ideal environment at its central location in the Cape Town CBD and secure off-site warehouse for storing classic and luxury cars. However, because classic and collectible cars are sought-after alternative investments, storing these motoring investments correctly is of great importance. The glass box storage facility is a climatecontrolled environment with four-car lifts inside the box; so four vehicles are elevated and four cars are positioned below. The elevated cars are usually cars with flat trays under them (like Ferraris), so nothing drips or leaks onto the cars below. The optimal temperature inside the glass box is kept at a standard 22 degrees Celsius. Furness explains that the care process of their client’s classic vehicle is quite intricate, and that the company goes to great lengths to keep the vehicle in tip-top shape. “It isn’t just about throwing a car cover over it and locking it in some bay,” he says.

“ Storing these motoring investments correctly is of great importance.”

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“The glass box has a sensitive climatecontrolled environment and because it is air-conditioned, there is no humidity inside the box at all. The tyres are kept up to optimal pressure and batteries are placed on trickle charge. Trickle charges mean a fully charged battery under no-load at a rate equal to its self-discharge rate, thus enabling the battery to remain at a fully charged level,” he says. According to Furness, as soon as the client phones to take the car out for the evening or afternoon, it’s a simple turn-key process for the client. “We take the car out of the box and off they go. The cars are generally left with a full tank of fuel. Essentially, we offer a service to a client who is pressed for time, and who just wants to enjoy their car.” Due to the nature of classic cars, RockStarCars gives clients a unique experience that offers total peace of mind. “Instead of simply storing your vehicle in some underground facility in Cape Town where sand, salt, dust and moisture is a constant threat, for only R4 500 per month, RockStarCars and Crossley and Webb offer clients one the best services in terms of classic car vehicle maintenance. “With normal long-term storage facilities,

clients sometimes return from a long work excursion only to find the battery and tyres flat. They have to spend a lot of time and money to get the car back up and running,” he says. Crossley and Webb specialises in restoration projects. This process includes repaint, retrim, rebuild and total chassis-off restoration or any combination of these. Modern upgrades are also done to the vehicles. Classic cars are enhanced with upgrades like modern braking systems, handling kits, power steering and modern airconditioning systems.

the cars come through, they get washed, cleaned, waxed and polished. Staff give the cars paint corrections and touch-ups. Any defects are taken out of the paint and the car is put back in the box and that’s how they stay. “It’s like a good pedicure for your classic car before its put to bed.” What’s more, RockStarCars sources vehicles for the movie and advertising industry in Cape Town and South Africa. “We have an extensive database of vehicles: from stunning American classics to beaten-up pickups, everyday cars to slick Maseratis. You dream it, we’ll arrange it,” Furness says.

“The Crossley and Webb service department carries out routine maintenance on all makes of classic and sports cars and is dedicated to quality workmanship. It offers an inspection and valuation service for clients who need to carry out due diligence on a potential classic car purchase,” Furness says.

“When supplying vehicles for the film and advertising shoot, we stay with the cars. We don’t just hand over the keys. We make sure the doors are opened and closed correctly. We make sure drivers don’t have pins in their clothes that could damage the interior, and we even show actors how to drive the vehicles.

He highlights the fact that these vehicles are not merely a means of transportation, but also an investment for these clients. “These people spend a lot of money restoring their vehicles; keeping it in its restored and optimal condition is big money,” he says.

We work closely with classic car collectors and people with a passion for their vintage wheels in South Africa and we’re the go-to guys with access to a very exclusive collection of vintage cars. Last year, we even did a film shoot where a 458 Ferrari was towed by an old classic Beetle,” Furness concludes.

There is a body detailer on site. When

“The tyres are kept up to optimal pressure and batteries are placed on trickle charge.”

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in the palm of your hands Laura Owings

Businesses are increasingly concerned with the privacy and security of their communications. Blackphone, the newest player in the mobile market, has responded with the world’s first security-enabled smartphone.

he annual Mobile World Congress in Barcelona, Spain swept the technology industry, as it usually does, in late February. But the biggest blockbuster this year was the unveiling of the world’s first smartphone which places privacy and control directly in the hands of its users. Blackphone, which is currently available unlocked for pre-order internationally, includes a unique combination of operating system and application tools that offer unparalleled security and privacy to executives, employees and public figures. “I have spent my whole career working to uphold the objectives of privacy,” says Phil Zimmermann, co-founder of Silent circle and author of PGP Technologies, which has teamed with Geeksphone in the Blackphone venture. “Now that mobile technologies are mature enough, we are proud to launch Blackphone, the first mainstream, fully integrated secure communications phone designed for anyone to use as easily as the legacy phones they’re already used to.”

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While the exterior may be familiar, it’s what’s on the inside that makes Blackphone unique. Built with a PrivatOS from Android, and stocked with a full suite of privacy-enabled applications, the phone gives users the ability to escape unauthorised surveillance, commercial exploitation of activity data and the loss of privacy and security. The privacy applications come built-in with free two-year activation. It includes Silent Circle’s flagship security software tools Silent Phone, Silent Text and Silent contacts, which allow subscribers to make phone calls, send texts and have video chats via encrypted channels. Subscribers can be based anywhere in the world, as long as they have data connectivity. Additionally, Blackphone is fitted with anonymous search, private browsing and secure cloud file storage. It also ships with a smart Wi-Fi manager and a powerful remote-wipe and device recovery tool. Technology reviews of the device are generally favourable, supporting its purported security capabilities. But some users could be misled about the extent of such protection, particularly in the aftermath of the Edward Snowden and NSA spying scandal. Blackphone, however, says the phone is not designed to offer NSA-level security. Nor is it a James Bond-style supergadget. Instead, it maintains the phone is for corporate users and individuals with concerns over corporate espionage. Stephen Bonner, from KPMG’s information protection team, warns that focus on privacy may be a security flaw in itself. Furthermore, he says the phone shouldn’t be viewed as a catch-all safety measure that protects users from everything. “By owning a Blackphone, a user could become a target because it acts as a red flag to criminals by highlighting that there’s something to hide. As the devices attract and house high-value data, attackers will be inclined to break in,” Bonner told The Telegraph in March. “Some of the threats these type of products aim to protect against aren’t realistic for most users. They might be a cool gadget, but business users need to worry a lot more about the applications on their device and the endto-end protections they have in place.” The device is targeted at travelling executives looking to use their own devices for both professional and personal use. However, the company notes its market can be much broader, “offering a solution to anyone who understands the value of maintaining personal privacy rather than giving it away for free”, it said in a statement.

“We wanted to deliver not just the best privacy, but the best total package,” explains SGP Technologies’ MD Toby Weir-Jones. “Blackphone offers unprecedented value in turnkey secure communications platform, and it’s easy enough to use; anyone who’s used a smartphone before will feel right at home as soon as they turn it on.“

Blackphone is currently priced at US$ 629 and comes with a full set of premium features, including HD screen, varying storage capacities, 1.3 megapixel camera and Bluetooth capability. Pre-orders of the phone are expected to be delivered when it goes on sale internationally in June this year.

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Making sailing sexy again 2013 RISKSA Regatta Anton Pretorius

In October last year, the prestigious Royal Cape Yacht Club (RCYC) set the stage for one of the most anticipated events on the South African insurance calendar. With some exciting sail racing and an electric atmosphere, events like the RISKSA Regatta really highlight the RCYC as an ideal venue for hosting corporate events.

he South African financial services fraternity, its members and all its captains of industry descended on the RCYC on 25 and 26 October 2013 for a weekend that not only featured some serious sailboat racing, but joyous festivities that lasted until the wee hours of the morning. COSA Media publisher, long-time RCYC member and ex-crew member on Majimoto II, Andy Mark, has always looked for ways to involve his love for publishing with his love for sailing – and this is where the RISKSA Regatta concept was born. Attracting sailing newbies and expressing the club as an event venue for RCYC clients and visitors was Mark’s objective and the RISKSA

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Regatta ticked both those boxes. Interest for the 2014 event has already been huge and RISKSA is keen to bring the event back this year. “Together we have pulled off the greatest corporate sailing event ever held in the Royal Cape Yacht Club’s illustrious 108-year history. From the outset, our intention was to create a platform for all involved to network and showcase their brands to competitors and clients alike. The enthusiasm and ability displayed by all involved shows that the event was successful,” Mark said. Angelique Edwards, COSA Media’s head of people and brands, says that 2014’s event promises to be bigger and better than before. “On the back of the success of last year’s

inaugural event, the interests from major financial services companies have nearly doubled. This year, the event promises a lot more participation with some surprises along the way,” Edwards said. According to Mark, RISKSA magazine is all about showcasing brand insurance. “Our competitors and sponsors made our jobs easy. We have far and away the best folk working and supporting our industry than in any other I have experienced. It’s been mentioned that we should find ways to make our industry sexy and I think we’ve achieved that.” Camargue Underwriting Managers, aka Les Gardiens of the Sea, emerged as proud winners of the Saturday’s racing. On yacht AL,

skippered by Robbie van Rooyen, Camargue sailed around the course in a corrected time of just 2:29:07, helped along by the freshening south-easter. Skipper van Rooyen said: “Thank you RISKSA. The crew and I had so much fun. We cannot wait for next year and hope that an event of such standard can be something we can look forward to every year. We were all overwhelmed by clothing we received by our firm; how well everything was organised and, of course, the party afterwards.” In second place was the Insurance Learning Academy’s team Aphrodisia, on the only catamaran in the race, Isla. Skipper Ian Henderson surprised everyone with his turn of speed on a course much more suited to keel boats. Their corrected time was 2:32:50. Henderson said: “We thoroughly enjoyed ourselves and had the most wonderful group of people in our team. We hope they are on board next time we take part. Next year, we’ll be sailing around South America, but when we return in 2015, we’ll definitely want to take part in the RISKSA Regatta again.”

The spirit displayed from some of the participants was nothing short of extraordinary. Whether it was the Insurance Learning Academy team which dressed up in tiny nurse outfits or prominent broker Tim Timmerman who braved the cold and sailed in his Speedo, everyone was in high spirits. “What an amazing group of people,” Mark was heard saying. The Friday night Captain’s Cocktail Party was hosted on the RCYC’s deck and the awards ceremony on the Saturday in the Regatta centre. The festivities were held in style with a live swing band, some quirky costumes and a merry atmosphere. Many memories were made and members of the insurance and financial services industry are still talking about it six months later. Chatting to RISKSA team members and boat owners, it’s clear that they all look forward to the 2014 edition of the RISKSA Regatta, not only in terms of racing, but also the post-race festivities. Space is filling up and spots are limited. To book your boat for the 2014 RISKSA Regatta, make sure you contact Angelique Edwards on (021) 555-3577 or ange@comms.co.za

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TL TRAVEL

Park it

Airport valet parking services Anton Pretorius

With long queues, flight delays and expensive airport parking lots, stressing about your car is the last thing a chief decision-maker with a demanding schedule needs. Not only does your vehicle need secure parking, but giving your Mercedes some TLC during your week-long business trip would be welcome, right? Airport valet parking is a great alternative for the businessman on the go. We look at whatâ&#x20AC;&#x2122;s on offer.

relatively new concept, airport valet parking services were established to minimise the inconvenience that air travellers had to endure; they had to look for parking prior to boarding their flights and, when returning, they had to walk, pay and search for their vehicles. Now airport valet parking companies are popping up like mushrooms at every airport terminal.

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The trick is to choose a company that will offer you the best in terms of price, service and keeping your vehicle safe and sound. We called several airport valet service companies across South Africa to compare what they offer including additional services. We asked each of them what it would cost to park our vehicle at their premises from Monday to Friday, and what services they offer.

Airport Parking Services (APS)

Car Park OR Tambo

Ka-Port Storage Aircare Carpark

OR Tambo Int. Airport Airport Parking Services offers hasslefree and convenient service available at both OR Tambo International and domestic terminals. BEE-compliant, APS is situated within close proximity (three minutes) to the OR Tambo International airport.

OR Tambo Int. Airport Car Park OR Tambo claims it provides a professional, safe and reliable service. All cars will be delivered to the domestic departure drop-off zone. Because flights are often delayed, Car Park will collect your luggage (if requested) and have your vehicle delivered within minutes.

Port Elizabeth Airport Ka-Port Storage, a family-run business, is within minutes of Port Elizabeth airport. Transfers to the airport are in your own vehicle so you do not need to unload your car to get a shuttle transfer. Vehicles are stored within the private grounds of Ka-Port Storage, and each car is assigned its own private roofed parking bay.

OR Tambo Int. Airport AirCare Carpark will collect your car and store it securely while you’re away, even returning it “sparkling clean” upon request. The driver/consultant will meet you at the departure terminals.

R400 (incl. wash and vacuum)

R340 (incl. wash and vacuum)

R320 (incl. wash and vacuum)

R340 (incl. wash and vacuum)

Services

Staff member collects your vehicle from terminal and stores it at undercover premises. Once landed, they’ll have your vehicle delivered within minutes.

All vehicles kept undercover and secure in private parking site (4 km) from airport. Surrounded by electric fencing, 24-hour surveillance and armed response. Collect and drop-off of vehicle at terminals

Ka-Port Storage staff will meet you at the car park, drive you to the airport in your own vehicle and bring it back to the secure car park where it will remain until you return.

All vehicles kept undercover and secure in private parking site (7 km) from airport. Surrounded by electric fencing, services by armed response. Collect and drop off of vehicle at terminals and collect luggage upon request

Additional services

Full premium valet (R550), vehicle servicing at dealers (R250), licence disc renewal (R250).

Full premium valet (between R450 – R550)

None

Valet (R450 – R550), executive valet wash (R1 000 – 1 400).

COMPANY

Location

Rate for five-day storage

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Cape Executive Parking

Automotion Airport Parking

Katanga Executive Parking

Execupark

COMPANY

Mr Parking

Location

OR Tambo Int. Airport Mr Parking claims it has a state-of-the-art under-roof parking lot, eight kilometres away from the OR Tambo International Airport.

Cape Town Int. Airport Cape Executive Parking prides itself on being the initiator and pioneer of the valet parking concept in South Africa and, in particular, starting the business at Cape Town International Airport.

Cape Town Int. Airport Automotion prides itself on delivering effective service experiences to all its customers over the years.

Cape Town Int. Airport Katanga Executive Parking offers a simple drop-off service, so you can just check-in and fly.

King Shaka Int. Execupark claims it provides a service that makes flying out of King Shaka International Airport convenient and hassle-free.

Rate for five-day storage

R300 (incl. wash and vacuum)

R1 005 (incl. wash and vacuum)

R1 060 (incl. wash and vacuum)

R975 (incl. wash and vacuum) R195 extra if flight is delayed

R300 (incl. wash and vacuum)

Services

Mr Parking collects and drops off your vehicle at the domestic or international departure zones and the staff will “treat your car with TLC”.

Drop off and collection takes place at the airport. It operates with 130 parking bays and offers 24-hour secure undercover parking in the building

With dedicated, reserved bays, simply sign the paperwork, grab a complimentary newspaper and relax. Vehicle is washed, vacuumed and stored.

No services, except complimentary wash and vacuum. If your flight is late by an hour or two, you pay the full R195 day charge extra.

Execupark’s professional drivers will meet you at King Shaka departures and take your vehicle to a fully secure private location monitored by surveillance cameras and armed response.

Additional Services

None.

A full valet service by Mini valet (R350), Auto Armor is avail- full valet (R700). able upon request. Selected services such as petrol, servicing and longterm parking can be arranged.

Mini valet (R225), hand polish service, Katanga VIP valet and leather treatment.

Pool car option, chauffeur service, general repairs, taking in vehicles for servicing at preferred dealership, fuel top-up at no extra cost, except for fuel, full auto valet (R450) and Meguiars polishing (R150).

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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

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RISKSA's guide TO

business

travel in

Africa

With its complexities and idiosyncrasies, there is no doubt that Africa can be challenging for any traveller. Language and cultural differences abound, safety and security concerns remain dominant, and disease and health risks are exacerbated by poor infrastructure. RISKSA offers you a business travellersâ&#x20AC;&#x2122; guide to seven key markets in Africa. Sarah Bassett & Nick Krige

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MOZAMBIQUE

he good news is that business travel services and high-end hotels are sprouting up across the continent, from Nigeria and Kenya, to Libya and Gabon, buoyed by business travellers flocking to the rich stores of natural resources, including minerals, oil and gas. According to Sandra Carvao, spokesperson for the United Nations World Tourism Organisation, international arrivals to Africa are expected to more than double for both business and leisure travel, from 50 million in 2011 to 134 million in 2030. Here’s everything you need to know when travelling for business to Mozambique and Mauritius.

Mozambique

Where to stay Radisson Blu Maputo The latest addition to corporate-friendly hotels in the city, this 154-room hotel opened in February, with a central location, stylish facilities and sea views proving popular with business travellers. A range of restaurants and leisure facilities are available for entertaining clients and relaxing, while meeting and conference rooms can cater for most events. Free high-speed Internet access is a plus. Polana Serena Hotel, Maputo In the heart of the city centre, this hotel offers impressive ocean views, while meeting the needs of a busy businessperson. It is within

A country famed for its idyllic beaches and warm seas, the bulk of Mozambique’s economic activity is centred on the southern capital of Maputo. The city is the political and economic nerve centre of the country. Northern regions are increasingly significant for the economy, where a boom in coal and iron ore mining have made the region a more popular business travel destination. Agriculture, mining and tourism form the backbone of the economy, which has seen impressive growth in recent years. GDP growth for 2013 was at 8.4 per cent, according to International Monetary Fund figures.

easy reach of the international embassies, government buildings, presidential complex, shops, restaurants and sidewalk cafés. Mavalane International Airport is a 15-minute drive from the hotel. Conference facilities and a suite for social events are also available. Hotel Cardoso Part of the continent-wide Lonrho group, the Hotel Cardoso is just up the hill from the city centre, but set apart from the bustle on a hilltop offering spectacular views over the bay. The relaxed terrace and restaurant are ideal for winding down at the end of the day, and there’s free Wi-Fi on offer throughout. Conference and events facilities are available.

Polana Serena Hotel, Maputo www.marieclairvoyant.com

Safety

Vaccinations

Electronics

Airports

Mozambique is considered a safe fairly country. Nevertheless, muggings, robberies and more serious crimes do occur. In recent years, attacks on women have increased in tourist areas. Women are warned not to walk alone on beaches. For the most part, Mozambican people are extremely warm and friendly and the country is far safer than its neighbours.

There are no vaccinations required for entry in to Mozambique. Hepatitis A and typhoid vaccinations are recommended. Malaria prophylaxis is recommended for all travellers to Mozambique.

Mozambique uses two-prong round pin, European-style plugs.

Maputo International Airport (MPM) is the largest airport in the country and receives the majority of international flights.

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Language While Portuguese is the countryâ&#x20AC;&#x2122;s official language, English is spoken widely in southern Mozambique. Outside of the major cities, a translator may be required for complex discussions.

Internet Internet usage in the country has been hampered by inadequate fixed-line infrastructure and the high cost of international bandwidth, but access has increased following the introduction of various broadband services including the landing of the first international submarine fibre-optic cable in the country in 2009. The lower cost of bandwidth has already started to trickle down and 3G services is now widely available.

Getting around For commuting between major cities, air travel is recommended, as potholed roads make for long, tiresome journeys. If you absolutely need to hire a car, a chauffeur driver is advisable. Within major cities, Maputo particularly, youâ&#x20AC;&#x2122;ll never struggle to find a taxi. Few taxis use their meters, so agree on a fare upfront.

Time zone GMT +2

Telecoms Coverage for roaming is dependable within cities. The local service providers are Mcel and Vodacom and both offer large network coverage throughout the country.

Money and currency Currency is the Mozambican Metical. US Dollars and South African Rand are widely accepted, particularly in the south, and can be easily exchanged at banks for local currency. Visa and Maestro credit cards are widely accepted in most large cities.

Visas Passport holders of Botswana, Malawi, Mauritius, Swaziland, South Africa, Tanzania, Zambia and Zimbabwe do not require a visa to visit Mozambique, and are granted a 30-day entry stamp on arrival. However, Mozambique recently introduced a strict visa regime applicable to all other foreign passport holders, who are now required to obtain a visa in their home country. Visit embamoc.co.za for full details.

MAURITIUS

auritius is one of the most prosperous economies in Africa. The government has taken bold steps to diversify the economy away from the historic mainstay of sugar cane production, and today the island attracts international investment in financial services, textile manufacturing and information technology. Tourism is also a key driver of the local economy. Port Louis is the capital city and home to most business headquarters. Commercial activity is focused around the large harbour, where the bulk of Mauritian exports are processed.

The Residence Mauritius This hotel is considered a jewel of the international hotel scene. The facilities offer meeting rooms and Internet access and a milelong private beach of immaculate white sand fringed by tropical gardens.

The St Regis Mauritius Resort The St Regis Mauritius Resort includes panoramic Indian Ocean and Le Morne Brabant Mountain views from its beachside location. All rooms offer free Wi-Fi.

Where to stay Trish Maritz, general manager at Sure Giltedge Travel, recommends the following hotels for business travellers to Mauritius.

The Residence Mauritius kodomo.com

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Telecoms

Airports

The major mobile phone and Internet service providers in Mauritius are Orange and Emtel; both providing their services through infrastructure largely controlled by the parastatal company Mauritius Telecom. International roaming is widely available, although locally purchased SIM cards are more cost-effective if you plan to make a lot of calls.

All international flights land at Sir Seewoosagur Ramgoolam International Airport in the south of the island. Due to the island’s narrow, winding and congested roads, the drive to Port Louis can take up to two hours, and a pre-arranged transfer is your best option.

Time zone GMT +4

Language English is the official language of government and business, but Mauritian Creole and French are spoken widely.

Getting around Within Port Louis, the rush hour traffic jams can make walking the fastest option, but taxis are freely available. Few drivers use the meter, so negotiate a fare upfront.

Visas With the exception of west and central Africa, passport holders of most African countries do not require a visa to visit Mauritius. Visit www.gov.mu for a full list of exempted passports and information on how to apply for a visa if required. If a stay is longer than three months, a temporary residence visa will be required.

Safety “Be alert for your own security in Mauritius. Exercise common sense and look out for suspicious behaviour,” warns Maritz. She offers the following safety advice: • Avoid remote areas alone. • Do not leave valuables in view in your car. • Avoid unexpected offers of (seemingly free) guided tours. Ulterior motives are common. • Do not patronise unlicensed taxis. Some robbers use this trick to lure and attack their victims.

Currency & cash Currency is the Mauritius Rupee. In addition to Rupees, Euros are accepted as currency, but not as widely. Credit cards and travellers’ cheques are widely accepted at Mauritian hotels.

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Internet

Vaccinations

Electrical

With its position as a growing hub for the information technology industry, Internet access is widespread, fast and affordable. Most hotels will offer complimentary web access, but public Internet cafés are easy to find in Port Louis.

A yellow fever vaccination is required for entry into Mauritius. Hepatitis A and B vaccinations are recommended. Malaria prophylaxis is not required for Mauritius.

Three-pin square plugs are used, although some hotels use round-pin South African plugs. Adaptors are readily available.

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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 Dear fellow passionate insurance industry member

t’s the fifth ‘Kuier with Carel’. I have just turned 40, which is old if I look at the Fulcrum Group’s CEO Vaughan Jones who is 31 and remember that the Lombard group’s chairman Miles Japhet was CEO of Hollard in his late 20s. Electioneering by our perhaps less than awe-inspiring politicians has reached fever pitch. Nic Kohler, CEO of Hollard, celebrated his refreshed brand by competing and finishing the Cape Epic. M&F may be for sale. Zurich is on track with its strategic review (the brokers who didn’t understand the previous one will be happy). Our regulator Jonathan Dixon still manages to challenge a few of our rather staid members with his consistent regulatory mantras, matched only by his consistent early morning performance in the Melrose Virgin Active Classic. Auto & General is cooking in Turkey; I wonder what Prime Minister Erdogan thinks of these clever South Africans and their chutzpah – making honest money in his country while many accuse him and his ruling party of being corrupt. Santam continues to be a solid industry leader we can be proud of with a great campaign around risk management and so on and so forth. In short, life in the South African insurance industry is much the same as always. Or is it? I gave serious thought to what I would write about this month. I was prepared for the scheduled line-up of brokers and their lunches (where they eat, why and with whom). However, I decided not to. Why?

Well, I want to use this month’s column inches to throw out a challenge, a plea, a cry that I hope makes King Richard III’s offering his kingdom for a horse sound soft and dull. My cry is for the hundreds of thousands of people who work in our great industry and the millions positively touched by it, daily, to give a damn. Do not go gently into the good night of a fading South Africa and world where it seems that potholes, wet coal, thin rates, boring competitors and too frequent and severe claims rule the day. We have all heard the Nelson Mandela quote about how things seem impossible until they are done, but it bears repeating. We can change things for the better. We have to. Let’s ditch the schadenfreude of pointing out what is wrong. Let’s not revel in the negativity of what could have been. Let us – as an industry which with innovation, brains and not a little courage insured ships sailing into the unknown 400 years ago – stand up and reclaim our place in society. A place of integrity, commitment, fun and making the world a better place. This week I end not with the obligatory bottle of Louis Roederer to be won (Douglas Donnelly from CIB and a few other entrepreneurial insurance businesses have won every time so it seems rather pointless to continue), but rather a note that the views in this column are my own and not those of the RISKSA team. If you find some of what you read a bit uncomfortable, e-mail me at carel@comms.co.za and let’s ensure robust debate in this industry we love and continue to build the best industry to work for.

Next time I will share some thoughts on how brokerages started.

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