RiskSA magazine November 2013

RISKSA Magazine

2012

4 PICA AWARDS WINNER

MAGAZINE OF THE YEAR

november 2013

Our readers are the smartest folk in the room.

issn 1812-5964 • RSA R45.00 (incl vat)

Wellness ProgramMEs Trends

ISSUE

133

9 771812 596005

11013

2014 Benefits & Pricing Staying on track

Is 4x4 cover for real?

Cybercrime

Lack of regulation leads to ignorance

Event Liability

How Etana underwrote the RISKSA Regatta

KINGJAMES 28087

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contents november 2013

regulars

features Medical scheme examination: 2014 benefits and increases

10

short terM

27

MEDICAL

54

Staying on track Is 4x4 cover for real?

28

71

Auto strike impact lingers for panel beaters, policyholders

life

42

erm

91

Wellness programmes

56

107 141

Medical aids on the up and up

66

better business

Critical cover: 10 unexpected costs of severe illness

72

lifestyle

Marital regimes - With this contract, I thee wed

10

80

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

Lack of regulation leads to ignorance on extent of cybercrime in SA

92

The show must go on

96

Reaping rewards: banking loyalty programmes compared

108

To have and to settle‌.

118

News

126

Events

136

RISKSA Regatta

142

Attitude and attire for the year-end function

152

28

92 84

Subscribe today RISKSA MAgAzIne

2012

4 PICA AWARDS WINNER

MAGAZINE OF THE YEAR

noveMbeR 2013

Our readers are the smartest folk in the room.

R490 for12 months

D T

Publisher & editor Andy Mark Managing editor Nicky Mark Copy editor Margy Beves-Gibson

TO TH

Feature writers Anton Pretorius Hanna Barry Neesa Moodley-Isaacs Nick krige Sarah Bassett

issn 1812-5964 • RsA R45.00 (incl vAt)

Art director Herman Dorfling Design and layout Mariska le Roux Regular contributors Jenny Handley Kirsten Halcrow Rob Rusconi

WELLnESS PRogRAmmES TREndS

ISSUe

133

9 771812 596005

11013

2014 BEnEfITS & PRIcIng Staying on track

Is 4x4 cover for real?

Cybercrime

Lack of regulation leads to ignorance

Editorial enquiries

Event Liability

How Etana underwrote the RISKSA Regatta

PO Box 60320, Table View, 7439 Tel: 021 555 3577 Fax: 086 618 3906 E-mail: nicky@comms.co.za Website: www.risksa.com

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or fax to 086 546 8674.

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2012

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

We for

FIA Pe

A

FIA Co

w

TO OUR UNDERWRITING MANAGERS, BROKER PARTNERS AND FANTASTIC HOLLARDITES – THANK YOU FOR MAKING US #1.

(TWICE)

We’re grateful to the members of the Financial Intermediaries Association of South Africa for voting us:

FIA Award Winner: Short-Term Insurance Product Supplier of the Year Personal Lines

AND FIA Award Winner: Short-Term Insurance Product Supplier of the Year Commercial Lines

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their existing processes and systems, or compromising their independence.

Want the best of both worlds? Contact Renasa today on 0860-RENASA or visit www.renasa.co.za.

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2013/09/16 8:55 PM

from the editor Dear reader, By the time you read this, the RISKSA Regatta will have been held and the FIA floating trophy awarded. We’ve become quite good at hosting events over the years – both our own seminars and those held in conjunction with our partners – but this event was something special. For starters there was just so much going on: aeroplanes left Langebaan Airforce Base at the exact moment necessary for them to be overhead at the regatta start; two evening functions where we served food; and we had live entertainment on both nights in a part-outdoor venue susceptible to the vagaries of the Cape weather. So it was with great interest that we watched first hand how event insurer, Etana, went about its business underwriting the risk. Read all about this story on page 146.

Gap cover is still with us – thank goodness – but comparing medical aid and medical insurance products is sometimes worse than trying to compare cellphone contracts. We take a stab at uncovering what is happening in the industry and what the trends are without using words like obfuscation and acronyms like PSA, NHI, PMBs, CMS, MSA and ARVs. Read more on page 10.

One more month to go until 2013 is consigned to the year that was, and we turn our focus to what 2014 holds in store.

Don’t miss our year in review issue next month and enjoy the read.

8

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10 2

Against a backdrop of unrelenting medical inflation, problematic fraud statistics, increased levels of chronic illness and continued regulatory uncertainty, it is once again the season of medical scheme contribution increases and benefit change announcements. RISKSA offers an overview of the key changes afoot.

11

8.7%

Bestmed Medical Scheme

Bestmed will increase its risk contributions by an average of 8.7 per cent, ranging from zero to 10 per cent.

On some options, Bestmed will increase the percentage of contributions that go towards savings accounts. These options have a higher overall average contribution increase of 9.29 per cent. The savings account on the Beat 2 option will be enhanced, from 15 per cent to 17 per cent of contributions, and savings account of three per cent of contributions will be introduced on its Pace 4 option.

Benefit changes • Midwife-assisted births will be covered on all options.

• The HPV vaccine (to prevent cervical cancer) will be included on five options.

• The co-payment for endoscopic procedures will be increased on three options.

• Certain chronic conditions that are not prescribed minimum benefits will not be covered on the Pace 1 and Pulse 2 options.

• A network of hospitals will be introduced on Pulse 1 and Pulse 2.

Service provider networks The scheme announced that its service provider strategy is currently being implemented, while its GP network is up and running, providing members with access to quality healthcare. The specialist and other allied professionals’ network is progressing well and full implementation is planned for first quarter 2014.

10.6% Bonitas Medical Fund

Bonitas will increase its contributions by an average of 10.6 per cent. The increases will range from 3.1 per cent to 10.9 per cent, depending on the option.

The contributions of BonCap members in the R9 301 to R12 700 a month income band will decrease by 16 per cent. An income band for members who earn more than R12 700 a month will be introduced. The increase on BonComprehensive, Bonitas’s top option, will be six per cent.

Benefit changes • The self-payment gaps on these options have been decreased.

• The overall annual limits on the Primary and BonCap options will be scrapped.

• The day-to-day benefits on the Standard and Primary options will be increased by 10 per cent.

• BonClassic will cover biological medications used to treat conditions other than cancer.

These medications are typically very expensive.

GAPS DECREASED

LIMITS SCRAPPED

8.9%

Discovery Health Medical Scheme Discovery Health announced a uniform 8.9 per cent increase.

Benefit changes • Benefit limits, co-payments and deductibles will increase between 8.9 per cent and 9.2 per cent.

• MRI, CT scan co-payments and oncology benefits remained unchanged.

• Annual thresholds increased between 8.9 per cent and 9.4 per cent.

• The Compassionate Care Benefit which provides access to extended home-based holistic care will have a 30 per cent increase in the annual limit.

• An exclusive arrangement with Netcells Biosciences will entitle members to a 25 per cent discount on umbilical cord blood and tissue stem cell banking.

• Discovery MedXpress will be the designated service provider (DSP) for chronic medicines for Delta plans. Medicines not ordered via MedXpress will carry a 20 per cent copayment as well as any dispensing fees.

• Discovery will fund telemetry devices for members registered on the chronic illness benefit (CIB) for diabetes, excluding KeyCare Members.

Insured network benefits changes: • A Maternity Benefit will provide unlimited antenatal consults and two 2D scans on the Executive, Classic Comprehensive, Classic Delta Comprehensive and Classic Priority plans. Members of Classic Saver and Classic Delta Saver plans will qualify for eight consults. These benefits will be provided once the medical savings account is depleted.

• An External Medical Items Benefit will be provided on the Executive, Comprehensive and Priority Plans. These benefits will come into effect once the medical savings account is depleted and will cover items such as mobility aids, breathing devices and insulin pumps. 

20%

25%

Co-payment for medicines not ordered via MedXpress

Discount on umbilical cord blood and tissue stem cell banking

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Be

r their fo t s e b e h t t n a w It means they

Choose life with the most suitable medical cover, family health and wellness benefits, for you and your loved ones.

Contact us on 086 033 3838 or newbusiness@bestmed.co.za www.bestmed.co.za Bestmed Medical Scheme is an Authorised Financial Services Provider (FSP no. 44058)

THE OLD SHANGHAI FIRECRACKER FACTORY 704316

. s t n e i l c g n i d n a “I love dem health.�

Fedhealth Medical Scheme

Fedhealth announced an 8.9 per cent average weighted increase for 2014.

“The scheme is extremely satisfied with the average increase we were able to pass onto members for 2014. Through active risk management, the scheme has been able to maintain its average age, one of the main contributors to cost increases over time,” comments Peter Jordan, principal officer at Fedhealth.

Genesis Medical Scheme Genesis Medical Scheme will increase its contributions by 6.4 per cent.

Genesis executive Brian Watson says it expects that its average increase for next year will be one of the lowest.

Commenting on how this was achieved, he says, “Genesis does not have to build reserves as it already far exceeds the legal minimum.

This allows it to assist its members with inflationrelated contributions. One must not overlook the massive benefit that self-administration brings to the costs. There is no need to pay VAT on profit and salaries and a board of trustees whose fees are among the lowest of all open schemes.”

Benefit changes • The benefit for scopes will increase by 13 per cent on all options.

• The benefit for out-of-hospital MRI and CT scans will increase by 10 per cent.

• The benefit for external appliances will increase by 25 per cent.

• The benefit for crowns and for temporary or provisional crowns will increase by 20 per cent.

13% SCOPES

Benefit changes • Members of the Maxima Basis option will have maternity benefits covered from risk in 2014. Benefits will include antenatal classes, consultations, scans and amniocentesis tests.

• The Terminal Care Benefit increased from R14 500 to R25 000 per family.

• Inflationary adjustments were made to benefit limits, savings and safety net levels.

• Self-payment gaps reduced marginally.

• Two new options have been developed in the lower cost contribution range of around R1 500 a month. These are awaiting approval from the Council for Medical Schemes. The Maxima Saver and Maxima Entry Saver will offer a hospital plan combined with day-to-day benefits and designed to be attractive to young, upwardly mobile families. More information will be provided following Council approval.

6.4%

10% MRI

8.9%

25%

14 6

CROWNS

APPLIANCES

20%

9.5%

Liberty Medical Scheme

Liberty Medical Scheme will increase its contributions by an average of 9.5 per cent. With the recent announcement of its merger with Spectramed, this increase will average out to nine per cent when combined with Spectramed’s increase of 7.6 per cent, once approved by council.

Benefit changes • All benefits, except for prostheses, will increase by seven per cent.

• Co-payments will remain at 2013 levels.

• The scheme will simplify its offerings to four options: Traditional, Complete, Saver and Hospital. However, because there are suboptions within these options, members will, in effect, have a choice of 15 offerings.

• Osteoporosis will be added as a chronic disease on two options.

• The cost of harvesting organs in a private facility will be covered. 

T

10.1% Medihelp

Medical Scheme

7.2%

Momentum Health

9.6%

Topmed Medical Scheme

Medihelp will increase its contributions by an average of 10.1 per cent.

Momentum has announced an average weighted increase of 7.2 per cent across all plans.

Topmed Medical Scheme has announced an average increase of 9.6 per cent.

Benefit changes • On the Medihelp Plus and Dimension options, co-payments on 12 endoscopic procedures performed in-hospital will be scrapped.

• Co-payments across all options will be reduced by as much as 78 per cent.

• The three Dimension Prime options that require members to use a hospital network will use state facilities as providers of chronic medicine. Contributions on these options will decrease by between one and 1.8 per cent, and the network options will be 20 per cent cheaper than the corresponding non-network options.

• All new oncology treatment plans will be handled by the Independent Clinical Oncology Network, a managed care entity.

“Momentum Health’s weighted average family increase is favourable when compared to the rest of the market. In the past year, Momentum Health has continued to grow and has experienced a lower claims utilisation, aiding growth in reserves. That, coupled with the fact the scheme has, for the period 2010 to 2012, maintained non-healthcare costs well below the level of the top 10 open schemes, all contributed to an overall improved financial position which, combined, enables an environment where contribution increases for the following year can be set at a lower level,” explains Damian McHugh, head of sales and marketing at Momentum Health.

Benefit changes • A new option, Active Saver, will be launched.

• If a proposed merger with Pharos proceeds, Topmed plans to discontinue two of its options, Traditional and Savings Plus.

Members on these options will be moved to comparable Pharos options. 

78% Copayments reduced

20% Network options cheaper

Benefit changes • All co-payments will remain at the 2013 levels.

• All sub-limits are increased by 5.5 per cent for 2014.

• Specialist procedure co-payments will continue in 2014. These co-payment amounts will remain unchanged.

• Momentum will introduce an obesity management programme that will be linked to HealthReturns. Individuals who score a Body Mass Index (BMI) of more than 30 in their free health assessment will gain access to a dietician.

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Increases at a glance

Medical scheme

Average contribution increase

Average gross contribution increase per beneficiary per month

Genesis Medical Scheme

6.4%

R58

Momentum Health

7.2%

R80

Bestmed Medical Scheme

8.7%

R146

Discovery Health Medical Scheme

8.9%

R129

Fedhealth Medical Scheme

8.9%

R120

Medshield Medical Scheme

9.4%

R124

Liberty Medical Scheme

9.5%

R133

Medihelp Medical Scheme

10.1%

R141

Bonitas Medical Fund

10.6%

R113

16 8

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Mergers, acquisitions and member growth The last decade has seen a steady trend towards consolidation among medical schemes in South Africa, with 58 medical scheme amalgamations and liquidations between 2002 and 2011. The Council for Medical Schemes’ (CMS) forecasting model suggests that, of the current 92 schemes, only 54 will be left by 2025. As the number of small and medium schemes drop, the medical scheme landscape has shifted to one dominated by increasingly large players. The CMS annual report 2012/2013 showed that in 2012, medium schemes decreased from 28 to 25, while smaller schemes decreased from 39 to 36.

The major amalgamations of 2013 include: BESTMED

SAPPI MEDICAL SCHEME

DISCOVERY HEALTH MEDICAL SCHEME

IBM SA

LIBERTY MEDICAL SCHEME

SPECTRAMED MEDICAL SCHEME

TOPMED MEDICAL SCHEME

PHAROS MEDICAL SCHEME

18 10

Bestmed announced its merger with SAPPI medical scheme as of 1 April 2013. The merger increased the scheme’s membership by 3 500, growing its membership to just over 81 000 principal members. Negotiations for a merger between Bestmed Medical Scheme and Minemed Medical Scheme are also currently underway.

Discovery Health Medical Scheme has taken over the membership of the staff of IBM SA, and amalgamated with Nampak Medical Scheme as from 1 March 2013.

After a failed attempt in 2010, Liberty Medical Scheme and Spectramed Medical Scheme announced their merge, subject to approval from the CMS, effective from 1 January 2014.

Once complete, Liberty Medical Scheme will become the sixth largest open medical scheme in South Africa.

Topmed Medical Scheme is in merger discussions with Pharos Medical Scheme. If successful, the merge will add more than 14 000 beneficiaries to the scheme’s current 25 000.

With the total decrease in the number of schemes, industry reports that the increased membership size schemes enables economies of scale and greater negotiating power to set tariffs with hospitals.

“When smaller, potentially less effectively run, schemes decide not to continue through merger or liquidation, it does release new members into the pool. This does allow the bigger schemes to grow even bigger which obviously contributes to economies of scale and theoretically a better deal for the members they serve,” says Jordan.

In its 2012/2013 annual report, however, the CMS states that the size of a medical scheme does not impact cost increases and that medical schemes remain price takers in the industry regardless of size, with no benefits gained in economies of scale for members who belong to large medical schemes.

Brian Watson, executive at Genesis Medical Scheme, adds that size does not necessarily impact the sustainability of a scheme or its ability to reliably pay its members’ claims.

“People put too much emphasis on size when, in truth, it is the risk profile of the scheme that is important. Size is irrelevant if a scheme meets the required solvency levels.”

He warns that the trend towards fewer, large medical schemes reduces competition and risks, creating an oligopoly environment where dominant schemes control hospital tariffs in an anti-competitive manner. 

Average 32 years end of 2012

Open schemes average age 33.2

MEMBER AGE

Restricted schemes average age 29.9

The PMB debate This schism in perspective between the prevailing voice of industry and that of the council and registrar is similarly apparent in the ongoing controversy around prescribed minimum benefits (PMB). Contrary to claims by medical schemes that PMBs drive up the cost of healthcare, the CMS argues that the introduction of PMBs has had a positive impact on schemes, and that suggestions otherwise are unfounded.

According to CMS CEO and registrar, Monwabisi Gantsho, “Since PMBs were reintroduced with the Medical Schemes Act (MSA), the industry has been performing better than ever and medical schemes have reached a new level of financial soundness.”

These comments were made at the inaugural Board of Healthcare Funders (BHF) conference in Cape Town in August. At the same conference, Christoff Raath, an actuary and the chief executive of the Health Monitor Company, presented research based on billing data submitted to medical schemes by general surgeons and anaesthetists. Findings showed that between January 2010 and July 2013, while the amounts claimed for non-PMBs

20 12

Pensioner members 7.1% in 2012

remained linear, many of these specialists were charging up to 300 per cent more for PMBs. In July 2010, government’s reference price list (RPL), which set a guideline base price for treatments, was removed, meaning that doctors and specialists are ensured full payment regardless of what they charge for a procedure.

The age profile of medical scheme beneficiaries has increased slightly since last year, from an average of 31.6 years at the end of 2011 to 32 years at the end of 2012, the latest CMS annual report shows. Recent years have seen a redistribution of the younger members of the medical scheme population, to the detriment of open medical schemes. Before the introduction of the Government Employees Medical Scheme (GEMS) in 2006, open schemes had a younger average membership profile than that of restricted schemes. In 2012, beneficiaries of open schemes had an average age of 33.2 years. Restricted schemes had an average age of 29.9 years. Despite the trend, the annual report notes that in 2012 the age profile of beneficiaries of open schemes became marginally lower than the previous year because the largest open scheme, Discovery Health, attracted younger beneficiaries. The age profile of GEMS members increased because it took on a large number of beneficiaries who were older than its average age. The percentage of pensioner beneficiaries (those over 65 years of age) increased from 6.6 per cent in 2011 to 7.1 per cent in 2012. According to the report, this affected the financial well-being of medical schemes, particularly open schemes, which have more pensioner members than restricted schemes.

improvement. Of course, there are still a great number of medical schemes including the two biggest that do not meet the legal solvency requirements.”

“The simple facts of the matter are that Regulation 8 is poorly drafted and it has introduced a great deal of uncertainty into the industry. No medical scheme can remain viable on a pay-in-full basis without knowing the extent of its potential liability. Gantsho’s stance of insisting on the pay-in-full interpretation, to the obvious detriment of medical schemes and their members, is not easy to understand. The issue needs urgent resolution,” he concludes.

The CMS says more information is needed to support the Health Monitor Company’s findings. Speaking at the release of the 2012 CMS annual report, Gantsho said the investigation needed to be extended to other specialties before final pronouncements could be made on whether overcharging for PMBs was one of the drivers of health costs in the country.

Amendments on the cards

Commenting on Gantsho’s assertion that the introduction of PMBs has had a healthy impact on the industry, Watson notes, “When he says that medical schemes have reached a new level of financial soundness since the new MSA, it is necessary to remember that under the old act there was no minimum solvency requirement and so schemes could really do as they pleased. The new act brought with it the Regulation 29 provisions on 25 per cent solvency so, naturally, there will be an

Amendments to the MSA have been drafted by the CMS and submitted to the Department of Health for approval. Gantsho reports that these will address PMBs, in addition to the management of scheme information, scheme governance and the council’s complaints and appeals process. However, the regulation that makes it mandatory for medical schemes to pay PMB claims in full will not be amended at this stage, he says. The Competition Commission is due to begin an inquiry into the private healthcare sector this month. It is expected that

300%

The increase in fees claimed for PMBs since 2010.

the inquiry will identify both the problems in the healthcare sector and the rules that must be introduced to enhance competition, PMB pricing and tariffs included. The commission aims to complete its work within two years, though it has been suggested a five-year horizon would be more realistic, suggesting a long delay on amendments to this area of the medical scheme regulatory regime remains likely.

Key focus for the year ahead We chatted to schemes about their strategic focus areas for 2014. This is what a few had to say.

“Continuing membership growth and, in particular, growth with the right membership profile will remain a key focus for the scheme.

Through its benefit design and complementary offerings like HealthReturns, Momentum Health incentivises a healthy, active lifestyle and thereby helps support member behaviour that contributes to the scheme’s long-term sustainability,” McHugh highlights as the focus at Momentum Health.

“To remain a top five scheme dedicated to client intimacy, the scheme has to manage total non-healthcare costs to less than 10 per cent of contributions. Integrating and setting up networks with GPs, specialists and allied service providers are some of the activities lined up for 2014. Not forgetting to offer a lifestyle and preventative care benefit integrated to the scheme offering whereby our members’ health and lifestyles are enriched through various programmes,” explains Elnarie Hendriks, head of distribution at Bestmed.

The strategic focus at Discovery Health will be ongoing innovation in products and services, ensuring greater value, protection and certainty for consumers.

“Membership growth with the correct profile is the main strategic objective for the Fedhealth scheme for 2014,” says Jordan.

“Genesis Medical Scheme has always and will continue to focus on providing the best possible service to its members. This means having qualified nursing staff on hand to answer clinical calls from members and to generally assist members link their medical issues to the funding obligations of the scheme. The focus is to continue to do what we have been doing for the past 18 years and that is to provide the best possible healthcare funding at the most reasonable rates,” Watson says.

“Membership growth with the correct profile is the main strategic objective.”

21

HEALTHCARE TRENDS

ACROSS THE GLOBE Christy van der Merwe

22 2

China

Australia

Universal access to healthcare is something that all nations strive for.

At the launch of the 2013 World Health Report, Dr Margaret Chan, director general of the World Health Organisation, described universal health coverage as “the single most powerful concept that public health has to offer”.

She added that universal health coverage is the best way to cement the health gains made during the previous decade. “It is a powerful social equaliser and the ultimate expression of fairness.” RISKSA takes a look at the major trends in healthcare in some of the major economies worldwide.

The universal healthcare access system, Medicare, was established 30 years ago in Australia and is partly funded by a 1.5 per cent income tax Medicare levy, with an additional levy of one per cent imposed on high-income earners without private health insurance.

The Australian Healthcare and Hospitals Association has advocated that some reforms should be made to ensure it stays relevant as Australian healthcare needs change. The country’s elections in September 2013 saw the Liberal-National coalition take over from the Labour party, which could likely mean reforms to the Medicare system.

The Australian Government also provides a private health insurance rebate (up to 30 per cent) to encourage people, particularly those over the age of 31, to get private health insurance. There are 36 health funds registered under the Private Health Insurance Act of 2007, including the government-owned Medibank Private.

China’s healthcare market is now the fifth largest in the world, and McKinsey expects it to grow to a value greater than R9.8 trillion by 2020, when it would represent seven per cent of the global market. China has made great strides towards universal healthcare coverage after the R1.37 trillion government-funded healthcare reforms, which took place between 2009 and 2011. The private health insurance market is in its infancy in China.

46% private financing

80% out of pocket

While the expansion of government-sponsored health insurance has been impressive, research conducted by Ping An Health Insurance shows that private financing in China funds about 46 per cent of total healthcare expenditure – 80 per cent of which is out of pocket expenditure.

Lifestyle diseases associated with urbanisation and increasing wealth are driving demand for healthcare from an already underfunded public healthcare system, leaving a significant structural funding and access gap for the private health insurance industry to fill, according to Ping An Health.

1.5% income tax

1%

extra levy for highincome earners

30% rebate for private health insurance

“There is a big move to manage diseases and the government is starting to open up for more public-private partnerships to manage this more effectively. Wellness and employee assistance programmes (EAP) are becoming very popular.

There are great opportunities in this space,” adds Deacon.

Four specialist healthcare insurance licences have been issued in China. One of these was granted to Ping An Health Insurance, which has a joint-venture agreement with South African private health giant Discovery.

R9.8 trillion



by 2020

Independent healthcare strategist, Len Deacon of Len Deacon and Associates, notes that there was a 30 per cent growth in private insurance when the government added these tax incentives to encourage those who could pay for additional services to take out private insurance.

23

South Africa

UK

In September, RISKSA reported that the South African public sector spends some R98 billion annually on providing healthcare to 85 per cent of the population, while the private sector spends about R105 billion on providing healthcare to 15.5 per cent of the population.

2000 144 medical schemes

2011 97 medical schemes

March 2013 90 medical schemes

The government has announced its intention to introduce National Health Insurance (NHI), although it is not yet clear exactly what form this will take, as the government finalises work on how benefits will be designed, how the population will be covered, and how services will be delivered. Pilot programmes rolled out in mid-2012 in certain areas continue, and the Department of Health says that this will help to strengthen the health system.

Health Minister Aaron Motsoaledi was quoted by South African Press Agency (SAPA) as saying that the NHI will rectify existing healthcare imbalances and give all citizens the right to affordable, good quality healthcare irrespective of socio-economic status. The government continues to develop policy and draft relevant legislation required for the NHI. Upon implementation, all South Africans earning above a certain threshold will be legally obliged to contribute to the NHI fund. The release of the White Paper is eagerly awaited by the industry. The proposed NHI system has come under much criticism from the private sector and governmental opposition parties as the provision of healthcare in South Africa remains a highly politicised issue because it is a basic right.

Meanwhile, private medical aid schemes in South Africa continue to grow despite the uncertainty regarding the NHI. The sector is also seeing a large amount of consolidation, as mergers between medical schemes allow for improved scale and benefits. Deacon does note, however, that affordability is becoming a problem, which is why the Competition Commission initiated an investigation into private healthcare. The Council for Medical Schemes reported that by March 2013, there were 90 medical schemes registered in South Africa, compared to 97 at the end of 2011, and 144 in 2000.

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England, Northern Ireland, Scotland and Wales each have their own publicly funded healthcare systems (National Health Service or NHS), covered by general taxation. Private healthcare in the UK is not as common and is accessed through private healthcare insurance (for example, Bupa) paid for directly by the client or through an employment-based medical scheme.

The NHS in England celebrated its 65th year of existence in July 2013 and has seen many changes over the years. The current coalition government has introduced the Health and Social Care Act, which has brought about substantial changes in the healthcare industry in England. Increased privatisation, which started in the 80s with mental health and long-term care, is happening to a larger degree through outsourcing of NHS services, and removal of the preferred provider status of the NHS, reinforcing the shift to a variety of providers.

Fears exist among some citizens that this will increase costs and is the start of complete privatisation of the industry. It is felt that when healthcare provision is privatised, providers chase income, costs increase, health outcomes suffer, and the system of universal care coverage falls away. However, Deacon notes that there is a greater focus on managed competition as a way to help control future costs in the UK and adds that it is believed that competition will add value in the healthcare sector.

On the other hand, in Scotland, the government has stated that there will be no privatisation of doctors’ services, and it has banned the privatisation of cleaning staff in healthcare facilities and continues with a policy of no prescription charges. It is also worth remembering that about 16 per cent of the population in Scotland have private health insurance over and above the NHS.

16%

of the population in Scotland have private health insurance over and above the NHS.

US

The Patient Protection and Affordable Care Act (dubbed ‘Obamacare’) was signed into law in March 2010, although implementation has been delayed as it has become a highly politicised issue. It introduces the biggest reforms in US healthcare since the introduction of Medicare and Medicaid in 1965. The Act aims at improving health insurance affordability and quality, lowering the uninsured rate by increasing public and private insurance coverage, while reducing the costs of healthcare for individuals and the government.

It has been a hotly contested issue, facing challenges in Congress, Federal courts and some state governments. It has been opposed for fear that it will lead to disruption of existing health plans, higher costs from new insurance standards, and also that it will increase the nation’s overall budget deficit.

44%

of healthcare spending by public programmes

31%

of population covered by public health cover

Obamacare was at the crux of the two-week US Government shutdown in October. Opposition parties could not reach consensus on the nation’s budget for 2014, ultimately shutting down the US Government until such time as the budget could be agreed.

The Act was introduced at a time when fewer people were getting private health insurance because of increasing unemployment, and were becoming increasingly reliant on public health insurance programmes. Public health programmes (such as Medicare and Medicaid) are said to cover about 31 per cent of the population, while being responsible for 44 per cent of healthcare spending.

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Staying on track – is 4x4 cover for real?

When things go wrong on an off-road adventure, specialist help is required.

Make sure the cover you’re offering clients is up to the challenge.

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Auto strike impact lingers for panel beaters, policyholders With the auto sector wage strikes over, we look at the likely ongoing impacts for vehicle owners, suppliers and insurers. RISKSA canvassed panel beaters and industry experts.

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Staying on Track Is 4x4 cover for real?

Anton Pretorius

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Africa offers some of the sweetest offroad adventure on the planet. Being far away from civilisation does bring its own set of risks however. You can’t just pick up the phone and call your brother-in-law for help if you get stuck.

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he problem is that there are many ‘specialist’ 4x4 products out there that are anything but. You would do well to find out all you can about these products before you send your client into the great wilderness, or it may just be you on the end of that ‘come help me’ phone call.

For most 4x4 owners, a vanilla comprehensive insurance policy may afford just the right level of protection. We all know that few soccer moms actually venture over the border with their prized 4x4. But if your client is heading anywhere that requires a ZA sticker and their passport, you might want to advise them to invest in a policy that provides proper 4x4 cover.

You’re looking for the following words in the policy; repatriation, medical evacuation and territorial limits. Cover on these aspects varies with each insurer and it’s imperative for brokers to know which insurer will go the extra mile to ensure their client’s safe return should the unforeseen happen.

“Take the time to understand your client’s needs” says Execuline Motor Insurance Underwriters director, Deborah George.

“Brokers must fully understand their client’s needs in order to source the most suitable cover. Brokers should also be fully au fait with each of the various products being sold.”

Santam says it provides cover by placing the prospective client in a specific category based on their insurance history. “We request particular information, such as the registered owner and the regular driver of the vehicle.

We also enquire about any losses or damage to vehicle(s) that may not have been claimed as well as valid claims in the previous three years,” says Donald Kau, head of corporate  affairs at Santam.

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According to figures released by the Department of Transport, 19 per cent of accidents reported over the festive season are related to 4x4s and recreational vehicles. The irony is that the majority of these accidents occur on-road rather than off-road. The dynamics of driving a 4x4 are different to that of a sedan. Braking and handling performance is also severely limited by mud and snow tyres, which are conversely so well suited to off-road conditions.

The worst-case scenario CASE STUDY 1 A client goes on holiday in the Caprivi. His vehicle, a Land Rover Discovery 4 SDV6 HSE suffers a mechanical failure not related to an accident and, as such, the vehicle is immobile and the family is stranded in the Caprivi. He contacts his insurer. What is the insurer’s next course of action?

Deborah George says that client would contact Execuline’s assist line to arrange towing to the nearest repairer. “We will arrange car hire for up to three days while the vehicle is being repaired and hotel accommodation up to R12 000 can be claimed back.”

She adds that Execuline covers mechanical or electrical damage. “However, we will tow

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and repatriate the vehicle up to the amount of R50 000 should there be any mechanical or electrical breakdown.”

Santam Personal policy perspective’s 4x4 cover offers tow-in cost and safeguarding after mechanical breakdown. “We will compensate the insured for the reasonable cost (up to R2 500) of safeguarding and moving the vehicle if it has experienced a mechanical breakdown. This cover applies only once during any renewal period,” Kau says.

Kau adds that Santam will compensate the insured for up to two nights’ accommodation for the insured and any passengers if the insured cannot complete the journey in the vehicle because it was either lost or damaged.

The indemnity to the insured amounts to R500 per person and R6 000 per event.

“If damage to the vehicle involves mechanical or electrical breakdown, we will not repatriate the vehicle because the client does not have a claim. If the insured, however, has a valid claim for the vehicle under this section, we will pay the insured up to R25 000 for the reasonable cost of returning it to the Republic of South Africa,” Kau adds.

CASE STUDY 2 The insured was enjoying the last day of holiday in Mozambique with his family and relatives.

He and his brother went on a 4x4 trail and on the way back to camp, they accidentally rolled the 4x4. Both were flung from the vehicle and sustained considerable injuries.

Tuffstuff 4x4 Insurance’s Raymond du Plessis says that as a Tuffstuff client, the insured automatically has access to medical evacuation for any life-threatening situation.

Tuffstuff’s medical evacuation desk at Netcare 911 is contacted for assistance and medical evacuation procedures are immediately activated.

“In a similar incident in Zimbabwe, one of our policyholders suffered serious injuries and due to the lack of proper medical care at the hospital in Harare, the paramedic remained with the injured party until the insured’s condition stabilised enough to evacuate her to South Africa,” Du Plessis says.

As with Tuffstuff, Cross Country 4x4 Insurance also offers airborne emergency medical evacuation. In the case of injury or illness, the injured party will be swiftly returned back to South Africa for hospital treatment.

George says that with Execuline, clients get up to R5 million for medical evacuation cover, limited to R1 million per person.

“Our service provider covers the person up to the limits regardless of any medical aid,” she said. 

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After loss of or damage to the vehicle in which they travel, Santam says it’ll compensate policyholders for medical expenses they incur and pay because of accidental bodily injury to members of the insured’s family who normally lives with them. Santam’s 4x4 policy states that at the time of the injury, the member of the insured’s family must be seated in the vehicle’s permanent enclosed passenger-carrying compartment. It must not be possible to recover the medical expenses from any other insurance or facility. Santam’s compensation is limited to the amount of R5 000 per person or R25 000 per event.

Out in Africa Exploring our wonderful continent beyond our borders is not without its dangers. While some countries pose very little threat, there are several countries where political strife could have severe consequences for the uninformed driver and his family. Brokers need to carefully examine their client’s policy wording before advising on adequate cover.

Countries outside of South Africa covered under Santam’s vehicle section of the policy are Lesotho, Swaziland, Namibia, Botswana, Zimbabwe, Mozambique and Malawi. Under their 4x4 cover option, these are extended to include Angola, Zambia, Kenya, Tanzania, Burundi, Rwanda and the Democratic Republic of the Congo (DRC). “The countries in Africa not mentioned above are not covered. Legislation in other countries

requires visitors to take out at least third party insurance there to prevent any liabilities should you be in an accident, adhering to legislation of the specific country,” says Kau. George says that Execuline automatically covers African countries south of the Equator including Kenya. Cover for additional countries can be obtained.

“War-torn countries like the DRC are not covered under our policy.”

Tuffstuff’s territorial limits are more comprehensive. Countries it covers include South Africa, Namibia, Botswana, Zimbabwe, Mozambique, Angola, Zambia, Malawi, Tanzania, Gabon, Uganda, Kenya, and even the DRC which most other 4x4 insurers does not cover.

CASE STUDY 3 The insured returns to the vehicle after shopping to find that his radio, sound system and roof-rack have been stolen.

Execuline covers permanently fitted accessories subject to the sum insured being sufficient. “A motor vehicle inspection is conducted when the vehicle is placed on cover. It is always advisable to inform your insurer of non-standard accessories. Extras would be included in the sum insured and the rate charged on the total sum insured,” says George.

Santam’s 4x4 product does not offer automatic cover for any accessories or add-ons on the vehicle. “The insured must specifically request to insure it under extras or ensure that the limit of compensation of the vehicle is sufficient to include the accessories or add-ons which may lead to an additional premium,” says Kau.

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IN MADE SOUTH AFRICA

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Off the

beaten track Nick Krige

Driving on dirt, through water and over rocks and dunes allows 4x4 owners to reach those scenic locations that are inaccessible to their sedan-bound counterparts, but it’s tough in Africa.

Dongas, flooding rivers and charging elephants are real threats. We look at some of the more notable risks associated with 4x4ing in Africa.

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Mechanical breakdown

Water crossings

Breaking down is an everyday possibility, but if it happens while on an off-road trip, it can be especially troublesome. The issue is that the vehicle will likely break down a fair distance from a suitable workshop.

Water crossings, including streams and rivers, rate fairly high on the list of off-road hazards.

There is no sure way of knowing the best route through a body of water just by looking at it.

This is why it is not advisable to venture off on a solo 4x4 adventure. Another set of eyes and mechanical hands, or a big 4x4 to tow the vehicle out of trouble can make all the difference.

It is impossible to plan for every situation, but it is essential to make sure your vehicle is prepared before embarking on an adventure.

Take the 4x4 to a mechanic and have it properly serviced before each outing.

Deborah George, director at Execuline, says clients should look at extra protection for the undercarriage of their vehicles. “Ensuring additional protection for the sump before the journey will potentially save the client from major damage,� she says.

Walk as much of the crossing as possible beforehand. This allows the driver to find the safest crossing and gauge the strength of the current and the firmness of the ground.

It is essential to fit snorkels to aid with deep water crossings.

Dongas Extreme side hills are obvious off-road hazards and can cause the vehicle to roll if not treated with the proper respect. An inclinometer may come in handy in these situations. Another method if there is no way around a tight spot is to attach ropes to the 4x4 to prevent it from rolling.

Crossing steep terrain in a 4x4 on firm, dry surfaces is usually fairly easy and safe, but if

defined, which makes driving into an obstacle that could damage your vehicle all the more likely. Additionally, if the vehicle was to suffer a mechanical issue or someone got hurt, it is more difficult for rescue services to find you. It also increases the chances of getting stuck in a dead end.

Take a good GPS with mapping features that can display positions relative to landmarks, roads and lakes. It could display a route out of trouble, the location of closest assistance and can even provide a location marker for rescue services.

Wild animals

the surface contains loose rocks, soft dirt or is muddy, it can prove difficult and dangerous.

Loose slippery surfaces on steep climbs can cause the vehicle to turn crossways and there is a risk of rolling. It is important to remember that just because the 4x4 descended a steep hill does not mean it will necessarily be able to get back up again.

Getting lost Losing your way off-road is always a possibility; in fact, it is half the fun. However, deviating from the path presents many risks. The biggest problems arise after dark when visibility is poor.

On less-used paths, the trails are not as

The highlight of many off-road adventures is the chance to see wild animals in their natural habitats, but many large animals, such as elephants, hippos and rhinos are known to be territorial; be especially careful when encroaching on their territory.

When on a 4x4 adventure, always respect nature and understand that you are in a wild and untamed environment. It is not unheard of for an angry elephant to tip a 4x4 over for getting too close to its young.

Be respectful and careful out there.

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ony Stalker and Angus Hutchison formed Stalker Hutchison & Associates 28 years ago, when they saw an opportunity to offer the South African market an alternative to Lloyd’s, especially with regard to broadform liability insurance.

Starting off with a small balance sheet and limited capacity, Stalker and Hutchison grew the business into what is today a 150-strong company writing a large share of liability insurance premium in the South African market. It also writes motor business, accident and health insurance, professional indemnity cover and financial products.

Stalker Hutchison & Associates was initially backed by Italian insurer Generali’s local arm, Stangen. Stangen was bought by Guardian National, which was later bought

by Santam. In 2008, a merger with the Admiral Underwriting Group gave birth to the current entity, Stalker Hutchison Admiral (SHA), making it the largest niche underwriting manager in Southern Africa.

Gary Corke, CEO of Stalker Hutchison Admiral

On the shoulders

of giants Hanna Barry

Taking over one of South Africa’s oldest, and certainly its largest, underwriting management agencies in February this year, Gary Corke is filling the shoes of his predecessors with quiet confidence, clarity of focus and determination to deliver the value proposition for which Stalker Hutchison Admiral (SHA) has become known.

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“I met with Tony and Angus when I started Emerald 14 years ago,” remembers Corke, referring to the company he co-founded and built into the country’s largest corporate property underwriters, Emerald Risk Transfer.

“I thought they best understood the UMA model and I spent time learning about their ideas during the start-up phase of Emerald.”

Fundamental to Stalker and Hutchison’s ideas was the belief in adding value and doing something different from larger institutions, driven by entrepreneurial thought. Basil Palmer would later take over from the two pioneers before being succeeded by Gary Corke in February 2013.

Shifting focus, broadening horizons For Corke, the offer to lead SHA was a massive opportunity and challenge. Having moved to South Africa from England in 1992, he co-founded what was then known as Emerald Underwriting Managers in 1999, together with Dave Manuel, out of a belief that the corporate property market needed alternative insurance solutions. “In order for a UMA to survive and remain relevant, it has to have a value proposition that takes it beyond what large corporate animals can offer,” Corke professes to this day. “It takes a degree of imagination to start a UMA.” Indeed, in an increasingly challenging business and legal environment, a great deal of imagination is required. “We have to adapt to a rapidly changing environment, otherwise we will stagnate. Those who can adapt and are strong enough, will likely survive and flourish,” Corke maintains. A recent eightfigure court award for a third-party liability claim starkly illustrates this shifting landscape.

Corke notes that this award will fundamentally change one of SHA’s products and the way it is rated. “There has been far more interest in South Africa around insurance claims over the last few years and whatever you may have perceived as being the correct award a few years ago is radically different now. This will continue and is in keeping with the way legal environments in the rest of the world have developed, coupled with a society that has become more aware of the opportunity to take on insurance companies and a legal fraternity that has done a good job of advertising that they have the right to do so.”

Corke notes with concern that some court awards are becoming emotional rather than contractual, to the extent that SHA is reexamining the reserves it has on old matters that still have to go to court, along with

product philosophies, ratings, deductibles and wordings. “Any organisation that gets through the next five years successfully will be one that has reacted well to the changing landscape.

Our only constant is change; we have to be more innovative,” he says.

Along this line of thinking, Corke has ploughed fresh focus into developing new products, as well as expanding distribution channels and territorial limits. The last six months have seen SHA bring out a cyber-liability offering, as well as a gradual-pollution policy. In addition to product innovation, SHA is focusing on

providing South African clients with global solutions, as they grow business operations beyond the confines of the continent. Sanlam and Santam’s interests in southeast Asia present fresh opportunity to distribute products there, too. In conjunction with a shift in focus, Corke has implemented more management reporting at SHA, while driving the use of new technology, developing a revamped website and, at the time of writing, planning a launch into the social media environment.

Yet, despite the notable number of changes he has made to the organisation, hiring new staff was not something he did in a hurry. Corke wanted to observe current staff “in all their glory” and made his first new appointment in August, seven months into his role. “To remain sustainable we must find and keep good people. The industry knows that we already have good people, which must be why they are always being offered jobs,” he smiles.

Going above and beyond While this may be true, keeping a head above water in a market fraught with legal and regulatory challenges, coupled with downward pressure on rates, remains a challenge. “We have walked away from renewals where the rates were not sustainable,” acknowledges Corke. “Ours is not an off-the-shelf product. Too often, there is little understanding among consumers about the differences between insurers’ offerings.

Clients and brokers need to appreciate the fact that liability is long tail business and they need to be sure that their insurers are around when claims mature. If the only thing for which a client is looking is to save on premium, we will often lose their insurances.”

SHA recently lost a sizeable portion of its medical malpractice and broker professional indemnity books, due to re-underwriting this business. “Others are willing to write it at rates that we are not willing to meet. We want to come up with solutions, but they have to be sustainable,” says Corke. “Our rate proposition is secondary to our value proposition.

I like conversations about value for money, but not about cheap products. I want the market to always think that we offer the best solutions, not the cheapest products, for the business that we do.”

Backed by Santam’s balance sheet and a willingness to treat each case on its merits, rather than run away from paying claims, Corke says SHA tries very hard to differentiate its offering. “Our shareholders will always demand returns and our customers will always demand value. We will remain relevant for as long as we continue to exceed the expectations of our shareholders and customers. I have a clear strategy about how to keep doing that and feel very privileged to have this role. There are great challenges ahead, but that is what makes it so exciting.”

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Zurich on the lookout for niche partners Hanna Barry

Zurich Insurance recently announced its 100 per cent acquisition of specialist bed and breakfast underwriter, BnB Sure, raising questions of whether it has plans to acquire further underwriting management agencies (UMA).

“All that I’m prepared to say is that we have a known and specific underwriting management agency (UMA) strategy and we are looking for niche players in niche segments and markets to partner with us,” Edwyn O’Neill, CEO of Zurich, tells RISKSA. “I believe the way partnerships are working will be different in the future than they were in the past. There are very exciting opportunities for UMAs, but economics and cost benefits prompt the need to leverage off the scale benefits of a larger carrier.” O’Neill

says that Zurich’s decision to acquire BnB Sure was all about its aspirations to grow into the hospitality sector. “BnB Sure is a wonderful start.

There’s no doubt that it supports our growth aspirations and strategic intent to expand hospitality offerings and, in so doing, our client value propositions.”

This development is the culmination of a journey that began in June 2012, when BnB Sure transferred its significant book of niche

hospitality business to Zurich. While BnB Sure will retain its name, O’Neill says that the acquisition represents an opportunity to deliver its products and value proposition to the market in a more efficient and cost-effective manner. “The acquisition provides a host of opportunities for Zurich. It will further strengthen our business and customers will benefit from access to Zurich’s global capability and BnB Sure’s expertise in managing hospitality risks.”

O’Neill confirms that there will be no job losses as a result of the acquisition. “Key staff at BnB Sure remain critical to its success and future aspirations. Dave Jack is excited to be back home and part of the Zurich family.” CEO of BnB Sure, Jack has been in the insurance industry for 47 years, having worked at SA Eagle, which started operating under the global Zurich brand in 2007.

“BnB Sure will continue to serve its customers using the same technological platform with underwriting and claims being managed within the current operating structure,” says Jack.

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regulations and I am sure it will settle down to business as usual,” adds Drew Schnehage of Aquarius Underwriting Managers. “Aquarius and MUA have a mutual respect and brokers will realise that in the end they are still dealing with MUA and nothing has changed.”

Certainly, Fourie is confident that through Telesure’s economies of scale, brokers will have access to substantial cost-saving initiatives, which will ultimately translate into insurance premium savings for policyholders.

remains a MUA brokered business Hanna Barry

Despite market speculation to the effect, specialist high net worth underwriter MUA Insurance Acceptances will not be writing direct insurance business through its partnership with Telesure.

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he MUA/Telesure partnership was announced on 9 October, bringing to an end MUA’s affiliation with Compass Insurance Company as its carrier, in favour of a new underwriting partnership with Auto & General, one of Telesure’s licensed companies. Christelle Fourie, MD of MUA, emphasises that MUA remains an underwriting manager and, as per the Short-term Insurance Act, cannot transact direct business.

reactions from the broker fraternity to its announcement, but said that the positive reactions far outweigh any negative reactions.

“It is important to remember that it is business as usual for MUA. The manner in which we handle our underwriting, claims and accounting will remain exactly the same as before. What will change is our ability to innovate,” she maintains. “I believe that brokers will see the benefit that the Telesure partnership will bring for themselves and their clients.”

“MUA will remain a broker-driven business.

What we will be doing is extending our reach into the Auto & General broker distribution model. It is our aim to insure each and every one of the VIP clients of as many brokers trading in the South African insurance landscape,” she says. Fourie admits that the underwriting manager has had varying

While this may be true, CEO of Echelon Private Client Insurance, Mark Marinus, confirmed in October that Echelon had several queries from brokers looking to move business to it.

Echelon is Santam’s specialist high net worth underwriter. “Brokers are a bit uncertain and have made noises to move business, but moving books is not as simple with the new

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Adriaan Louw, CEO of Vantage Insurance and former chief executive of MUA, says that he can understand MUA’s move, given the difficult operating conditions currently being experienced by the industry. “The market remains in turmoil, following a period of heavy losses coupled with regulatory changes, especially affecting UMAs. With the depressed economy continuing, new business is at a premium and many operators are fighting for a diminishing pool. Most growth comes from swopping existing books, particularly to secure cost efficiency,” Louw comments.

Cost efficiencies are particularly relevant in domestic insurance, where the market has become highly commoditised and direct channels abound.

Although MUA’s move may not suit the oldschool, traditional broker network associated with them, Louw says that so far, the market has been fairly unresponsive. “Many different factors play a role, so it cannot just be assumed that we would gain by such a move,” he notes. “We foresee that there will be further consolidation, with mergers and takeovers a frequent reality. More important is the maintaining of quality service levels and skills, which I fear there is a general lack of. The less we are prepared to pay for this, the more erosion of experience and skills will be the order of the day.”

Fourie assures RISKSA that no structural changes will take place at MUA as a result of the partnership. “The underwriting and claims decision-making process remains firmly with the MUA management team, which will continue to have the same underwriting and claims handling mandate as before,” she says. “We have great aspirations to grow our business into a substantial force in the South African insurance market and this partnership will give us the capability to reach our strategic goals.”

Leon Vermaak, chief executive of Auto & General, adds, “Traditionally, Auto & General has played in the middle market segment, so the opportunity to explore the premium market is very exciting.”

Price Forbes making its mark Hanna Barry

elebrating its first anniversary of trading in September, PFP Insurance Brokers, a subsidiary of Price Forbes and Partners in the UK, has built up a strong technical team, invested significantly in IT and grown its business in the rest of Africa. All signs point to the fact that PFP is here to stay.

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“Despite what our competitors might think, we are reintroducing PFP into the country for another 100 years,” says chief executive, Warren Bolttler. Bolttler was chief risk officer at Dimension Data from 2003 to 2012, before joining PFP. Among the most recent newly appointed staff is Linda Hulley, who spent 17 years with Glenrand MIB before joining Alexander Forbes for nine years.

Hulley has been appointed senior technical broker at PFP. Fred Abrams, who spent the last 13 years with Aon and later Marsh, joins the PFP team as account manager, as does Johan Kock, who spent 33 years as a technical broker and client executive at Alexander Forbes. Ex-Aon Johannesburg’s head of commercial business, Patrick Pillai, is now PFP’s executive for operations and commercial business, driving the broker’s growth in the commercial market in South Africa, alongside its primary corporate insurance focus.

While Bolttler admits that it has been more of a challenge to land large South African clients, he says PFP has executed a number of deals on the rest of the continent. Its main African partner is Tanzania’s Africa Risk and Insurance Services (ARIS), which is the preferred South Africa partner of Alliance Insurance Corporation in Tanzania and is building relationships with other brokers and insurers in Nigeria and the Democratic Republic of Congo (DRC).

PFP’s manager of African business development, Paul Lewis, was previously CEO of Heritage Insurance and has been instrumental in building PFP’s Africa footprint, capitalising on existing relationships and networks. Lewis says Price Forbes will continue to focus specifically on the energy sector including oil and gas, offshore and onshore and large infrastructure projects not necessarily energy related.

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Lion of Africa Restructures Hanna Barry

Lion of Africa Insurance (LOA) recently announced a new structure, built around Gauteng as the hub of its business and making its entire professional team market facing, creating integrated sales and underwriting teams for different market segments.

“This has the effect of making the underwriting technical team much more accessible to our brokers and clients and is expected to make the development of superior insurance solutions for our clients a lot simpler,” it said in a statement.

A client service centre in Johannesburg, which opened on 1 October, aims to ensure that 80 per cent of all administrative, underwriting and claims enquiries are attended to in real time.

“The new model significantly raises the bar for Lion staff, in support of its intermediary customers,” says Adam Samie, CEO of LOA.

48 2

“We did cancel some business (including a few agencies) as part of the underwriting cleanup, which usually drives underwriting cycles.

However, we do not expect significant impacts on premium volumes in 2013 and we are optimistic that the new service model will see us comfortably drive new business growth with key customers during 2014. We are raring to go and we know that our intermediaries will enjoy the ride so much more.”

In its financial results for the half-year ending 30 June 2013, LOA reported an underwriting

loss of R47.7 million. This compares with a profit of R5.5 million for the same period last year. “The first half results were not great.

Like the rest of the market, we suffered a spate of large fires in January and February, combined with serious flood damage in February and April,” comments Samie.

“Given the relative size of the company and the investment costs of new systems and increased compliance, Lion of Africa has a management cost structure that is higher than the market average. This makes the company particularly sensitive to even small changes in the claims ratio.”

Samie says that the claims situation has since abated. “While we expect that our claims ratios will not be materially different from our historical ratios (albeit it at the higher end of the spectrum), I am not optimistic that we will report an underwriting profit in this financial year.”

Seven staff members were retrenched in the process of restructuring sales and operations areas. These were mainly in branch offices, where jobs were absorbed into the new service centre in Johannesburg. “It is a testament to the robustness of our planning that, following a significant electrical fire at our head office in the early hours of Saturday morning, the service centre was up and running on Monday, 7 October without a hitch,” Samie says.

gives direct insurers the edge Hanna Barry

Poor quality data is making intermediated insurers price less effectively than their direct competitors and these price differences will become more pronounced if this is not addressed.

“Data is the distinguishing factor between winners and losers, between thriving and struggling insurers,” according to Raimund Snyders, CEO of Mutual & Federal. “The intermediated insurance model is being challenged at its core and more knowledge,

understanding and insight is required.

Good data supports good decisions and enhances competitive strength, while promoting efficiency from a quality and cost perspective.” According to a 2011 research paper by American IT advisory firm Gartner Inc., poor data quality is a primary reason for 40 per cent of all business initiatives failing to achieve their targeted benefits. The paper finds that data quality affects overall labour productivity by as much as a 20 per cent.

For example, while Outsurance might spend 30 to 40 minutes collecting data on its clients, most intermediated insurers and brokers spend just 15 minutes collecting data.

“Clients are getting more accurate quotations out of direct players. We need to take more time to mine and understand our customer data, using it for underwriting purposes,” says

Karen Miller, Mutual & Federal’s executive for corporate and niche.

Snyders emphasises that the insights brokers have into their customers need to be inserted into the insurance value chain. “Brokers should be able to provide information and data that enables quality decision-making, excellent customer service and sound underwriting.

Computer systems can never collect the insights that human relationships can collect.”

Miller notes that the co-delivery of services in the intermediated business model means that brokers and insurers need to share data across the value chain. “If one entity captures data at the source and everyone uses it, this will improve service and drive down costs. The extent to which processes can be automated depends on the quality of data at the beginning of service delivery.”

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Intelligent Solutions

Be windscreen

wise

How it’s properly made In support of: Windscreens

Your vehicle windscreen, like wearing a seat belt, is one of the road safety considerations on which you simply cannot compromise. It is an important part of the vehicle’s structural integrity, designed to allow for visibility but also adding strength to the car, which is why it has to be manufactured according to strict specifications.

W

indscreens are required to be shatterproof by law. This is an intrinsic property of the windscreen, which means that the laminated glass will not shatter and release splinters upon impact, or allow flying objects to penetrate the glass, which could cause injury or death.

The dangers of improper windscreens A recent motor vehicle accident (pictured) in Thabazimbi, highlights the importance of manufacturing windscreens to the required original equipment vehicle manufacturing standards, to keep drivers and passengers

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safe from splintering or shattering glass. The accident shows what can go wrong with a windscreen if it is not properly made.

The glass has separated from the vinyl, which can result in long fractures of glass lacerating the occupants of the vehicle, causing serious injury or death. This separation of materials means that the windscreen cannot absorb the energy of the object when it hits the windscreen.

This windscreen clearly failed to meet its intended design function, and from the photos it is evident that there was no adhesion between the glass and the vinyl. The glass broke away completely from the vinyl.

In the manufacture of laminated glass, one or more layers of vinyl (polyvinyl butyral) are sandwiched between two pieces of glass to form a safety product. Typical uses are architectural and automotive, and different uses demand differing adhesive properties of these products, which requires different specialist processing requirements.

Using the wrong vinyl interlayer for a particular application can result in serious failure of the product to meet its intended purpose. The same can be said if the manufacturing process is not carefully controlled within specific criteria.

In the manufacture of automotive windscreens, critical control of the adhesion between the glass and vinyl is essential. Drivers should never have reason to fear penetration of the front windscreen by objects like stones, injury from splinters of glass, or impaired vision. When a windscreen is hit by a solid object in normal circumstances, one or both of the sheets of glass will break, causing a splinter like fracture with concentric circular lines extending from the centre of impact.

The resulting glass fragments must stay attached to the vinyl. Depending on the impact energy, the windscreen will bulge, or undergo

n

of long-term stabilising raw materials of the UV stabiliser, resin and plasticiser. Not all vinyl has this consistent composition and this is the important safety imperative. This characteristic flexibility, with strength and stability, is what saves lives.

Control of the glass is also essential for the correct lamination. Surface roughness and surface tension must be tightly controlled. There are a number of manufacturing methods to laminate the glass and vinyl ‘sandwich’, during which the air is eliminated and the windscreen edges are sealed.

This is why major global vinyl manufacturers work closely with original equipment windscreen manufacturers to ensure complete compatibility between the vinyl and the specific glass laminating process. If the laminate adhesion levels are too high, the windscreen could allow flying objects to penetrate the glass, while if the adhesion is too low there is the risk of splinters being released from the glass during any vehicle impact.

Analysis of the windscreen from the Thabazimbi accident, conducted by an independent laboratory in Pretoria, reported that the vinyl in this windscreen contains at least three plasticisers. From this report it was concluded that the vinyl formulation is incorrect; the vinyl manufacturing process is unstable; the windscreen manufacturing process is not under control; or any combination of these. elastic deformation. This happens because the vinyl interlayer is not sheared or cut off by the sharp edges of the glass fragments, but becomes partially delaminated. In this process, vinyl may expand due to its elasticity, and the laminated safety glass will experience elastic deformation within certain limits.

Vinyl for windscreens is formulated with special ingredients acting as adhesive controlling additives. It is important for the manufacturer of windscreens to ensure that the vinyl consists

Shatterprufe puts safety first The Shatterprufe brand is an authentic shatterproof windscreen manufacturer in South Africa, and part of the trusted PG Group.

Shatterprufe can provide a driver with the peace of mind that its windscreens are manufactured to the correct specifications. The company’s proudly South African manufacturing facilities work closely with original equipment manufacturers, and adhere to the strictest standards to ensure safety on the road.

Above: A recent accident in Thabazimbi shows the separation of the glass and vinyl layers of the windscreen. This can happen upon impact if the windscreen is not properly manufactured.

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Treasury minds Hanna Barry

the gap

Health insurance providers and cash-strapped South Africans are no doubt heaving a sigh of relief after Treasury announced that it would publish a revised draft of the controversial Demarcation Regulations, this time making provision for gap cover and hospital cash plans under defined parameters.

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ogether with a media statement released in October, Treasury published the 343 comments it received during the consultation process on demarcation, a number of which were from members of the public urging government to keep gap cover. In their submission to Treasury, one individual wrote, “Please do not do away with gap cover and drop us, the general public, into the clutches of the medical aid industry.” Another pointed out, “It is our right to provide for any shortfalls in our medical expenses through insurance cover (GAP). This surely takes the burden off government which does not supply adequate medical services anyway.”

In light of strong public support for gap cover, Treasury and the Department of Health (DOH) will publish revised draft regulations by the end of the year for a further period of public comment, before they are finalised and gazetted. According to Treasury, revised draft regulations will acknowledge the role of health insurance products in the marketplace but

54 2

be clear that they must complement medical schemes, supporting the social solidarity principle embodied in medical schemes.

Medical costs create gap cover need Independent healthcare specialist, Len Deacon, comments that while gap cover should be included in the new regulations, the bigger issue is the shortfalls in the healthcare system that result in the tremendous popularity of gap products. “At the core of the problem is the pricing of PMBs (prescribed minimum benefits) at cost with no constraints,” Deacon tells RISKSA. “Medical schemes are regulated but pricing is unregulated, in a market which is designed to work in a social rather than a commercial sphere.” Deacon adds that there is no real correlation between the cost of healthcare and outcomes. “What is charged is not related to what the cost is of delivering that care, but more on what the market (medical schemes) can bear. The result is that private healthcare is becoming unaffordable, as the

demands for universal health coverage for more of our people grow. This goal is not possible with unregulated pricing. I believe the first step is to fix the pricing mechanisms.”

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INS

The Board of Healthcare Funders (BHF) says it applauds the fact that the Treasury is taking efforts to ensure the principles of social solidarity within the healthcare insurance realm. “We believe that medical schemes are the correct vehicle for financing healthcare as they are based on these principles. However, the BHF believes that the reforms necessary to contain increasing private healthcare costs are becoming ever increasingly urgent, as it is the lack of these reforms that give rise to commercial insurance products.”

CEO of Discovery Health, Dr Jonathan Broomberg, adds that while further clarity on the demarcation debate has now been provided, fully understanding the impact of these regulations on medical schemes and consumers will be possible only once the precise detail of the regulations has been published. “We are pleased that there is a clear commitment to ensuring that health insurance products do not undermine medical schemes,” he notes.

Redefining the business of a medical scheme A proposal to amend the definition of the “business of a medical scheme”, contained in the Medical Schemes Act, is contained in the Financial Services Laws General Amendment Bill, which was before Parliament at the time of writing. It is expected that once amended, many health insurance products will fall within the ambit of this definition and be required to conform to its requirements, unless explicitly excluded by the revised regulations.

Conditions for exclusion include, among others, enhanced product disclosure/ marketing requirements and alignment of broker commission between health insurance and medical schemes products. “These conditions are designed to prevent health insurance policies from undermining the business of a medical scheme,” Treasury explains in a statement.

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Wellness programme Round-up part 1 Hanna Barry

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I

n a bid to secure customer loyalty, retailers, service providers and insurance companies offer their customers rewards programmes in the form of lifestyle and financial benefits. With a focus on medical schemes this month, RISKSA has rounded up four rewards programmes that are offered by medical schemes, unpacking what each one offers and at what cost. We hope you find this useful and look forward to bringing you the next installation in an upcoming issue.

Discovery Vitality “Do well: Know your health.

Improve your health. Get rewarded.�

The philosophy Discovery Vitality is a wellness programme that rewards members for getting healthier.

The cost Members of Discovery Health can automatically join Discovery Vitality. Those on Discovery Life need to be paying a minimum of R350 for their life policy to access Vitality and this excludes the monthly Vitality fee. It is also available to Key Care members and through some companies.

The monthly costs for 2014 are: Single member: R169 Two members: R199 Three or more: R225

How it works Discovery Vitality works on different statuses: Blue, Bronze, Silver, Gold and Diamond.

Diamond status is awarded to those members who maintain Gold status for three consecutive years. Everyone starts at Blue and progresses as they improve their wellness. The value of the discount on most benefits is determined by the status of the member, with discounts increasing the higher the member’s status.

Earning points Points can be earned in a variety of ways, from completing a range of online health assessments (including fitness, nutrition and mental wellbeing), doing a Vitality Health Check at an accredited pharmacy or a Vitality Fitness Assessment at a biokineticist, as well as visiting the gym and keeping fit.

Blue Single member: 0 Member plus one: 0

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Bronze Single: 15 000 Member plus one: 30 000 Silver Single: 35 000 Member plus one: 70 000 Gold Single: 45 000 Member plus one: 90 000 Diamond Single: Maintain Gold for three consecutive years.

Member plus one: Maintain Gold for three consecutive years.

For each additional member aged 18 years and older, add: 10 000 (Bronze), 20 000 (Silver), 30 000 (Gold).

The benefits Visit www.discovery.co.za/portal/individual/ vitality-partners for a full list of Vitality partners. Here are some examples.

Cash back is based on Vitality status and works as follows:

Blue

Bronze

Silver

Gold

Diamond

More than 5 years

10%

12%

14%

15%

20%

3 to 5 years

10%

11%

12%

13%

15%

Less than 3 years

10%

10%

10%

10%

10%

Fitness

Retail and leisure

Virgin Active and Planet Fitness: Up to 80per cent monthly savings on both, depending on the type of gym access (i.e. whether for single or multiple clubs). 150 points earned per workout. The gym benefit is cancelled if members don’t visit the gym at least 36 times in a rolling 12-month period. To restart the benefit, members must repay the once-off activation fee of R865.

Alongside Ster Kinekor movies for less than half price and up to 15per cent Clicks ClubCard Cash-back Rewards based on Vitality status, members can get up to 20per cent cash back in the DiscoveryCard store network, which includes, among others, @home, Builders Warehouse, Exclusive Books, Stuttafords, Totalsports and Toys R Us.

Travel Kulula: Discounts range from 15per cent (Blue) to 30per cent (Gold) and 35per cent (Diamond). Emirates: Discounts range from 15per cent (Blue) to 30per cent (Gold) and 35per cent (Diamond). Europcar: Discounts range from 8per cent (Blue) to 20per cent (Gold) and 25per cent (Diamond). Protea Hotels: Discounts range from 15per cent (Blue status) to 35per cent (Diamond status). With a DiscoveryCard, the discount on VitalityHotels is boosted from 30per cent (Blue) to 45per cent (Gold) and 50per cent (Diamond). *Vitality members with DiscoveryCards can earn cash back when shopping, among other additional rewards and savings. For example, holders get up to 25per cent cash back at Pick n Pay and Woolworths.

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Momentum Multiply “Earn points and rewards for doing the everyday things that enable you to live a healthy, active and financially fit life.”

The philosophy Momentum Multiply is premised on improving the physical and financial wellness of Momentum policyholders.

The cost All Momentum policyholders automatically qualify for Multiply membership. The monthly costs are: Single member: R147 Two members: R169 Family of three or more: R179

How it works Momentum Multiply works on different statuses: Bronze, Silver, Gold, Platinum and Private Club status. Everyone starts on Bronze status and progresses as they improve their wellness. The value of the discount on most benefits is determined by the status of the member, with discounts increasing the higher the member’s status.

Earning points Points can be earned in a variety of ways, from completing an online Momentum Wellness Profile, financial wellness assessment and financial needs analysis, to going for a voluntary HIV test, regularly visiting the gym and monitoring your fitness through FitTrack or by doing a fitness assessment.

Bronze Single: 0 Family: 0 Silver Single: 25 000 Family: 50 000 Gold Single: 45 000 Family: 85 000 Platinum Single: 65 000 Family: 110 000 Private Club Single: 85 000 Family: 130 000 (In order to reach Private Club status, an individual must have achieved the points threshold and been a member of Multiply for two consecutive years.)

FitTrack and the Multiply pedometer The Multiply pedometer measures your activity through the amount of steps you take and the distance you walk every day.

FitTrack calculates your Multiply FitTrack Index using files downloaded from a heart rate monitor or the Multiply Pedometer. You can earn up to 800 points a month based on the Multiply FitTrack Index you have reached and for logging your training activities.

The benefits Visit www.momentum.co.za/for/you/rewards/ enjoy for a full list of benefits. Here are some examples.

(Bronze) to 30per cent (Platinum) and 40per cent (Private Club).

Protea Hotels: Discounts range from 25per cent (Bronze) to 40per cent (Platinum) and 45per cent (Private Club).

Retail and leisure Through a voucher system, members get discounts at Woolworths ranging from 5per cent (Bronze) to 8per cent (Platinum) and 10per cent (Private Club). Full price movies at Nu Metro will cost members as little as R15 (Private Club) and, at most, R19 (Bronze).

Fitness Virgin Active: Members get between a 20per cent and 60per cent discount on their monthly gym membership fee, based on average monthly gym visits over a rolling three-month period.

Planet Fitness: Members can save up to 80per cent on monthly gym membership fees with Planet Fitness. The maximum overall discount is R450 a month.

Travel Mango: Discounts range from 20per cent (Bronze) to 40per cent (Platinum) and 50per cent (Private Club).

Emirates: Discounts range from 15per cent (Bronze) to 30per cent (Platinum) and 40per cent (Private Club).

Avis: Discounts range from 15per cent

Momentum Multiply offers discounts on online shopping and here are some examples:

Bronze

Silver

Gold

Platinum

Private Club

Apple (iPad)

10% (7.5%)

12% (9%)

14% (11%)

16% (13%)

20% (15%)

Samsung (printers, accessories)

7.5% (10%)

9% (12%)

11% (14%)

13% (16%)

15% (20%)

Canon

20%

25%

30%

35%

40%

Jenna Clifford

10%

12%

14%

16%

20%

Kalahari (max. number of discounted items a month)

60% (1)

70% (2)

80% (3)

90% (4)

100% (5)

20%

25%

30%

45%

40%

Serengeti eyewear

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Liberty Own Your Life “Make the most of every moment.”

The philosophy Just over a year old, Liberty’s rewards programme does not work on a points or status basis and everyone enjoys the same benefits.

Membership cost Individuals must have a Liberty policy where the premium is worth more than R400 a month. Members belonging to a Liberty Health Medical Scheme qualify automatically regardless of their monthly premium.

Main member: R129 Family membership (main member, with or without spouse and children): R189 Additional child dependant: R70

How it works All members enjoy the same set of benefits and don’t need to accumulate points or complete various tasks to secure or enhance benefits.

The benefits Visit www.ownyourliferewards.co.za/

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Partner for a full list of partners.

Here are some examples.

Fitness Virgin Active: 80% discount on Club membership and 70% on Premier during year one.

Planet Fitness: R80 a month on nonPlatinum clubs.

Travel South African Airways: Discounts of 5–7% off domestic and international flights.

Avis: 10% discounts on car rental, point to point, chauffeur drive and luxury cars.

Sun International: Up to 45% discount.

Retail and leisure Jack’s Paint and Hardware: 5% off Panache paint; 10% of all tools and hardware.

Hirsch’s: 10% off electronic goods and selected appliances; 15% off a range of household goods.

Nike: 15% discount on any Nike product.

Jenna Clifford: 15% off selected jewelry.

Nu Metro: 50% savings on two 2D or 3D tickets at any Nu Metro cinema.

Sandton City: Four hours free parking.

Reality by Sanlam The philosophy A lifestyle programme aimed at empowering its members by saving them time and money, as well as helping them maintain a healthy lifestyle and remain informed on various topics.

The cost Any clients of the Sanlam Group qualify to join Reality. There are a variety of membership options on Reality, which offer varying levels of benefits. We’ve elected to use the Reality + Gym option. The monthly fee is R179 and the primary members must have two qualifying Sanlam Group products. The Reality+ Gym benefit does not include discounts on dining, Computicket or the wellness benefit, which rewards healthy members through discounts on their risk cover premiums.

How it works Benefits are dependent on your Reality membership option. There is no points system for benefits, but Reality+ Gym members can earn cash rebates based on how frequently they visit the gym.

The benefits Reality has a number of discount partners, but also works on the basis of special offers on a wide range of goods and services, which are

accessible via its website: www.realityshop. co.za. Here are some examples of set available discounts.

Quick Cab: 20per cent discount (only in Gauteng).

Sun International: Discounted rates on hotels.

Fitness

Retail and leisure

Virgin Active: All Reality members receive an upfront gym discount of 15per cent.

Planet Fitness: All Reality members receive an upfront gym discount of 20per cent.

Members on the Reality+ Gym option receive access to a rebate model rewarding them for the amount of times they visit the gym. It works as follows:

Hugo Boss: 20per cent discount with Reality membership card.

Grays: 25per cent discount with Reality membership card.

Travel Reality agents: Reality agents can assist in finding the best deals on flights, car hire, weekends away and business trips.

Keedo: 20per cent discount.

Waltons: 5per cent discount.

Get Smarter: From R500 of business and lifestyle courses.

MSC Starlight Cruises: Partner cruises free.

Personal assistant: The Reality PA is available 24/7 and can assist with anything from quotes on tyres, plumbers and cellphone contracts to daily weather reports and décor for birthday parties.

Usage

Infrequent Casual

Moderate Frequent

Monthly gym access requirements

0–3

4–7

8 – 11

12+

Rebate

R0

R50

R169

R300

*Only one gym visit a day is counted for rebate purposes.

Choosing the right rewards programme Duncan Barker, certified financial planner at Toro Financial Planners, says that clients shouldn’t get a rewards programme unless they engage and interact with it, because then they will be paying for it and not enjoying the benefits. “Newer rewards programmes don’t make you achieve points or status upgrades, but rather reward you for being a member. To me that detracts from what these were meant to do, which is to reward you for making better lifestyle decisions,” he comments.

“My advice is to see how clients can access a rewards programme within their current policy or investments, rather than look to take out a new policy just to get a rewards programme.

Clients should find one that suits their entire financial plan.”

Clayton Samsodien, MD of Genesis Employee Benefits, says that he is a great supporter of rewards programmes, in that they allow consumers to play a role in reducing healthcare costs in South Africa by improving their health. “One issue that was not addressed when developing these programmes was the immense challenge in changing behaviour.

In general, people know they must exercise and eat healthy, but they don’t. Incentives alone cannot change behaviour; there has to be more awareness and education before consumers will engage. The reality is that most people will take a pill for cholesterol before they give up their beloved basted steak for vegetables and fruit.”

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INSURANCE INDUSTRY MOBILE APPS Incorporating emergency assist services, our apps are designed with efficiency in mind and offer an innovative approach to engaging with your customers.

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CONTACT US FOR MORE INFORMATION OR TO TAILOR-MAKE YOUR APP! Anthony Kotton: +27 82 784 4271 (anthony@oneloyalty.co.za) Ryan Grill: +27 82 552 8216 (ryan@oneloyalty.co.za) Switchboard: +27 11 291 7300 or visit www.oneloyaltyrewards.co.za

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W un m

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M m tr a th th in re g q s s e ti c

For more information on this service e-mail info@europassistance.co.za Europ Assistance SA is a registered Financial Service Provider. FSP 5001

T c ty “ s m in 8 a

IN CASE OF EMERGENCY We never know when we are going to need urgent medical attention. The very nature of the word emergency means a serious, unexpected and often dangerous situation requiring immediate action. Your best defence is having a plan, and in the case of a medical emergency, this means the ability to summons qualified professionals at the touch of a button.

“No one wants to find themselves in an emergency situation, yet there is tremendous peace of mind knowing you have access to 24-hour emergency advice and assistance,” says Shane Marais – Head of the Medical Contact Centre at Europ Assistance SA. “Making one call puts you in touch with an independent national network of emergency medical personnel, ready to respond to your emergency.”

Europ Assistance SA’s Emergency Medical Service (EMS) contact centres available around the clock and is manned by medically trained and experienced professionals. In the event of a medical emergency, trained emergency medical personnel will assess each situation and dispatch the most appropriate medical response transportation via air or by road.

Marais continues, “As a benefit, the value in offering your member base access to emergency medical assistance and transportation cannot be underestimated. Apart from immediate dispatch of life saving assistance, members will appreciate the quality service delivery, patient care and professionalism that are part and parcel of the service”. Additional benefits include transportation of children to a place of safety and repatriation of mortal remains as a result of a medical emergency. The service enables comprehensive daily, monthly or quarterly reporting of contact centre interactions and claims statistics. The claims authorisation process strictly adheres to scheme protocols and procedures. All Europ Assistance SA’s emergency case managers have an emergency care qualification and current registration with the Health Professions Council of South Africa.

The strength of Europ Assistance SA’s success in the emergency assistance services industry can be attributed to high quality assurance levels and sophisticated technology. Marais says, “In terms of our Emergency Medical Service, we have a specialised department managing the service level agreements and performance of the numerous service providers involved; including 145 EMS providers, 438 response vehicles, 836 ambulances, 12 helicopters, and 13 fixed wing aeroplanes”.

Marais confirms that full clinical and logistical audits are conducted upon application by a prospective service provider, prior to acceptance onto the panel.

On the technology front, Europ Assistance SA relies on a number of system capabilities and strengths to provide an indispensable service. Location Based Services allows the tracking of a caller via cell phone location. In addition, there is geo-coding of the incident location against the selected mapping system. Case managers have the option of changing mapping systems between the default system (AFRIGIS) and internet-based Google Maps, should they be unable to locate the incident location on the default search.

Emphasis is placed on fast call flows. Marais further mentions that the system is designed for optimal efficiency, with less questions necessary to minimise call-taking times. “Our system also matches the geo coordinates of the incident location with the preferred service provider, to select the closest provider according to level of care specifications”.

Europ Assistance SA’s latest VAS innovation is particularly effective in case of emergency. Call Me is a client web portal which facilitates simple, secure and convenient activation of Europ Assistance SA’s services (in this case, Emergency Medical Services) with one click of a button on a member’s mobile device. Says Marais, “With the Call Me facility on their phone, members just push the appropriate button on their cell phone and wait for the call from one of our medical customer service agents. They will know immediately that it is an emergency and will be able to activate the appropriate service, timeously and effectively”.

Europ Assistance SA prides itself on providing product offerings designed to meet the individual needs of its clients’ customer base. Emergency Medical Services are vital and can be very effective in boosting client retention.

Medical AIDS Neesa Moodley-Isaacs

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It’s that time of year, when medical schemes start announcing their contribution increases for the following year, while brokers help members evaluate their medical scheme and options. RISKSA takes a look at the factors that contribute to medical scheme contribution increases.

on the up and up edical schemes say one of the highest contributing factors to premium increases is general tariff increases. This refers to the increase in the price per unit of healthcare services offered by providers such as private hospitals, doctors and medical specialists.

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Peter Jordan, the principal officer of Fedhealth, says premium increases are also affected by increases in claims due to ageing, and increased denand from members for new medical technology. Bobby Ramasia, principal officer of Bonitas Medical scheme, says the most significant factor affecting contribution increases for medical schemes is the increase in healthcare claims cost, which is driven largely by tariff inflation, the impact of ageing and increased claims.

Tariff increases These increases are generally driven by Consumer Price Inflation (CPI). Jordan points out that while medical schemes and administrators always strive to keep cost increases at a minimum, the reality is that these costs are not completely within their control. “Schemes and administrators negotiate with providers on an annual basis and the hospitals have historically always received tariff increases in excess of CPI. This is partially due to the nature of costs incurred by the hospitals in the running of their business such as salary costs (which tend

to increase at a rate higher than CPI) and medical technology. The rest of the providers usually accept CPI increases. The schemes and administrators have not yet generally succeeded in achieving CPI increases in their negotiations with the hospitals.”

Mark Bishop, the head of business services at Netcare, says the fact that the price of healthcare services so closely tracks the CPI in South Africa is remarkable, especially considering the high labour cost of service delivery. “It is a well-known fact that labour costs have far outstripped CPI in recent years,” he says.

The impact of ageing As members get older, they tend to claim more from their medical aid – on average, around two per cent more for every year gained, according to Ramasia. “Ageing and utilisation combined tend to be in the order of between 2.8 per cent and five per cent a year,” Jordan says. He points out that benefits normally increase with CPI but not with ageing or utilisation.

“Premiums have to keep pace with scheme costs, of which benefit increases are only a portion. This means there is an increasing gap, especially if the ageing and utilisation component is fairly substantial. It is very seldom that any benefit increase happens at the same increment as the premium increase.

Unfortunately, the implications of this are that

there will always be a gap, which increases over time,” he says.

Increased utilisation This refers to higher average claims frequency and average claim amounts as a result of new medical technology, procedures and drugs, improved healthcare access, and changing claiming behaviour, which may be driven by increased benefit awareness. Benefit enhancements or reductions could result in further changes in claims experience, which will translate to higher or lower claims increases. Bishop says the expenditure on healthcare which grows faster than CPI is relevant in South Africa but is often distorted when reported. “In other words, South Africans buy more healthcare every year than they did the year before.

This is fuelled by the changes in demand for healthcare; this, in turn, is driven by the increase in chronic conditions – the high disease burden – so often commented on by government,” he explains.

However, Prof Alex van den Heever, a health economist at Wits University, says there is no concrete evidence about an increase in utilisation. “Utilisation is a function of age distribution. The older people become, the sicker they get. But the average population of the medical schemes in 2000 was the same as it is currently. Someone needs to explain why utilisation increases by three per cent every year,” he says. Van den Heever

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argues that this is actually being driven by specialists and private hospitals. “This includes the admission of patients, hospital stays and referrals to more expensive services as well as the billing of theatre hours,” he says.

The use of technology Bishop says another cost driver is advancements in technology, which enable more diseases to be treated while making new surgeries possible.

Roly Buys, executive for funder relations and contracting at Mediclinic, told the Financial Mail that having more patients means more nurses on duty and that increases have been due to factors beyond the control of hospitals.

“People are living longer and innovation in medical technology is increasing the range of conditions that can be treated. This trend is not unique to South Africa and is often experienced in health systems throughout the world. It is key to understanding why medical inflation is often higher than CPI,” he says.

Van den Heever says technology is often introduced prematurely and inefficiently in healthcare because companies know that there’s a willing market. “Insured people will insist on using the latest technologies and drugs to get well quickly.” However, medical schemes are often reluctant to pay the high costs associated with this, unless it can be motivated by clinical criteria, and this leads to patients paying large co-payments or being forced to fund the use of these technologies and drugs out of their own pockets.

Benefit increases not keeping up with contribution increases It is common practice that the monetary benefit limits are annually increased with CPI, which means that these keep pace with general inflation. Further benefit enhancements may be made on top of these. Over time, however, the effects of increased utilisation and ageing means that higher contribution increases are required, which may result in benefit limit increases not entirely keeping pace with contribution increases.

Council for Medical Schemes

On the other hand, this implies that members are also claiming more, which means that the pool of members certainly benefits from these utilisation shifts. Considering the group as a whole, given that contribution increases are determined primarily with reference to claims cost increases, we could argue that contribution increases are in fact tracking benefit increases rather than the other way around.

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What are the solutions?

Jordan says the main way to address medical inflation would be by managing hospital costs. “The problem with this is that schemes need to negotiate hospital fee increases on an individual basis (in terms of a Competition Commission ruling).

Schemes may not collude and the hospital groups use this fact to their advantage.”

Jordan says hospital groups use the argument of a national skills shortage as one of the main cost drivers in their annual fee negotiations. If there were a greater supply of skills (for example, nursing staff), this would put downward pressure on the annual increase demands by hospital groups.

Ramasia agrees, adding that a large part of claims increases is driven by the increase in tariffs charged; in other words, the increases in healthcare provider costs. “So, any reasonable initiatives to curb cost increases at base level will certainly have a positive effect on the overall medical inflation figure,” he says.

He points out that if we consider the normal continuum of care, with the general practitioner as primary gatekeeper, followed by the specialist and ultimately the hospital, it is clear that costs increase exponentially as a patient moves along this supply chain.

“The best way to reduce costs would be to ensure patients are treated at the correct level of care, instead of passing them along into ever-more costly care settings without sufficient justification,” Ramasia says.

He suggests another step could be to channel more births to the natural birth route as opposed to Caesarean sections.

“The latter is about twice as expensive and resource intensive as the former, which puts undue pressure on the healthcare system.

Naturally, a C-section can be clinically justified and it has an important role to play in the healthcare system. However, this is not always the case and the benefits of natural birth are too often underplayed,” he says.

He adds that this would not be a quick fix, though, as a lot of public education would first be required and the necessary support resources put in place. South Africa has one of the highest C-section prevalence rates in the world at around 70 per cent for births within the medical schemes population.

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life insight | life | investment | retirement

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Critical cover: 10 unexpected costs of severe illness We look at the costs of critical illness, what makes critical illness cover invaluable, and what makes it distinct from other disability cover options.

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Marital regimes - with this contract, I thee wed Marriage has considerable financial implications. We explain what your clients need to know about marriage regimes and how these impact their financial planning and protection.

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Critical cover Sarah Bassett

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10 unexpected costs of severe illness For clients already paying for medical aid coverage, a gap cover product and a disability income protector, a critical illness product can seem unnecessary. RISKSA looks at 10 unexpected costs of critical illness your clients will likely not have thought of, and why this cover can be invaluable.

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or the average South African, the chances of contracting a critical illness prior to retirement are reasonably high, according to Walter van der Merwe, CEO of FedGroup Life.

Old Mutual’s 2012 claim statistics showed that the average age of severe illness claimants is 42. Statistics from the South African Heart Foundation show that one in three men and one in four women will suffer from a stroke or heart attack before the age of 60. According to national statistics, about 40 per cent of cancer cases in women occur between the ages of 30 to 54.

According to Jaco Gouws, product actuary at Old Mutual, the reality is that only a third of all costs related to a severe illness are direct costs.

Two-thirds of the costs are indirect lifestyle and non-medical costs, which many people do not consider. And direct medical costs may exceed the limits and specified rates of medical aid and gap cover products.

All these costs are incurred over and above

any income loss that a client may suffer as a result of the critical illness. Income protection helps to compensate for lost income, but does not cover the cost of the additional expenses incurred, often at significant detriment to financial security.

Without critical illness cover, patients may be forced to dip into their savings or sell off assets to fund these additional costs, or rely on family to help them fund the expenses, warns Schalk Malan, executive director at BrightRock.

Ten unexpected expenses of critical illness

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Alternative medicines, treatments and approaches not recognised by medical aid Certain experimental treatment regimens and medications are not covered by medical aid, notes Van der Merwe. “At present, a new treatment is in clinical trials in Germany which may provide a way to stop the onslaught of multiple sclerosis without interfering with the body’s immune system. This would not be covered by medical aid.”

Alternative treatments are also not covered by medical aid, but some are commonly recommended treatments for symptoms associated with severe illness. “Breast cancer patients, for example, often experience joint pain and stiffness from aromatase inhibitor (AI) treatment. Acupuncture can provide an improvement in the pain,” he explains.

2

Loss of a spouse’s income

While an unwell client’s own income may be covered by an income protector policy, loss of income if a spouse has to take unpaid leave to care for their partner or children may have a significant impact on the household’s  financial security.

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NET#WORK BBDO 8016135

3

Nursing care

Ongoing nursing and care at home, which may require specific skills and qualifications specific to the nature of the disease and treatment, can be a considerable expense to add to the monthly budget, Malan notes.

4

Household support and assistance

The cost of hiring drivers, child minders or someone to help around the house can add up quickly. Ryan Switala, head of risk product development at Liberty, notes the example of a 33-year-old single mother, diagnosed with breast cancer. Treatment required a mastectomy followed by chemotherapy. The treatment left her exhausted and unwell and she found she had to pay a fulltime nanny to look after her daughter during the period of her treatment.

5

Ensuring the ability to have children in the future In the same case, the mother’s chemotherapy treatment threatened to affect her ability to have children in the future. Feeling that she may still want more children, she was able to afford to freeze eggs using her critical illness payout.

6

Equipment specific to a person’s condition A patient who develops blindness may need an expensive computer system designed for the blind and may need to make adjustments to their house. Another patient might require a hospital recliner chair bed, specific pillows to

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aid comfort while bed-bound, or expensive vital stats-monitoring equipment, such as a blood pressure machine.

7

Treatment for anxiety, depression and post-traumatic stress disorder Depression is a common phenomenon in patients who suffer from a critical illness.

Research done by the Montreal Heart Institute shows that after a heart attack, almost one out of every two patients becomes depressed.

“Of the 45 per cent of patients found to be depressed, 18 per cent were severely depressed and 27 per cent reported mild to moderate depression. The highest level of depression is experienced between six and 60 days after the heart attack. The fear of death along with financial worries could aggravate the situation,” Gouws explains.

“The entire family is affected by a critical illness and may need treatment in order to cope and adjust, besides the treatment for the patient suffering from the disease or illness,” notes Van der Merwe.

8

Medical aid shortfalls and co-payments Medical aid and gap cover products pay benefits according to specified rates. These often do not cover costs in full. Certain gap cover products do not cover cancer at all. There are also limits on the amount of cover provided for critical illness and specific treatments. For this reason, there may still be a significant shortfall on medical costs, especially in the case of long-term illnesses. Co-payments required

for multiple procedures can also add up at a shocking rate.

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Travel and accommodation

For patients who live in rural areas, or simply at some distance from a specialist treatment centre, there may be significant costs associated with ongoing travel over the course of the treatment period. Toll fees, petrol and travel costs, and accommodation costs for the patient and an accompanying family member or companion can add up considerably.

10

Palliative care

If the patient does not recover, they may require palliative care. This could include nursing, psychology, social work and physicians. This is typically declined by medical aids as it is deemed frail care.

Ultimately, as Switala points out, it is not so much the examples themselves that are important. “You could come up with any number of examples that may be relevant to a specific set of circumstances. Rather, it is important to recognise that a critical illness event is going to cause a person to have to, or want to, make some lifestyle adjustments and incur some additional nonmedical expenses.”

Critical illness cover will provide a person with the financial buffer required to cope with these added costs and will enable choice at a deeply stressful time; choices that could alleviate stress, discomfort and even the course of treatment.

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Built to Hanna Barry

serve

Celebrating 100 years of ‘Serving those who serve’ in 2013, it’s no wonder that life insurance company, Assupol, has a rich history. While there is not a great deal by way of an historical record of its origins, what can be gleaned from meeting minutes and articles makes it clear that Assupol was born out of a need.

Rudi Schmidt, CEO of the Assupol Group

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ore precisely, it arose out of a need in 1913 to provide financial support to the families of deceased policemen. Initially collecting contributions on a fairly informal basis, this became more formalised with time and Assupol’s first official meeting was held in 1914, the same year that the Assupol fund was registered. “From its beginnings, Assupol has been a members’ company. It never belonged to the police and no money flowed from the police budget to Assupol,” highlights Gert Wessels, executive director of group sales.

Wessels has been with the Assupol Group for more than 30 years and was the CEO, a position he relinquished in July 2010, in the interest of succession, which included the strategy alignment of Assupol Life following

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Gert Wessels, executive director of group sales

demutualisation. During his term as CEO, Wessels built Assupol Life from a small niche insurer to a diversified insurance company with assets in excess of R2 billion. Today he serves as a mentor to his fellow executives, while taking responsibility for the group sales strategy.

“Assupol has always been a commercial business. It became a mutual society when the Long-term Insurance Act was amended,” adds Rudi Schmidt, CEO of the Assupol Group. A non-executive director of Assupol since 2000, Schmidt assumed the role of group CEO in May 2010.

“Although Assupol’s niche market was the police until the late 70s, it has always been an independent business with an open insurance licence. The company’s core focus was the

South African Police Service, which today still remains an important market to Assupol.”

Having had the SAPS as its core market in the initial years, Assupol built its own risk and mortality tables based on its experience, which allowed Assupol to competitively and accurately price its products for its market.

“Due to the lack of information and the perceived higher risks, our competitors were unnecessarily loading the premiums. Most insurers steered clear of the black market because they didn’t understand the mortality or the risks,” explains Schmidt. “Assupol, however, had a single set of mortality tables based on 30 years of mortality history of our niche market.

We understood our market, knew the risks and knew how to price the product. This was our

core competitive advantage and a key reason why the police remained such a large part of our business for that period of time.” Assupol paid all the claims submitted during both World Wars and survived near bankruptcy in 1918, as a result of losses from a Spanish flu pandemic.

Due to its early focus on the black South African market, the insurer required no shift in strategy when a democratic government came to power in 1994. “We decided in 1985 to focus on the black market, which was neglected by the majority of insurers,” notes Wessels.

Adds Bridget Mokwena-Halala, CEO of Assupol Life Limited, “We have a great relationship with the police services because of how we have treated them historically.”

Mokwena-Halala has been with the group for 13 years and has come up through the ranks

of Assupol since joining in 1999. She worked in sales, managed regions and headed up HR before being appointed as the CEO of Assupol Life. “People understood that Assupol was there for its members and paid claims quickly, which is why it was promoted by senior members in the SAPS,” she continues.

Back then, claims were paid based on an affidavit from a station commander. Today, this forms part of supporting documentation, reflecting dramatic changes in the fraud landscape. “Unfortunately, today we require more information to ensure we are paying valid claims,” she acknowledges. “Fraud syndicates are very active, particularly in the low-income market segment. They especially target insurance companies that use the shorter period of paying claims as a competitive advantage.”

An unknown innovator Assupol is one such insurer, paying out 98 per cent of its claims within 48 hours, of which 86 per cent are paid in less than 24 hours.

But its fraud detection processes are robust enough to enable claims payment within this time frame, while maintaining sufficient due diligence. Although it might not have the marketing budget to advertise the fact, a focus on the speed of claims payouts is not the only innovation Assupol has introduced to the life insurance market, says Schmidt. Providing for the transportation of mortal remains, as well as returning all premiums to policyholders who have been claim free for 10 years, are two of the other notable innovations it pioneered.

These benefits are now considered standard in the life insurance sector. Schmidt maintains

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

But a rapidly developing new generation of customers will communicate and conclude business with Assupol in a different manner, demanding that its systems and processes evolve to keep in step. Nonetheless, one thing that will remain constant is its target market.

With 72 per cent of its clients falling between LSM 4 and 8, Assupol plays primarily in the economically active segment of the lowincome population.

Bridget Mokwena-Halala, CEO of Assupol Life Limited

that the only means by which Assupol could achieve a compound growth rate on embedded value of over 32 per cent a year, coupled with continued growth in new business, is through innovating and delivering on promises.

Certainly, Assupol’s head office in Menlo Park, Pretoria is a lot less impressive than some of its competitors, who are located in areas with a far higher per square metre premium. Having moved into this office with just 16 employees, today the block of offices houses over 200 employees, while the group employs 546 full-time staff. “I’m still receiving the same pay I received in the 80s,” jokes Wessels, underlining Assupol’s focus on cost control in a humourous manner. While it may not have invested significantly in smart suites for its executives, it has invested in face-toface engagement with its market. Ninety-two mobile offices in rural communities, largely unreached by competitors, have clearly proved a highly successful investment.

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“We want to remain a key player in the low- to middle-income segment, which will remain the biggest class in South Africa for a long time to come,” says Schmidt. “As this class evolves, their expenditure patterns will change and their product needs evolve, too. This presents enormous growth potential to meet these changing needs. We don’t have plans to grow into the rest of Africa, because we believe there is still so much opportunity locally to grow in this market segment. We understand this segment better than our competitors and we will continue to serve it better than anyone else.”

“Our motto is ‘Serving those who serve’ and we want to remain a niche insurer, focused on the mass market, as well as governments and parastatals,” adds Mokwena-Halala.

Assupol’s 800-strong agency force is primarily responsible for selling policies to these markets, though it also has 256 broker principles on its books. Clearly a passion and concern of his, Schmidt says that broker upliftment is a real challenge, given the restraints imposed

by Conflict of Interest (COI) legislation on the amount that insurers can legally spend on developing independent brokers. “Insurance companies are best positioned to develop people in the financial services sector.

While this may be a conflict of interest, government needs to take a pragmatic approach given the social structure,” he emphasises. “Insurance is a scarce skill and if commission payments are interfered with, a company like Assupol will be hardpressed to

find brokers who are willing to incur the costs involved with venturing into rural areas to sell products. This is ultimately to the detriment of the economic upliftment of those areas.”

Schmidt rightly points out that one of the best mechanisms of preventing people from sliding back into the poverty trap is insurance, which is a safety net that the government cannot afford to provide to everyone. “Unfortunately, regulatory implementation often fails to recognise the key role played by insurance companies in this regard. In order for regulatory change to be sustainable, it must be to the ultimate benefit of everyone in the insurance value chain, including the consumer, broker, insurer, the regulator and the communities. That is the only way to create sustainable industries, uplift communities and promote financial literacy in low-income markets.”

Serving those who serve In a bid to enhance the strength and sustainability of Assupol, while uplifting the communities it serves, the company took the decision to demutualise in 2010. It had previously considered the possibility of a demutualisation and reverse listing into Rentmeester, a subsidiary of Rentsure, back in 2002. But after a failed merger, Assupol walked away from these negotiations.

Pursuant to the breakup, Rentmeester instituted a claim against the company that was dismissed in the High Court five years later, paving the way for Assupol to continue the implementation of its strategy of demutualising.

Needless to say, Assupol maintained its independence and kept going strong, having its decision to demutualise approved in December 2010. Partly driven by regulatory change, Assupol’s demutualisation spoke more to its need to access capital markets. “As a mutual society, you can’t raise debt or issue equity, which means the only available capital is internally generated. We continue to grow new

business at a double digit rate and have had to at times constrain this accelerated growth, because of the limited capital available,” explains Schmidt.

As part of the demutualisation process, Assupol issued R891 million worth of shares to its policyholders, probably the largest wealth distribution undertaken by an unlisted company. “Just in excess of 240 000 policyholders became shareholders and more than 80 per cent of these were previously underprivileged black individuals,” says Schmidt.

Ninety-three per cent of these policyholders opted to cash in their shares, which at the time were valued at R2.50 a share. When the demutualisation process started, they were valued at R1.25 a share, reflecting Assupol’s rapid growth rate.

Since a number of individuals who had contributed to building Assupol’s wealth

were no longer policyholders at the time of demutualisation, or were in group schemes where they would not derive any individual financial benefit from it, Assupol created a community trust into which 25 million shares worth approximately R70 million, were invested. The South African Revenue Service (SARS) recently approved the trust as a public benefit organisation.

selected based on how they complemented Assupol’s strategic direction. The International Finance Corporation (IFC), which is a part of the World Bank, was chosen based on its strong global brand and best practices. The IFC holds deals with over 100 banks in Africa.

A BEE-structured deal enabled the Women’s Development Bank (WDB) to be brought in as an investor.

“Through an independent board of trustees, which will be accountable for managing capital in line with the trust deed, this trust will benefit the communities in which we do business on an ongoing basis,” notes Schmidt. “In my career history, Assupol’s demutualisation will always feature as one of the most exciting and enriching projects I was involved in.”

The WDB bought 10 per cent of its shares for cash, holding the rest as a notional loan against the shareholders. “The WDB aligns well with our empowerment schemes, operating in low-income areas and working to empower women,” says Schmidt. The third investor, Investec, was chosen for the value it adds by way of its insurance expertise and entrepreneurial spirit. These three shareholders, together with management, hold an 83 per cent stake in Assupol.

In it for the long haul Some 223 000 shareholders were then replaced with three strategic investors, each

While there were murmurings of a possible company listing at the time of the demutualisation, this does not seem likely in the near future. Assupol shares are, however, being fairly actively traded on an over-thecounter platform run by independent company, Equity Express.

“Companies generally list for the purposes of generating capital and liquidity. Right now, we need neither, as our key strategic investors have taken a long-term view,” notes Schmidt. “We want to list at the right time for the right reasons, rather than create additional complexities in the business that do not add value.”

It is this clarity of focus and resolve to contribute meaningfully to its chosen market, clearly reflected in the conversation of the three executives, which leaves me feeling certain that Assupol will continue ‘Serving those who serve’ for 100 years to come.

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Life insurance & marriage Christy van der Merwe

Spring and summer in South Africa also ring in wedding season, with venues fully booked and planners frantically busy. Brightrock Insurance highlights some key points to consider when advising couples who are about to get married or have recently done so.

A

s grim as it might be, it is important to discuss financial needs and responsibilities in the event of a spouse suffering a debilitating illness, injury or death,� says Schalk Malan, executive director at BrightRock.

Newlyweds A young couple will typically not have significant assets and their insurance cover generally needs to emphasise income-related needs, such as provision for debt, household expenses and healthcare costs. Although both spouses might work full time, one partner is likely to earn more than the other, earning a primary income for the household, which might cover car finance or the bond on a new house.

There might even be more arbitrary debts, such as paying the cost of the wedding reception,

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honeymoon or study loans, which is why the newlyweds need to consider a policy covering the loss of income in the event of disability, illness or death.

Couples should look into various scenarios, such as cover for the period it would take the dependant spouse to recover or reskill to generate new revenue, or the settlement or partial settlement of joint debts or bonds affected by the loss of primary income. The decision whether to protect income until retirement age or death will depend on how much provision the couple has made for retirement; a responsibility which does not fall under life insurance.

Newlyweds should also ensure that their policies are flexible and are able to change or buy up cover when their circumstances change.

On average, salaried South Africans finance a new car every three to five years, and many new parents will upgrade from their starter home to a family home once children arrive.

Sustainable affordability Given the high levels of debt and growing asset base at the newlywed stage of marriage, affordability of cover is an important consideration, but should not be achieved at the expense of future sustainability. The couple could, for example, look into a policy with a last-death option (offered by BrightRock) which allows clients to choose to defer the payout – with a premium waiver – of the cover on the death of the first spouse, to the death of the surviving spouse. This is a cost-effective option for couples with affordability constraints, because the surviving spouse effectively has life cover for free, as no further premiums are due, but the benefit will pay out upon the surviving spouse passing away.

If the couple is jointly repaying a bond, do not insure the full bond on both partners but only the proportion of the bond that the affected partner is responsible for repaying. This will prevent over-insurance and unnecessary premium spend by both partners.

Two lives, one policy Insuring both spouses on one policy means they can insure benefits that are tailored to their needs. A recurring benefit could pay out monthly to the surviving spouse in the event of the first spouse’s death. The couple could have the option of conditional, limited-term or life-long payouts. One company even offers the surviving spouse the option to capitalise the stream of recurring payouts into a once-off lump sum payment.

Some setbacks have a domino effect. The couple may need to invest in dread disease or critical illness cover to make provision for any additional expense needs that arise from serious illnesses or injuries.

Disability cover will provide an income for the ill or injured spouse (and settle debts in the event of being unable to generate an income), but it doesn’t cater for additional expenses like the cost of lifestyle adjustments or shortfalls in medical aid payouts. The extent of the couple’s medical aid coverage and their affordability concerns will guide the appropriate level of cover.

Funeral and death-related costs Young couples must consider increasing their life cover to provide for funeral and death costs, so the surviving partner won’t have to dip into the couple’s developing asset base and can access a portion of the payout for immediate expenses like funeral costs. Listing your spouse as a sole beneficiary of your life insurance policy may not be as considerate as you think.

Ensure that more than one beneficiary is named in your policy, especially if more than one financial dependant is involved. This will prevent complications in the event where both spouses die simultaneously and simplify matters with the division of financial benefits between multiple dependants.

smArt Alec tells his clients about Altrisk’s comprehensive cancer cover. they can now be covered for all conventional cancer and carcinoma in situ events typically excluded. And, as a standalone benefit, there’s no need to replace existing critical illness policies. it all adds up. because at those odds, you’d expect Alec to have done his homework.

For more information speak to your Altrisk broker consultant or go to www.altrisk.co.za

We’re your type of risk insurer.

For younger couples, with a smaller asset base, estate duty might not yet be a major concern. At the very least, every couple should have a last will and testament that deals with the disposal of their assets and liabilities after death.

“Newlyweds should also ensure that their policies are flexible and are able to change or buy up cover when their circumstances change.”

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

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Lessons

in

life

While your clients may hope that the worst won’t happen to them, relying on hope to protect their financial security is risky. The increasing cost of long-term insurance may seem like a financial burden, especially in tough economic times, but the potential cost of not having cover is so much higher.

His cancer treatment was ruthless and for months he was bedridden and unable to work.

Sadly, Paul never completed his treatment, and passed away just six months after his diagnosis.

Ryan Chegwidden, actuarial head, Altrisk These real-life stories demonstrate just how important financial planning is to your client’s future wellbeing.

There are no guarantees At 41, Paul was happily married with two children and ran a successful business. Besides the pressures that come with being a business owner, Paul had a healthy lifestyle.

In April last year, he developed a mild cough, more of a nagging irritation really, and it was only when a growing back pain got the better of him that he went for a check-up. Paul went for a few tests and, even at this stage, he was not overly concerned. The results were devastating.

Paul had stage three cancer. The back pain was caused by a tumour that had grown around his spine and lungs.

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Paul was financially astute and had a comprehensive financial plan. His medical bills were paid in full through his medical aid. His critical illness cover and income protection saw him through the months of not being able to work and the 24-hour home care he needed.

His business kept going, thanks to the key-man cover and the buy-and-sell agreements he had in place with his brother, who worked in the business. His life cover sorted any outstanding debts, secured their family home, and ensured that his wife and children would be able to sustain their lifestyle.

The fine line between having it all and losing it all Chris is a maverick 50-something entrepreneur who tends to flirt on the side of risk a little more than he ought to. He runs an engineering business, loves to take his motorbike out for a burn and his Greek ancestry imparts him with a love for good food and wine.

He runs his business as a one-man show and it’s always been subject to the two-hands syndrome — if Chris is not working, his business is not making money. With Chris, it was either feast or famine.

It was his love of a feast that got him in trouble with a high cholesterol level — a combination of genetic factors and not such a great lifestyle.

His expanding midlife girth and high cholesterol contributed to a health scare three years ago, but not so much that it would galvanise him into action to commit to some healthier habits, let alone an annual medical. Unlike Paul, Chris was cavalier about his financial security.

Then, in September, Chris collapsed at home.

Currently Chris is three weeks into fighting for his life in a high care ICU unit in a private hospital. He is unconscious, diagnosed with chronic diabetes, organ failure, including pancreatitis and kidney failure, is on dialysis and on a respirator.

But here’s the real kicker — Chris has no critical illness cover, no disability cover, no income protection and no medical aid. He has only a small life policy which he took out years ago.

Chris never considered that the unthinkable would happen to him. Now his loved ones are faced with a financial catastrophe. His family and friends are struggling to find the money to keep him in a private ICU facility to give him the best chance of survival. His partner Joanne has given her entire life savings of R250 000 to keep Chris in a private hospital. His assets and equipment from his business have been sold off to secure a few more days in the ICU. His house may have to be sold to defray further costs.

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The situation is heart breaking.

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• His most valuable asset, his ability to earn an income, was not insured.

• His house, his last remaining asset, hangs in the balance. If Chris survives, he will have no home to go to, and will have to rely on others to sustain him until, and if, he gets back on his feet.

• With the massive organ failure, Chris will be disabled. He certainly won’t be able to work at the pace that he could before. He has no disability cover and no other means of earning an income.

His story could have been so different if he had a financial plan with long-term cover in place.

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So, the next time you have a client who believes they don’t need a financial plan and the advice of a professional adviser, tell them about Paul and Chris. None of this is fiction — it all happened.

Many people say: that will never happen to me.

Your question to them should be: why not you?

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getting

retirement saving right Rob Rusconi is general manager of Lombard Life, a licensed long-term insurer that seeks to meet customer needs through partnerships with BrightRock and FMI. Lombard Life is a member of the Lombard Insurance Group.

The retirement reform has been a long process, some might say painful. What sort of outcomes can we expect and how might these affect insurers and financial advisers?

ombard Life doesn’t have any products providing long-term or retirement saving. In fact, we don’t operate in the investment space at all. This is partly because of the uncertainty of the reforms and partly because the saving space is a scale game. Capital and patience need to be in abundance. But our decision is in no small measure affected by our conviction that this is a tricky sport to play, where the rules of play are opaque and competing difficult.

Let’s look at what might change.

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National Treasury’s 2012 Budget sets out four main concerns. The first is that South Africans are not saving enough. Aggregate numbers from the South African Reserve Bank show that we are not putting money aside.

Retirement fund figures show that we continue to take more out of pension vehicles than we are putting in, far more than is predicted by the number of new retirees. We are just not preparing for retirement.

The second concern is that we are not preserving what we have saved. Too many South Africans switching from one job to another take their retirement saving and spend it rather than transferring it to their new employer’s pension pot. Furthermore, products are still not designed with portability in mind.

It is difficult or expensive for those who have started saving in most retirement annuities, for example, to pause their contributions when their circumstances change.

The third problem raised by our National Treasury is that high fees and charges remain a problem. Government incentivises retirement saving through tax subsidies. It has an

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obligation to make sure that the money that it puts into our pockets stays largely with us rather than going to the organisations to whom we entrust our saving (not forgetting those who advise us).

portability that we’re after, not churning.

Efficient portability implies less cost and that in turn probably means little or no space for commission. Strategy? Focus on the long-term needs of the customer.

Fourth, South Africans generally don’t convert their retirement saving into lifelong annuities.

They choose instead to invest into marketrelated products without a lifetime guarantee of payment. This exposes them to the risk of their lives outlasting their money. There is not much they can do about this when, well into old age, the risk becomes reality and advice is no longer available.

Three: lower charges across the board but particularly for individual products. This would definitely cut out some of the existing room for commission. We could see the commission issue largely resolved well before pension reform actions are taken. The retail distribution review should emerge quite soon.

The strategy here again is to demonstrate long-term thinking to your client and settle for long-term revenue through as-and-when commission or regular fees.

National Treasury has released five discussion papers. Two of them consider incentives, one for non-retirement saving. The rest match the other three challenges that our policymakers seek to address. A wide range of recommendations seeks to address the goals while respecting existing rights and managing the extent and speed of the change. This article aims not to describe these but to consider the implications of the broad sweep of events for financial advisers.

One: we’re aiming for more saving. This provides opportunities for financial advisers.

However, tax incentives for the wealthy are likely to be reduced, so for those advisers concentrating on pension saving for the wealthy, a change in strategy might be called for. The distinction between retirement and other saving becomes less important at high income levels.

Two: we’re aiming for portability. That sounds promising to advisers and it is, but its efficient

Four: more lifetime annuities at the cost of so-called living annuities that provide access to higher investment returns but no longevity insurance. Don’t expect an either-or situation here: retiring individuals probably need a combination. But policymakers are going to make a big effort to alert consumers to the risk of investment-linked strategies in old age. Traditional annuities ironically pay commission up front, but generally provide to the savvy adviser less income than a living annuity strategy over three or four years.

This may sound like a disaster for the intermediary. Income for advisers seems set to fall. There is some truth in this argument, but there is also tremendous opportunity.

Government is set to put considerable effort into instilling sound saving habits.

Good, patient financial advisers who put the interests of their clients first are polishing their surfboards for the new wave.

Life insurance industry in

good health

Assets held by South African life insurers have grown by five per cent to R1.8 trillion in the first half of this year, according to long-term insurance industry statistics released by Peter Dempsey, CEO of the Association for Savings and Investment South Africa (ASISA). empsey revealed the industry’s assets exceed its liabilities by more than triple the legal reserve buffer required by the Financial Services Board (FSB). “This indicates that the industry remains healthy and well positioned to honour future benefit payments to policyholders,” he explains. In the first six months of this year consumers took out just over five million new individual risk and savings policies, paying monthly premiums of R8.6 billion.

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Dempsey notes that monthly premium income for the period grew by three per cent for risk policies, retirement annuities and endowment policies. Credit life policies, however, experienced a 23 per cent decline, resulting in an overall decline of two per cent for total recurring premiums.

Single premium policies showed strong growth in the first half of this year. Consumers bought just over 95 000 single premium policies between January and June this year worth premiums of R39 billion. This represents a 13 per cent growth. Dempsey says total new premiums for the first six months of 2013 amounted to R47.5 billion, a healthy 10 per cent increase over the previous half year, which ended December 2012.

was paid out in the second half of last year and Dempsey points out paying benefits to policyholders is the core business of the longterm insurance industry.

The total benefits paid, R14.3 billion, constituted death benefits paid to beneficiaries of individual and group life cover. A total of R4 billion was paid in disability cover from individual policies and group cover.

Policy surrenders The value of surrendered policies increased by 18 per cent to R26.4 billion in the first half of 2013. Dempsey explains that this must be seen in the context of the total value of in force policies – a large portion of the life industry’s R1.8 trillion assets – and not just the new investment business written.

economy, the relentless increases in the fuel price and subsequently consumer goods, and job losses.

However, he encourages consumers to think twice before surrendering vital cover. “While it is understandable that consumers will tap into their investments when they are no longer able to make ends meet, we need to caution policyholders against cashing in their policies unless this is a last resort since it is almost impossible to make up the value lost in later years,” he concludes.

He says the increase in surrender values does not come as a surprise, given the state of the

Policyholder benefits In the first half of this year, the life industry paid R155 billion in benefits to policyholders, beneficiaries and pension fund members as a result of death and disability claims, maturity payouts and pension, annuity and other payments. This is 27 per cent more than

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Lack of regulation leads to ignorance on extent of cybercrime in SA Without an independent regulatory body, SA companies are not required to report data breaches. How safe is personal information from cybercrime?

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The show must go on With an influx of world-class entertainment stars and live productions, we take a look at the insurance requirements of holding a large-scale event.

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Cybercrime in SA

underestimated Christy van der Merwe

The lack of a single independent regulatory body means that the extent of cybercrime and data breaches in South Africa is largely unknown. Companies are not legally required to report on breaches in security and it is difficult to gauge how safe personal data truly is in the hands of trusted companies.

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he Lloyd’s Risk Index 2013, which assesses corporate risk priorities among global business leaders including South Africa, ranked cyber risk third on the list of top business risks – a jump from 12th place in 2011. In South Africa specifically, the Lloyd’s survey ranked cyber risk sixth, but it was ranked as the risk that the companies were least prepared for. So, while executives are waking up to the severity of cyber risk, they are not adequately dealing with it.

Marthinus Engelbrecht, CEO of NewOrder Industries, an enterprise risk management services company, concurs. He says companies in South Africa need to investigate their cyber risk profile as a matter of urgency. In most cases, decision-making executives remain oblivious and often view IT security as a grudge purchase. Cybercrime in South Africa is ubiquitous and has reached epidemic proportions, with cybercriminals stealing personal data, in many cases, to on-sell it to well-organised syndicates.

Engelbrecht adds that the proliferation of smart

mobile devices poses a threat that companies and individuals are struggling to deal with. A new scam is that of cybercriminals who have deployed applications (apps) infected with malicious code; when a consumer downloads the app onto their phone or tablet, criminals can skim the device and use personal information stored on it.

Ever-evolving cybercrime tactics Banks in South Africa remain the focus of cyber crime attention because that is where the effect materialises and where it is first noticed by an end user. In reality, every company or individual who stores personal information online is at risk. Engelbrecht says that cybercrime is becoming more focused. At an individual level, this is evident in scams such as the SIM swap. Fraudsters obtain a client’s banking logon details, through a phishing e-mail for example, and once they have logon details and a cellphone number, they pose as the client and request a new SIM card from the cellular provider. The client’s SIM card identity is transferred to the new SIM card, cancelling the existing one, allowing the fraudsters to intercept the banking SMS authorisation reference number and granting them access to the victim’s bank account.

Head of retail banking at Absa, Arrie Rautenbach says that together with the South African Banking Risk Information Centre (SABRIC) and cellular providers, Absa has implemented stricter measures throughout the process to try and strengthen weak links enabling SIM swap fraud. Absa is constantly

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offering and receives constant requests from companies for this kind of cover.

Other companies with a cyber liability offering in South Africa include Camargue Underwriting Managers; it has been one of the company’s niche liability products since 2001. Catherine Berry, senior underwriter of financial and personal lines, says that Camargue is seeing increased volumes of enquiries for cyber liability, particularly from larger, listed corporations.

updating security systems and is investigating a new system where one-time passwords are not sent by SMS to a cellphone number or SIM, but rather to an actual device, that will need to be registered.

These hacks cause reputational damage and put personal data at risk, leaving the door open for identity theft and all the ills that accompany it. They are just as damaging as hacks done purely for financial gain.

CEO of FNB Online, Lee-Anne van Zyl, affirms that all fraud is investigated and additional controls are continually added to enhance security layers already provided, with risk management at an enterprise level and in every business unit, especially FNB Online.

Unfortunately the weak link is often the enduser, inadvertently clicking on a scam link or e-mail. Terms and conditions of transacting online put the risk at the door of the client, and there is no insurance available for cybercrime at an individual level.

In May 2013, the Hawks arrested a man in Johannesburg for defrauding MTN of millions of Rand in airtime. He had hacked into MTN’s IT system, allowing the criminal syndicate to profit from selling stolen airtime.

Costly corporate cybercrime At a corporate level, targeted cybercrime also has various guises. Engelbrecht notes that cyber industrial espionage is increasing in South Africa. This takes the country’s reputation for crime and corruption to the online realm, where companies are spying on their competitors to gain access to prices, tender data and other sensitive information.

Companies are also at risk of criminals hacking into systems purely for financial gain, or falling prey to the increasing trend of ‘hacktivism’.

Hacktivists damage systems to gain fame and make a statement – their deeds are often politically motivated or to seek justice. South Africa has recently experienced a number of these attacks; the South African Police Service (SAPS) was hacked in May, and it was believed to have been motivated in response to the lack of justice following the Marikana shooting. The hacker gained access to names and personal details of whistleblowers who had reported crimes online. It exposed the negligence, incompetence and weakness of the SAPS cyber security systems.

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Sadly, the majority of breaches experienced by companies are not reported. The 2013 Kapersky Global Corporate IT Security Risks survey, which includes South Africa, reports that in the past 12 months, 91 per cent of the companies surveyed had at least one external IT security incident, and 85 per cent reported internal incidents. These breaches are expensive. Not only is the company defrauded, but it damages the business reputation, affects the ability to trade and seize new opportunities and, of course, breaches mean that additional professional services must be brought in to rectify the situation, including IT professionals, risk, legal, physical security and public relations management skills.

Keep calm and cyber insure In response to the high cost of data breaches, major corporate risk underwriters are starting to offer policies specifically devoted to managing the financial impacts of cyber breaches,and more companies are purchasing cyber insurance, says the US-based Ponemon Institute in its report ‘Managing Cyber Security as a Business Risk: Cyber Insurance in a Digital Age’.

Cyber liability insurance is a rapidly developing product in South Africa, says Celeste Buitendag, new business developer of cyber liability at Stalker Hutchison Admiral Specialist Underwriters. The company recently launched its cyber liability

HA

AIG has its CyberEdge product, and CyGeist, which underwrites for Guardrisk, is another operator in this market. CyGeist is the first South African underwriting management agency dedicated solely to the provision of cyber insurance. The CyGeist product provides insurance cover for consequences of a network or privacy breach, including costs to recover corrupted or destroyed information assets; network and business interruption; third party claims arising from compromised systems or data; crisis management and notification costs; and expenses of specialists, investigators, attorneys, forensic auditors or loss adjusters.

POPI power Concern over cyber security is no longer the preserve of the IT department. It is a complex, often intangible risk, leaving numerous operations of a business exposed.

Cybercrime has no geographical borders, thus no central policing authority, and laws in one country would not hold weight in another, making it a nebulous, but frightening threat, says Buitendag.

Berry reasons that cyber risk in South Africa is underestimated. There is no legislation obliging companies to divulge information on cyber security breaches, so South Africans are mostly blissfully ignorant of the extent of the problem. This will change, she adds, with the introduction of the Protection of Personal Information (POPI) Bill, which will make it mandatory for companies to inform clients of cyber breaches that may put their information at risk. POPI will also entail the establishment of a much-needed regulator in South Africa.

POPI promulgation is long overdue, and it is hoped it will come into effect imminently. The bill will grant the end consumer the right to question whether their information is safe, and South African companies will have a year to improve their systems.

POPI is likely to boost cyber security and intensify interest in cyber insurance in South Africa. The good news for companies and individuals is that the purchase of cyber liability insurance means the bolstering of cyber security defences, leaving companies better prepared to deal with cyber security threats, putting them high on the overall risk management agenda.

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show must go on South Africans have been treated to a host of international acts over the last few years as the country has become a more attractive destination to the world’s stars. However, for the show to go on, there is a substantial amount of work that goes on behind the scenes. We take a look at the insurance requirements of holding a major event.

Nick Krige

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South Africa is enjoying increasing interest from international acts and artists and, while this is fantastic news for fans, each entertainment act presents its own set of insurance risks and parameters. “From a risk management perspective, when we consider visits from comedians like Eddie Izzard, John Cleese and Russell Brand compared to music icons ranging from Rihanna to R Kelly, hosting the comic acts is arguably a potentially simpler affair than hosting big name music acts, who fill stadiums as opposed to theatres,” says Clive Shelver, MD of Film Entertainment Underwriters, a specialist insurance company writing on behalf of Compass.

“Rihanna has unfortunately gained certain notoriety this past year for cancelling her concerts at the last minute. Nonetheless, the dynamics of risk management for any act, no matter the size of the venue or the audience, all present their own issues and specific considerations,” he continues.

Cold feet In the event that an artist does cancel a show, there are many issues that need to be considered, such as whether the artist was paid up front and if the client can be reimbursed.

“The artists are normally paid a portion prior to performance and it will form part of the insurable limit. The organiser will have an agreement with the artist that would typically state that if the event cannot continue for whatever reason, the artists must still receive their agreed fees in full. Some agreements may make reference to artist’s refunds if the artist is unable to perform. The criteria that will influence the risk will be the profile of the artist – the numbe of performing artist, when the artist is arriving in the country and the performing history of the artist,” answers Denise Hattingh, owner of KEU Underwriting Managers specialists in events and film insurance.

According to Dani Ettridge, manager of sport, recreation and Eentertainment division at Aon South Africa, it is important for the broker to understand the terms of the contract between the event organiser and the artist. This will make it clear to the broker where their client’s obligations lie in terms of which party is liable and under what circumstances in the event of a no-show the insurance policy can then be structured effectively. 

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“Three years ago, if I had said to you that we needed to be concerned about volcanic ash disrupting flights and possibly causing a show to be cancelled, you would have laughed it off.

However, it is now on the radar that an incident which happens on the other side of the world can affect local risks here,” she adds.

Whether or not the artist gets paid is often the least of the event organiser’s financial concerns in the event of a cancellation. “Even if the organiser receives a refund of the artist fee, this still leaves all other expenses incurred, such as venue hire, travel and accommodation costs,” says Hattingh.

The fee paid to the artist is only one line item in the budget and does not represent the full cost of an event. “There is a slew of non-recoverable costs, such as advertising, venue hire with a noncancellation clause in the contract, commitments to sponsors and ticket vendor commissions that, if uninsured, could affect the sustainability of the event organiser’s business,” agrees Ettridge.

Curtain call In a different scenario, the artist may be available to perform, but the event is cancelled for some other reason, for example, sudden loss of venue due to fire or flood. The artist will still be due their fee, in addition to all of the other costs incurred. “To make sure the client is covered against financial catastrophe for reasons beyond his or her control, the broker needs to understand how a policy will respond to the unimaginable,” explains Ettridge.

Cancellation insurance policies are written on an all risks basis with certain exclusions automatically applied to the cover unless the client specifically requests it. This is the logical way of handling this type of cover as it would be impossible to imagine every different scenario that could arise at an event and then write insurance for that possibility.

It makes far more sense for the cover to cater for every eventuality, except certain exclusions.

For example, the weather will not be an issue at an event hosted indoors, so it is automatically excluded unless specifically required by the client.

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Major risks of staging an event: Cancellation and abandonment “Weather is the single biggest reason for cancellation and thereafter nonappearance. So if the event organiser can contain these two aspects, it will significantly reduce the risk,” says Hattingh.

Damage to the venue.

“There must be clarity on who is responsible for setting up the stage.

Understand what you are expected to do and what your agreement stipulates,” warns Hattingh.

Non-appearance of cast “This is less of an issue today because of the tightly bound legal contracts to which performers are subjected,” says Shelver.

Weather-related risks It is important to consider the time of day and year when considering weatherrelated risks. Consider whether the stage, artists and spectators are protected from the elements, and if so how severe can the weather be before it becomes a problem.

Events liability “An Act of Parliament recently passed in South Africa dictates that organisers need this insurance in order to stage an event and ensure that they are covered for safety elements,” warns Shelver.

However, if it is included, the weather still needs to have a direct effect on the event for the cancellation insurance policy to be triggered. “If a sudden storm tore through the stadium, then yes, the organiser may be forced to call off the event in the interests of the safety of everyone in attendance and the artist. The claim would comprise reimbursing the insured their nonrecoverable costs and put the event organiser in a position to refund the ticketholders who’d want their money back,” says Ettridge.

These weather-related claims will only apply in unexpected events; so a strong gust of the southeaster in the Western Cape is not grounds to trigger the policy. In some cases, it might be preferable for the event organiser to seek a cancellation, such as if the event does not prove as popular as they had hoped. Insurers need to protect themselves by insisting on conditions with cancellation insurance.

Local knowledge Issues such as the weather, locations and distances make local knowledge a vital asset to brokers operating in this space. Clients who reach out directly to the London market to arrange their policies may end up paying more than they should, or find themselves without the cover they need. “Even a London underwriter with a fair idea of the country will not possess the local knowledge of a South African broker,” explains Ettridge.

“For example, some overseas underwriters approach for the World Cup let what they historically knew about Soweto influence their rating for the opening ceremony. A local broker would know that even though Soccer City is in Soweto, there was no undue risk. It was held at a world class venue in a vibrant community surrounded by first rate infrastructure.”

This can lead the foreign insurers to perceive the risk too harshly and increase rates accordingly. They would not understand what other factors might come into play whereas a local broker is more aware of what is really happening in South Africa. That is always to the benefit of the client.

Break a leg The risk of injury to event goers, or even the artist, where the event organiser might become legally liable is a real concern, but has been largely overlooked until recently. The Safety at Sports and Recreational Events Act II of 2010 states that all stakeholders in an event, this includes sponsors, are required to have liability insurance in order to host the event at venues with a large capacity. However, the response to this requirement is often for organisers to go for the cheapest possible option, leaving them exposed in case of an incident.

“Event liability is not very high on the radar and needs to go through a maturation cycle.

For the larger event organisers and those who have been exposed to international clients, event liability is a standard line item in their budget. For the smaller companies, it isn’t yet,” explains Ettridge.

The point of the legislation, and the liability policy itself, is to ensure the safety and security of everyone at the event and, in the event of a disaster, that there is cover to compensate those affected. However, the onus is on the claimant to prove loss and negligence.

“This legislation is what we deem as civil liability. The injured party would need to go to a lawyer and would need to prove loss and negligence of the event organiser. It is not strict liability, which means there that the burden of proof is on the injured party or owner of the venue,” says Christiaan Erasmus, specialist risks at Etana.

In the event of an incident, however, the issue can get quite complicated, especially if the loss occurs in the area surrounding the event and not at the actual venue itself. For example, if a scaffolding blows over outside the venue and hurts someone walking past. “The current tactic of plaintiff attorneys is a shotgun approach.

They want to get justice for their clients, so they go after everyone, from the event organisers, to the scaffolding company and the engineer who

signed off on the structure. They might even go after the local municipality if it happens on public grounds.”

Another issue is that event organisers sometimes do not contract themselves out of liability. Because they always use the same people they assume there will not be an issue.

Brokers should encourage their clients to make sure that everyone involved has adequate liability insurance. “Our policies will cover you for a legal liability; that is extremely important because a legal liability can mean anything.

The act includes a provision to ensure the safety of event attendees while en route to the event,” says Erasmus.

“We try to discourage clients from taking out the minimum possible liability coverage. As soon as the policy is triggered, we pick up the legal costs of appointing attorneys. However, if the court finds against our client and orders a sum to be paid to the injured, the policy will pay out only to the maximum limit of the policy minus the legal fees. The damages could become astronomical, especially if someone loses their life,” he warns.

Growth industry

On 13 August 2011 at an outdoor concert at the Indiana State Fair, a wind gust from an approaching thunderstorm caused the stage to collapse injuring 58 people and killing seven.

Events liability considerations – KEU Underwriting Managers 1.

Type of event

2.

Crowd control

3.

Security

Shelver says that the entertainment section of the insurance industry has grown considerably over the last 10 years, mirroring the influx of international talent to this country. “However, it remains a niche market. Currently we have a limited amount of brokers who specialise in film and entertainment insurance, although with time and increasing international interest, this number will likely grow.

4.

Road closures

5.

Contractual agreements – what will your client accept responsibility for?

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Artist liability

7.

Medical response teams and assistance

8.

Temporary constructions

“Working in the entertainment industry insurance sector is satisfying and interesting as you can never tell what might happen at an event. For this reason, you never know when you might need that apparently obscure entertainment insurance,” concludes Shelver.

9.

Are you responsible for obtaining the engineer’s certificate?

10. Will you be held liable if a construction is stolen or damaged?

11. If you have exhibitors, are you responsible for their actions?

12. Do your sub-contractors have sufficient insurance, and what is sufficient?

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The serious side of

entertainment

n the film and television industry, multi-million Rand decisions are made each day and the insurance requirements are as varied and dynamic as the productions, events and people who seek coverage.

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Every project brings its own combination of physical characteristics, influenced by scheduling and other logistical demands.

International venues, temporary facilities and personnel and the immense consequences of cancellation or production interruption are but a few of the challenges faced by companies requiring cover.

It is important for both the production company and the underwriter to understand the risk in hand seeing that each production is completely unique. The consequential implications must be identified prior to the start of any production and this responsibility lies heavily on the shoulders of the broker. It

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When breaking a leg is more than just a expression.

is therefore critical to understand the industry and the possible pitfalls, according to Denise Hattingh of KEU, an underwriter which focuses exclusively on the entertainment sector.

“KEU is a specialist entertainment industry underwriter; we focus exclusively on the needs of this industry. Yet there is no question that specialist brokers add huge value to

our business and bring an understanding of what is really happening at the coal face, as it were, allows us to tailor solutions that are appropriate to each situation. Underwriters take comfort in dealing with specialist brokers,” she says.

“There is no business like show business. Once clients acknowledge this, they realise that it is impossible to get the right cover for film and TV productions from an off-the-shelf product or a general broker,” says Hanlie Carstens, MD of CGM Insurance Brokers. In fact, she says, film and entertainment clients use non-specialist brokers at their peril.

For instance, where animals are being used in front of camera – the risk then becomes the animal being the main artist in the production.

Not to forget the animal handler as the animal will not perform without the presence of the handler. “When your business is specialised, you need to seek out insurance partners who

have an even deeper understanding of the risks in your industry than you do. In the film and TV industry, the broker should be able to highlight risk – to both the client and the underwriter – from the very first reading of the script,” says Carstens.

Technical underwriting is a crucial element of the film industry’s exposure to risk. In this age of digital filming – which progresses at an incredibly fast pace – there are specific risks that can be identified only if the broker has kept up with the latest cameras and processes in use. “Aside from the value of the cameras used in a production, the client also needs to be covered against the additional costs of re-filming the affected sequences as a result of a faulty camera,” says Liz Macleod, a specialist broker at CGM. “By educating the client, you get better levels of cover for greater piece of mind,” says Macleod. “We are often caught between a panicked client and a cautious underwriter and have been known, on occasion, to drop everything to attend to an issue that has arisen.”

She recalls one ill-fated project where it seemed that nothing else could go wrong. “A big portion of the set burned down and the location owner refused to allow further filming on his property until he was satisfied that the claim and consequences would be dealt with satisfactorily. The delays and the impact of these delays were expensive and very stressful to the insured,” she says.

Due to the rapid response of KEU and CGM – they attended the film set on the same afternoon, with a loss adjuster – the claim was agreed to and a substantial interim payment was made the very next day. The situation was resolved within 24 hours, all was amicably settled and the production company was allowed to continue filming.

Specialist brokers in the film and TV industry will need to solve the risk issues that come with all forms of production, to simplify complex procedures and assist with legal and financing requirements. Of course, they need to understand the need for confidentiality and respond to calls 24/7. Carstens cautions against being fooled by the glitz and glamour of the industry.

No matter how well each project is run, it is always exposed to a large number of risks. “From liability claims to equipment failure or loss and non-appearance or cancellation, nothing beats experience to properly anticipate and allow for the consequences,” she says.

Brokers also need to tap into local solutions for local problems to balance the needs of the insured and the underwriters and ensure that the crew understands what the cover provides. A recent production, which required a stunt precision driver to drive a luxury sports vehicle, had to deal with the aftermath of an accident during the final filming. “The vehicle veered off the road – narrowly missing the crew – and a new vehicle had to be brought from Johannesburg to Cape Town, where the production was being filmed,” recalls Macleod.

All of the creativity, time and effort to plan ahead can be scuppered if the cover doesn’t allow the client the flexibility to deal with unexpected events. “There is an old adage that one needs to master the rules to have the ability to be flexible,” concludes Carstens, “a specialist broker needs to have a masterful understanding of the industry for success.”

Event Liability

Film Producers’ Indemnity

12 years

of rousing performance This is KEU’s 12th year of stellar performance in delivering tailor-made insurance solutions to the film, television, events and entertainment industries. Since the opening act, KEU has struck the right balance between good partners, a solid track record and the flexibility needed in the entertainment industry. We’d like to thank our entire team – the star performers at the frontline, the technical team behind the scenes and of course, our partners – for helping us to tell a new story in insurance solutions for the entertainment industry.

Here’s to the next exciting episode in KEU’s story!

Event Cancellation

Prize Indemnity

Equipment All Risk Contact: Denise or Chummy 88 Monkor Road, Randpark Ridge Tel: 0861 00 0090 Fax: 0861 00 0030 email: info@keu.co.za

www.keu.co.za KEU Underwriting Managers CC underwritten by Centriq Insurance Company (RF) Ltd, will partner only with registered short-term brokers to ensure your risk is covered. KEU is a member of SAUMA.

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CGM Insurance Brokers provides specialised commercial insurance products, comprehensive risk-analysis and industry expertise to film and TV production companies.

Authorised FSP: KEU 5076 Authorised FSP: CENTRIQ 3417

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Product Recall Christy van der Merwe

Product recall is one of the worst crises a manufacturer can experience. Being prepared is vital and having specific product recall insurance is advised.

RISKSA looks at the status of compulsory product recalls which were expected to increase when the Consumer Protection Act came into effect in South Africa.

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D

espite warnings that the number of compulsory product recalls in South Africa would increase once the Consumer Protection Act (CPA) came into effect in 2011, the Consumer Commission has not instituted any compulsory product recalls in South Africa, says Narain Kuljeeth, Acting National Consumer Commissioner.

“The Commission believes that this is because suppliers and industries have instituted recalls of their own accord,” adds Kuljeeth. The Commission has received several notifications from suppliers conducting voluntary product recalls, mainly for safety and product quality assurance reasons.

Rosalind Lake, director at Norton Rose Fulbright South Africa, explains that voluntary product recalls are regulated by the Commission’s product recall guidelines. “When suppliers initiate a product recall voluntarily, the supplier must inform the commission within two days of initiating the recall. In terms of the recall guidelines, failure to notify the commission is an offence under Section 110 (2) of the CPA, punishable by a fine or imprisonment for a period not exceeding 12 months, or both.”

Lake advises South African companies to ensure that they have product recall insurance, because the obligations on a supplier to carry out a product recall are onerous and expensive.

Compulsory product recalls can be initiated by the National Consumer Commission,

and the National Regulator for Compulsory Specifications (NRCS), if the goods in question do not comply with any specifications applicable to it.

these cases of gastro are linked to food, is high. Consumers need to be made aware that they are at risk from the food they consume,” emphasises Krogh.

The Consumer Commission states that it is not ordering compulsory product recalls because it feels that suppliers are adequately selfregulating. However, Adele Krogh, business manager at the Food Safety Network, says that compulsory product recalls are not taking place in South Africa because South Africans are simply not voicing their complaints. Also, there are few publicly available platforms and no consumer education on what people should do if they have an issue, she adds.

South Africa lags international recall trends

“We have laws in effect in South Africa to protect consumers, but they are not being enforced. Consumers just accept that food is safe, but perhaps they should not be so trusting.

Stats SA reported that between 2008 and 2010, gastro intestinal infectious diseases were the third most common cause of natural death in South Africa. The likelihood that many of

“Overseas consumers are more aware of liability and have proper public channels to complain and track product recalls.”

Overseas markets in the US, European Union (EU) and Australia are more developed in terms of product recall, and have online databases with specific details of all products recalled from the market. These are kept up to date, and can be accessed by the public.

In comparison, data on product recalls in South Africa is not readily available and this makes it difficult to gauge the true impact that product recall is having on South African companies. It is difficult to determine how many recalls are taking place, at what level, and in which sectors. There are a handful of product recalls that have been made public in South Africa and that are referred to by numerous industry experts.

These include Bumbo baby seats, which are manufactured locally and exported, and a batch of Rhodes Chakalaka, which was recalled in 2010 due to pH variances. If there are more recalls taking place in the country, they are not being made public.

“Product recall is still not a very big issue in South Africa, compared to developed international markets. Overseas consumers

Why specific product recall insurance is vital

Rosalind Lake, director at Norton Rose Fulbright South Africa, explains that traditional manufacturer’s liability insurance is not adequate in a case of product recall.

Under common law in South Africa, the onus would be on the claimant to prove fault (either negligence or intent) on the part of the supplier, to be successful with a product liability claim. The Consumer Protection Act (CPA) does away with this requirement. A claimant does not need to prove negligence of the supplier, but rather, only has to prove that they suffered harm because a supplier supplied unsafe goods; there was a product failure, defect or hazard in the

goods supplied; or inadequate instructions or warnings were provided in relation to any hazard arising from the use of goods.

Thus, under the CPA, third parties harmed by the products recalled will have a claim even if there is no fault by the supplier.

The insured supplier may have to pay out for harm but will not be covered by their insurance policy because the product recall might not be triggered by negligence on their part. The product defect could have been caused anywhere up, or down, the supply chain. The CPA says that the producer or importer is responsible for the safety of the users of its products, so the

company could be liable, even if it took reasonable steps within its own processes.

Importantly, product recall insurance is not just about covering potential third-party claims. In essence, the reason for a product recall is to avoid third-party claims and get products back before harm is caused. The insurance covers recall costs, rather than paying damages.

With increasingly diverse supply chains, the costs of product recalls are very expensive, and reputation and brand management associated with product recalls can also be very costly.

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are more aware of liability and have proper public channels to complain and track product recalls,” says Etana Agri head of underwriting, Ben Brandt. South African companies that export are thus more likely to be required to recall products.

deviates from the contractual specifications.

Etana offers product recall as an optional extension of product liability (because there is a potential to cause harm) or contractual liability (when a product does not meet contractual specifications).

Insuring against the risk of product recall goes a long way to ensure a company has the adequate processes in place should a recall be required. This can save a brand and assure consumers that they can trust a company.

Christof Bentele, chief broking officer: crisis management at Towers Watson (Re) Insurance Brokers, explains that the take-up ratio of product recall insurance in South Africa is currently much lower than in Europe, the UK or US. In these international markets, numbers of recalls are increasing, as is the severity. This is evidenced by the figures published by the Food and Drug Administration (FDA) and Department of Agriculture in the US, and the Rapid Alert system for Non-food Products (RAPEX) and Rapid Alert System for Food and Feed (RASSF) in the EU.

Forewarned is forearmed

Rather than having a negative view on product recalls, they should be viewed as a positive, says Krogh. Voluntary recalls show that companies are actually concerned about the safety of their customers. Companies would be well advised to ensure they have a copy of ISO 10393: Consumer product recall – Guidelines for Suppliers to assist them with the recall process. If handled correctly, product recalls could actually strengthen a company’s brand, she concludes.

“It’s not that recalls only happen to bad companies – they happen. Increasingly global and diverse supply chains mean that the impact of a product recall can run into millions of Rand,” notes Van Keimpema.

Impact of product recalls According to Towers Watson, recalling an automotive product costs more than five times the original distribution costs. This is largely due to line stoppages and is a potentially debilitating loss for automotive parts manufacturers.

Bentele adds that product recall coverage is often seen as too expensive, although the rates have come down slightly during the past few years. However, because it covers reputational risk, loss of profits and it is a line of business with severe losses, the rates are justified.

“Product recall is one of the worst crises that a manufacturer can experience. It is a very complex issue that includes tracking and traceability of products. Being prepared is vital and crisis management teams are required,” explains AIG South Africa profit centre manager, Eelco van Keimpema.

In the fine print Product recalls are not only instituted because shortcomings of a product have potential to cause harm. Often there are simple labelling issues or, particularly with exported products, differences in specifications between countries.

Getting the actual products back to the supplier once they have been distributed is about 30 per cent of the cost involved with product recall, he adds.

The lists of ingredients or chemicals that cannot be used is continuously changing from one country to the next, explains Etana head of Agri, Andre van der Walt.

In terms of sales contracts, exported products that do not adhere to specific criteria will be shipped back to the producer, and this is when brokers can play a vital role, adds Van der Walt.

Brokers can provide guidance to exporting farmers regarding specific exclusions when insurance is involved.

Farmers often use certain ingredients in their manufacturing or growing process and that familiarity means they can easily overlook those exclusions in contracts. Their produce may then contain a specific ingredient that

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“The difference between a well-executed product recall and a poorly executed recall is blatant and expensive.”

AIG is one of the few companies in South Africa that offers specific product recall insurance. The company’s solution covers the financial cost of recall, dedicated recall specialists who can assist the client to make decisions regarding communications, media coverage and public relations management, which are top priority in product recall cases.

“We have seen an increase in activity on our own accounts. Not necessarily CPA related in South Africa, but among companies that export, and also voluntary recalls, because South African companies genuinely care about their customers and will initiate a voluntary product recall if they know there is reason for it,” says Van Keimpema.

When underwriting for product recall, some of the main aspects taken into account are the recall preparedness of a company, the traceability of products, batch sizes and value, and quality controls at the manufacturing facility.

FSP No iS 274

Agricultural exports from South Africa are increasing; and as these exports increase, so do the number of product recalls. Not due to defects of the products, because often the products are still safe for consumption, but because they do not meet the stringent conditions abroad.

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Reaping rewards: banking loyalty programmes compared RISKSA lines up SA’s banking reward programmes for comparison.

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To have and to settle‌ A recent ruling from the Pension Funds Adjudicator suggests that pension funds must ensure that settlement agreements comply with the Divorce Act. What does this ruling teach us?

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REAPING REWARDS banking loyalty programmes compared

Sarah Bassett

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With the recent launch of its UCount Rewards programme, Standard Bank is the last of the big banks to join the loyalty programme trend. Given the reputation of the South African banking industry for taking its customers for all it can get, just how rewarding are these programmes? RISKSA finds out how the offerings compare.

FNB eBucks (No annual fee. Credit card can be linked at annual fee of R200) FNB’s eBucks reward system is the longest running and arguably bestknown of the banking rewards programmes in South Africa. The system allows customers to earn points when using their FNB cheque card. There are five different tiers in the FNB eBucks programme.

The reward level is based on the amount of reward level points you collect from FNB over a 12-month rolling period and are collected by using FNB products and services.

Depending on the level a customer qualifies for, they can earn between 0.4 per cent and 2.5 per cent back on all of their eligible spend and between one per cent and 15 per cent back on airtime and petrol purchases. Those in the first tier will receive one per cent of their petrol or air time spend in eBucks reward.

By tier four, this has increased to 7.5 per cent.

In order to achieve level five, consumers must accumulate 18 500 points. All eBucks earned have to be spent with partners or on the eBucks website.

FNB eBucks earners are capped by account, with personal cheque account holders only able to earn a maximum of eB9 250 per month, equivalent to R925 and FNB credit account holders earning eB9 000, or R900.

There are a number of requirements that must be fulfilled in order to qualify for any rewards at all. As of July 2013, some of these requirements have been simplified. Minimum balance requirements, for example, are no longer applied. Customers can now earn points on both their airtime and fuel expenditure, rather than one or the other as was previously the case. “Good banking behaviour” now qualifies for reward. For example, customers

can earn additional reward level points if they withdraw more cash from till points than ATMs (as this saves banks maintenance and security costs associated with ATMs), don’t have any branch transactions in a month, and shop online with their qualifying FNB Cheque Card.

Exceptions: eBucks cannot be earned on smart transfers, travellers’ cheques, foreign exchange, EFTs, cash payments or casino gambling transactions.

Standard Bank UCount rewards (Annual fee R240) Standard Bank’s UCount rewards programme was launched in June 2013 and offers a number of features similar to those of FNB’s eBucks. It too offers a tiered structure where using different products and services from the bank earn customers points that determine which tier they fall into on a month-to-month basis. Dependent on the tier a customer is in, they will earn rewards on all qualifying spend on debit, cheque or credit cards.

Members of the programme will receive up to 1.5 per cent back in rewards points on all general purchases made with their Standard Bank debit, cheque or credit card. For all grocery purchases at Checkers, Checkers Hyper, Makro, Pick n Pay, Shoprite, Spar and Woolworths, members will collect up to 10 per cent back in rewards points. Other specific retailers offer up to five per cent in rewards points returns.

However, customers on tier one, two and three can earn only between 0.25 per cent and three per cent back in reward points on purchases.

Members who currently qualify can get R1 back per litre of petrol purchased at Caltex garages.

In December 2013, the rate reduces to 20 cents in rewards points per litre of petrol. Every

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10 reward points is the equivalent of R1.

Members of the programme have a variety of options for redeeming rewards points.

They can be converted to SAA Voyager Miles at a rate of one reward point to one SAA Voyager mile. Members can redeem them for purchases on travel and on online malls, use them to visit a Bidvest Premier Airport Lounge, redeem rewards points at the participating rewards retailers, use them to pay for fuel at Caltex forecourts, or can use their rewards points to make a deposit into a savings account or donate them to charity.

The UCount rewards programme is capped at a maximum of R15 000 in reward for tier-4 customers, while tier one customers can get back a maximum of R2 000.

“Consumers should carefully weigh up the fees charged by the different banks, the cost of the various rewards programmes and their likely projected return based on tier qualification.”

Exceptions: Points cannot be earned on gambling, toll gates, cash advances, EFTs, inter-account transfers and payments, cash withdrawals, foreign exchange purchases, cheques issued, stop and debit orders, fuel purchase and garage card purchases (the latter qualify for immediate discount only).

Bianca Wright

Nedbank Greenbacks

(Annual fee R179) Nedbank’s Greenbacks are similar to FNB’s and Standard Bank’s systems, although perhaps more straightforward as they do not have any different reward levels or a tiered system.

Customers simply earn ‘Greenbacks’ back on all eligible card spends at the rate of one greenback for every R5 spent.

Comparison of costs and benefits FNB eBucks

Standard Bank UCount

Nedbank Greenbacks

Absa Cash Rewards

Advertised return

Up to 2.5% back on your purchases. Up to 15% back on fuel and airtime purchased.

Up to 10% on grocery shopping and up to 1.5% on general purchases. Caltex returns of R1 per litre of petrol purchased.

1 Greenback for every R5 eligible spend.

Up to 1% back on qualifying spend. 5% back on purchases at Sasol service stations.

Point to Rand exchange

10 eBucks to R1

10 points to R1

25 Greenbacks to R1

No points

Rand value of return

Top tier: R1 per R40 of qualifying spend.

Bottom tier: R1 per R250 of qualifying spend.

Top tier: R1 per R10 qualifying spend.

Bottom tier: R1 per R400 qualifying spend.

R1 per R125 of qualifying spend.

Top tier: R1 per R100 of qualifying spend.

Bottom tier: R1 per R400 qualifying spend.

Annual fee

None (R200 to link a credit card account)

R240

R179

R252

Reward cap

eB9 250 (R925) per month.

Top tier: R15 000 per month.

Bottom tier: R2 000 per month.

None

None

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Greenbacks can be spent only via the Greenbacks store and the prices are set at about 38 Greenbacks to R1. This means the effective reward is actually R1 per R190 spent (0.5 per cent).

An eligible spend of R34 010 within a year would cover the programme annual cost, with every R190 spent over and above resulting in R1 actual reward. There is no limit on the possible rewards that can be earned.

The best return for your Greenbacks is to pay your banking charges with them. A total of 1 500 Greenbacks equals a R50 contribution towards your bank charges. This is 30 Greenbacks to R1, which is a better ratio than when making purchases with Greenbacks. There is no cap or limit to potential rewards allowable.

Customers can link up to 10 credit or cheque cards to their Nedbank Greenbacks account, at no additional fee.

Exceptions: Eligible spend excludes cash withdrawals, casino chip purchases, fuel purchases, finance and other card charges, fees or taxes levied by Nedbank or the government, the purchase of travellers’ cheques or other negotiable instruments, garage card transactions, budget account instalments and interest, insurance premiums and internet transfers/payments.

Absa Cash Rewards (Annual fee R252) Absa rewards differentiate themselves from the other banks’ rewards programmes by offering their rewards in cash instead of points which can be redeemed only through certain channels. They also work on a tiered system where you can earn between 0.25 per cent and one per cent back on all qualifying spend on Absa debit, cheque and credit card purchases.

A customer’s tier is determined by how many Absa products and services they use. Members also receive five per cent back on all spend at Sasol service stations.

One Absa Cash Reward is equivalent to R1. There are also Absa Cash Rewards partners which offer discounts of between three and 10 per cent to members. There is no cap or limit on potential rewards allowable. As alternatives to cash, customers can also redeem rewards for airtime, shopping vouchers, travel vouchers, an investment in an Absa Money Builder account or a donation to a charity of their choice.

Exceptions: Qualifying transactions exclude EFTs, fees and charges, travellers’ cheques, foreign exchange, cash withdrawals, garage card transactions and all transactions through registered and unregistered (local, international online) casinos and all transactions at Sasol forecourts and convenience stores, bill payments, pre-paid airtime, electricity and lottery purchases. You will only earn cash rewards on the first R3 000 that you spend at Sasol during the accrual period.

The rewards programmes offer limited value for those with limited disposable income, but as monthly spend increases, the possible rewards increase considerably. Consumers should carefully weigh up the fees charged by the different banks, the cost of the various rewards programmes and their likely projected return based on tier qualification.

This will allow for a true indication of the actual rewards from different bank offerings. Interest rates offered across current and savings accounts are also worth considering for this calculation; a good rewards programme may not be worth paying the higher fees for a lower interest rate.

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Mitigating risks

of fraud and corruption on board next year, it indicates that Fraud and corruption in Africa, offering two-thirds of brokers surveyed see the need this kind of insurance to be offered in the notably South Africa as it for present climate,” notes Teixeira. boasts the continent’s largest Writing the cover economy, continues to top the Teixeira says that CIB takes care in advising brokers on how to write fidelity guarantee lists of highly rated risks, forcing itscover correctly. “How to write the cover depends on the risk itself. There are various businesses to insure against options available depending on the type business. A blanket policy covers all these in-house perils. ofemployees, while a position basis policy covers employees who hold specific positions within the company or who have specific titles, such as the financial manager.”

onsidering the size of its economy, South Africa has the highest number of reported fraud cases on the African continent, says auditing consultancy KPMG in its third Africa Fraud Barometer, released in 2013. Of course, this does not mean that most of the fraud is happening in South Africa, but rather that the highest number of reported cases take place in the country.

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Transparency International’s Corruption Perceptions Index ranks countries and territories based on how corrupt their public sector is perceived to be, and in the 2012 survey, South Africa was ranked 69th out of 176 countries profiled on this index. Countries topping the index include Denmark, Finland and New Zealand, while those ranked last include Afghanistan, North Korea and Somalia.

Fraud and corruption ranks second in the top 50 priority risks for South Africa, in the 2013 Lloyd’s Risk Index, while consultancy Ernst & Young reports that oil and gas, mining, telecommunications, consumer products, pharmaceuticals and aerospace and defence companies, in particular, are receiving greater scrutiny when it comes to fraud and corruption.

The Africa Fraud Barometer showed a decrease in reported fraud on the continent between the first half and the second half of 2012; however, South Africa bucked this trend, with findings indicating a slight increase (1.46 per cent) in the

114 2

number of fraud cases reported between the first half and the second half of 2012. More than two-thirds of South African companies polled in an ITWeb survey in 2012 reported that they had discovered cases of fraud committed by their internal staff over the past three to five years, adding that white-collar crime was on the increase.

As a result of this rise of white collar crimes reported, independent short-term insurance administrator, CIB Insurance Administrators (CIB) says that there has been an increased demand for the company’s fidelity guarantee insurance cover sought by local businesses, to mitigate the risk of theft committed by employees.

Lisa Teixeira, COO at CIB, says that while employee theft rarely makes headlines unless it is on a grand scale, this kind of crime can have a negative impact on a business, both in monetary terms and to a company’s reputation.

“A fidelity guarantee, issued by an insurer, is a contract of insurance indemnifying the insured for money they have lost due to theft by an employee. According to a recent survey conducted by CIB, over half of the brokers surveyed currently offer fidelity guarantee insurance, with another 13.6 per cent intending to offer it within the next year.”

“With another 13.6 per cent set to bring this

Teixeira says there are a number of other factors that impact the writing of fidelity guarantee cover, including the company’s risk management processes, with detection and prevention processes; performance management and disciplinary processes; and ensuring that all employees follow the correct processes. “A company’s standard operating procedure needs to address this risk and make sure that controls are put in place to mitigate the risks. A company with a more stringent and robust risk management strategy is less likely to experience losses of this nature.”

Teixeira notes that there are extensions available on this cover, as well as implications if the cover is incorrectly written. “As with anything that is written incorrectly, a business owner would not get the necessary indemnity at claims stage. In other words, the client would be exposed.”

She highlights that fidelity guarantee cover is often confused with professional indemnity or mismanagement of funds cover. While CIB would never want clients to treat all of their employees as potential criminals, the reality is that there is always an element of uncertainty when dealing with people, which is why business owners need protection from this kind of crime.

As ever, the broker’s role is crucial in protecting against fraud and corruption risks. “The broker needs to understand the client’s business processes to identify where losses of this nature could occur. Once this understanding is in place, suitable risk mitigation and insurance measures can be considered,” Teixeira concludes.

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The use of

layered voice analysis and truth verification analytics in claims processing

Brian Martin, Legal Manager at Renasa insurance Company Limited

The use of layered voice analysis (LVA) technology is being actively promoted to the insurance industry as a reliable tool in the detection of fraudulent claims.

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W

hat are the implications of the use of this technology as a lie detection and truth verification tool and does it offer any advantage to the insurance industry?

LVA is claimed to be an innovative, highly advanced computer technology based upon a wide spectrum analysis of voice frequencies. In essence, LVA technology analyses voice patterns to detect brain activity traces so as to provide a better understanding of a subject’s mental state and emotional make up at a given moment, by detecting the emotional content of speech when responding to questions. The technology identifies various types of stress levels, cognitive processes and emotional reactions that are reflected in the properties of a person’s voice.

The technology claims to provide insights into the way a person thinks; what troubles or excites them; what portions of their speech they are uncertain about; and what areas

appear to be sensitive issues for the speaker. It uses a unique mathematical process to detect different patterns and abnormalities in the speech flow and to classify them in terms of stress, excitement, confusion and other relevant emotional states.

How reliable is LVA? It is important to remember that there is no true lie detector, as lying is not a unified set of feelings that can be measured or quantified.

There is no fixed set of characteristics that can be used to differentiate between lies and truth.

The developers of LVA acknowledge that there is no technology which can use a fixed set of characteristics to differentiate between lies and truth, but LVA may be used to detect the associated emotions behind a lie and, by so doing, can lead to identification of a lie.

It is claimed that data so obtained can be processed by statistical learning and algorithms

to predict the probability of deceptive or fraudulent intention in a sentence.

Can insurers employ LVA in claims investigation?

The use of such technology in the verification of claims made against insurers is not without difficulty.

Part IV of the Policyholder Protection Rules (PPR) deals with void provisions in a policy of insurance. Rule 5.1 provides as follows: “A provision of a policy is void to the extent that it provides expressly or by implication: – 1. That in connection with any claim made under the policy, the policyholder may be obliged to undergo a polygraph, lie detector or truth verification, or any other similar test or procedure which is furnished or made available by the insurer or any other person in terms of an arrangement with the insurer and which is conducted under the control of the insurer or such other person; 2. For an inducement of any nature for a policyholder to voluntarily agree to undergo a test or procedure envisaged in paragraph a of this rule where the policyholder submits a claim under the policy;

3. That where a policyholder under other circumstances than those contemplated in paragraph b of this rule voluntarily agrees to undergo a test or procedure envisaged in paragraph a of this rule where the policyholder submits a claim under a policy, and the policyholder fails to pass such tests, the claim will be rejected or the policy will become void “merely as a result of such failure to pass the test or procedure.”

Fraudulent activity within the insurance industry is a significant problem; it can be argued that reasonable processes and measures should be permitted where this may assist in the detection of fraud. However, fraud combating activities must be conducted within the ambit of the regulatory framework and the law. The provisions of PPR and the principles of Treating Customers Fairly (TCF) must not be infringed in the process of claims investigation and the constitutional rights of policyholders should be respected at all times.

If LVA is used solely as a detection tool to identify claims which may be suspect and require further independent investigation, but not as a basis for the rejection of liability, this would appear be acceptable.

The effect of the provisions of PPR, TCF and

the right against self incrimination clearly mean that the policyholder may not be obliged in terms of the policy to undergo a polygraph, LVA or similar procedure at the instigation of the insurer, or for any inducement to be given to a policyholder to voluntarily agree to undergo a test or procedure where a claim is submitted under a policy. Furthermore where the policyholder voluntarily agrees to undergo an LVA or similar test, the results may not be used to either reject liability for a claim or to declare the policy void merely as a result of such failure to pass the test or procedure.

It follows that insurers should not use LVA or similar procedures as a tool for rejecting liability for claims or for seeking grounds to void a policy or to reject a particular claim.

Before such steps are taken, there must be reliable and objective evidence to support such action. The policyholder should always be advised of the provisions of PPR and their entitlement to decline any request to undergo LVA analysis without penalty.

Particular care must obviously be taken by insurers not to deceive people or to induce them to act to their detriment in violation of their rights, as any wrongful conduct on the part of an insurer or its agents could give rise to an action for damages.

AD Western National ?

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Nick Krige

Keeping mobile

Companies around the world are realising the power of connecting with consumers through their mobile phones, and none are more aware than the organisations doing business in and with Africa. Insurance penetration remains relatively poor in many sectors on the continent and the major issue is the inability of companies to get their products to those who need them, especially in remote areas.

Mobile phones are the answer to that problem. A United Nations Agency, the International Telecoms Union, predicts that the number of mobile phones in Africa will outnumber the population of the entire continent by early 2014.

The smartphone has the potential to get more people online than any other device preceding it, and insurance companies around the world are jumping at the chance to engage with customers, stakeholders and brokers.

The Life Insurance Marketing and Research Association examined the mobile initiative of 53 life insurance companies in the United States and Canada and found that a third already had a mobile initiative in place and another 30 per cent planned to launch a mobile programme this year.

The Deloitte Insurance Tech Trends 2013 notes that US Insurance companies such as GEICO, Nationwide Mutual Insurance Company and the Progressive Group of Insurance Companies invested in mobile early and continue to stand out for their commitment to mobile.

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reness

For risk awa

Mobile services can encourage safer behaviour and provide up-to-date relevant information to policyholders, from financial news to weather warnings, which alert users to imminent flooding in the region.

In Japan, Tokio Marine’s mobile app uses its location to tell users how significant their earthquake risk is when they’re getting quotes for earthquake insurance, which is not covered under homeowner policies.

Dutch insurer Interpolis offers a mobile app that shows road and weather conditions based on the location of the smartphone. State Farm’s Steer Clear mobile app is part of a comprehensive programme that helps young drivers learn safe driving habits and alerts them to hazards on the road.

For the poli

cyholders

The most obvious application for an insurer to invest in and get to market as soon as possible, is one that will allow customers to get quotes, file claims and pay bills. The market leaders in the US have functionality that allows users to save documents simply by taking pictures with their smartphones so they can take early evidence photographs of a claim.

This kind of app will not make an insurer stand out or get them new customers, but it is the kind of service that people will begin to expect and the absence of it could lose the company business.

According to Deloitte’s Insurance Tech Trends 2013, the adoption of mobile claims applications among insurers has surged in recent years.

FOR ANYTHING The potential for mobile technology in the insurance industry is unlimited and it is likely that companies that elect to react to market trends instead of searching for innovative solutions will be left behind.

In the UK, Aviva plc’s MyClaims app, in addition to all of the standard quotes and claims functionality, routes users to the call centre in a more efficient way, allowing them to receive assistance almost instantly. Now, don’t you think clients would prefer that to listening to 1980s hits on repeat for 10 minutes?

The potential of mobile technology is obvious, but we are still in the early days of the mobile era and many companies are experimenting with ways to combine the insurance industry with smartphones. We take a look at what is being done on this fledgling platform.

For adjuste

rs

Insurance companies should look beyond client-facing applications and consider what other functionality they can access through this technology.

There has been a notable increase in apps for e-procurement in property, auto and physical damage claims adjusting. An adjuster-specific app can allow the ordering of spare parts instantly from the claim site, reducing delays for the customer. They could request services, such as a tow truck, on the spot.

The result is a more efficient claimshandling process and can reduce the need of paying money to the customer as business is handled directly with the service provider through the app.

For quotes

Using an app to provide quotes to potential new customers has occurred to every global insurance company, but that does not mean that it cannot be creative. Apps can use device hardware features to simplify the quoting process for customers and agents.

For example, Progressive’s app uses a smartphone’s camera to take a picture of the licence plate to obtain a car’s technical specs, and a picture of the driver’s licence to get other information needed to complete the application.

cking

For claims tra

In the event of a claim, it is likely that the insured will be stressed and may not be thinking straight. The mobile app can provide reassurance by indicating help is on the way.

Using the GPS to find the nearest tow truck, it can prompt them to file the claim in the right way and encourage them to take photos of the event. GEICO auto insurance customers can ‘bump’ Android phones to exchange ID cards with other drivers in the event of a claim.

Deloitte’s Insurance Tech Trends 2013 highlights the Dutch Association of Insurers, which offers an app that customers of all insurance companies can use to report motor claims. Taking a picture of the number plates of the cars involved triggers a message to the insurance companies of all parties involved and a text messaging procedure that functions as an electronic signature.

APPS-PLOSION Internet traffic statistics, device sale numbers and broad measures of how people spend their time clearly illustrate that the mobile age is well underway: • In 2012, both Apple and Google Play surpassed 25 billion app downloads.

• As of September 2012, Square Inc, a merchant services aggregator and mobile payments company, is processing $8 billion on an annualised basis. Up from $1 billion just one year before.

• A survey of web-enabled phone owners found that 80 per cent of participants used their smartphones while watching TV. • As of December 2012, 13 per cent of all Internet traffic originated from mobile devices.

• In the second quarter of 2013, the total global install base of smartphones and tablets is predicted to exceed those of personal computers.

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KNOW

yourself “Moral certainty is always a sign of cultural inferiority. The more uncivilised the man, the surer he is that he knows precisely what is right and what is wrong. All human progress, even in morals, has been the work of men who have doubted the current moral values, not of men who have whooped them up and tried to enforce them. The truly civilised man is always sceptical and tolerant.”

- HL Mencken, influential American writer

L

eaders cannot lead others until they know how to lead themselves.

Leadership ability hinges on selfawareness and self-mastery. You will need to know your assets, liabilities, how people perceive you, where your potential lies and what you can borrow from others to get you where you need to be. For some it may be really simple – they immediately know what their strengths are and can easily recognise and verbalise them. For others, they have to think a little harder.

One good way to start is to create what I call a personal balance sheet. It forms the basis of a personal business plan that extends into a brand plan. You can start with a simple conversation that you have with yourself, asking what your assets are. These need to include qualities such as sincerity, loyalty, courage, skills and attributes such as financial knowledge, IT skills, good communication skills, delegation and time management.

Enlist the help of a colleague, someone who has worked with or for you. Ask how they see you – your assets and liabilities. You may be

surprised as often colleagues see your good points before you see them. We all have limitations and flaws, but we do not need to focus on them. We merely need to manage them, and change those that can be changed.

We do have to accept who we are, what we have, and then make the most of it. Some of our inherent qualities are here to stay (like my impatience). Accept them and work with them, or around them.

Now’s the time to look at what you’ve got and admit to what you’re not.

Together discuss your potential. This may be learning a third language, developing your emotional quotient, becoming more accessible to your team and a better listener. Sometimes colleagues may surprise you and make simple suggestions that you could benefit from: Start to dress smartly, or stop interrupting when others are talking. They may not suggest that you enrol for a MBA. Remember, any business is evaluated not only on current assets and liabilities, but in its potential too. Where does most of the potential lie? In human and intellectual capital. Finally look at who can help you achieve success. Perhaps you need to expand your team, start to work with a mentor or executive coach or appoint a personal assistant (PA).

List all these comments under the headings of assets, liabilities, perceptions, potential and loans. This is your personal balance sheet.

As a guideline for going forward and using your balance sheet, spend 75 per cent of your time focusing on, and leveraging your assets. Spend just 20 per cent managing your liabilities, and 5 per cent of your time consciously doing things differently.

We need to consciously train ourselves to focus on our positives, and to leverage them for good results. If you think back to school – being good at one subject was great – but teachers and parents often focused on that one subject that you struggled with. Sound familiar?

It would have been far more productive to boost your confidence with the subjects you were excelling in, before trying to improve those that were more challenging.

Use your personal balance sheet as a living, working document. It should be evaluated at least quarterly; it should be used as the baseline for when you hire an additional member of your team. Ideally, this is done with the whole team, so that at a glance you can see the gaps and plan to fill them appropriately, drawing off others’ strengths.

It is the strong, well-balanced, confident leader who is brave enough to admit his flaws and appoint to his weaknesses.

Brand, leadership and high performance facilitator, Jenny Handley, has developed a large following through her own weekly career column in the Cape Times. She is a member of international speaking platforms and regularly inspires audiences on brand, performance management, personal development and leadership. Her previous books Raise your Game® (co-authored with Gavin Cowley) and Raise your Profile, were bestsellers. Raise your Leaders™ is available as an in-house leadership academy for companies, and is now available in all leading book stores.

For details of Jenny’s books and courses visit www.jennyhandley.co.za.

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Verifying qualifications Kirsten Halcrow Managing director: EMPS (PTY) LTD

a necessity

It is not just people trying to get their first job who are doing it. There seems to be a growing culture of forgery even in the highest reaches of government, corporations and academic life.

EMPLOYERS' MUTUAL PROTECTION SERVICE

Last year, Johnny Molefe, who had been newly appointed to the position of vice chancellor of Tshwane University of Technology, was found to have a highly questionable doctorate from a shady ‘university’ in the Caribbean.

R

ecent reports bring the South African Police Service under scrutiny after reports that KwaZuluNatal police spokesperson Vincent Mdunge has a fake matric certificate. This once again calls into question the integrity, good standing and trustworthiness of another government institution.

CV fraud at any level is a problem, but it can become life-threatening when perpetrated by someone purporting to be a qualified professional; a fake medical doctor prescribing drugs or, heaven forbid, practising surgery; a fake engineer managing safety in a factory; or even fake teachers working with children.

It can be agreed that most CVs contain one or other detail that is slightly incorrect, like dates slightly out, achievements a little inflated, nothing too serious. But there are those that have gross misrepresentations – fake qualifications, job histories or experience and some very blatant lies.

The time for trust is long gone. Verification of authenticity as well as ensuring the credibility of an organisation is far from a luxury any longer but rather a necessity.

Trust in our society is not a given anymore.

Over the past few years we have seen a serious increase in CV fraud. Websites offering degrees for sale are also growing. Very well-reproduced diploma and degree certificates are now easily obtainable.

Aggressive competition in the job market and competing for access to institutions of higher learning force candidates to put themselves forward in the best possible light, even, it seems, if this means being dishonest. These days a fake matric certificate can be bought for around R2 000.

“Websites offering degrees for sale are also growing.

Very well-reproduced diploma and degree certificates are now easily obtainable.”

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Property seminars

It has been another successful and exciting year for RISKSA’s Insurance Bootcamp. ith a strong focus on property insurance for the last national roadshow of 2013, 420 delegates flocked to the various conference venues (Cape Town, Durban and Johannesburg) to partake in detailed discussions and get an informative take on the subject. With all three events so well attended, it’s clear that our Insurance Bootcamps have grown from strength to strength. We report back from the last Insurance Bootcamp roadshow for 2013.

W

This year’s final RISKSA Insurance Bootcamp kicked off on a cold winter’s morning in September. Hosted at the Lagoon Beach Hotel

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in Milnerton, Cape Town, this seminar proved to be the biggest Insurance Bootcamp ever hosted in Cape Town with 120 delegates.

RISKSA’s Insurance Bootcamp has grown in leaps and bounds over the past year as each seminar this year was sold out with a record amount of delegates. With the focus on property insurance, more than 400 eager representatives from the insurance industry gathered at various conference facilities across the countries to get valuable insight on the different aspects of this topic.

The Durban leg of the Insurance Bootcamp was held on 29 August at the Southern Sun

Elangeni Hotel’s Signature Conference facility; while the Johannesburg leg was hosted by the Protea Hotel Balalaika in Sandton the very next day. All three hotels boasted luxurious and comfortable conference facilities.

Expert and informative presentations on property insurance were led by loss-adjustor John Sutton who spoke about the claims side of property insurance; Sasria’s Mokgadi Sebola discussed material damage; and Abdul Ebrahim from Etana Insurance gave delegates some perspective on property and, specifically, building insurance. A very big shout out goes to RISKSA event manager Angelique Edwards who put this roadshow

THE VOICE OF THE INDUSTRY

together. With her at the helm, RISKSA’s Insurance Bootcamp has shown some significant growth over the past year. A big thank you to our sponsors, Etana Insurance, Sasria and the Insurance Learning Academy who helped us make these events possible.

Described as professional, informative and thorough, delegates reacted positively to the seminars and we expect another record attendance for next year’s series of events. Make sure you book your spot and watch this space as we will focus on some topical issues within the insurance industry. For more information, contact Angelique Edwards on (021) 555-3577 or e-mail ange@comms.co.za.

Insurance Bootcamp is a joint venture between RISKSA Magazine, the Insurance Institute of the Cape of Good Hope (IICoGH) and the Financial Intermediaries Association of Southern Africa (FIA). A big thank you to our diamond sponsor, Etana Insurance; platinum sponsors, Sasria and the Insurance Learning Academy; our silver sponsor, for their support.

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news Sanlam launches product suite for graduates The Sanlam Group launched Sanlam for Graduates, a suite of investment and risk products designed to help those graduates who hold a three-degree or four-year diploma to make the best use of their financial resources into the future. Sanlam for Graduates is available to young (20 to 35 years old) and established (35 and older) graduates.

“Our rates are highly competitive and a sickness benefit – on offer to individuals with a three-year degree or four-year diploma for the first time in South Africa – can be adapted to each client’s circumstances and needs. It offers a variety of products from retirement annuities to income protection and dread disease cover,” says Nishen Naidoo, solutions manager at Sanlam Personal Finance. The RAs offered under this suite of products are from Sanlam’s new Cumulus Echo range, which pay out bonuses to reward clients for long-term savings.

Sasria’s loss ratio doubles

SA’s most trusted insurance brands Mutual & Federal and Santam have jointly scooped the accolade of most trusted short-term insurance provider in the Reader’s Digest Trusted Brands survey for 2013. Runner-up Outsurance came highly commended. The Trusted Brands survey has been running internationally for more than 10 years. This is the first time that it has been conducted in South Africa. In the life insurance category, Old Mutual took the top spot for most trusted brand, while Sanlam and Discovery both came highly commended.

According to Reader’s Digest, the survey sought to reveal the brands that South Africans rely on. The methodology for the survey included an initial scoping survey to build the brand lists for each category, through an open-ended questionnaire.

The main survey was then conducted with South Africans, who rated brands on a trust scale of one to 10. As the dual winner of the short-term insurance category, Mutual & Federal notes that this puts the company ahead of six competitors.

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RFIB opens SA office Absa has announced the introduction of its fully integrated online insurance platform.

According to the company, it is the first of its kind in South Africa.

Clients will have easy access to a launch suite of six core short-term and life insurance and investment products on the single platform.

Absa clients will be in a position to apply for and manage short-term insurance policies to cover residential buildings, household contents and vehicles.

Additionally, life insurance, funeral cover and credit protection can be serviced and will all be available for purchase through Absa Online on its website.

Special risks insurer Sasria reported a 75.5 per cent decrease in underwriting results for the financial year ending March 2013, as a result of increases in the frequency and severity of labour strikes. An increase in claims frequency, especially in the fourth quarter of 2012, resulted in its combined loss ratio deteriorating from 45.9 per cent to 88.1 per cent.

Sasria experienced a 91 per cent increase in the claim frequency and a 135 per cent increase in claims severity over the past year. Currently, 80 per cent of claims are as a result of labour strikes. The highest value claims for the period came from the farmworkers’ strikes in the Western Cape.

Total claims increased in value from just over R200 million in 2011/12 to almost R600 million in the 2012/13 year. The number of claims increased to 2 233 in the year ended March 2013, from 1 174 in the prior year.

Despite the increased number and value of claims, Mokgadi Sebola, customer relations manager at Sasria, says that a rate increase is not expected.

Fitch affirms Santam’s AA+ rating Fitch Ratings has affirmed Santam’s National Insurer Financial Strength (IFS) rating at AA+(zaf) and National Long-term rating at AA(zaf). The outlooks are stable. Fitch has simultaneously affirmed Santam’s subordinated debt at A+(zaf).

Santam’s ratings reflect its dominant position as the largest general insurer in South Africa, with a strong domestic franchise and a market share of over 22 per cent. It writes all classes of business and has a well-known brand in both commercial and personal lines, says the ratings agency.

Fitch believes that Santam remains adequately capitalised based on the agency’s own riskadjusted assessment and the minimum statutory requirement. At the end of 2012, Santam’s regulatory solvency ratio decreased to 41 per cent from 48 per cent at end 2011, due to a special dividend that was paid in March 2012 and a series of weather-related losses in the second half of 2012. However, this is still well above the minimum regulatory requirement of 25 per cent.

While Santam’s underwriting profitability was affected by a series of weather-related claims in 2012, it has a long history of strong underwriting profitability which compares favourably to peers, Fitch Ratings notes.

Munich Re withdraws from SA crop market Munich Re, the largest global reinsurer, has announced that it will withdraw from the South African crop insurance market, after more than 20 years in the business. The company cited large weather-related losses, high claims ratios and concerns over the sustainability of crop insurance as the reasons for its exit.

International reinsurers pay approximately 80 per cent of agricultural losses as a result of drought or hail. “South African farmers and insurers are therefore capable of coping with weather risk in agricultural production,” comments Junior Ngulube, CEO of Munich Re of Africa. “The market crop portfolio, which includes hail and multi-peril crop insurance (MPCI) where drought losses are covered, has shown consistent negative results in the last few years.

This has led to Munich Re becoming increasingly concerned about the sustainability of crop insurance (particularly MPCI) in its current form,” he continues. Repeated poor market results in seasons with adverse weather patterns, such as drought and hail, led to high claims ratios.

“We have consistently communicated our concern to the market to adapt insurance products and expense structures accordingly,” says Ngulube.

Government assistance in international markets in extreme catastrophic years makes private sector participation feasible and Munich Re believes that a public-private partnership, which includes smallholder farmers in its safety net, is the solution for South Africa. The reinsurer says it remains committed to South African agriculture through, for example, its involvement with the South African Insurance Association’s (SAIA) Crop Insurance Committee. The committee aims to establish a PPP in conjunction with National Treasury and the Department of Agriculture, Forestry and Fisheries, to achieve a product structure similar to other countries.

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Increasing commercial crime costs insurers billions

Domestic economy and regulation are top risks in the minds of SA insurers

A consistent increase in commercial crime is costing the South African economy billions of Rand annually, placing the insurance industry under tremendous pressure. South African Police Services (SAPS) Minister Nathi Mthethwa has announced a 0.6 per cent increase in commercial crime for the period April 2012 to March 2013. In the year under review, Santam reported a total of 101 cases of commercial crime with a total value of R 14.7 million to the SAPS. Santam’s data for the 2012/2013 period shows a five per cent increase in reported vehicle theft claims, a 20 per cent decrease in reported vehicle hijacking claims and an 11 per cent increase in reported business robberies. Reported business burglaries fell nine per cent for the period.

“Commercial crime has a direct impact on costs for insurer and policyholders. Corruption, fraud and theft will impact the cost of claims and acquisition fees,” says Helen du Toit, Santam’s head of audit and forensics.

According to the crime statistics, home robberies have increased by 3.6 per cent over the last year. “As a result, it is important for homeowners to ensure they implement precautionary measures to protect themselves against this increasing crime,” says Christelle Fourie, managing director of MUA Insurance Acceptances. She recommends installing exterior motion sensor lights and detection beams, as well exterior lighting and CCTV cameras.

new

Domestic economic conditions and a wave of regulatory change are viewed

by South African insurers as some of the top risks they face, Ernst & Young (EY) said after the release of its new Business Pulse report for the insurance industry entitled, ‘Exploring the dual perspectives of the top risks and opportunities in 2013 and beyond’.

“While concerns over macroeconomic trends remain high on the agenda of South African insurance CEOs, current domestic economic conditions fall closely behind,” said Trevor Rorbye, director for Advisory Insurance at EY, in an interview with RISKSA. The research is based on a survey of executives at over 65 insurance companies across the globe, 74 per cent of which employ over 1 000 people and 36 per cent over 5 000. The study identified the top 10 most important risks facing the industry, along with the opportunities insurers can capitalise on, given these risks. Macroeconomic trends was the top-ranking risk, followed by regulation and the Eurozone debt crisis. The top three opportunities were improved distribution and product development, promoting fair outcomes for customers and shifting sales to accommodate changing customer needs.

South African insurers placed macroeconomic trends, including lower returns on assets and a slower rate of growth, at the top of their list. This was followed by concerns around the impact of a fluid domestic economy, fluctuating exchange rates and policy uncertainty. The third risk is related to regulation. “The industry is expected to implement too much regulatory change at once. Ten to 20 per cent of an insurer’s staff complement is tied up in regulatory compliance projects, creating huge costs for the insurer that will pass to consumers,” comments Rorbye.

Further key opportunities identified include using new requirements from regulators to create competitive advantage through better enterprise risk management and re-optimising capital structures. Others involve employing new technologies to turn vast data into a more comprehensive understanding of customer needs that can underpin the launch of new products.

appointments

One Financial Services

Compli-Serve SA

Altrisk

Michelle Bellin has been appointed as procurement manager at One Financial Services Holdings.

Bellin has many years’ experience in procurement management, much of which has Michelle Bellin been spent in the motor environment. One Financial Services is confident she will make a significant contribution with her expertise.

Yurika Pistorius has joined regulatory compliance services firm Compli-Serve SA as a compliance officer.

She brings extensive experience in both short- and long-term insurance, both locally and abroad.

Yurika Pistorius A graduate from the University of Pretoria, Pistorius holds a BLC and an LLB. She is a member of the Compliance Institute of South Africa and the Corporate Lawyers Association of South Africa.

Grant Hanafay has been appointed head of underwriting at long-term risk product provider Altrisk. He takes over from Dalene Allen, Altrisk’s underwriting director and Grant Hanafay co-founder, who will be moving into a more non-executive consulting role. Hanafay was previously head of underwriting at Liberty Life Special Projects.

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SSP Insurance technology solutions provider SSP has appointed Gary Tessendorf as pre-sales consultant.

De Kock has an MBA from the Edinburgh Business School, is a past finalist of the Associate of Chartered Secretaries and a Fellow of the UK Chartered Institute of Management Accountants.

brings more than 16 years’ experience in the insurance industry, and holds a BCom from the University of the Witwatersrand, and an LLB from the University of South Africa.

Santam

Camargue Carmargue Underwriting Managers has announced that Caroline Yeo has been appointed as fiduciary senior underwriter.

Prior to joining SSP, Tessendorf worked for IAG New Gary Tessendorf Zealand, where he was the operations manager responsible for all operational aspects of the New Zealand Travel Insurance Division. He has 15 years’ experience in the insurance sector.

Zurich Insurance

Elvin de Kock

Zurich Insurance Company South Africa has announced the appointment of Elvin de Kock as chief risk officer. He is responsible for the co-ordination of all compliance and assurance activities

Gerhard Diedericks

Santam has announced the appointments of Riaan Louw as head of broker services north, and Gerhard Diedericks as the new head of Santam Agriculture. Louw has been with Santam for more than 23 years and previously held the position of CEO of Santam Namibia.

Diedericks has been with the company for 28 years and brings invaluable knowledge to the agriculture business.

Centriq

within the business.

De Kock brings over 25 years of executive management experience in prominent organisations in South Africa. He has worked for Reuters Limited, Motorola SA and ICL SA. In 2009, he joined Absa Bank’s group technology division as COO.

Riaan Louw

Katja Wentzel

Centriq Insurance is pleased to announce that Katja Wentzel, who held the position of executive head of large corporate, has taken over as executive head or risk finance. Wentzel

Caroline Yeo

Infiniti Insurance Infiniti Insurance has announced the appointment of Sharon Paterson as new CEO. Paterson joined Infiniti in 2008 and has served as an executive Sharon Paterson director since 2010. Her previous mandate was to grow Infiniti’s relationships and business with its broker clients and to manage Infiniti’s reinsurance programme. As CEO, Paterson will leverage her established reputation and implement the company’s strategic vision.

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o c . news roundo upm .c The cream of .com content Hanna Barry

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

these resignations were unrelated and that the future remains bright as ever for Mutual & Federal.

Subject: Munich Re pulls out of SA’s crop insurance market Date sent: 20 September Summary: The lead article in this RISKSA WIRED expanded on a statement made

by Munich Re that week, which noted its decision to withdraw from South Africa’s crop insurance market. No small move on the part of the world’s largest reinsurer, RISKSA thought this warranted some comment from industry stakeholders, especially those with large agricultural books. We managed to secure comment from Santam and Mutual & Federal, as well as reinsurance broker Aon Benfield. Aon Benfield was critical of the move, while Santam and M&F underlined its ongoing commitment to the market.

Munich Re cited large weather-related losses, high claims ratios and concerns over the sustainability of crop insurance as the reasons for its exit.

RISKSA WIRED (Subscribe on our website) Every Friday, we send out a newsletter containing the week’s top stories. Here are the past month’s most popular newsletters and stories.

Newsletters with the most opens Subject: M&F loses two execs to competitors Date sent: 13 September Summary: On the Sunday evening before Friday, 13 September, RISKSA was tipped off that two further executives had resigned from

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Mutual & Federal. After some scratching and an interview with CEO, Raimund Snyders, we published an article on the Monday, confirming the resignation of Leroy Munetsi, executive for Africa and new markets, and Vuyo Lee, executive of brand, customer and transformation. Our source told us that Munetsi would be joining Telesure, a fact that we were able to confirm with the insurance group. The speculation was that Lee would be joining MMI Holdings, but neither MMI nor Lee would confirm this. Snyders simply stated that Lee would be leaving M&F for a “large financial services group”. Snyders assured RISKSA that

FOLLOW US ON TWITTER @RISKSA Mutual & Federal operations chief expected to join Santam Published: 1 October Clicks: 252 clicks Summary: Mutual & Federal announced the resignation of its chief operations officer, Kevin Wright, on 1 October. That same day, RISKSA published an article predicting that he would be moving to Santam to take on the role of chief information officer (CIO), although this was not confirmed by either company. Taking into account the fact that Santam’s CIO had resigned just two weeks

m o p m o

before; that M&F’s announcement noted that Wright would be moving to Cape Town (Santam’s head office is situated in Cape Town); that Wright had extensive experience in data migration (having been in charge of getting M&F off its legacy system); and that Santam is currently undergoing a similar upgrade of its administration and underwriting software, a project that is costing it dearly as reflected in its most recent financial results, RISKSA connected the dots and made the prediction. Our prediction was confirmed the next day when Santam sent a letter to staff and stakeholders announcing Wright’s appointment to the position of CIO. Mutual & Federal loses two execs to competitors Published: 9 September Clicks: 241 Summary: This article covered the resignation of two senior executives from Mutual & Federal, namely, Leroy Munetsi and Vuyo Lee. It noted that Munetsi, executive for Africa and new markets, would be leaving M&F for Telesure and that Lee, executive for brand, customer and transformation, would be joining a large financial services group, speculating that this was MMI Holdings. Read RISKSA WIRED above for more.

Retweets The tweets breaking the news of Kevin Wright’s

Guy Carpenter’s office opening

resignation from Mutual & Federal, along with the article predicting his move to Santam, received a total of 15 retweets.

Like our page / RISKSA Albums with the most likes With six likes, the album with pictures from Guy Carpenter’s office opening in the heart of Sandton was this month’s winner. Our album from the International Conference on Financial Services in Durban in October followed closely behind, receiving four likes and two shares.

International Conference on Financial Services

Post with the most likes The RISKSA Regatta newsletter posted on 27 September received 20 likes. It provided an early weather forecast for the race weekend, profiled the competing teams, deciphered some sailing terminology and took a look at the Royal Cape Yacht Club development sailing programme.

In second place…

The post celebrating the fact that the RISKSA Facebook page had passed the 1 000 likes mark received 11 likes and 13 shares. In celebration, we gave away a 12-month RISKSA Magazine subscription to two lucky fans who shared the post.

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events Assupol Gala Awards The Assupol Gala awards ceremony is an annual event to honour Assupol’s top performing representatives, sales managers and brokers. Hosted this year at the Maslow Hotel in Sandton, the evening was one of glitz and glamour. TV personality Gerry Elsdon, was MC of this special occasion. The Assupol Gala fell in the centenary year of the company and the theme, ‘Once in a Lifetime’, was a tribute to the lifetime of achievements and milestones in Assupol’s 100 years of existence.

Group CEO Rudi Schmidt

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Bestmed 2014 product launch Brokers from across Cape Town gathered at the Lagoon Beach Hotel in Milnerton to hear the latest from Bestmed Medical Scheme. Keynote speaker Paul Naidoo kept the audience engaged with his hilarious and informative insights into sales and brand promotions. Graeme MacKenzie offered a breakdown of the newly launched Just Rewards, Bestmed’s new health and lifstyle rewards programme. CEO Dries la Grange announced the member contribution increase for the year to come and the enhanced benefit offering across the product line.

(From left) Riana van Zyl (Completemed) and Elnarie Hendricks (Bestmed).

IICoGH annual music quiz

(From left) James Shepherd (Marsh Cape Town) and Natasha Wyborn (IICoGH).

The Insurance Institute of the Cape of Good Hope (IICoGH) held its annual music quiz in Cape Town in September at the Italian Club near Milnerton. Industry folk brought out their best psychedelic thinking-wigs to battle it out for the top spot. Sponsored by AIG, the evening kicked off with live entertainment and dancing and even a little karaoke, before the serious business of quizzing began. The team from Mutual & Federal emerged victorious, followed by runners-up Marsh and Etana. The great food, flowing drinks, good music and fantastic company made for a very entertaining evening.

Find the T competition Morolong Ntsane, of Standard Bank Head Office, IT department, is the latest winner of a TomTom Start 20 satellite navigation system in the RISKSA/ Tracker ‘Find the T’ competition. He is pictured with Tracker’s Philippa Scullard, key accounts manager for insurance business.

TRC/0146/E

INSURANCE

Find the Tracker ‘T’ and win a TomTom worth R1399 HOW IT WORKS: Look for the Tracker T hidden in this magazine and stand a chance to win a TomTom Start 20 Southern Africa Edition Go to tracker.co.za to fill in the entry form The winner will be contacted by Tracker and announced in the next issue of Risk SA and on tracker.co.za

Go to tracker.co.za for more info T&Cs apply.

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The International Conference on Financial Services Held at the beautiful Wild Coast Sun resort outside of Durban, the theme for UNISA’s 4th International Conference on Financial Services was ‘Critical Transition in Financial Services’, with a focus on regulatory change.

Sarah Bassett

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packed line-up of speakers, both local and international, covered diverse topics including the journey to Basel III, the challenges in Solvency II implementation, the cost implications of compliance and effective risk management to ensure sustainability.

The latest on Solvency II Known to many as the godfather of Solvency II, Professor Karel van Hulle, former head of pensions and insurance for the European Union Commission, presented a regulator’s insight into the development and delays behind Solvency II, the European risk-based regulatory directive. Originally scheduled for November 2012, he said that Solvency II was now unlikely to be implemented before 2016. Delays are due to the failure to agree on Omnibus II, the amendments to the directive that evolved in the wake of the global financial crisis. Van Hulle warned that without the implementation of a risk-based solvency regime, insurers would not be able to deliver on their commitments in volatile markets.

Twin peaks danger Though closely aligned with the objectives and structure of Solvency II, South Africa’s Solvency Assessment and Management (SAM) regime differs substantively in its application of the Twin Peaks model, which separates the regulation of prudential and market conduct risks. Commenting on this approach, Van Hulle warned, “Market conduct decisions impact solvency. For example, you can make life insurance products so safe for the customer that they are unprofitable for insurers. These two arms need to work in synergy.”

Also presenting at the conference, Lesetja Kganyago, deputy governor of the South African Reserve Bank, emphasised that because of the interconnection between the banking and insurance sectors in South Africa, the prudential regulation of both sectors required centralisation.

“The interaction between banks and insurers in South Africa is considerable. Out of the top four banks, three are also insurance companies and, in the case of one, the bank is owned by the insurance company,” he explained.

Prof van Hulle disagreed with this perspective, warning in an interview with RISKSA, “The sectors face fundamentally different risks and require separate regulation.” He cautioned that the current interconnection between the sectors in South Africa creates dangerous systemic risk, where a failure in the banking system would see consequent failures in the insurance market and vice versa.

Culture, technology and risk management Presenting on the role of culture in risk management, Horst Simon, director of operational risk at Dubai-based corporate consultancy network, Horwath MAK, noted that the future of any business lies in managing behaviours to embed a risk management culture throughout the entire organisation. “In many organisations, risk information and analysis is compiled in a report, given to the board or CEO, and is never used again. This needs to change.

Organisations need to shift their focus from compliance to the benefits afforded by risk management; the traditional approach is simply no longer enough,” Simon continued.

Speaking on the role of emerging business intelligence (BI) technologies in risk mitigation, Gerhard Botha, chief technical officer for IT company PBT Group, emphasised the role of technology in enabling informed, risk-aware decision-making. He revealed that 80 per cent of organisational data is inaccessible to decision-makers. Discussing big data technology, which enables the rapid synthesis of data form multiple sources, Botha made the point that while these solutions provide deep insight at significant speed, current solutions are not yet mature and may be obsolete quickly.

It is a costly investment and requires a sound business case for investment. “This is an area to watch closely, but beware of being caught up in the hype. Organisations must be careful in matching their needs to their investment.”

Rogue trader Infamous rogue trader, Nick Leeson, the man responsible for the collapse of the UK’s Barings Bank, shared his story and spoke on the need for risk control in banking. “All financial scandals are the result of poor systems, poor controls and poor attention from people monitoring those controls,” he warned.

Risk managers need to be empowered to challenge the status quo within their organisations. In his case, his ‘superstar’ trader status meant that nobody questioned him. He believes rogue trading is a daily occurrence in financial markets. Further topics covered included the role of the JSE in Africa, ethics in business and service delivery and the role of local financial markets in economic growth.

“He cautioned that the current interconnection between the sectors in South Africa creates dangerous systemic risk, where a failure in the banking system would see consequent failures in the insurance market and vice versa.”

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events IRMSA Awards Evening

Celebrating 10 years of existence, the Institute of Risk Management South Africa (IRMSA), held its annual awards evening on Friday, 4 October at the Gallagher Convention Centre in Midrand, Johannesburg.

Attended by risk managers from across the industry spectrum, from transport and telecoms to the construction/engineering industry and public sector, the top winner of the night was from the insurance industry. Volker von Widdern of Marsh was announced Risk Manager of the Year and Michael Ferendinos of Rand Refinery, Up and Coming Risk Manager of the Year. Past IRMSA president, Hennie Thessner, spoke about some of the major achievements the institute has achieved over the last 10 years. Among these, was the South African Qualifications Authority (SAQA) approving IRMSA as the only professional body for risk management in South Africa in 2011.

Joining forces with Gert Cruywagen and his Cruywagen Risk Foundation to establish the Cruywagen-IRMSA Risk Foundation in 2010 was another highlight. Cruywagen himself was awarded honourary IRMSA membership at the event. Alongside facilitating student internships and exchange programmes for students from the USA and South Africa, the Cruywagen-IRMSA Risk Foundation hosts Risk Lab events, where topical issues are discussed and academic study in the various disciplines of risk management encouraged.

Thessner thanked IRMSA’s CEO, Gillian le Cordeur, and her team for their fantastic support in building IRMSA’s profile. New IRMSA president, Sheralee Morland, spoke with passion and enthusiasm about what lies ahead for the institute, which involves further focus on professionalisation through proposed board exams for its members. She gave Bheki Gutsha the President’s Award for dedication to the institute.

The night’s winners While the top two awards went to Von Widdern and Ferendinos, there were a host of industryspecific awards for the following categories: Agriculture – Munich Re of Africa Education – North-West University, Vaal Campus

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Winner of Risk Manager of the Year, Volker von Widdern of Marsh (centre), with the 2012 winner, Gordon Howes of Turner & Townsend, and Sheralee Morland.

IRMSA CEO, Gillian le Cordeur.

Environmental initiative – Aurecon Financial services – Nedbank Healthcare – Jointly awarded to Medscheme and Mediclinic International Information systems – Jointly awarded to Cura Software Solutions and Exxaro Logistics and transport initiative – Transnet Mining, resource, construction and engineering: Runner-up – Aurecon Winner – PricewaterhouseCoopers Public sector initiative: Runner-up – Department of Arts and Culture Winner – Western Cape Government’s Department of the Premier Telecoms: Runner-up – Vodacom Winner – MTN

Exceptional service – North-West University Vaal Campus Up and coming Risk Managers of the Year: Third runner-up – Charlene de Beer, Turner & Townsend Second runner-up – Nkosinathi Mhlongo, Ethekwini Municipality First runner-up – Betty Spencer, Department of Arts and Culture Risk Manager of the Year: Second runner-up – Mandisa Mondi, Transnet Freight Rail First runner-up – Beulah Misrole, Western Cape Government’s Department of the Premier Look out for our December issue, where we will feature interviews with Von Widdern, Le Cordeur and Morland.

Altrisk launches new broker tools

(From left) Mokgadi Sebola (Sasria), Nico Knop (Sasria) and Sandra Snowball (IICoGH).

Sasria Roadshow 2013 Having kicked off its national roadshow in Bloemfontein, Sasria hosted a breakfast for insurance industry stakeholders at the Crystal Towers Spa and Hotel in Cape Town, in conjunction with the Insurance Institute of the Cape of Good Hope (IICoGH).

Sasria showed the impact of riots and strikes in 2012 on its claims and highlighted some new products in the pipeline. Industry representatives were welcomed to share a tasty breakfast and interact with Sasria representatives, asking questions and giving suggestions to the organisation.

Not only did Altrisk announce Grant Hanafay as the new head of underwriting, but MD of Altrisk Michael Blain also introduced a new quoting tool called What If at the Cape Town leg of its roadshow held at the Pepper Club Luxury Hotel and Spa in the CBD. What If allows brokers to draw up servicing quotes and illustrates different scenarios to clients. Responding to macroeconomic uncertainty, Altrisk also launched a new retrenchment benefit, which pays a non-taxable lump sum, up to R150 000, in the event that the insured is involuntarily retrenched due to operational requirements at their place of work.

MD of Altrisk, Michael Blain.

Fiduciary experts hold third annual conference

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The Fiduciary Institute of Southern Africa (FISA) held its third annual conference in September. About 200 fiduciary practitioners, academics, FIA members, guests and other stakeholders gathered in Midrand to discuss industry issues and to lift the standards of fiduciary practice in South Africa. This includes estate planning, the drafting of wills and the administration of trusts, beneficiary funds and decreased estates. Prof Linda SchoemanMalan from the department of private law at the University of Pretoria proposed an amendment to the Wills Act 1953, to clarify the position of potential heirs who are unworthy to inherit from the estate of a decreased person.

Ronel Williams, a fiduciary specialist at Nedbank Private Wealth, spoke about the practical problems the executor in a deceased estate faces in cases where potential heirs are disqualified. Other speakers included Prof Francois du Toit, deputy of the law faculty at the University of the Western Cape, Dr Henk Kloppers, a senior lecturer at the faculty of law at North-West University, Tiny Carroll, a fiduciary specialist at Glacier by Sanlam, Arnold Shaprio, director and head of the wills and deceased estates department at attorneys Routledge Modise and Anje Vorster, a lecturer in estate and financial planning at NorthWest University.

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news international

Europe Online giants to challenge distribution market

According to recent survey of European insurers, almost two-thirds believe that competition in the distribution market in the next three years will come from non-insurance players such as Amazon and Google.

“To maximise value from digital, insurers will need to move from a product-centric culture to a customer-oriented mentality. The threat posed by emerging competitors such as Internet giants is real because user-experience improvement is part of these companies’ DNA, and this is a strategic weapon in gaining market share in the insurance distribution business,” says Jean-Francois Gasc, Accenture Distribution and Marketing Services.

Sixty per cent of European insurers did not have a digital strategy in place or the strategy was limited to only a few areas.

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Results from the survey, conducted by Accenture and involving 78 insurers, showed the total annual volume of property and casualty, and life insurance policies sold through digital channels in Europe could reach R335.8 billion in 2016, more than double the 2012 value of R161.2 billion.

Zurich to merge Middle East and Africa regional office with Europe

As of 1 January 2014, Zurich’s general insurance Middle East and Africa office based in Dubai will be merged with Zurich’s Europe office in Dublin. Zurich’s 50 staff working in their Dubai Middle East and Africa regional headquarters have been notified of the move to Dublin and their roles are now under review, with the intention of redeploying as many of them as possible within the business.

The changes are not affecting Zurich’s global life business in the region. Patrick Manley, head of Zurich GI Europe, will become head of Zurich GI Europe, the Middle East and Africa.

A spokesman from Zurich also confirmed that up to 60 staff out of a total of 280 are being made redundant across the Zurich Middle East general insurance business which has offices in six countries, including one in Dubai. Staff in Africa is unlikely to be affected.

UK British regulators scrutinise impact of capital influx on insurers

Industry regulators in the United Kingdom are examining the effect the wave of capital from investors, such as hedge and pension funds, is having on the insurance industry. “The availability of this additional capital inevitably affects the decisions made by insurers and reinsurers on the underwriting and pricing of risk, and on the viability and sustainability of important lines of their business,” says Julian Adams, deputy chief of the UK’s Prudential Regulation Authority.

Funds are increasingly investing in insurancelinked securities such as catastrophe bonds to generate higher yields as interest rates stay near record lows. About R437.6 billion of the R5.07 trillion capital accumulated in the reinsurance industry at the end of June came from nontraditional sources, according to Aon Benfield.

That growth has forced reinsurers to cut the rates they charge, threatening profit.

USA Insurers getting faulty data from health exchanges

Insurers are receiving incomplete data from the new American-run health exchange, which means some Americans may not be covered even after they sign up for an insurance plan.

While it’s not clear how widespread the problem is, the reports from industry consultants are the first hint that the technical troubles faced by consumers trying to sign up for health plans under the Affordable Care Act may also be hitting the insurers. The companies are receiving electronic files that cannot be opened or have missing information.

“If we don’t see substantial improvement soon, then I would throw up the yellow flag,” says Dan Schuyler, a consultant advising states and insurers on the exchanges. “The concern is some people still may not have coverage by 1 January.”

Environmental group slams US crop insurance option

An insurance provision in the US farm bills proposed by the House and Senate could mean that corn, soybean and wheat farmers are set to make more money in a bad year, such as during a drought, than in a good year, an environmental group claims. In a 20-page report, the Environmental Working Group criticised the proposed Supplemental Coverage Option (SCO), which is in both the House and Senate versions of the farm bill, claiming it would have increased crop insurance payments during last year’s drought by R67.6 billion on top of the record R169 billion that was paid out.

A corn farmer in central Illinois during that drought would have had crop revenue of about R12 928 an acre, or R1 989 an acre more than he had expected at planting time, according to agricultural economist Bruce Babcock of Iowa State University. “The best year they ever had [financially] would have been their worst year in terms of drought,” explains Babcock.

Global IAIS plans worldwide capital standard by 2016

The International Association of Insurance Supervisors unveiled plans to develop a global risk-based capital standard for insurers by 2016.

Asia No major losses expected from typhoons

The two most recent typhoons to hit Asia are unlikely to cause significant insurance losses according to industry experts.

Typhoon Nari killed 13 people in the Philippines, while 25 people lost their lives as a result of typhoon Phailin.

The typhoon had caused torrential rain and severe flooding in many parts of central Luzon and several other provinces. “However, we are not aware of any major insured losses to commercial or industrial complexes in the most seriously affected areas,” reads a statement from loss adjuster Crawford.

Although there is still significant flooding following typhoon Phailin in Odisha, the insurance industry is not expected to be badly affected.

There is a huge amount of under-insurance in the areas hit. There was also not a massive impact on industrial areas or risks.

Full implementation of the framework will begin in 2019 after two years of testing and refinement with supervisors and internationally active insurance groups (IAIG), according to the body. “It is undeniable that the business of insurance is global and global issues demand global responses,” says Peter Braumüller, chair of the IAIS Executive Committee.

“This is why the IAIS, whose members constitute nearly all of the world’s insurance supervisors, has committed to develop and implement the firstever risk-based global insurance capital standard.”

In 2010, the IAIS began developing a comprehensive framework for the supervision of IAIGs or ComFrame.

The IAIS has now agreed to develop a risk-based global international capital standard and to include it within ComFrame, which has always included a capital component within its solvency assessment.

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lifestyle balance

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RISKSA Regatta We give props to all our teams and sponsors who made the inaugural RISKSA Regatta one to remember.

Hanna Barry

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Attitude and attire for the year-end function

How to look splendid and play the social butterfly to perfection.

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Regatta Recognitions With the 2013 RISKSA Regatta done and dusted, several participants are suffering from a serious case of the post-race depression blues.

What would you give for just one more day on the azure waters of Table Bay with the wind at your back, the sun on your face and the wheel of a yacht at your fingertips? Good news is that we’re already planning the next RISKSA Regatta, so watch this space. We give props to all our teams and sponsors who made the inaugural RISKSA Regatta one to remember.

Insurance Learning Academy

Camargue

ILA is an INSETA-accredited learning provider.

Anyone with a genuine interest in the insurance industry will benefit from ILA’s innovative skills programmes and courses. Passionate tutors groom students for the industry by teaching them valuable life skills and RE prep training in addition to the full NQF Level 4 qualifications.

Camargue underwrites niche liability insurance and provides risk management solutions to a broad spectrum of industries. Founded in 2001, the aim was to meet the rapidly changing risk transfer needs in a changing and challenging global economy. Through its partnerships with Hannover Re, Lloyd’s, Mutual and Federal and Brit Insurance, Camargue has done just that.

Etana Insurance

Grandmark International

Etana’s personalised method of doing business – exclusively through brokers – makes use of handshakes and face-to-face conversations to find ways of tailoring their insurance products to fit the precise needs of a client’s business. Etana is a truly South African company: diversified, innovative, optimistic and down to earth.

Grandmark Int. has been servicing the aftermarket collision industry for over 15 years.

By supplying high-quality, affordable automotive body parts for an extensive range of vehicle makes and models, its competitive pricing and consistent stock levels ensure that it is able to give customers the parts they need, when they need them.

Sasria Sasria covers politically motivated riots, but its mandate has been extended to cover damage caused by non-political riots and public disorder, loss of mortgage loans as well as terrorism. By lending stability and offering peace of mind, Sasria’s goal is to help create an environment for positive growth and change.

Mutual and Federal With a history that dates back more than 180 years, M&F, one of Africa’s oldest short-term insurers, is justifiably proud of its tradition of service and quality, as well as its range of products, including personal, business and farmer insurance, which are among the best on offer anywhere in Southern Africa.

Zurich Zurich is a short-term insurance company headquartered in Johannesburg and listed on the JSE. Founded in 1965, Zurich offers insurance products and services that respond to the needs of individual, commercial and corporate customers. It has a network of sales areas and a series of service outlets across the country, employing approximately 1 000 people.

PG Glass PG Glass, one of the leading suppliers of automotive and building glass fitment services in South Africa, has been supplying the local market for well over 115 years. it boasts a 24/7 call centre to process customers’ glass repair and replacement insurance claims or fitment requirements without hassle. PG Glass assures that every piece of glass the teams install is to the highest safety and quality standard – local is indeed lekker!

Shackleton Risk Management Shackleton Risk Management specialises in providing niche market commercial insurance to liquidators, attorneys and professional persons.

Today, the company has representation in all the major South African commercial centres and annually issues guarantees totalling billions of Rand to leading liquidators countrywide.

Zurreal Zurreal, the multi stakeholder programme developed by Agility Channel, provides more benefits to brokers, members, providers or employer groups. It shows how loyalty and human capital programmes are formulated.

Not just a product range, Zurreal is a way of doing business and expresses exceptional levels of service.

aon south africa Being an extension of the global insurance giant, Aon South Africa is one of the leading providers of insurance broking, risk management and human resource solutions in SA. Aon unites to provide customers with distinctive client value via innovative and effective risk management and workforce productivity solutions, giving them the best advice and attentive service possible.

webber wentzel Webber Wentzel, a leading law firm in Africa, was rated by several international ratings agencies in 2012. With a staff complement of 800 people, WW’s client base includes many of South Africa’s top 100 companies. WW’s collaborative alliance with global law firm Linklaters will see them working closely together for the benefit of all clients in Africa.

one financial services One is a dynamic, professional and innovative group. Initially a motor underwriter, One is now an amalgamation of niche underwriters, providing products across all lines of business.

Supported by a large panel of specialist service providers and suppliers, One provides the highest level of claims service available, giving brokers and clients peace of mind in the event of a claim.

VIP press boat sponsor MUA Established more than 20 years ago, MUA Insurance Acceptances has become one of SA’s leaders in tailoring insurance risk management solutions for the high net worth, short-term personal lines market. MUA writes business on behalf of Compass Insurance Company Ltd, and is a wholly owned subsidiary of Hannover Re through the shareholding ownership of Lireas Holding.

PFK Electronics PFK focuses on the design and manufacture of unique electronic solutions and products.

Driven by a culture of innovation, the company is supported by a strong research and development capability and state-of-the-art production facility.

PFK supplies to manufacturers, the aftermarket, major fleet and freight companies, and the public transport sector.

Prize sponsor echelon Echelon is a niche underwriter focused on the lSM 10+ market segments in South Africa. As true specialists in local short-term insurance, Echelon offers personal asset risk solutions to meet the needs of professionals, business owners and executives. Combined with traditional and innovative benefits, Echelon’s value proposition endorses intermediary expertise in client risk management.

5ounces The team members of 5ounces are serious wine and food lovers. And just like you, 5ounces also wants the best experience for the least money.

Its scouts are constantly on the lookout for highquality wines and unique gourmet food products.

They negotiate the best deal possible, and then they match their members with the products they’ll love.

FIA safire In 1987, Safire was born when a group of farmers and timber-growers decided to curb the spiralling costs of insuring their timber by creating a unique insurance co-operative. Today, Safire consists of a flat management structure where representatives are accessible to anyone who needs them and all queries are managed effectively with a personal touch.

The watchdog of the local financial services industry, the Financial Intermediaries Association of Southern Africa (FIA) has generously sponsored the prestigious FIA Floating Trophy to the winner – which seems appropriate as the FIA represents integrity and credibility. The annual trophy will be up for grabs again at the next RISKSA Regatta.

RISKSA Development Sailing Team Four young sailors from the Royal Cape Yacht Club Sailing Academy made up the RISKSA Development Sailing Team and competed on the boat After You. Yachting is a great platform to introduce young people to team building and skill development. Sailors from the RCYC Sailing Academy get the opportunity to race competitively and some are selected for sponsored skippers’ courses, which in itself can be a career booster.

Duane Petersen (20) Duane started sailing through Grassy Park High in 2006. Progressing through the ranks, he started winning a lot of competitions. “I want to further my keel boat sailing and the RCYC Sailing Academy is helping me realise my dreams,” he said.

Ricky Samuels (16) Since 14, Ricky’s been hooked on sailing.

His school, Plumstead High, awarded him full colours, first team sailing honours and male athlete of 2013. Ricky’s goal in life is to compete

in the Cape to Rio race, finish in the top five of a Lipton Regatta and acquire his ultimate skipper’s licence. “Thanks to RCYC Sailing Academy, Zeekoevlei Yacht Club and Sail Pro for giving me these wonderful opportunities,” he said.

Abdul Muhaimeen Thompson (17) Abdul got into sailing while attending grade eight at Plumstead High. “Doing a sport was compulsory. After they mentioned sailing, I thought about doing something different and more extreme. I chose sailing and it’s the best decision I’ve ever made.” Abdul started out as an amateur, but slowly progressed into becoming

a more advanced sailor. “Sailing keeps me out of trouble and away from bad things,” he said.

Mornay Harding (21) When Mornay was 13, a teacher at the high school he attended introduced him to sailing and, since then, he has never looked back.

Today, Mornay is a sailing coach at the Zeekoei Sailing Centre, he has completed first-aid courses and is currently doing boatbuilding. “I hope all this will take me further in my career and prepare me for one day when I hope to get the opportunity to sail in regattas around the world.”

RISKSA Regatta

CoveRED Arranging an event of this magnitude which brings together so many heavy hitters in the financial services industry was a first for us at RISKSA. We know a thing or two about planning a spectacular event, and we know a fair deal more than most about risk management, so we understood the need for specialist insurance for our extra special event. That’s where Etana sailed in‌

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not be the World Cup, but it is a complex event, over two days, with numerous people involved, on land and sea, including sports, eating, drinking and celebrating.

Etana Insurance became the wind in our sails when it agreed to sponsor the event liability for the RISKSA Regatta. We received event liability cover to the value of R5 million, and marine liability cover to the value of R2.5 million. The Etana Coastal Specialist Risks team, headed up by Tiaan Erasmus, guided us through the process of making sure that the event is as safe as possible, and our statutory duties are met.

Etana set up a meeting and visited the RISKSA offices to go through the intricacies of the regatta and other aspects of the event. It might

The first thing Etana alerted us to was that event liability insurance is a legal requirement, under the Safety at Sports and Recreational Events Act, no. 2 of 2010, and we would need to have efficient risk management in place. “As the event organiser, have a checklist.

Keep this on file for your records and as a way of ensuring you are prepared before the event. This should include all the safety and security measures you have in place, crowd management and motor vehicle parking arrangements if necessary and, of

course emergency medical measures and participant medical measures in place,� explained Erasmus.

Documenting every single thing you do as an organiser means that you can prove that you have taken proper care down the line, should any criminal penalties or claims arise.

We were made fully aware of the need to have proper documentation to cover our bases, and essentially to protect ourselves from as much potential liability as possible. We would have to emphasise to our risk-savvy participants that they should remain alert and aware and take good care of themselves. ďƒ

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After a briefing on the details of the regatta, Erasmus advised that we should have the correct indemnity forms drawn up for participants who will be racing, and members of the press who will be watching from the press boat. Etana pointed us in the right direction to get these waivers drawn up, and also sponsored this cost.

Event organisers often take insurance policies with the lowest minimum limits to save costs, but this is not advisable. Limits are an important consideration and should be tailored to suit your event. It is not a pleasant thought, but if someone is seriously injured at your event, defence costs alone can run into millions of Rand.

RISKSA would also need to draw up contracts with the yacht owners hosting the teams and racing for the prize money, as well as ensuring that they have their own comprehensive marine insurance for their boats, and any third party on the boat, in order.

Because the RISKSA Regatta has very important elements of the event taking place on the ocean, which is often riskier, we would require specialist marine cover for the portions of the event on the water. Frank Ponnen, head of Etana Marine, was on hand to advise us on the cover needed for this portion of the event.

We were relieved that ours is a relatively low risk event. Things that will likely push up premiums, are events where there are children involved; where people are protesting or pushing for reform; or where temporary structures such as marquees or scaffolding are used – none of which applied to our event.

Being taken through these steps gave us another chance to scrutinise the event and the finer details. Having a knowledgeable broker guide us through it was like having a confident skipper at the helm, giving us that extra life-jacket of support and security.

It instils a further layer of confidence and preparedness in the event organising team.

It left us even more eager to batten down the hatches and take to the open seas.

Below: Tiaan Erasmus, head of the Etana coastal specialist risks team visits the RISKSA office, taking us through the intricacies of the RISKSA Regatta event liability cover, which Etana sponsored.

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About the event being coveRED The inaugural RISKSA Regatta started off with the formal Captain’s cocktail party for the teams and skippers on Friday evening at the Royal Cape Yacht Club. Saturday morning, teams and guests arrived at the Yacht Club for a light brunch, before they departed for the dock to get ready to race.

The regatta began at 13h00 and the 16 teams of varying sailing experience and ability battled it out on the ocean. Journalists on the press boat documented all the action. A guest appearance by the Echelon Silver Falcons gave guests and teams a dramatic aerial thrill as they swooped and soared over the racing yachts for encouragement. With all the boats safely back to shore, Saturday evening was time for the prize giving to commend the outstanding achievements of all involved and a spit braai, with entertainment from the band to celebrate.

The Etana difference Etana has been providing event liability insurance since June 2012, after receiving numerous requests for this type of cover following the changes in legislation. Thanks to Etana’s supportive role and comprehensive risk management, the product offering has been well received in the market. The company’s premiums are priced according to the risk, which is why it is important for brokers to get as much information as possible about the event, so that the risks can be adequately graded.

Policies differ in scope and cover, which is why brokers will seek out individually tailored, bestvalue options, and be aware of restrictions and exclusions. There are a few areas in this regard that distinguish Etana’s offering: • Etana has a wide defence costs provision (in the event that legal fees are incurred).

• Etana does not sub-limit food and drink coverage or spread of fire cover.

• Etana includes automatic benefits, such as coverage for first aid treatment, and sudden and unforeseen pollution, among others.

• Etana does not have an excessive force exclusion.

• Etana’s cover incorporates public liability and products liability – including defective workmanship and employers’ liability.

• Etana has user-friendly policy language that is easily understandable.

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One for the occasion What it takes to be a good corporate event planner

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s events manager for COSA Media, corporate events planner Angelique Edwards has created some memorable moments for our company. From organising the logistically challenging Insurance Bootcamp and Better Business Breakfast seminars, to planning the biggest corporate sailing regatta in South Africa, Angelique certainly has a knack for putting a great event together. She shares some of the techniques and skills needed to plan a successful corporate event.

So, do you come from an events planning background?

Yes. Before I started working at COSA Media, I used to be the events manager at a prominent property magazine where I was actively involved with organising several seminars. I organised the Power Investor seminars and worked closely with Dr Dolf de Roos from Rich Dad, Poor Dad fame.

Tell us about the events you’ve put together over the last year?

Over the past year, I’ve headed up the Insurance Bootcamp national road shows, each

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with different themes and topics, in Cape Town, Durban and Johannesburg, for 450 people. I also organised the Better Business Breakfast, which is a topical breakfast seminar for industry leaders in Johannesburg and Cape Town with 80 – 100 people at each sitting. Now, we’re busy with the RISKSA Regatta, the biggest corporate sailing event in South Africa. We’re expecting about 300 invited guests and there’s a lot of logistics to go with it.

What are some of the key responsibilities when it comes to organising an event?

As a planner, you’re responsible for invitations, speaker selection and briefing, registration, venue selection, vendor selection, catering, production, gifts, transportation, travel schedules of speakers and travellers, delegates, costing, logistics, lodging, destination management and conference services among others.

What are some of the skills needed to be a good events planner?

First, as an event planner, you need good communication and team-building skills. Event planners and managers have to communicate with many people from different companies on various levels in order to execute an event successfully. From vendors and venue coordinators to clients and guests, communication and collaboration are imperative skills for hosting a successful event. Negotiation, time and project management skills are also vital to the success of the event. There will be numerous times throughout the planning process where you’ll be required to negotiate beneficial outcomes on behalf of your client.

What are the most important things to remember on the day of the event?

On the day of the event, it is important to go through your checklist to make sure you covered everything that you could do beforehand. Make sure you’ve given yourself enough time to do the tasks that are going to fall to you. There’s nothing worse than underestimating the time it takes to finish a task and then not being able to relax (get dressed and be fresh and ready to receive all of your guests). With corporate events you want to make sure that everything is set up and your registration and arrival snacks are ready and waiting. If you have a presentation, always test all the equipment beforehand so that it is ready

Angelique’s do’s and don’ts of corporate event planning:

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The client is always right Drawing up a checklist with deadline dates is important. Always give your speakers earlier deadline dates than necessary as they often tend to miss them. Understand that you are dealing with clients and the client is always right. You often deal with different problems and some clients will never be happy with the venue, traffic, etc. Don’t take it personally: apologise and offer a solution. Always build extra ‘fat’ into your budget as there are often unexpected expenses. Always plan to accommodate extra delegates.

Don’t forget about your attendees Your organisation may have its own agenda for the meeting or event, but you need to think about things from your attendees’ perspectives.

What do they want from the meeting? What impression do you want them to leave with after the event is done? This is where corporate event entertainment can play a big role in your planning. By including appropriate entertainment, you can ensure that your attendees will enjoy themselves.

Create a theme for your event Your theme will make planning much easier and will give your event a ‘wow’ factor. Your theme should be co-ordinated with the purpose of the event. Incorporate your theme into your venue decorations, your invitations, your marketing collateral and other items. to go once everyone arrives. Make sure the sound, video equipment and speakers are in proper working order.

What about budget?

Budget is a crucial part of the event-planning process. The objective is to provide event planners with a financial limit. It should be specific and include revenues (sponsorships and ticket sales) as well as expenses (printing, location, food, supplies and security). To make sure you don’t forget anything, go over your budget checklist not once, not twice, but three times.

What are some of the tools you use when planning an event?

I often make use of Office applications such as Excel to set up checklists, work out budgets and do costing. I also use online registration and payment portals to limit the amount of invoices and keep track of payments.

How important is keeping track of the weather when organising an event?

Always keep the weather in mind. Let’s say you're planning a big outdoor party: it’s always

important to make sure that you have a backup plan in case of foul weather. Being based in Cape Town, there’s the possibility that the weather could turn. For the RISKSA Regatta, we knew that bad weather (strong winds or rain) could threaten the event, which is why we have organised a separate event as a Plan B. When it comes to the weather, think like a boy scout and always be prepared.

Do you ever get to attend a party and just enjoy it, or are you always thinking about it from a planner’s perspective?

Yes, I do get to attend parties for the fun of it. Over the holidays, I attended many parties for which I had no responsibility.

Although, you can’t really break out of your mould. Even though I was just another guest, I still caught myself saying things like, “Can I get you something to drink?” So I guess it is difficult to turn it off, but I definitely do get to go to numerous functions. The majority of the time, it’s business-related. However, it’s great fun when I do attend a private event, but it’s also difficult to sit back and just be a guest, picking up different tips and ideas.

Don’t let your attendees sit in silence During the downtime in your events, use light background music to avoid the sound of silence or noisy chatter. Music doesn’t have to be the centrepiece of your event, but some background music can help give your event a touch of professionalism. On the other hand, you don’t want music that is so loud, it smothers conversation.

Hire professional event entertainment or ice-breakers Event entertainment is another way to increase excitement about your event and ensure that people come back next year. Your event entertainment vendor should be experienced with corporate events so they know how to maintain professionalism and be entertaining at the same time.

Don’t put off promoting your event Promotion is the key to making sure your event is well attended. Once you’ve got the date, venue and theme in place, start spreading the word. Use press releases, social media, industry magazines and other avenues to promote your event and pre-register attendees.

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Attitude

attire & for the year-end function Christy van der Merwe

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End-of-year functions are a celebration of hard work and dedication throughout the year – a time to reward yourself for surviving the rush and to relax with colleagues. RISKSA enlisted image experts to enlighten us on how to look ravishing for the party, and the boundaries that must be respected, to avoid awkwardness.

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our personal brand is what differentiates you from your peers and competition, and influences what people think about you and how they perceive you, explains Georgina Hatch of New You Image Consulting. The temptation at the end-of-year function is to be bold and show a different aspect of your personality, but Hatch warns that personal branding is about authenticity and consistency. “It is important to maintain your brand at all times, including at company functions. Behaving differently will demonstrate inconsistency and this equates to unreliability.”

You should maintain your personal brand at the end-of-year function and, if anything, this event gives you a chance to network and bolster connections by showing your best side.

Firstly, don’t arrive too early or too late, says Hatch. While attendance is usually mandatory, the organisers appreciate timely arrival.

Behaviour basics Fay and Megan Coleman, directors at Image Insured, explain that tried and trusted behaviour basics should be on display at formal functions.

As you arrive at the table you are seated at, before sitting down, introduce yourself and greet every person at the table; and make conversation with everyone at your table, not only your partner. Remember to excuse yourself before you leave the table and push in your chair when you leave. ”Be sure to move around and socialise instead of just staying in one spot all evening,” stresses Coleman. Don’t monopolise one person, particularly not the boss.

Make sure you have discarded your chewing gum before sitting down to eat so you are not

faced with the awkward situation of having to discard it in public. When it comes time to eat, don’t forget to place your napkin in your lap before eating and don’t talk with food in your mouth.

What to wear The conundrum of what to wear is always top concern before the year-end function. Make sure the dress code is understood and choose outfits accordingly. If there is a fancy dress theme that requires a costume, a good place to look is the closest China Mall, suggests Coleman. “They always have fun, inexpensive dress-up attire.” However, even if there is a fancy dress theme, there are some essential rules that should always be adhered to.

The important thing to remember is that you should find what works for you, accentuating your best features, because your own individual style will be classic and timeless, explains Coleman. This will also ensure that you don’t spend a fortune every year. “Often people try too hard and end up looking uncomfortable and awkward in their outfits.

Women usually want to wear a ‘little black number’, but unfortunately black only works on certain skin tones.”

As an image consulting business, www. imageinsured.co.za recommends that all men and women have a colour analysis beforehand to ensure they understand which colours suit them, and wear the correct colours on the evening.

Coleman also advises to plan and get outfits well in advance, especially ladies, as it’s extremely difficult to find what you are looking for at the last minute. This applies to men too, especially if hiring suits. “You don’t want to be caught short and not be able to hire a tux, because hiring companies get hectically busy at the end of the year.”

Buying vs. renting Tuxedo hire, including shirt and tie, starts from around R500. Purchase prices vary but you can expect to pay at least five times this amount to buy outright, says Hatch. Tuxedo rentals work best for men who don’t need to wear a tux on a regular basis but, if you have to attend many formal events, then it is a worthwhile investment to purchase your own suit.

The advantage of rental is that you can change styles for different occasions. On the other hand, the advantage of buying is that the suit

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can be tailored to your specific body shape and height. Hatch notes that tux styles do change, but unless men are confident about wearing the latest style, it is best to opt for the classic tux combination. This can always be updated with more modern shirts and shoe styles.

When it comes to women renting outfits, there is a bit of a stigma attached to this; however, Coleman adds that if you are going to attend only one formal evening function a year, it is recommended to hire an outfit, “as there are some stunning evening gowns out there”.

Hatch says that if women attend a lot of formal company events, then it pays to occasionally rent an outfit to change things up. “If women prefer to purchase their outfits, it makes sense to find a dressmaker who can design and make a variety of outfits at a lower cost than traditional retail,” she adds.

All colours, shapes and sizes

Top tips for women:

Top tips for men:

• Ladies, do not reveal too much cleavage or leg.

• Bling in the evening is great, go sparkly and dangly, but always remember to accessorise according to your size. If you are petite go for tiny, dainty jewellery.

If you have a larger build, chunky is great.

• If your dress is very detailed, downplay the accessories. If it is very plain, add more accessories.

• Incorporate colour – don’t always opt for the safe little black dress.

Use a gorgeous pashmina or shawl to accessorise your outfit, particularly if the dress is lownecked. Carry an embellished clutch bag in popular metallic colours.

• Gentlemen, never wear short sleeves, or black or loud coloured shirts.

Shirts should be white or very subtle colours for a smarter look.

• Do not be tempted to wear anything other than black formal shoes, no matter what colour your cummerbund may be.

• Taller slimmer men can wear slightly longer jackets; however, make sure that the arm length is correct. The shirt sleeve should finish on the palm and the suit jacket should end before the wrist bone. The difference between the two should be one centimetre.

• Slim fit tuxedos look great on very toned bodies; however if you are very thin or overweight, go for a regular fit.

• A good quality watch is a great accessory, and cuff links are a must with black tie attire.

When it comes to shapes, women can usually be classified into one of four body shapes: the triangle, which is also known as a pear shape; the inverted triangle, also known as the V frame, which is an athletic shape; the rectangle, also known as the H frame, which is pretty much straight up and down; and the hour glass or the 8 frame – this is the shape that most women aspire to.

According to Hatch, men fall into one of five basic body categories: trapezoid, which is regarded as the ideal body shape for men; inverted triangle; triangle; rectangle; and oval, which is a rounder body shape.

The trick to dressing correctly is to try to balance out your shape, drawing attention to the good parts and disguising the bits that you don’t wish to highlight. Hatch emphasises that colour can be used to either hide or highlight different aspects of your body shape by creating the effect of an optical illusion. Monochromatic colours (one colour from head to toe) elongate the body shape and make it look slimmer.

If the lower half of your body is wider than the top half, wear darker colours on the bottom and brighter colours on top to balance the body shape. If your body shape is rectangular with little definition, wear darker colours on top and brighter colours on the bottom to create the illusion of shape. This also works if you are slender and wish to add width to your frame, or if you are tall and want to look shorter.

Hatch shares some of the basic rules for camouflage, so that you can enhance your best features.

• Vertical lines lengthen and narrow.

• Horizontal lines shorten and widen.

• Curved lines add roundness.

• Diagonal lines can conceal or emphasise.

• Light, bright colours emphasise and enlarge.

• Dark colours reduce and minimise.

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• Insert colour breaks where you want the eye to be drawn to, such as a trim waist or broad shoulders.

• Monochromatic colour top and bottom will elongate the body length.

• Separate colours top and bottom will widen the body shape.

• Patterns add bulk.

• Heavy, chunky or shiny textures add bulk.

• Smooth, muted materials diminish.

With these key elements in mind, all that is left is to enjoy the party – have a great time with your colleagues.

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IU

Diary of a travelling

insurance

salesman

The sometimes sad, sometimes funny observations of Anton Roux, CEO of Aon South Africa, and his colleagues on their travels through Africa.

Flori-duh

A country that Jeremy Clarkson calls the United States of Paranoia and, after spending a few days here, it is not difficult to see why.

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y lunch order experience is a fair representation of America.

Ordering a turkey and bacon ciabatta, which is a sliced turkey breast and apple wood smoked bacon on a ciabatta roll with lettuce and tomatoes, is not nearly as simple as it should be.

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Me: “I’d like the Turkey Applewood Bacon Ciabatta, please.”

Waiter: “With ketchup, mustard, mayonnaise or all three?”

Me: “Mustard.”

Waiter: “Guacamole or cream?”

Me: “Guacamole.”

Waiter: “With Swiss, American or cheddar?”

Me: “No cheese.”

Waiter: “You have to choose one, sir.”

Me: “Cheddar.”

Waiter: “Grated or sliced?”

Me: “Sliced.”

Waiter: “And a beverage?”

Me: “What is a beverage?”

Waiter: “A drink, sir.”

Me: “A Coke please.”

Waiter: “Regular, cherry or Coke light?”

Me: “Coke light.”

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Waiter: “Medium or large?”

At this point I got up and left.

The problem with this place is everything has been designed by a lawyer to cater for every eventuality. The population is like a bunch of rabbits caught in the headlights because of all the choices they have. America is weird.

However, a water taxi taking me from the Hard Rock Café to Universal Studios, in a man-made river that is five foot deep, has to be equipped with an automatic external defibrillator, just in case I have a heart attack during the six-minute ride.

America is experiencing a crime problem.

Car-jacking is becoming common and a man in a Cadillac was hijacked while waiting for his wife in a shopping centre parking lot recently. The accused used a pump action shot gun. These types of issues now happen weekly. Police cars are being stolen. They steal the vehicle to remove the on-board laptop and, if the thieves are lucky, there will be firearms in the boot. The car is then abandoned.

Pharmacies are being targeted, not for the cash but for the drugs. This means they have employed plain-clothed armed security guards to pretend to be customers.

My cab driver told me that a robber was shot and killed by one such guard in a pharmacy last week.

It is April of 2009 and the financial crisis is severely affecting the American economy.

Unemployment is between eight and nine per cent, and General Motors recently announced it will close 75 per cent of its factories for nine weeks. From my perspective, crime can only get worse as a result of unemployment, and the one industry that will grow in the USA will be the private security industry.

They have sufficient amounts of soldiers returning from Iraq and Afghanistan to become private security guards. This feels a bit familiar, and proves the First World is not immune to the problems we face.

Africa is my continent of choice, and I believe we live in the best place in the world.

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