FIA Insight Q2 by Greenpepper Communication

2nd Quarter Edition ition 2008 2010 R19.95 (incl)

INSIGHT

Website: www.fia.org.za S A’s PREMIER INTERMEDIARY MAGAZINE 36647575797597359738765-0

Editorâ&#x20AC;&#x2122;s Soapbox

Presidents Message

From the Desk of the CEO

FIA Code of Conduct

Company Profile - Peter Todd

Vehicle Crime

Livestock Insurance

Early Diagnosis

Group Funeral Schemes

Investment Strategy

Relocating Overseas

Financial Planning

Choosing Life and Disability Cover

Sustainability of Short-Term Intermediary

Healthcare

SAIA Donation

Interviews FIA Awards

Rising to the Challenge

Terrorism

New Blood in the FIA

Risk Management

Need for Advice

Snippets

Visitors Could Score

Cost of Transnet Strike

Cementing Intermediary Sustainability

Skyrocketing Retirement Claims

Engineering

Appointments

Choice of Insurer

Profile Gerrit Lambrechts

New Class of Specialist

New Force in Healthcare

Humour

Please visit our website: www.fia.org.za

FIA Insight The official mouthpiece of the Financial Intermediaries Association of Southern Africa P O Box 11901 Centurion 0046 Tel: 012 665 0085 Fax: 012 665 0534 Email: info@fia.org.za Website: www.fia.org.za Publisher Financial Intermediaries Association of Southern Africa Chief Executive Officer Manie Booysen manie@fia.org.za Chief Operating Officer Justus van Pletzen justus@fia.org.za President Seamus Casserly seamusc@firstequity.co.za Editor & Media Manager Clive Franks Fax: 086 642 4540 Cell: 082 306 9158 clive@fia.org.za Graphic Design Streak Design cc Cell: 083 447 2010 Editorial Contributors Seamus Casserly, Manie Booysen, Jonathan Broomberg Mike Stoker, Gareth Stokes, Andres Franzetti, Walter Cronje, Pierre Roussouw, Brian van Flymen, David Jackson David Price, Gari Dombo, Chris Busschau, Barry Taylor, Mark Lapedu, Shaneen Abrams, Dimitri Balios, Paul Brightman, Colin Macheke, Brian Spanier-Marson, Rowan Burger, Adele Joubert, Debbie Barret, Brian Gillespie. Subscription Rate: R79.80 inclusive of VAT per annum FIA national office has the name of an independent practitioner near you. The views expressed in this magazine are not necessarily those of the FIA. Readers following any advice contained in the magazine, do so at their own risk.

EDITOR’S SOAPBOX

Editor’s Soapbox

by Clive Franks

What an incredible and eventful quarter we have had with the many

The 2010 Financial Intermediaries Association's (FIA) Industry

scintillating events that have taken place.

Recognition Awards was held at Emperors Palace on Thursday 3rd June, with over 1000 guests, making it the most significant event on the

On 23-26 May history was made when the first Insurance Conference

insurance calendar, it was a sparkling event and paid tribute to those

was held at Sun City hosted by the FIA, SAIA and the IISA.The event was

insurance product providers who received favourable ratings in the FIA's

highly successful with a huge amount of participation with both

annual intermediary satisfaction benchmark survey conducted by

prominent international speakers addressing the delegates on a wide

Bluestream Research. The top contenders per segment for 2010 were, in

spectrum of subjects pertinent to the insurance industry. The high

most results, no surprise with Discovery, Momentum and Santam taking

quality of their deliveries and the manner in which pertinent matters were

the top positions. Sanlam also made a major impact and for the first time

dealt with was both exemplary and highly informative.

won both the Investment Categories. CIA, backed by Compass, won the new UMA Category for Underwriters.

The events organisational delivery was brilliant and I am sure that all the participants, whether service providers, intermediaries or speakers

Seamus Casserly, President of the FIA, said that the awards add value to

managed to reap valuable gains from this event. Some of the highlights

the industry by providing benchmark best practice statistics for

were the induction of Keith Kennedy as the new president of IISA and the

intermediary satisfaction. Furthermore, participating in the survey

social events that were of a high standard and thoroughly enjoyably.

provides a platform for intermediaries to rank their interactions with

Tracker's evening with the theme 'Soccer World Cup' demonstrating the

insurance companies and in so doing, encourage healthy competition

delegates' support of Bafana-bafana and the World Cup was to be

amongst providers.

remembered for the fun and energy it generated. The Gala evening by the

rating over 6000 contracts of their product providers with regards to the

IISA and sponsored by Mutual and Federal although more subdued was

perceptions, views, expectations, awareness levels and opinion on:

The results are obtained through FIA members

once again a huge success and was enjoyed by all with great

•

Product quality.

entertainment provided by Ian von Memerty a well rounded MC and very

•

Service quality.

talented entertainer. Each speaker's presentation can be accessed by

•

Relationship quality.

clicking on the Insurance Conference on the FIA website then click on

•

Overall satisfaction with their supporters.

Media Centre Tab and then click on Presentations and choose the presentation you would like to view.

The 2010 award winners in the following categories are: •

Personal Lines - Santam

The beak away session by the FIA Advisory Council and chaired by

•

Commercial – Santam

Steven Akakios was handled with professionalism and embodied the

•

Corporate – Santam

seriousness of the feedback that was given. Each of the various exco's

•

Life/Risk – Discovery

gave feedback to the delegates and addressed all the various concerns

•

Investment (Investment Products Single Premium) – Sanlam

of the members. The council engaged in lively debate and resolved many

•

Investment (Investment Products Recurring Premium) – Sanlam

of the issues of concern expressed by various divisional and branch

•

UMA – CIA (Commercial and Industrial Acceptances)

chairs. The President, Vice- President, immediate Past President, CEO

•

Medical Aid – Discovery

and COO all addressed the delegates and gave useful constructive

•

Employee Benefits - Momentum

feedback to all. The delegates at the conclusion of the sessions felt confident with the feedback that they could now impart with to their

FIA members currently act as intermediaries for more than 85 percent of all

branches.

short-term insurance and the majority of financial planning business, healthcare planning as well as employee benefit business in South Africa.

On Thursday morning the FIA AGM was held at the Johannesburg

The association represents thousands of financial services intermediaries,

Country Club in Auckland Park, where the members ratified all items on

of which many participated, included in the survey. Following the official

the agenda.

awards ceremony on 03 June, interested parties may contact the FIA to ascertain how they may obtain copies of the report.

FIA PRESIDENT

Message From the President of the FIA to our Members Dear Colleagues, The Year 2010 is almost half over at the time I write this article but The FIFA world cup has not yet kicked off so I won't tempt fate by making a prediction. The positive impact on our country that a good Bafana performance will have is immeasurable and on behalf of all intermediaries and members of our association may I wish Bafana a great tournament and may they exceed all our expectations. Go Boys we are all rooting for you. The FIA's year has also started with a real intent and huge effort on the part of the executive under Manie's leadership. Now that a number of infrastructure and administration projects are completed – for example the new web site, new accounting and membership management system, financial control consolidation, membership structures and voting , etc - they are ready to focus on member matters and delivery of our undertakings. At the advisory council held during May I delivered our report card and we have certainly delivered on a number of fronts. I do not intend repeating the feedback here as I am sure that your representatives have provided feedback, but a few key projects require specific mention: •

•

The RE1 and 2 road shows conducted jointly with the FSB and other industry bodies in over 30 centres was a huge success. The FIA has never presented in more centres than this and all who attended are better informed about the pending examinations and their requirements. We are participating in the Insurance Data Exchange project - now named Stride - with SA Insurance Association. This holds huge risk and also some potential benefits for our various business models and the future of intermediation in its current form. It will be an industry watershed issue and will require careful negotiation. The 12th Annual FIA Insurer Awards dinner was a huge success and grows in stature every year. As you know the research and findings are based on our member's views, is an opportunity for the FIA to rate insurer performance and has become a real benchmark for the industry. May I congratulate all the winners and thank them for their continuing support for the intermediated channel. We believe that the awards will lift overall insurer performance and

thereby ensure an improving consumer experience for the benefit of us all. In order to enhance our profile, your Association participated in The • Insurance Conference at Sun City as a co-sponsor with SA Insurance Association and the Insurance Institute of South Africa. I am sure that all who attended will agree that it was a huge success and created a very positive profile for us. This co-operation with the broader insurance industry really positions the FIA as a genuine partner in the industry for the benefit of all. • The Insurance Laws Amendment Act drafting team at the FSB now includes an FIA member. This is a real milestone for us and is illustrative of the FIA's status at the FSB and the regard that they have for our constructive interactions with them. • Our new Fee structure for existing members only applies in 2011 which means that our fee has remained constant for the past few years. I believe that we can have real pride in the achievements over the recent past which address the image and influence section of our strategic plan. The big issue for me for the balance of the year is to improve communication throughout the association. This initiative is based on feedback at the Advisory Council and following general discussions with members. All parties are guilty but the wasted effort and time in repetition of feedback is proving really frustrating and costs all of us indirectly. The executive is working on a plan to resolve this urgently as it is important that we are all well informed on all topics that may affect our businesses. We are also planning to refresh our strategic plan later in the year and will advise on progress once some is achieved. Finally thank you again to all the volunteers for their tireless work. They make this association really special. Have a brilliant second half of 2010 and enjoy the World cup in true South African fashion. Regards Seamus

C E O

FSB focuses on the Consumer by Manie Booysen FIA’s CEO

Jonathan Dixon, Deputy Executive Officer of Insurance at the Financial

During April

Services Board (FSB) reiterated the FSB’s responsibility towards the

2010 the FSB

consumers in the financial services industry during his keynote address

published a

at the Insurance Conference held recently at Sun City.

discussion paper and

He also outlined the present status on major initiatives at the FSB that

invited various

include the Solvency Assessment Management Project, Treating

role-players in

Customers Fairly (TCF) and the introduction of new regulations for Micro

the financial services industry to the first workshop to set the scene for

Insurance.

the “Treat the Customers Fairly” (TCF) programme. TCF is a regulatory initiative by which firms are required to consider their treatment of

These aspects are supported by the final amendments to the General

customers at all the stages of the product life-cycle, including the design,

Code of Conduct – Conflict of Interest, that were recently published. The

marketing, advice, point of sale and after-sale stages. By encouraging

amendments are the result of many consultations with industry role-

firms to re-evaluate their company culture and to include the attitude of

players and the last FIA input was submitted during December 2009. The

treating customers fairly, the outcome is likely to result in a more optimal

Code is clearly focussed on the fair treatment of customers and the

one from the perspective of the regulators, consumers and ultimately the

prevention of the rendering of inappropriate financial services by

firms.

providers. It is clear from experience in Europe, where the programme has been The above-mentioned issues have now been addressed and

articulated and initiated by the FSA, that the involvement of senior

promulgated in Section 1 and 3 of the General Code of Conduct as

management in the TCF programme is crucial and it lays responsibility

amended and broadened by Board Notice 58 of 2010. Certainly the most

for treating customers fairly, squarely at the door of senior management.

significant outcome of the general code of conduct is the stipulation in section 3 A (2)(a) that every provider, other than a representative, must

It is important to note that the regulators want to encourage firms to treat

adopt, maintain and implement a conflict of interest management policy

customers fairly without relying on too many rules and in particular

that complies with the provision of the act.

wishes to avoid laying down a huge raft of new rules. The success will be placed on the outcome of the programme rather than the policing of

Given the fact that the FAIS Act focuses on aspects such as fit and proper

rules and regulation.

Level 1 and Level 2 regulatory exams and the General Code of Conduct

with special reference to Conflict of Interest and to regulate the

Customer satisfaction is at the heart of the insurance industry and it is of

relationships between intermediaries and clients, one could expect to

the utmost importance that the industry not only projects an honest and

see a new focus in terms of regulation and the financial products

ethical image but that service providers act in an appropriate manner.

themselves and their providers.

The focus of the FSB bodes well for the future of the insurance industry.

CODE OF CONDUCT

FIA CODE OF CONDUCT by Brian van Flymen FIA’s Vice –President This article is the first in a series intended to highlight provisions of the new Code of Conduct which has recently been adopted by the board of Directors and accepted by our Members.

educate; conduct our business with utmost good faith and honesty.

The necessity for the establishment of a Code of Conduct is to be found in both the rapidly changing framework of regulation and the increased awareness of consumer protection – very powerful drivers indeed! The King III report on Governance applies to all Members large and small not only public or listed entities. This together with the new companies act will affect us all.

The Members too are expected to act in similar fashion by placing the interest of their clients before their own thus promoting the professional conduct essential to remain relevant within the insurance industry and respected by the community at large.

Our Code has in fact been approved by the FSB and is in many respects aligned with those of SAIA and ASISA with whom we share a common future.

Self regulation needs to be proactive and we must remain vigilant. Unprofessional and dishonest activities should be reported to the FIA offices wherever they may be uncovered.

FIA Directors, Management and all importantly the Members, undertake to “observe and comply with the requirements of the Code”.

To my mind the opening provisions of our Code, as referred to above, are the most important as they go directly to the question of conduct. Let us always remember that long term success is inevitably the result of holding the right values.

Obviously greater public awareness of the FIA, our self regulatory measures and our generally ethical behaviour must be created. The directors and management have committed themselves to this task. We will promote our image wherever possible; constantly strive to inform and

Members, this is your Code, please familiarise yourself with its provisions.

P R O F I L E

Interview with Peter Todd, Managing Director of Absa Insurance & Financial Advisers by Clive Franks Background: Absa Insurance and Financial Advisers (“AIFA”) is the Advisory and Distribution arm of Absa Financial Services. With more than 1,500 Financial Advisers and Insurance Brokers, AIFA is one of the largest intermediary companies in the country. Built around a bancassurance model, AIFA covers the full spectrum of financial services across all segments – from the individual through to large corporate business. AIFA's distribution model is built around multiple channels – from call centres and digital channels to highly qualified advisers. Despite being part of a financial services cluster that owns its own product houses, AIFA provides independent advice and has contracts with all the major product providers. This ensures that the Absa customer is always presented with best of breed solutions. FIA: What impact do you think that the Consumer Protection Act will have on Insurance and will it be positive for the industry? Many of the aspects, which the Consumer Protection Act aims to address, such as simple language and transparency have, to a large extent, been addressed by the FAIS Act. The bigger impact will arise indirectly for the insurance industry in terms of client liability exposures. Strict liability for distributors means that brokers will have their work cut out when advising their clients on appropriate liability cover. Until some precedent is established, there will be a lot of uncertainty as to the full potential impact of the Act on the insured and hence the insurance industry. Ultimately the changes are in the interest of the consumer and, therefore, must be in the interest of the industry. If we are a truly customer-focused industry, we should welcome legislation designed to protect the consumer, be it compliance, or consumer protection legislation. Regulators do not dream up new rules and regulations to keep us busy – they respond to the industry's own short-comings or lack of controls. If everyone in the industry truly treated their customers fairly, there would not be a need for regulations. Unfortunately, we all end up paying for the sins of a few. FIA: What is AIFA's mission statement? We subscribe to one Vision – that of the ABSA Group – which is to be the leading Financial Services Provider in South Africa and select African countries. Our mission is simple – we are passionate about building and protecting our clients' wealth by delivering the best solutions through their channel of choice. FIA: What is your positioning in respect to the role of the intermediaries and the various distribution channels?

I have strong views in this respect as Absa has various distribution channels under one entity. Channel conflict will always exist and we feel that it can be better managed by maintaining a single span of control. The customer must engage with us through their channel of choice - if they do not perceive the value of a particular service they won't pay for it. If you take the short-term personal lines industry as an example, huge inroads have been made by direct insurers. If one looks at the global trends in that regard direct insurance it is going to increase and not reduce. That is not to say there is no future as an intermediary in personal lines insurance. Instead the challenge becomes one of demonstrating that value one can add. The consumer buys directly, based on price and not on informed knowledge. This is a risk to the consumer and ultimately the reputation of the industry, as the average consumer does not understand the fine print and jargon contained in a standard insurance policy. Unfortunately, they only find out when they have to claim and often it is too late. Therefore, the intermediary, in my mind, has a significant role to play and as someone who has a better understanding than most – I would not do without the services of an intermediary. Intermediation can come in different forms and although advice can be given through call centres and the internet, I think we are still a long way off from where technology replaces human contact. The challenge to the intermediaries is how they position their value, which may influence the customer's perception of the value. The Financial Intermediaries Association of Southern Africa (FIA), as an intermediary organisation, plays a key role in positioning the value of the intermediation. I believe the FIA has taken decisive action to stop negative advertisements by direct insurers that undermine intermediaries by characterising them as charlatans and money grabbers. The FIA took action to stop that and this is absolutely the role of the FIA as an organisation. These adverts were also short-sighted in that they not only undermined the role the intermediary plays in the industry, but they created a negative perception around the industry as a whole. FIA: What impact is the World Cup going to have on Insurers and Intermediaries? From an insurance perspective there is a risk that people have not given enough consideration when extending existing accommodation or building extra accommodation on their properties so as to operate them as B&B's. Similarly they have not given enough consideration to the material change of risk when converting the homes temporarily to B&Bs. Hopefully they have an intermediary to render appropriate advice in which case they will be fine!

Looking at the investment side of our business, we expect big inflows into our country during the World Cup. So the question is: 'post the World Cup, where is that money going to go and what are people going to do with it. Hopefully we will see a spike in investment flows post World Cup. Pre-World Cup has seen huge amounts of money being invested in infrastructure development, which will slow down post world cup. This will result in less insurable risk and as such lower premium flows. FIA: Do you perceive Solvency Assessment Management (SAM) as having a positive impact on short-term insurance? A lot of this, is work in progress with the Financial Services Board (FSB), but after the experience of what we have been through globally with the credit crisis, there is much more focus on capital requirements regardless of whether it is a bank or an insurance company. We are moving into a period where the cost of capital is going to increase and this will ultimately have an impact on the consumer as the increased cost is borne by them. Yes, it provides more security to the consumer, but it comes at a price. FIA: What do you think are the main challenges facing the Short â&#x20AC;&#x201C;Term and Life Insurers? The big challenges are regulatory, be it SAM, the Consumer Protection Act or Treating Customers Fairly as a principle-based governance framework. The conflict of interest legislation recently promulgated is going to have a massive impact on the intermediaries and the industry, and the relationships insurers have with intermediaries and how they manage those relationships is going to change significantly. We live in a world of heightened consumerism and this trend will continue â&#x20AC;&#x201C; with it will go additional cost, which will pose a challenge to companies in so far as they need to pass that cost on to their consumers.

FIA: What is the most valuable advice you can offer to the consumer? My advice pertains to the role of the intermediary ensure you get good and appropriate advice. Always utilise the services of an intermediary as they will add value and you should insist that they add value! FIA: Are you willing to share a brief CV of yourself and what your interests and hobbies are outside your role in ABSA? I grew up in Stellenbosch and qualified from UCT obtaining degrees in accounting and law, joined the legal profession and ended up here in the insurance environment, through choice and not by coincidence. I find our industry a very stimulating one to be involved in and have worked in the industry in South Africa for a number of years. Most recently I was based in Singapore for six years looking after the Asian businesses of then Alexander Forbes, which was later sold to an American company (Lockton). I arrived there with no children and returned with three so it was a very productive period in my life! I returned to South Africa just over two years ago and have been running AIFA since my return. I am a typical South African interested in all types of sports and a keen golfer, cyclist, swimmer, runner and was an active tri-athlete in my day, having represented South Africa in the 30 â&#x20AC;&#x201C; 34 age group category at the 2001 World Championships in Canada. I still keep up that interest but having three young kids and a demanding job does hold me back a bit and I am not as active as I'd like to be. I restrict my reading to biographies as I have a fascination with people who have succeeded af ter triumphing against the odds..

S A I A

Vehicle Crime no longer the Biggest Challenge facing Motor Insurance by Adele Joubert

"The South African Insurance Association (SAIA) supports healthy competition, across all industries," said SAIA Chief Executive Barry Scott. This remark was made after the SAIA had taken note of the recent findings of the Competition Tribunal which reportedly had found that Netstar, Matrix Vehicle Tracking, and Tracker Network - representing over 90 percent of the industry - and the Vehicle Security Association of SA (VESA) contravened the Competition Act by setting standards which created barriers to entry, resulting in anti-competitive behaviour. Although the SAIA cannot comment on the specific recent finding regarding some companies in the tracking industry, as it has not been privy to the detailed findings and was not approached by the Competitions Commission regarding this issue, the SAIA supports both healthy competition and quality products that will protect consumers and their assets. "The SAIA is a representative body, and always attempt to act in good faith. Accordingly, we do not encourage our members to contravene any laws of our country, including the Competitions Act." "We will however continue to support the development and enforcement of minimum standards as both a consumer protection and risk management mechanism, provided that this is done within the confines of competition policy," Scott (Pictured above) added. "The requirement for suppliers to apply standards to their products is good for the consumer. This is why the SABS exists - imagine an environment where unsafe household electrical appliances were sold." "Similarly, all vehicles sold have to comply with minimum standards, to ensure the safety of motorists.â&#x20AC;? "The application of minimum standards therefore ensures that products are effective and achieve the purpose for which they were developed, and ensures that the products are safe.

"When the electronic vehicle security market first opened up, there was an immediate plethora of products developed, most of which were totally ineffective, and many of which were unsafe. Motorists were often left stranded on the roadside due to the failure of the security product." "We can all remember car alarms going off all night, mostly caused by false alarms. Many of these products also failed to prevent vehicle theft." "For these reasons, the SAIA supported the formation of VESA, not as a deterrent to the development and distribution of effective products, but in order to protect the consumer against the fitment of ineffective and unsafe products," Scott emphasized. "The SAIA would like to see an environment where competition is encouraged, and at the same time consumers are protected and insurers' risk is minimized." "The risk that the insurance company accepts directly affects the premium the consumer pays - the higher the risk, the higher the premium. Managing risk is therefore also in the interest of the consumer where it matters most - the consumer's pocket," added Scott. In addition, the insurance industry plays a prominent role in the fight against crime. At the time when the insurance industry first became involved in requiring vehicle security devices to be fitted, vehicle crime was escalating out of control. Since the SAIA involvement together with Business Against Crime and the relevant authorities as well as other relevant role players such as NAAMSA and VESA, vehicle crime has reduced on average by approximately 50%, and is now no longer the biggest challenge facing motor insurance. "The SAIA does not have any role to play with regards to the commercial practises and/or business decisions of our members. SAIA members are individual companies that make their own underwriting decisions, and any decisions companies make regarding the encouragement to use specific service providers are made by the different companies themselves on an individual basis." "Many factors will influence such decisions, including their own claims experience. It is, of course, the right of all companies to contract any service provider should this be deemed prudent," Scott added

A G R I C U LT U R A L I N S U R A N C E

Livestock Insurance by Pierre Rossouw, Santam Agriculture Relationship Manager

Insurance is an important tool to manage risk for the commercial livestock producer. The livestock insurance product offering has been developed extensively to offer the livestock farmer tailor-made insurance solutions, and keep up with new trends in agricultural insurance. Pierre Rossouw, Santam Agriculture relationship manager, explains that the highly technical, scientific and competitive agricultural environment has caused farmers to become more aware of insurance and the need to protect their businesses against risk. “You find that farmers aren’t only more aware of insurance, but also have more knowledge of the type of risks they can insure against,” Rossouw says. He says that interest in Santam’s livestock insurance product has grown over the years and now includes a sizeable number of clients in South Africa and Namibia. He points out that small commercial livestock producers are also recognising the importance of insurance. “If a farmer doesn’t have the cash flow to absorb losses, insurance can be the difference between losing a business and picking up the pieces and starting again,” he says.

There is more to livestock insurance than just insuring one’s commercial or pedigree animals. Livestock insurance has four related components, namely: insurance for fire on veld, insurance for purchased feed, liability cover, transit cover and insurance for pedigree or commercial herds. According to Johan van den Berg, Santam Agriculture manager for product development, the “Fire on Veld” product was designed to insure the production or grazing value of rangeland, pastures and crop residues used for animal consumption against runaway fires. This policy is unique in the agricultural insurance industry, as Santam is the first insurance company to develop and commercialise a product of this kind. Transit cover protects the farmer transporting animals to and from the market or auction. Liability cover is essential to protect the farmer against third party damage, for example if animals break out of camps and damage a neighbouring farmer’s crop, or run into the road causing a car accident resulting in injury or death.

He attributes the increasing uptake in general agricultural and livestock insurance to better marketing of product-specific insurance products. In the livestock sector, the growing number of feedlots on farms is another reason. More farmers set up feedlots as a means to improve their cash flow and turnover. This is quite apparent when maize prices are very low and farmers try to extract more value from their maize crop by converting it into beef in a feedlot. However, this introduces new types of risks to the farming enterprise such as a greater risk of disease (if buying in animals from auctions for commercial slaughter purposes), hence the need for insurance.

Farmers should also decide whether they require insurance for stud or commercial animals. They are advised to tailor their insurance policy based on risks specific to their area. In certain areas, lightning is a big risk and farmers would then take out cover for this. The insurance product for stud animals and commercial herds differs in some respects. If a farmer wants to take out insurance for stud animals, they have to be registered with the relevant breeders’ association. Animals from a commercial herd aren’t necessarily purebred, and are mainly reared for the commercial market.

Access to the Internet has also changed insurance trends. Farmers can search for insurance information and quotes online. However, Rossouw believes that the agricultural insurance market is slightly different as farmers still value face-to-face contact with a broker to discuss their needs. He says this might be changing in a younger generation of farmers, but for more senior farmers this is certainly the case.

Stud animals are insured on an individual basis. Comprehensive cover can be taken out, but it is up to the farmer to include the perils he deems most important. The policy can insure against death of animals caused by an accident, illness or disease. Such insurance would include cover against fire, lightning, explosions and attacks on livestock by wild dogs or other wild animals.

Quantifying the livestock farmer’s risk is not a one-size-fits-all approach, either. Factors such as a farm’s setup, type of livestock, and areaspecific disease risk have to be assessed individually. “Santam is even more focused on personal contact than ever before. We still rely on the services of a broker and this forms part of Santam’s success and why we can continuously grow our insurance book,” he says.

On the other hand, individual animals in a commercial herd cannot be insured. The entire herd can be insured for fire, lightning, explosions and some additional extensions. The type of comprehensive cover available for studs also doesn't apply for the commercial herd. Rossouw explains that there is a good reason for this: “Stud animals can be individually identified as they are registered, but this is not the case with commercial animals,” he says.

At Santam Agriculture, livestock insurance is not a stand-alone policy, but can be taken out as part of a farmer’s asset insurance portfolio. Santam is also the only insurance company that offers insurance against

theft of animals, if the client complies with certain terms and conditions. “Stock theft is a huge problem and most insurance companies won’t grant insurance against it,” he says.

Livestock insurance is a comprehensive product and often the range of cover available is overlooked.

DISEASE MANAGEMENT

Early Diagnosis Disease Management is Essential for HIV/AIDS Commenting on Government’s ambitious implementation of a R1.4 billion campaign aimed at the prevention and treatment of HIV/AIDS, Katy Caldis, CEO of Fedhealth said she was encouraged to see such commitment and top level support for the campaign.

message regarding HIV treatment and its incredible results is not yet being heard loud and clear by members. We are hopeful the Government’s testing campaign will impact favourably on this by creating more awareness around the matter”.

From a scheme perspective she said it would be advisable for all private medical aid members to embrace the programme and go for testing. “Getting tested is a critical entry point for HIV/AIDS prevention and interventions. Testing is no longer viewed merely as a diagnosis strategy, but is based on the member’s need to know their HIV status for the purpose of changing their behaviour.

The most crucial factor in fighting HIV/AIDS is to start medication and other treatment at the right time. Medicines are available to attack the virus, while vitamins, good nutrition and exercise can play a critical role in keeping the body strong and healthy. “Starting treatment at the right time ensures the effectiveness of the medicines, improves quality of life and decreases the risk of serious infections or other complications,” she says.

This provides HIV-positive members with the opportunity to take care of their health so as to slow down the progression of the disease as well as to take precautions in order to reduce the risk of transmission. For HIVnegative members there is also a huge benefit to getting tested, knowledge of their status alleviates anxiety and increases awareness of their vulnerability to infection and hence the need for behavioural change,” she says.

Besides medication to treat HIV, which includes drugs to prevent motherto-child transmission, AfA includes medication to prevent opportunistic infections; regular monitoring of the disease’s progression and response to therapy; ongoing patient support through a nurse-line and clinical guidelines and telephonic support for doctors.

Caldis says Fedhealth places strong emphasis on the value of Managed Health Care. “It’s important that members understand this management of their chronic condition is a facility put in place as a means to improve their clinical outcomes. There tends to be an inaccurate perception that it is merely a way of containing costs to the scheme. The discipline of health risk management aims to balance cost (price and utilisation of healthcare services) with quality of care (best healthcare results or outcomes) and access to healthcare services,” she says. When chronic conditions are identified at an early stage and the necessary treatment and lifestyle interventions are implemented, the quality of life of many sufferers can be improved and maintained. Living with HIV is no exception. Although HIV/AIDS is a frightening disease for many people, the treatment available today allows the majority of people living with the virus to lead healthy and productive lives for many years. Fedhealth is just one of the schemes that has a managed healthcare programme in place for people living with HIV, just as there are programmes for members who suffer from cardiac disease, diabetes, asthma and other chronic diseases. “There are currently 2 313 Fedhealth beneficiaries registered on the Aid for AIDS (AfA) programme of whom 81% are on antiretroviral therapy (ART). On average, in recent years 60% of the beneficiaries who joined AfA did so at a late stage of the disease when the optimal time to commence therapy had passed,” says Caldis. “This is tragic evidence of the fact that the

“Early registration on the AfA programme is therefore the key for the best possible management of the disease. By registering before medication is even needed, the member gains access to invaluable support and guidance thus preparing them mentally and emotionally for when they do commence actual treatment,” concludes Caldis.

GROUP FUNERAL COVER

Group Funeral Schemes within the Iemas environment by Shaneen Abrams Manager: Group Funeral Schemes Iemas a member of the FIA Shaneen Abrams says; Group Funeral Cover provided by employers, is accepted and well understood by most employees. Given widespread economic turmoil, perk slashing and cost cutting are likely to continue. Employers often eliminate or reduce training, cancel holiday parties, slash bonuses, tighten travel policies and toughen negotiations on the expected annual salary/wage increases. While this is understandable, employers are missing out on tax effective ways to improve the financial situation of employees. Providing one’s staff with a marginal salary increase is arguably a sign of an employer that cares, but this in itself is not enough. Therefore, a widely understood and real need based entry level risk funeral cover could be the next best option. A funeral cover employee benefit (EB) could be a small start for employers who want to offer some form of EB in the current environment. Abrams points out several rewards to keep in mind: • EB group funeral cover is inexpensive and easy to manage. • The advantage of a funeral cover EB is the speed with which the cash can be obtained to service emergency debt for family funerals. • This kind of assistance allows the employer to invest in staff indirectly and it shows that the employer understands all cultures by addressing the needs of the entire family circle; furthermore ensuring that the employees view the human resource protocol of a business, in a positive light. • Employee wellness, productivity, loyalty and high levels of retention are enjoyed by companies that offer more than monetary incentives to stay. • Given the high levels of violent crimes, HIV / Aids and road accidents, offering this type of additional employee benefit to staff will also help make the employer a more attractive prospect for potential employees. • A funeral cover benefit saves the employer the problems associated with staff requests for emergency finance. Many people just do not have the ready cash to meet funeral costs, and often turn to the employer for loans. • As a final point, it ensures that staff do not have to make use of less desirable informal finance sources. A group funeral scheme through Iemas can be stand alone or can be part of an integrated employee benefit package.

Iemas operates throughout South Africa, enabling the type and level of customer service which employers expect. First rate administrative suppor t and prompt claims payment are essential to the success of any employee benefit arrangement. EB packages typically cover the member, spouse and children on a compulsory basis. Employers who recognise the needs of employees provide voluntary cover for parents and extended family members. Cover for a child is extended to age 25 if the child is in full time education at a recognised institution and is still a dependent. Funeral cover normally starts on the first day the member is actively at work. Voluntary cover will be subject to 6 to 12 month waiting period and members will be covered in the event of accidental death during this period. Premium rates depend on the size of scheme membership, occupations, average age, geographical location, voluntary or compulsory membership, benefits provided and administration of the group. Scheme administration and premium collection is crucial, to the success of any group scheme. In the interests of simplicity and speed Iemas has kept administration to an absolute minimum. Iemas Group Schemes provide ‘The Funeral Care Plan’ marketed by over 39 branches situated nationally and up sells through their call centre to individual Iemas members. This plan is available to over 140 000 individual Iemas members. Iemas has the necessary technical skills, to cater for individual employer or union needs and requirements. Iemas Group Schemes is part of the Iemas Financial Advisory Services Division of IEMAS headed by Piet Wolmarans, Executive Director: Sales and managed by Shaneen Abrams, Manager: Group Funeral Schemes.

INVESTMENT

The Importance of an Investment Strategy by Brian Spanier – Marson a member of the FIA Employee Benefits Committee PF 130: “The proper management of the investments of the fund is a critically important component of the governance of the fund”.

Member needs largely set the investment objectives so these issues must be faced and a position taken. The decision is not an easy one.

Introduction In fact there is nothing more important than the proper management of the investments of the fund. This aspect touches every member’s world and has the potential to add real value in promoting their financial security as they approach retirement age. For many members the retirement fund share of fund value will be a major component of their overall “nest egg” at retirement. The design, formalisation and monitoring of the fund’s investment strategy reflects the Trustee’s commitment to this critical objective – it is a crucial document!

Administrator limitations The administrator’s ability to manage more complex strategies is a crucial input to the process. Can they cope effectively with individual member choice or age banding? There are administrators currently who cannot effectively administer anything more than a simple “one-size-fits-all” strategy. This ability needs to be tested by Trustees – the most effective manner to gain comfort is to visit the administrator and ask for a live demonstration of the system capabilities.

The formalisation process The process involved in the writing and agreeing of the investment strategy is one of it’s most important benefits. This inevitably leads Trustees to examine their own preconceptions and to challenge the assumptions made by others – an interesting debate should be welcomed. This is of great value to the process as Trustee grapple with some universal challenges (risk versus return) and must eventually decide on the best course given the fund’s circumstances. For some Trustees this process is an important growth and learning opportunity – this is especially true in the case of Trustees who will “carry the message” to individual members. Trustee’s discover, during the course of this exercise, that decisions are made in context and they must start this process by understanding all relevant variables making up “the full context”. For once they will ask certain fundamental questions – what is the average age of members, what is the age and savings distribution? What are the expectations of members? What investment performance is possible given risk parameters? Hopefully a determined debate will ensue but also (hopefully) a universal approach will be achieved that can be captured in a formal document. Trustees will have been alerted to certain important fund specific issues that require monitoring and review – that is a job well done! So often focus is lost during this process and Trustees are reminded to focus on the key issues – member needs, taking a long term approach, full communication and aligned service providers. Professional advisors can play a key role in this process and should be used by Trustees to bring additional experience to the debate. Member needs The recent volatility starkly illustrates a dilemma faced by Trustees – how do they define member needs and what priorities are attached to these identified needs? On the one hand some members may be fiercely opposed to any negative return and then on the other hand the same member’s mathematically determined “need” is a return of 6% + real return until retirement! There could be a conflict between emotive response and cold headed calculation. One approach is a purely quantitative based mainly on a member’s salary, his accumulated savings to date, desired replacement ratio and expected investment returns. This produces the required average real return till retirement. The other consideration is the member’s volatility tolerance – often at odds with the required return. The Trustees must discuss their response to these issues – all such issues need to be carefully considered – and this will influence the asset managers and portfolios selected and the benchmarks set. An added complexity is dealing with clearly differing member needs within the same funding arrangement. On this matter the administrator needs to be consulted to ascertain the level of investment complexity that can be effectively managed by the administrators and their system.

A record of decision making Properly formulated the investment strategy document also answers a number of member questions – “why did you select that particular investment manager and that specific portfolio”? The document will set out the Trustee’s decision process, the factors considered and the objectives addressed by Trustees. It will also set out the performance targeted and the monitoring process adopted to review future progress against these identified objectives. Monitoring of performance PF 130 states: “The investment performance of the fund assets is the most important factor in determining whether the fund will be able to deliver on the retirement benefits…or whether there will be a sufficient amount accumulated…for an adequate replacement of income”. In other words, performance matters! So often the asset management industry talks down this important component. Who else other than the Trustees can take responsibility for monitoring and reviewing the performance of portfolios relative to the benchmarks set in terms of the investment strategy? The Trustees must put in place an effective mechanism of review with agreed time-lines. A communication tool One of the most important uses of the investment strategy is to communicate clearly and fully with members. Sadly, few members will take the time to read and understand this strategy but for those who are concerned a proper record has been kept of decisions made and the process to be followed. Service providers such as asset managers are charged with executing the decisions made by the Trustees and they should be directed to that part of the strategy that pertains to them. Important criteria on which they will be judged eg the benchmarks agreed or volatility tolerances, are contained therein. Annual review The investment strategy must be formally reviewed at least annually to ensure that Trustees fully apply their minds to the plan and ensure the relevance, and their commitment to, the content relative to prevailing conditions. Conditions influencing the strategy may be market forces, current economic reality or member demographics and these do change and require review. Housekeeping issues If individual member choice is offered Trustees must be aware of their responsibility to make options clearly available to members on a regular basis. If an age related strategy has been adopted then anniversary dates must be considered for default switching. Conclusion Investments are the reason why funds exist. They should be taken seriously enough to be the subject of thorough review and discussion and should be part of a long term plan. The investment strategy formally records this plan, it sets out the objectives agreed by Trustees and their commitment to achieving these objectives.

I N T E R N AT I O N A L

Moving Abroad? Mind the Gap! by Andres Franzetti, Wholesale Business Development Manager, Clements International

Working abroad can be a transformational experience that can enrich an individual’s life for years to come. However, moving to a foreign country for an extended stay requires more than a pocket translator and packing supplies. Health and safety are of critical importance, and living in another country often increases risk. Insurance is a safety net and in the current global economy, nobody can afford unnecessary losses due to unanticipated events. Even if individuals already have insurance, gaps in coverage can exist anytime they travel outside of their home country, whether it’s a short-term trip or work relocation. Not all insurance policies cover losses that occur outside their home country’s borders, so it’s important that they obtain coverage for their new destination to help protect them against everything from everyday accidents to larger disasters. Here are a few ways to help clients “mind the gap” when they relocate to a new country. Automobile If they aren’t opting for public transportation, automobile coverage is essential. Automobile policies cover a variety of risks, such as comprehensive and collision, primary liability and excess liability. Comprehensive and collision protects your client’s vehicle should a theft or accident occur while it is parked or being driven. Primary liability is generally compulsory, and provides coverage in the event they have to pay damages to another party due to bodily injury or property damage. Additionally, it is important to have excess liability, which cover damages above and beyond primary liability limits should serious injury result from an accident. Laws and insurance levels vary throughout the world. While some locations require a minimum amount of coverage to be purchased, other countries have no regulations. Most developed countries have regulatory authorities which mandate how insurance providers conduct business and develop specific guidelines for the insurance industry. They also provide assurance that claims will be paid for covered losses. However, some countries lack consistent laws and often these laws are not enforced. Insurance providers offering international products are able to asses these regulations and recommend proper coverage for the client’s vehicle. Personal Property If your clients haven’t moved yet and are still in the packing process, they’ve probably realized how much they actually own. This is a great opportunity to advise that they start thinking about obtaining proper coverage for the move, as well as their stay, at their new destination. Transit insurance is an important part of any international move. Property has a greater risk of becoming lost or broken while it’s transported from one location to another. It is advisable to find a personal property policy that includes transit insurance, to avoid any gaps in coverage. Often, individuals will purchase transit insurance from a moving company and wait until the items have reached their new home to purchase a separate personal property policy. This may seem like a safe way to protect household items, but if a claim occurs during the moving process, it is difficult to prove when the loss occurred – during shipping, while in storage, in customs, or while the boxes were in transit to the residence. Most personal property policies offer the option of listing scheduled and unscheduled items. Most items will be considered unscheduled, such as clothing or household items. High-value items, such as jewellery and artwork, are considered scheduled items. Scheduling coverage helps ensure that clients receive the full, appraised amount for the item in the event of a loss. In addition, this list should be updated annually as item appraisals can change over time.

Finally, it’s important to be mindful of the coverage effective date. If your clients are cancelling their current homeowner or property coverage, the effective date of the new international policy should be the same as the cancellation date to help prevent a gap in coverage. Health Aside from auto, liability and personal property coverage, clients need to insure their most valuable asset: their health. Typical health coverage doesn’t extend beyond the borders of their home country, so when they travel or relocate to a new country, they’ll need a new plan to cover this gap. The following are a few things to consider when helping them conduct a search. Many international insurance policies include emergency evacuation. Occasionally, job assignments take expatriates to areas where advanced medical practices aren’t prevalent. An emergency situation is the wrong time to discover that their health plan will only pay for local medical assistance. If a policy includes emergency evacuation, they could be transported to a suitable medical facility or even to their home country in a life-threatening situation for necessary medical care. Some policies even include a clause that allows family to be transported to the hospitalization site. Another item to think about when choosing a medical plan is your clients’ current health status. If they’re being treated for a medical condition before they begin a new insurance plan, make certain there aren’t exclusions for preexisting conditions. When a plan does not cover pre-existing conditions, it means they’ll be paying out-of-pocket for continued treatment of your medical condition in the future. Finally, find out how the insurance plan pays claims. Many health plans will only reimburse the insured for the expenses paid when medical services are rendered, meaning they will pay out-of-pocket, and then must submit a claim form for reimbursement. An emergency which requires surgery or long-term hospitalization may result in a large financial burden, so it’s important to discuss how claims are handled with the insurance provider before purchasing the policy. High Risk If your clients are travelling to an area with political or civil unrest, they’ll encounter unique risks. For their safety, a range of insurance services have been created to protect them should an unfortunate event occur. Kidnap and Ransom coverage is an insurance policy that can save lives. With Kidnap and Ransom, a team of professional hostage negotiators are commissioned to work with the captors to secure a safe return for the detainee. Some recent hot spots have included countries in certain regions of South America and Africa. Another important type of coverage to consider is War and Terrorism. You may not be aware that many medical and life insurance policies exclude claims resulting from acts of war and terrorism, but often offer an extension for people who are interested in the optional coverage. This may be relevant if your clients relocate to countries, such as Iraq or Afghanistan, where there is significant risk due to civil and political unrest. Moving abroad is an exciting endeavour, but also brings distinctive challenges. Relocating to a new country involves many unfamiliar risks and it’s easy to assume that insurance will follow individuals wherever they go. If you help your clients take the necessary steps to “mind the gap” and acquire the right coverage, they’ll be protected no matter where in the world their journey takes them. If they prepare for these risks with the proper insurance, their next step is sure to be in the right direction.

FINANCIAL PLANNING

The Basis of Professionalism – Helping People To Do the Things they Don’t Want To Do! by Chris Busschau Chair FIA Financial Planning Committee. I have often told people that the two vocations that are most similar to being a financial planner are those of being a minister of religion or a medical doctor. We all have a responsibility fir persuading people to do things that they don’t feel like doing! Losing weight, controlling your blood pressure or cholesterol, changing your lifestyle, being a more caring person, being less self centred – all these changes are unwelcome for most of us – and we also don’t feel like buying life assurance, saving money that we could spend on fun things, drafting a will. We don’t wake up in the morning thinking “Today’s the day to do this!”.

(and prospective clients!) should see you as a well qualified advisor who has the backing and technical resources of other experts and build a long term relationship that will support your planning process. THE “SALES PARADOX” Is SELLING difficult? You bet it is!

So, what are some of the keys to making this happen? But…… Do you enjoy BUYING? Of course! And so does everybody else!

THE RHYTHM OF LIFE As much as we may not like to admit it, every person’s life has a similar rhythm. The key events usually happen at similar times, and the difference between success and disappointment is very often dependent on how we respond to those key events. Do we plan for them, do we review our plans when we reach those important times?

Why do we find it difficult to sell to people if they like to buy? The secret of success in our business lies in solving this riddle. SET THE SCENE IN YOUR MIND

The critical stages in the lives of virtually everyone are:

Schooling

Tertiary Job Birth of Marriage Education changes children

Health Retirement Death crises

There are a number of steps that we should build into the planning process for our clients. •

• • •

Conduct a careful, thorough analysis of our current financial structure and of the desired situation at each of the stages. This is often called a “Financial Needs Analysis”, and is best conducted by an expert. Prioritise the issues that show up in the needs analysis. Develop an action plan - and stick to it! Review the plan once a year.

Probably the most difficult of these is prioritising the issues that need to be attended to. The following list will give you an idea of what should usually come first and then a logical sequence. Each person will have their own particular circumstance, so this list is not at all prescriptive, but it will give you a guideline that you can explore. 1. Prepare a will in order to ensure that your assets are distributed to the correct people and that dependants are properly provided for. 2. Calculate how much life assurance cover is needed in order to fund the provisions of your will and then set that cover in place. 3. Ensure that medical expenses and serious disability have been catered for. 4. Start a programme of investments for the education of your children. 5. Calculate how much capital you will need to provide an income on your retirement. It is never a good idea to try to do your own health diagnosis or to prescribe your own medication – and this applies to a financial plan as well. Your clients

Imagine walking into a clothing store to buy some slacks. While looking around, a sales person approaches you and asks what you are looking for. You reply that you are looking for slacks, and the sales person’s eyes light up. “I’ve got just the thing for you! Come this way!” If you are like me, your reaction will be negative. We become defensive and try to escape. Why? When we actually do want to buy? I believe that the answer lies in the second question – we love buying, but we don’t like to be sold to! WHAT’S THE ANSWER TO THE RIDDLE? It is quite simple. The most successful Financial Planners never actually sell! They help people to buy! You may be surprised to hear me say this, but I believe that FAIS has forced us to become more successful! “How can that be?” I hear you ask. “FAIS has given us extra paperwork and all of this takes more time,” you continue. Well, the process of doing a full FNA helps customers to identify their needs. Once the needs have been brought to the surface we have to propose solutions – and this is where the client report comes in. By presenting options, we allow the customer to make the choice, and when the customer makes the choice a BUYING process has taken place. So, embrace the process, bring satisfaction to your clients, and become more successful!

COVER

Choosing Life and Disability Cover should not be a Shot in the Dark by Mark Lapedus, Head of Retail, Alexander Forbes Life a member of the FIA

After buying your home, investing in life and disability cover is one of the most impor tant purchases of your life. Given the far r e a c h i n g consequences of this decision it makes sense to seek professional advice before you buy cover since making the wrong choices could leave you or your dependents in dire straits should you become disabled or die. “Buying life and disability cover is certainly more complex than buying car insurance” says Mark Lapedus, Head of Retail, Alexander Forbes Life. Yet too often people just settle on an arbitrary figure because, at the time, “one million Rand sounded like a lot of money.” But if people take the time to consider their family’s current and future financial needs, the length of time that they might be disabled, or the length of time their dependents might have to live without their income people begin to realise that selecting this kind of cover is actually a very important decision. Looked at this way price can be a very poor guide in choosing the most suitable income protection benefit since the cheapest scheme may cease before your anticipated retirement age - or may not provide comprehensive coverage on an ’own job’ basis . This means that if your are disabled at 53, for example, and your income protection policy ceases at age 55, the benefits will only be paid out for two years - even if your needs require that you work to 60 or 65. “And if you are able to perform another job, even though it might be less well-paying, you will not be paid out at all” warns Lapedus.

A professional advisor would point out these pitfalls while providing the option of paying slightly more for cover to a retirement age of 65. Also, securing cover on an ‘own occupation only’ basis will guarantee payout – irrespective of whether you can perform a less demanding job. Lapedus also notes that people often omit information that could materially affect their benefits and hence their family’s lifestyle in the event of mishap. While mostly this is not done maliciously it can have devastating consequences. “A professional advisor can prevent this kind of oversight while guiding people to the kind of decision that suits their individual needs and circumstances” says Lapedus. A professional advisor also provides the personal touch. Having an advisor with whom you develop a professional relationship and who can advise you as your circumstances change is a lot more effective and user-friendly than trying to deal with a call centre where the onus is on you to know what you need to disclose or when to update or change your cover. Moreover, buying life cover and disability benefits is not a once-off event. Individual risk benefit coverage should be re-evaluated on a regular basis as both your needs and the type of benefits available in the marketplace change over time. “Protecting the lifestyle and future prospects of your dependents is something you have worked your entire life to secure. Making sure that this is not all lost in the event of your death or disability is in fact one of the most significant decisions of your life – and certainly too important to be left to guesswork or arbitrary price-based decisions” advises Lapedus.

A professional advisor would point out these pitfalls while providing the option of paying slightly more for cover to a retirement age of 65.

S H O R T- T E R M

Taking stock – Sustainability of the Short Term Intermediary business by Barry Taylor Chair FIA Short- Term EXCO The face of the short term intermediary business has changed so dramatically over the past two decades one wonders how those tough bosses and mentors of ours, who took no nonsense from young whipper snappers, but, on reflection gave us a training that made us into true Insurance practioners, would be feeling watching the current goings on. We see the emergence of new “direct” markets with efficient quoting and delivery systems, a proliferation of the “Hippo” concept of on line multi quotes and then the new look regulators with the mind set of ensuring customer protection based on sound and tried and tested International best practice. So, how do we react?? The emotions take over and we resist and resist and get ourselves into quite a state not realizing that it is these very models that should force us into reflecting on our businesses, finding innovative solutions and proacting self regulation. We give little credit to the regulations that ensured the stability of our Banking and financial system when the rest of the world came crashing down, so maybe we should be taking the proverbial breath and asking ourselves “what can we do to ensure fairness of competition and regulation”? At the FIA Advisory Council meeting at Sun City, which was held just prior to the very successful “FIA, SAIA & IISA" annual conference, I posed the following questions/ statements: “STOP MAKING EXCUSES JUST BE PROACTIVE” followed by “improvement happens when we are willing to evolve and grow” and “what needs to change around here to improve the way we do things for our customers” (with acknowledgement to an article in the Sunday Times on the 9 May by Bill Price). Surely we should be focusing our energies on what we are good at, i.e. looking after the best interests of our customers rather than wasting time on issues over which we have little control? Are we equipped to nurture the very business that is our livelihood and that looks after so many hundreds of our people and their families? Where is market innovation coming from, the Direct markets, SAIA, FIA?? I know where I think it is and I ask the question, what are the Intermediaries doing to create the type of products and concepts that really got competition going in the eighties and nineties? Where are the innovators and mavericks who made life so interesting, and challenging for Insurers? Despite the regulatory regime on qualifications that is incumbent on all practitioners, why are the levels of practical knowledge and application so poor? How serious are we about taking ourselves to another level of service excellence and are we really treating our customers fairly? In my humble opinion it is time for retrospection and then some serious refocus and re-energising to plan and strategise as to how we, as an outstanding Intermediary Industry, can take up the cudgels to once again becoming entrepreneurial and innovative SMART Insurance Intermediaries where we run ahead of the pack in our endeavours to sustain our Industry and more importantly give our customers no reason to fall for the mass of marketing hype that prevails in the TV and written media. In view of the above I thought it prudent to summarise a number of initiatives that are in the pipe line and that will undoubtedly influence the future of how we operate as Intermediaries: • The Insurance Laws Amendment Act (ILAA) and in particular that section that refers to “Binding authorities/Mandates” already states the criteria pertinent to the requirements of Insurers and Intermediaries alike.

What is still to come are the regulations that will clarify the requirements and disciplines on the various role players, the essence being around the managing of potential conflicts of interest and the interchange of customer and risk data. The FSB have adopted a very transparent process around the deliberations of the look and feel of these regulations with representatives in the Short Term space coming from SAIA, SAUMA and the FIA. The timelines are that the regulations are now in the drafting process and should be in the public domain for comment by late July 2010. • The “Stride” (Short Term & Reinsurance data Exchange) project with SAIA & FIA is well under way with the end result being the creation of an efficient and streamlined flow of data from the Intermediary to the Insurer. In addition to creating efficiencies this will also satisfy the requirements of the ILAA. • Treating Your Customer Fairly (TCF) project has been initiated by the FSB and as with the ILAA, in consultation with Industry stakeholders. TCF will endeavour to create a culture of fair treatment for the customer focusing on the quality, clarity and efficacy of products and services sold including product design and fair claims settlements whilst FAIS will focus on the “Advice” issues The approach will be one of “Top down” and the CEO’s will be made accountable for it’s effective implementation and ongoing sustainability. • Compulsory Motor Insurance – it is estimated that of the approximately 8,5m motor registered (let alone the unregistered) motor vehicles on the roads today about 70% are uninsured. This imbalance of insured to uninsured vehicles creates the potential of serious financial pressure in the motor insurance industry and the growing extent of uninsured liability for Third Party damage is the cause of much financial stress amongst consumers. There is a joint initiative with SAIA, the FIA and stakeholders from Government working on the outline of a workable solution. • Sustainability of Insurance – SAIA have proacted a forum including Insurers. the FIA, Reinsurers and Government which will focus on the involvement of the Insurance Industry in relation to the environmental aspects of sustainability that includes environmental, social and financial or government dimensions. An initiative of this nature is essential for the sustainability of insurers in that it will bring to the fore a more efficient identification, quantification and pricing of risk also encouraging and promoting the concept of understanding of the ecocentic issues that are affecting the globe and also the proper and effective risk management on the part of customers to counter these effects. • The recently introduced RE I and RE II examinations will undoubtedly result in a more informed intermediary market, which in turn will have a positive spinoff on the professional image of the Industry in general. • The introduction of the FIA and SAIA Codes of Conducts bodes well for the Industry and demonstrates a willingness to create a regimen of self regulation.

So all things said and done, we have a great Industry to preserve and sustain and the message must clearly be a call to arms by all stakeholders and “LET’S DO IT”.

OPINION

Discovery Opinion Piece BACK IN THE 1980s life assurance was very much a product that was sold. Nearly all the large insurers employed life insurance salesmen to sell the products of the company they worked for, often door to door. Much has changed since then. Today life insurance products are largely distributed through the independent financial advisor network, where intermediaries are not placing one company’s products only but trying to find what is best for their clients. In doing so they will consider a range of products from a number of life companies. That’s very different to the hard sell of 10 or 15 years ago. It’s accurately summed up by Edmund Franklin, insurance lead at management consultants Accenture SA. Commenting on a recent global survey by his international group of insurance firms, he says: “Insurers are aiming to deliver products that are bought and not just sold.”

An estimate by Discovery Life is that premiums have reduced by 30% to 40% over the past decade, saving clients around R6.3 billion in the process. The survey asked respondents across the world about what modern technology platforms, like mobile technology and digital marketing, they were using. It found insurance companies were investing significantly into new media to match the changing needs of consumers. “Potential buyers of insurance are changing in numerous ways and their expectations of their providers are increasing steadily,” says Franklin. Two important developments in the South African life insurance industry in the past decade helped change the perception that insurance products should be bought rather than sold. First was the groundbreaking separation of risk from investment in insurance products. Flowing from this was a new focus on service and ongoing interaction with the client, of using technology to assess the health and risk of the client through the life of the policy. This has resulted in South African insurers becoming global leaders in dynamic underwriting. Discovery Life was the first to separate risk benefits from investment when it launched its Life Plan in September 2000. At the time the universal life product, which combined death and disability cover with investment, was dominant in the market. Soon afterwards however the other major insurers were launching risk only cover – Old Mutual with

Greenlight, Sanlam with Matrix, Momentum with Myriad and Liberty Life with Lifestyle Protection. One consequence of this industry wide swing to risk-only policies was lower premiums for consumers. An estimate by Discovery Life is that premiums have reduced by 30% to 40% over the past decade, saving clients around R6.3 billion in the process. The so-called new generation products often included improved benefits too, like more transparent and objective claims definitions and a broader range of cover. Claims payouts therefore increased, by more than the rate of inflation, resulting in better value for money for policyholders. Lower premiums, in general, and more flexible policies offering broader cover also gave independent financial advisors more to work with. Back in the 1980s life policies were fairly standard. The new policies offer the advisor more choice and the ability to tailor make life cover for clients. At the industry level better products and service can be seen in the sharp drop in disability complaints to the Ombundsman, a reduction of 67% over the past 10 years. The South African insurance industry has also taken the lead in providing “dread disease” cover. Today, most insurance companies offer policies that apart from the principal life also provide severe illness cover for family members, contain fewer exclusions and pay for conditions previously not covered. Dread disease has also been extended in many policies to a whole-of-life benefit, giving people cover at older ages when they tend to need it most. It’s all a big change from the door-to-door insurance salesman of the past. And there’s little doubt that insurance products and service will continue to develop in the future. Based on technology and the changing needs of clients, as shown in the Accenture survey.

At the industry level better products and service can be seen in the sharp drop in disability complaints to the Ombundsman, a reduction of 67% over the past 10 years.

C O M B AT T I N G C R I M E

SAIA Donates over R1.7 million to Combat Crime The South African Insurance Association (SAIA), on behalf of its members donated over R 1.7 million to Business Against Crime South Africa (BACSA). ‘Our industry has, since 2002 donated over R10 million towards BACSA’s crime-combating activities and we remain committed to contributing towards improving the crime situation in our country to ensure a sustainable and successful future for all,’ said Ronnie Napier, Chairperson of the SAIA Board. Mr Napier, in handing over the contribution to BACSA said that the funds as approved by the SAIA Board for an eighth consecutive year would assist BACSA with trio crimecombating activities in conjunction with the relevant authorities and partners. Mr Napier reported that through the continuous efforts of the industry working with par tners such as BACSA and the South African Police Services (SAPS) that motor vehicle crime had reduced since 2002 by 50%. He further stressed that ‘while incidences of vehicle theft had greatly reduced over the years, there was no room for complacency concerning crime.’ Mr Napier highlighted that in previous years support to BACSA had focused on combating motor-vehicle crime. However, now that such crimes were no longer the most pressing priority for the short-term insurance industry, SAIA was for the first time making a contribution that was borne by all of its members, rather than “only by SAIA’s motor insurance members”. ‘Motor insurance remained the largest class of business for the industry and the high cost of claims related to the issue of road safety was becoming increasingly problematic for many members within the shortterm insurance industry’, said Napier. 26

‘As about 70% of insurance claims were road-accident related, the Association had adopted a strategy to address the causes of claims, while also maintaining a focus on crime-combating’, said Napier. Dr Graham Wright, CEO of BACSA, concurred with Mr Napier that the initiatives undertaken to prevent crime could serve as a springboard for efforts aimed at reducing the high accident rates. “We believe that systemic improvements are necessary, in addition to addressing the culture of non-compliance in South Africa”, said Dr Wright. Dr Wright stressed the importance of partnerships in combating crime and building a responsible citizenry. He stressed that all had a role to play as the police and the relevant Government agencies could not do it alone. Successes had been experienced and some of the trio crimes appeared to be stabilising. Dr Wright attributed this to the leadership within the Department of Police to address crime with renewed vigour and determination. Other success factors included a business sector focused on informationsharing and doing what it could to `put its own house in order’. Dr Wright thanked SAIA for its contribution as a good corporate citizen that recognised that the fight against crime needed a holistic response to sustain current gains. ‘BACSA was committed to working closely with Government and business partners at this time of renewal, re-commitment and action to progressively realise the shared vision of a South Africa in which people both were safe and felt safe’, said Dr Wright. SAIA was thanked for being a stalwart and important partner in the fight against crime.

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FIA President: Seamus Casserly The customer is always King – and the FIA annual awards have this very much top of mind. The FIA’s President, Seamus Casserly, says the FIA’s awards survey and the results arising from it - which precede the annual awards ceremony – have the ultimate objective of improved service to the end customer. “As intermediaries and brokers we can only be as good as the product suppliers are -and this includes issues such as innovation, response times and approachability. All of these are measured by our survey, which we hope contributes in some measure to the overall upliftment of the insurance industry as a whole and its response times and quality of product.” Another relevant aspect of customer service is the new Financial Services Board initiative, known as “Treating Customers Fairly.” Says Casserly: “We believe that our FIA survey will materially assist all product suppliers, who will be most impacted about treating customers fairly, to uplift their service and up their game, so as to more easily comply with this Financial Services Board initiative.” Casserly adds that the FIA still has a little way to go in unifying all intermediaries under the same banner. This remains an FIA objective, as is enhanced communication. “We continually strive to achieve this and we have put in place fresh mechanisms to ensure that we communicate more effectively with not only the membership, but with consumers.” Casserly points out that the awards methodology and research is now more of an industry benchmark than ever before. The awards survey has the advantage of consistency of approach over a number of years, in addition to which the FIA has added two new categories to the research survey this year. Researchers made as many as 22 000 calls in order to obtain the results – almost double the previous total. The two new categories this year comprise Underwriting Management Agencies (UMAs) and the splitting up of “Investment Products” into Recurring Premium Investments and Single Premium Investments. - courtesy David Jackson & Business Day

Another relevant aspect of customer service is the new Financial Services Board initiative, known as “Treating Customers Fairly.”

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Interviews with the Winners of The FIA Awards 2010 CIA CIA (Commercial and Industrial Acceptances), acting on behalf of the Compass insurance company, won the award in the new category of Underwriting Management at last night's FIA ceremony in Johannesburg. Says Andre de Vaal, MD of CIA: “This award would be recognition of the hard work and dedication we have put in during the last ten years, to achieve our main goal of providing excellent service and creating demanding customers. “We have always placed a great deal of emphasis on our professional advice and availability, from management down through the ranks, as well as on our integrity. But the most important factor is the level of service clients receive from us. Turnaround time in the insurance industry is core and we try to achieve instant turnaround times. We seek to create a situation where our brokers are empowered to do their job better – so that they don't have to wait days or weeks before they can go back to their clients with a solution.” Underwriting managers are specialists in their specific fields, De Vaal adds. CIA, for example, have chosen to specialise in the field of building insurance, which includes aspects such as sectional title insurance, among others. “There are many intricacies in the insurance of buildings – it's not just a question of standard user policy for clients. Underwriting managers provide technical knowledge and one of their main attributes is that they are required to provide a level of service that is even higher than that provided by traditional insurers. In this manner, both brokers and clients get the best technical advice and service.” While it has been a particularly tough trading year for the insurance industry in general, De Vaal notes: “We are fortunate in the building insurance sector in that buildings are invariably one of a client's biggest assets. They can't afford not to have those assets insured. So we have escaped the worst effects of the recession. “In fact, we have grown during the downturn in that people have realised that they should rather cut back in other areas, and ensure that their buildings are insured, so that they don't lose a valuable asset in the unfortunate event of a fire, for instance.” The company also undertakes risk management surveys as part of its service offering. “In many instances, we are also able to point out to customers where they may be falling foul of Occupational Health and Safety regulations and advise them to give attention to this.” De Vaal says the role of the FIA in the underwriting management sector is “vital.” “They are the link between the insuring client, the consumer and ourselves. As much as we provide technical knowledge to brokers, they provide the best possible advice to clients. They do a risk analysis for them, try to understand their insurance needs, assess the exposures – then offer appropriate classes of insurance to insure that exposure.”- courtesy David Jackson & Business Day

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Interviews with the Winners of The FIA Awards 2010 Discovery A strong focus on meeting consumer demands for lower cost benefit options in both the life assurance and medical schemes sectors, has been a key feature of Discovery’s strategic marketing over the past 12 months. Discovery won this year’s FIA insurance awards in the categories: “Long Term Insurance: Life Risk” and “Health.” Says Hylton Kallner, Chief Marketing Officer for Discovery: “In both the life assurance and medical schemes product lines, our focus in the past year has been on providing appropriate products for the economic environment – such as our Healthy Food benefit which not only encourages people to eat healthier but gives them a significant discount on healthy food if they do so, so bringing down the cost of eating healthily in the process. “Secondly, we introduced the Delta options within Discovery Health which give members a choice of significantly lower contributions without sacrificing benefits if they use our proprietary hospital network. Once again the focus has been on offering a more affordable option where people need it. Kallner emphasises that this product is not in conflict with the regulatory regime within which medical schemes are required by law to operate. “Our approach is that a tight regulatory environment is no excuse for not being innovative. In fact, the regulatory environment encourages initiatives that are sustainable and offer better affordability.” The product option concerned enables members using selected hospitals within the Discovery network to make savings of between ten and 20% on their premiums with full benefits coverage, Kallner says. “Where members are willing to have a slightly more limited choice (of hospitals), we are able to offer a significantly lower cost option without sacrificing any benefits.” “In Discovery Life, we introduced products that protect people against financial and economic volatility in the risk space. While the focus has been on delivering products that are appropriate for a more difficult economic environment, we have also focused on enhancing our service in key areas, to give consumers value for money.” Says Kallner: “In the life assurance market there is no doubt that there has been significant pressure on consumers. Our response was to create an efficient funding structure for our product, which was introduced early on in the downturn cycle.”

“Our view was that by focusing on efficiency, we would be meeting a fundamental client need, because the need for the risk product is real, regardless of the economic conditions. This has served us well through the economic cycle and has allowed us to continue to grow despite the difficult trading environment.” In the medical schemes arena, Kallner says Discovery Health’s focus has been on ensuring the ongoing financial strength and stability of its medical scheme, with more than R6-bn in reserves. “This has been achieved in combination with products that focus squarely in delivering more affordable options for our members. At the same time, we have seen a flight to quality in the sector, as consumers have balanced the need to contain costs with ensuring they get value for money.” Kallner says the lower income market is currently the fastest-growing segment in its health products base. “We have seen a significant demand in this market segment for access to private healthcare, where we have been able to deliver a good product at a reasonable price.” He adds: “These are unique awards for us in that intermediaries are probably the best placed in the community to judge our product and service, given that they are independent and operate across the entire industry. So to be recognised by them in this way is a very positive achievement for us.” Kallner says the FIA plays a vital role within the life assurance and medical schemes insurance sectors. “They are often our harshest critics, but they are also suppor tive partners. Their feedback allows us to improve and the role that they play in advising and assisting clients to navigate a complex environment is more important than ever. We see a definite need for advisors and representative bodies such as the FIA.” -courtesy David Jackson & Business Day

Discovery introduced a “cover integrator” that effectively allowed people to buy additional risk cover at half the price of standard cover. 29

Congratulations to the winners Personal Lines - Santam Commercial - Santam Life/Risk - Discovery Investment (Investment Products Single Premium) - Sanlam Investment (Investment Products Recurring Premium) - Sanlam UMA - CIA (Commercial and Industrial Acceptances) Medical Aid - Discovery Employee Benefits - Momentum

2010 Awards

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Interviews with the Winners of The FIA Awards 2010 Momentum The government’s proposed National Social Savings Fund (NSSF) is the single dominant issue within the employee benefits industry and one that is arguably set to have the largest impact on benefit design going forward. Carol Atkinson, Head of Product Development and Marketing for Momentum BenefitsAtWork (which includes its umbrella fund offering,”FundsAtWork”) says: “The NSSF has contributed in changing the thinking in the employee benefits landscape. This has started to change the behaviours of pension funds, insurers and employers and how they approach the issue of employee benefits.” Momentum was the winner in this year’s FIA awards in the category: “Employee Benefits.” Atkinson says the mooted national social fund has brought home to all players that to maintain and survive into the future, funds will need to achieve a targeted fee level which can only be achieved with a large membership base. “With these assumptions firmly in place we have seen the growth of umbrella funds, as standalone funds would no longer be a viable option.” An umbrella fund is a fund where multiple employers can participate. This means they do not have to establish their own fund but can enjoy the benefits of a larger fund as well as enjoy the benefit of concentrating on their core business. Government had initially indicated that the new National Social

Savings Fund would be implemented in 2010, which would enable the State to provide a basket of basic employee benefits. But as yet no final proposals have been put to market and discussions are continuing between government and relevant parties, including employee benefit funds and insurers. Broadly speaking, the new scheme envisages that everyone in formal employment will contribute to the fund providing provision for retirement, death and disability. “For Momentum, winning the FIA is a huge accolade,” says Atkinson. “We started with a zero base and have grown our umbrella fund to more than 130 000 members in the ten years since we started it. It has been about keeping ahead of the marketplace, being innovative and providing product flexibility. We try to meet the different needs of employers instead of the “one size fits all’ approach. “To some degree there are some paternalistic employers who would like to keep their own funds and are looking for certain product types, but many others recognise that this is not their core competency and are happy to outsource this to specialists such as ourselves.” Technology is another key issue, says Atkinson. “In the same manner that banks have become internet-based, the expectation from pension funds and insurers is exactly the same – we need to utilise technology and to get more information out to our members. Even though we have not seen greater levels of savings in the past two years of the recession, consumers are certainly more interested in what they get out of their product and are looking for more information. “People need to take control, and to know that they have access through their employer and their insurer to the correct information. They are looking for education – how does the product work and where are the benefits? These are the issues that will make companies successful into the future. All of these dynamics need to be taken into consideration.” Atkinson says the intermediary community “is our livelihood…they have been instrumental in the success of FundsAtWork. Part of our strategy was to tap into the SME market. But many small enterprises found it too onerous to consider taking on these products. It’s through our intermediaries that we have been able to reach these small businesses and provide them with solutions. “Advice in the employee benefits game is still very strong and very much needed.” - courtesy David Jackson & Business Day

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Interviews with the Winners of The FIA Awards 2010 Sanlam In choosing an investment vehicle, there are a number of key points to watch out for in getting the optimum return from your hard-earned nest-egg.

treating clients – from product design, advice and to point of sale to service and communication.

The first is to identify your investment objective, says Hennie de Villiers, CE of Sanlam Topaz, the business unit within Sanlam that focuses on the retail middle market, including retail life assurance.

Adds De Villiers: “For us, winning this FIA award is an enormous vote of confidence from the intermediary fraternity, who, especially in the field of investments, play a key role. In times like these, clients need appropriate and ongoing advice.”

Sanlam were the winners in this year’s FIA awards in the long term investments sector, in two categories: Single Lump Sum Investments and Recurring Premium Investments. Deciding why you choose to invest – and what for – is the first step. “For example, is it to provide for your retirement, to save for your children’s' education; or to save for something you intend to do at some future stage in life?” Then you need to assess your investment risk appetite. How much risk you can take is also dependant on how much money you have available? If you have limited savings and need to live on that money, you cannot take undue risk – while if you are relatively well off, the reverse applies. Another aspect to look at, says De Villiers, is which product will be the most tax-efficient for you. For example, within a life assurance policy (a minimum of five years duration), the life company pays tax on behalf of the investor at a tax rate of 30%. Says De Villiers: “This means that for affluent individuals, saving through a life policy is a good option, because they save on tax. For those in the lower middle market, however, it’s better to save through a vehicle such as linked investments using unit trusts, where they will pay tax themselves. This is more tax-efficient for them, as the tax rate applicable to individuals within the lower middle market is lower than 30%. “Also, if you want to save for retirement, a retirement annuity is an excellent option, as contributions are tax deductible, and you can start by paying as little as R150 per month.” Another issue to take into consideration is the amount of flexibility required, as well as the investment term. Regulatory issues in the pipeline that financial services providers will need to take into account, says De Villiers, include the National Social Security Scheme, the details of which still have to be finalised and is probably still some way off. Imminent are new conflict of interest regulations that will regulate the financial relationship between product providers and intermediaries. In addition, the FAIS (Financial Advisory and Intermediary Services) Act, now in force for several years, regulates how intermediaries should provide advice to clients. A new initiative by National Treasury, called “Treating Customers Fairly,” itemises a range of principles to which service providers will need to adhere in

He says that for Sanlam, the watchword has always been quality. “This quality spans a number of dimensions, one being the focus that we place on assisting brokers and the level and type of support we provide to make it easy for them to do business, and to enable them to provide ongoing investment advice.” De Villiers says that during the investment turmoil of the last few years the company has placed much emphasis on assisting brokers to advise clients, especially where clients sought to remove all money from the market at the worst possible time. “Clients should keep their original investment objectives in mind, and understand that these are long term investments. “Last year Sanlam performed very well, and we reaped the fruits of a lot of work we have been putting in for a number of years, which is based on a strong client and intermediary focus. This includes making sure that clients can afford what they buy and that these products meet their needs, so that in difficult times they can manage to hold onto those investments. Along with this goes good service, both to intermediaries and to clients.” With the economic recession in mind, De Villiers says Sanlam extended the available options for people to take a “premium holiday” when falling into difficulties with payments, yet still be able to keep their investments intact. - courtesy David Jackson & Business Day

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Interviews with the Winners of The FIA Awards 2010 Santam Triple award winner Santam scooped the Short term Insurer awards in all three categories for the second year running at last night’s (June 3) Financial Intermediaries Association (FIA) annual insurance awards banquet in Johannesburg. The categories were : Personal Lines; Corporate Insurance (typically JSElisted and large companies) and Commercial Insurance (focusing strongly on the retail and SME-type business). The Long Term Insurer of the Year awards for Recurring Premium and Single Lump investment products was won by Sanlam; while Discovery scooped the pool in the Long Term: Life Risk as well as the Health sector categories. The Employee Benefits category was won by the Momentum Group. A new category this year – Underwriting Management – was won by Commercial and Industrial Acceptances (CIA), on behalf of the Compass insurance company. FIA members account for more than 85% of all short-term business placed in the SA insurance market, and about half of the business placed in the long term life assurance and investment categories. FIA membership is made up of companies, or financial services providers, registered with the Financial Services Board (FSB). Says Santam’s Executive Head: Broker Distribution Edward Gibbens: “The awards inspire us to keep on doing well. For all companies participating, the significant aspect is that these awards come from the broking community. They set high standards, against which we are measured. So to win one of their awards is a great achievement. “It is also an acknowledgement by the brokers of the commitment and support that we give them.” Gibbens adds that Santam has streamlined processes and procedures for all insurance claims – with an eight-hour turnaround time in place for the replacement of items that are the subject of smaller claims. He says the company has also placed a great deal of focus on transformation within the industry and has launched a Santam Black Intermediary Development initiative, through which 42 black brokers were trained last year. “The intention is to train 500 over a period of time, which we also believe will add a lot of value to the FIA, as well as to the broker community and Santam in future.” Gibbens points out that the issue of skills development remains a key industry challenge. “We try to add value to brokers by offering training programmes for their staff. It’s an issue that is also being addressed by the FIA, who have a specific training committee in place, among other measures. We are working closely with them to try to lift the level of skills within the industry, across all classes of insurance.” In a difficult trading year across the business spectrum, Gibbens says the challenge for brokers was to ensure they give clients the right advice on retaining – and not cancelling – their policies when having difficulty meeting premium payments. “While we have experienced some policy cancellations,

we have also seen people adjusting the type of cover to suit their pocket, which is the preferable option. “The role of the broker in this is crucial in assisting clients to cut back on the right aspects of cover. Brokers have had to be very innovative in making sure that they come with these types of solutions for clients.” For short term insurers, the continuing increase in the incidence of motor vehicle accidents is another vexed issue. “It’s a major concern for the entire industry,” says Gibbens. “Another issue is the amount of fraud we are seeing in the marketplace. Obviously in difficult times, people adopt different measures to try to make up their income shortfall. Fraud is not something that can be fixed overnight, given that we are sometimes having to cope with the likes of professional syndicates.” The frequency of motor accidents has also increased, one of the main factors being the excessive rain in the recent wet summer – specifically in areas such as Johannesburg. Potholes and broken traffic lights remain other ongoing problems contributing to motor accidents and damage. Santam believes that risk management is an issue that needs to be addressed across all insurance sectors, including Personal Lines. Over the past 12 months, Gibbens adds, clients have had to substantially rein in costs and in some instances have cut back on risk management programmes – or have failed to initiate new ones, resulting in increased workplace risks such as fires, for example. “From a commercial and corporate perspective, fires are a big issue. Storm and hail damage in the very wet summer has also affected clients adversely.” Gibbens says that Santam’s interaction with the FIA over the past two years has been extremely positive, a major advantage being that the broking fraternity now speaks through a single industry body. “This makes a big difference to brokers as well as insurers and clients get the benefit at the end of the day.” He says that the value of the relationship that the company has with brokers is crucial, specifically when times are tough. “After we won all three awards last year, we spent a lot of time and effort studying the research to ascertain exactly why we won and where we featured prominently, relative to our competitors. In addition, we spent a lot of time in building our relationships with the brokers. “We also spend a considerable amount of time trying to gain a better understanding of the clients that we deal with – what their needs are, and their attitudes and behaviour patterns towards insurers. “From this feedback, we have adapted and updated some of our Personal Lines products substantially. On the commercial side, we are currently busy with a number of innovations relating to product changes in specific segments. We also invest a great deal of time on market segmentation, which makes a big difference for brokers by sharing information with them about what’s happening in specific industries – and what is required from us as insurers as well as brokers.” - courtesy David Jackson & Business Day

FIA ADVISORY COUNCIL 23 & 25 MAY 2010

T I C

Industry Leaders Rise to the Challenge

While impediments may include a small or no reduction of private and public sector debt, no financial boom as banks shed by Michael E. Stoker - Insurance Gateway® a division of Stoker Risk and ICT (Pty) Ltd. risks, low interest rates and www.insurancegateway.co.za inflation, rising commodity prices, regulatory overload It is a real feature of our industry to see hundreds of industry leaders gather, for and increase in taxes, growth drivers include the growth of emerging markets, two days, to review critical developments in the industry at a high level, as was the emergence of new markets and trends after severe recession, an increased the case at “The Insurance Conference” this year. Setting aside such a large savings ratio, price cycle moves towards a hardening market and well rated chunk of time amid today’s busy workplace schedules, demonstrates the insurers providing confidence in the market. commitment which the industry’s executives have towards excellence. This year’s conference held at Sun City, from 23-26 May was dubbed a “super conference” in view of it having been, for the first time ever, jointly hosted by the Financial Intermediaries Association of Southern Africa (FIA), the Insurance Institute of South Africa (IISA) and the South Africa Insurance Association (SAIA), who together represent the majority of insurers and brokers in the South African insurance environment. The FIA took the opportunity to hold an Advisory Council meeting on the Sunday as well as the Tuesday at the end of the second day’s proceedings, making it a long day for the FIA delegates. The Advisory Council meetings provided a valuable forum for communication between the FIA’s Regional structures. Given the many challenges which the industry faces, the conference theme “Rising to the Challenge” was certainly appropriate as were the topics, which covered a broad range of subjects, with two breakaway sessions catering for delegates’ areas of special interest. The program included presentations by leaders in the local and international insurance industry, and the conference was attended by delegates from Africa, Europe, United Kingdom and the United States of America. The collaboration between the various sector interests in meeting today’s and tomorrow’s challenges was well received, as evidenced by a significantly increased attendance at the conference this year, as well as positive comments in this regard, by the Deputy Executive Officer of Insurance, at the Financial Services Board. Guest of Honour Guest of Honour, Clem Booth, a member of the Allianz SE Board of Management who has inter-alia responsibility for Allianz’s global insurance lines was grounded in London, he wasn’t sure, whether due to the Airline Strike or the Ash Plume, delivered his address from London via Skype and it was great to hear from Clem, in spite of him being grounded. Clem’s brief titled “Leadership at a time of crisis and change” looked at leadership issues from a perspective of the global financial crisis, its impact on the insurance industry and the leadership challenges faced in the “New Normal”. Clem highlighted that we have experienced the most severe financial shock in 60 years, bringing some of the most established financial services companies to their knees, causing an unprecedented level of government intervention and bailouts, giving rise to the “New Normal” we face. Learning from past mistakes is key in paving the way forward and Clem took a look at some of the macro economic, behavioural and social drivers that are important in this regard. According to Clem, what is required for the way forward in the “New Normal” will be, capital strength, a diversified high-quality investment portfolio, underwriting discipline and excellence, customer focus and global positioning. He says while the industry remains in good shape, global insurers still face some serious headwinds however, there are positive mid-term effects of the global financial crisis, which outweigh the negative effects.

Leadership challenges for the “New Normal” says Clem, include the triumph of greed over fear, linear behaviour in a cyclical world and recognition that sustainable growth is about people and leadership. Keynote Address In the Keynote Address, Jonathan Dixon, Deputy Executive Officer of Insurance, at the Financial Services Board (FSB) outlined the present status on major initiatives at the FSB , including the Solvency Assessment Management project, Treating Customers Fairly and the introduction of new regulations for Micro Insurance. Much will be heard about these initiatives in the coming months. General Sessions General sessions provided a comprehensive regulatory update on the Insurance Laws Amendment Act, Binder Regulations and the FAIS Regulatory Exams, Data Connectivity issues and Data Sharing and Insurance Fraud. Breakaway Sessions The Breakaway Sessions covered Professional Indemnity and the Intermediaries Guarantee Fund, Solvency Assessment Management, the Sustainability of Motor Insurance and Retirement Reform. Day 2 Day two covered a wide range of subjects including Environmental Challenges facing the Insurance Industry, an Overview of the Healthcare Environment which included a detailed exposition on demarcation issues between Medical Aids and Short-term Insurance and the Current State of and Trends in the International and Local Insurance Environments. In closing the conference, Brian van Flyman, Deputy President of the FIA congratulated the organisers of the programme, which he believed had raised awareness of the larger issues facing the industry and the country as a whole and said he is very optimistic about the future of intermediaries, as complex products will always require intermediation, adding that the future of intermediaries is assured, if they embrace the changes around them. He further went on to say that the sustainability of the financial services industry is dependant on the conduct of market participants and not on the sale of products. Confidence needed to be restored in the industry by treating customers fairly and we should loose the industry jargon and unintelligible phrases to make ourselves understood to the consumer, especially having regard to the emerging market. Brian felt that the conference had been a huge success in motivating, informing and educating delegates and in providing an all important forum for networking amongst industry peers and he exhorted direct insurers and multi-channel insurers with a direct distribution channel, not to bring the industry into disrepute in the eyes of the consumer, by means of advertising which is disparaging of the intermediary. When you are next on the FIA’s website, you can click on “The Insurance Conference” banner, for a link from where you will be able to download the conference presentations.

Gala Dinner The Insurance Conference 2010

The Insurance Conference 2010

‘Rising to the Challenge’

Wo r

an c e r u C s o n n I fer t a e nc p u C e d

SASRIA

Examining the Terrorism Risk during the 2010 FIFA World Cup by Colin Macheke by Sasria Business Development Executive

Sasria Business Development Executive spoke out at the 2010 Insurance Industry Conference. Is there a risk of terrorism during the 2010 Fifa World Cup? This is a vexed question that is on everyone’s mind, especially in light of the recent scare in New York’s Times Square. What this event showed is that terrorism has many faces, and that it can take the form of both organised action by established groups, as well as ad hoc - yet extremely dangerous action by individuals. Any high-profile event where large numbers of people congregate is a potential terrorist target, and this is something that is top-of-mind for local security services, World Cup stakeholders and the insurance industry. That is why the presentation by Sasria Business Development Executive, Collin Macheke, who addressed this subject at the recent 2010 Insurance Conference. The annual conference, which took place from 23 to 26 May at Sun City, is the country’s premier forum for showcasing, discussing and analysing insurance risks and solutions. And this year, more than most, delegates have to consider risks that would not usually present themselves. “Terror threats have already been voiced against the UK, US and Italian teams,” said Macheke, “so the risk of terrorism during the World Cup is one that everyone involved is taking very seriously.” Sasria, South Africa’s leading special risks insurer, has over 30 years of experience in managing such extraordinary risks as public disorder, labour

disturbances, civil unrest, strikes, lock-outs and acts of terrorism. “We bring a well-established knowledge resources to the table,” proclaimed Macheke, “and forewarned is definitely forearmed. “Of course, by the nature of the threat of terrorism, no-one involved including Fifa, the government or stakeholders like Sasria can comment on how specific threats are being investigated and dealt with. It is enough to say that we need to be prepared for any eventuality.” Thorough vulnerability and threat analyses form the cornerstone of all responses to the possibility of terror attacks during the World Cup have been done. These take into account both the global context of this threat, as well as local preparations and security plans. “Being part of the international community and hosting such a significant international event places South Africa in a different threat category,” stated Macheke. “Although the country itself might not be on the radar as a terrorist target, a different set of rules applies when it is hosting an event of this nature”. “We nevertheless have the skills and experience in both the private and public sectors to prepare for a secure World Cup, and to make sure that it will be a safe and enjoyable event for everyone.”

PROFILE

Darius de Vries Vice-Chair Protea Branch by Clive Franks

Darius has recently been appointed as the new vice-chair of the FIA’s Protea Branch showcasing the FIA’s willingness to inject new young blood into the management of the FIA to keep it healthy, alive, vibrant and appealing in order to attract the younger generation into the industry. Darius matriculated from Helpmekaar Private School in Johannesburg and has been involved in the insurance industry from the start of his working career being employed by Intersure Insurance Group for the past 10 years. He finds the industry very exciting and stimulating and feels that that it holds an exciting and vibrant future for the younger generation. Darius encourages more young people to become involved in the industry as with the need for writing qualifying exams it is becoming more professionalised and as such will be no less recognised than any other professional qualification as is the case with the accounting, medical or legal professions. He emphasises the fact that it is a niche profession and that with the structures and code of conduct that have been put in place by the FIA it is a very relevant profession that has a huge impact on the South African economy. 42

The reasoning behind Darius standing for election as vice-chair was his desire to be more involved in the industry and to gaining a more in-depth understanding of the industry role players and exposure to all the dynamics and perspectives of the industry. He also feels that in this manner he will be able to contribute significantly to the members of Protea branch, and always be able to bring their needs and requirements to the forefront of the organization with enthusiasm and passion. He feels that the best advice he can impart to the members of the Protea Branch is to be professional, relevant doing a client needs analysis always placing the needs of the consumer first, to settle all claims expediently and in a professional manner. Darius says that he has a passion for all and extreme sports with water skiing being his favourite having started participating in the sport since the age of nine.

RISK MANAGEMENT

Risk Management 2010 – Comply or Explain by Paul Brightman - ART (Pty) Ltd

In 2010, all business owners in South Africa will be given a choice within the new Companies Act legislation and King III Commission guidelines, to ‘comply or explain’ their position on formal Risk Management processes. Similar legislation is being or has been enacted in many parts of the world; yet another global phenomenon. So far so good, but what are the issues?

So the choice to exercise this preferred and legislated business imperative is to some extent in your hands, in the same way that your risks are your own. You can expect pressure to adopt formal Risk Management practices from other stakeholders over time though. Will you be complying, explaining or embracing Risk Management in 2010?

1. There are far too many business entities in SA for the authorities to quickly and effectively police the implementation of legislation. 2. Risk Management is generally perceived as a costly, timeconsuming, complex and a boring issue; greyer than insurance. 3. Ignorance abounds regarding Risk Management and legislation relating to it. 4. Expertise and solution suppliers are few and generally expensive. 5. Business owners are in the higher pressure section of the business cycle, mainly due to economic circumstances. So Risk Management could end up being treated as a dull cousin of AIDS and global warming, but with far fewer supporters, denialists and activists. There are some positives though: 1. We all practice some form of Risk Management, usually informally. 2. You can discover business opportunities in the process. 3. Corporate and Government operations will not escape scrutiny and will tend to deal with those entities who share their protocols, imperatives and cultures. 4. There is a social police force to comply or explain to as well as the regulators; you, your family, shareholders, customers, suppliers, banks, insurers and so on. The list is long. 5. This is an international business initiative with a sound logical and intellectual foundation. 6. Business risk assessors such as banks and insurers can supplement existing information requirements with Risk Management profiles. 7. The practice of Risk Management gives you a semblance of control, enabling you ‘thrive not survive’ in the business cycle. 8. Support systems are available from as little as R3,500 per year, including VAT.

So Risk Management could end up being treated as a dull cousin of AIDS and global warming, but with far fewer supporters, denialists and activists.

ADVICE

The Need for Advice by Rowan Burger, head of Pension Reform for Liberty Corporate

Commentators often criticise financial advisors for collecting fees that are not reflective of their efforts or the value they add to their clients. The recent turmoil in the investment markets gives a clear message in terms of the importance for the vast majority of South Africans to have some form of financial guide. The cost of advice is normally calculated simply by deducting the expenses collected by advisors from the gross benefit. Admittedly it does become hard to determine the additional value generated by advisors and therefore this thinking tends to go unchallenged. However, it is the trusted relationship the broker has with his client that protects the client from making the wrong choices that truly protects value over time. Critics of brokers never understand the lack of financial literacy and the human behavioural instincts which lead to value destruction by their clients. There is never an award for the fireman who prevented the disaster or the airport traffic controller who safely lands the plane. There are a number of human instincts, perfectly honed through evolution to protect our species which are significant handicaps to saving for retirement. Fear The first human behaviour is a fear of the uncertain. In the investment world the uncertain is generally crudely defined as risk. Generally the greater the risk accepted by a saver the greater return should be expected as compensation. The risk of short term loss is the one that fixates clients; however the true risk is not achieving the required investment objective over the full term of the investment. The consequence of following a conservative cash investment strategy will lead to an expected retirement benefit around half of one following a conventional balanced fund approach. Regret The second common human error encountered by financial advisors is one based on regret. Clients look at performance numbers, gravitate to the top of the table and regret that they did not select the best performing option and immediately switch to that investment. Many times this error is further compounded by not properly understanding the history. These investments may be measured over too short a time frame or could

simply not be appropriate. Advisors tend to face the brunt of this instinct. It is far easier to blame someone else for a perceived failing. A switch to cash in February 2009 would be 40% behind a portfolio of equities at the start of the World Cup. Resigning to gain access to pension funds Many people resigned from employer funds or terminated their investments following the fall in the market over 2008. If you stuck around you will feel the pain of regret today. But you'll feel the joy of pride in future as the market rebounds and you get the benefit of the favourable tax treatment. Path of least resistance Another common human failure is one of inertia. Given two possible outcomes, the one which requires no action will tend to be the one people uncertain of their options will follow. This is certainly evident in the retirement funds space. The no action option is simply to have your benefit paid into your bank account when you resign from your employer. Deciding to invest in a retirement annuity or preservation fund requires work and understanding a complex investment and regulatory field. It is for this simple reason observed retirement benefits from defined contribution funds are roughly a third of what they should be. Advisors are needed to explain the implications and help the process. This inertia can be seen again by the large number of individuals who have not chosen to get back into the market or make investments given the current global uncertainty. The market has rallied and the significant investment returns have not been enjoyed by many. Advice is key This is where the need for a financial advisor comes in. Most investors are intelligent people, neither irrational nor insane. But behavioral finance tells us we are also normal, with brains that are often full and emotions that are often overflowing. And that means we are normal clever at times, and normal stupid at others. The role of a financial advisor is to be the financial life coach and help investors to learn to increase the ratio of clever behaviour to stupid. Much like the fireman or the airport traffic controller, the value of their work can only be assessed when things go wrong, not when all is well.

SNIPPETS Penisula FIA Peninsula held their member meeting on 23 April at the Hussar Grill in Camps Bay. Two special certificates were presented: a 25 year membership certificate to Johan Coetzee, as well as a specially ordered “45 years of service to the industry” certificate to Geoff Hirschmann. Members were asked to bring blankets or make a cash donation to buy more, and R 2500 was collected. Thank you all the generous donators! The balnkets will be distributed to those who most need them. Your committee wished to donate these to very needy pupils at Ruyterwacht Preparatory School to keep them warm on cold winter nights. Most of you attending the lunch who did not bring a blanket donated generously towards our effort resulting in

R2500 being collected. We were able to buy an additional 60 blankets. Last Thursday, 3 June Donovan Witten, Peter Teuchert, Salomi Steenkamp and I visited the School to hand over the blankets. The principal had identified children in advance as needy recipients for the blankets, and they or their parents have written letters thanking the school and the FIA. When we arrived with the blankets, an entire flip-file with thank you notes was handed to us. This file will be available for all of you to peruse at our next meeting. The children were extremely excited and it was a heart warming occasion. Attached are some of the photos taken by Peter.. Two new members have also joined the meeting – welcome to Clive Rutherford and Demetri Champanis.

Sasria Scoops 2010 Metropolitan Oliver Empowerment Award State-owned insurance underwriter recognised for extraordinary BEE success Sasria, the insurance company that covers the extraordinary, has scooped the 2010 Metropolitan Oliver Empowerment Award in the Government Agency and Parastatal Category. The Metropolitan Oliver Awards are South Africa’s leading awards for achievement in the area of black economic empowerment (BEE), and recognise strides that have been made to make local companies and organisations more representative.

FIA National Office Supports Bafana-Bafana

While Sasria is a state-owned insurance underwriter, this does not negate the need for a strong focus on BEE, says Business Development Executive, Collin Macheke. “Sasria plays a key role in risk management in South Africa,” he says, “providing insurance for such extraordinary events as public disorder, labour disturbances, civil unrest, strikes, lock-outs and acts of terrorism. In the same way, we aim to be at the forefront of transformation, and are honoured that our BEE efforts have been recognised in this way.”

RISK

World Cup visitors could score from unwary locals – FNBIB by Debbie Barret, General Manager, Marketing, at FNBIB a member of the FIA ORDINARY South Africans trying to ‘score’ additional income from the World Cup should first tighten up their ‘defence’ – and short-term insurance is the lynchpin of a sound defensive strategy. The tip comes from FNB Insurance Brokers (FNBIB), the short-term insurance specialists in the FNB financial services group and a broker known for proactive consumer advice. Debbie Barret, General Manager, Marketing, at FNBIB, notes: “Focus tends to fall on the commercial advantages South Africans can derive from 400 000 World Cup visitors, but look at the event from a risk perspective and you realise that hosts – even a family letting out a single room – open themselves up to a wide variety of claims for damage or loss. “South Africans generally have a casual attitude to issues like liability and the need for compliance with preconditions and stipulations. However, when a dispute arises it is not a sufficient defence in law to shrug your shoulders and say ‘Ag, man, this is Africa’. “The USA is among the World Cup finalists. So are many European nations. Americans have a reputation for being quite litigious while Europeans are used to strict compliance with terms and conditions. If claims arise, they will calculate restitution in dollars, sterling and euros, compounding financial impact for South African families.” FNBIB says the first step for prudent locals looking to rent out rooms and facilities or provide services is to check the terms of their existing insurance policies. Pay particular attention to sums insured as they might be inadequate in the event of a large claim. Worse still, the underwriters could reject claims if insurance terms and

conditions are flouted. Barret explains: “Policy wordings and exclusions are extremely precise. Any change in circumstances would normally have to be disclosed to the insurer while failure to make disclosure could invalidate your cover. “Normal household cover does not normally extend to paying guests staying in your home while standard motor insurance for the family car, combi or 4x4 probably does not cover fare-paying passengers. “In the event of any claim by a foreign visitor, a family looking to make a few thousand rands in extra income could be looking instead at sizeable restitution in their personal capacity because they did not have appropriate cover.” The key issue is the need for business and commercial covers rather than standard household and personal covers once a home, facilities and vehicles are used for commercial purposes. An individual may have adequate liability cover in a personal capacity, but enjoy little or no protection if a claim involves the conduct of income-earning activities. “Insurance brokers have a huge role to play,” says Barret. “Knowledgeable insurance industry professionals can provide expert guidance on issues such as the appropriate types of policy and the extent of prudent cover. “If you are going for a financial win during the World Cup, make sure you have a good insurance broker on your team.”

A D V E RTO R I A L

EMK- Estate Analysis and Financial Planning Software The EMK software was developed as a tool to empower a financial planner in the life-insurance industry, who can provide a client with accurate and ethically correct advice. A financial planner, who conducts a holistic analysis of a client’s portfolio, in the presence of the client, can explore many possible scenarios. This creates a platform of trust from where wealth can be created, protected and maintained by means of intellectual decision-making based on the significant and meaningful results obtained. SARS has tested the EMK software, and confirmed the results to be financially accurate and legally correct. The EMK software is upgraded annually. Feedback from current users of the EMK software include statements such as “my lapses are nearly zero” , “the client understands the financial planning analysis”, “the average premium per policy has nearly doubled “ and “the system eliminates complication in the market.” .These comments may be attributed to some of the unique features of the EMK software, including: • An integrated and interactive database for a portfolio of clients. • A translation option for a bilingual (English and Afrikaans) interface. • The user-friendly and understandable menu-driven navigation. • A family target rather than an individual or a product-based focus. • A collection of help screens (e.g. relevant legislation: deductions allowances – tax, estate and sessions). • A variety of separate reports which can be combined as a final analysis report. These reports may be previewed or printed. • The system warnings that appear when vital information is not correctly supplied. • An option to generate and print the last will and testament of a client. The dynamic benefits of the EMK software include: • Income Tax. The automatic calculation of contributions towards RA’s is available. The tax savings, as well as average and marginal rates for tax on single amount benefits are shown. • Retirement Fund. The benefits and taxes are calculated.

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Insurance Portfolio. The impact of different sessions and beneficiaries on estate tax and administration costs can be determined. Balance sheet. The calculation of the impact of limited rights created and enjoyed, the accrual, as well as any possible bequest on the estate can be demonstrated. Business Interest. The value of business interests, including subsidiaries and client-value, can be determined for buy and sell agreements as well as an asset in the estate. Will. The impact of any possible bequests, Art.4 (q) amount, and accrual on estate tax can be determined. A testamentary determination can be tested. These impacts can be shown graphically. A will can be generated as an editable MS-Word document. Estate. The tax payable by the estate is calculated. A liquidity test is done, and any shortfall or surplus amount is calculated. Problem identification. A warning message appears when problem is identified, e.g. the lack of sufficient funds to finalise an estate. Possible solutions may be tested. Financial Planning. A meaningful financial planning may be done for the event of death, disability or retirement. This analysis takes deficit/surplus of funds in the estate, life expectancies, needs, increased rate of needs, sources of income, and capital sources into account. This allows for informed and knowledgeable decisions on investments and provisions for the future.

For further information or demonstration of the EMK software please contact: • Call: Magda Pretorius at 021 9104232 or Coert Steynberg 082 852 8829. • E-mail: management@emk.co.za

STRIKE ACTION

SA Inc loses billions as Transnet downs tools by Gareth Stokes online editor for FA News

On 27 May 2010 two of the country’s largest unions ended a 17-day ‘no work no pay’ strike at state-owned freight logistics group, Transnet. The wage settlement will cost taxpayers in the region of R1 billion per annum, but the strike cost SA Inc billions more in damage to proper ty and reputation! Businesses face many perils during strike action. These include revenues lost due to disruption in manufacture and distribution, and damage caused by striking workers. In May 2010 transport giant, Transnet, suffered both losses as members of the SA Transport and Allied Workers Union (Satawu) and the United Transport and Allied Trade Union (Utatu) declared a wage dispute. The unions demanded 15% against the company’s 11% offer. Chris Wells, acting chief executive at Transnet, said striking workers caused R60m damage to the group’s railway infrastructure during their action. These losses included ‘torched’ trains and damage to various Spoornet railway yards. But Transnet wasn’t the only company affected by the strike. As goods piled up at ports and rail sidings countrywide, many sectors of the domestic economy took strain.

import/export concerns. Business Unity SA (Busa) said the strike cost the country between R6 and R7 billion rand. “Supply chains [were] severely disrupted and, in many cases, export contracts have been permanently lost,” it said. “Beyond the overall statistical aggregates lie the devastating effects the strike is having on companies and workers in sectors like transport and agriculture!” Fruit producers in the Western Cape were particularly hard hit. And their ‘no nonsense’ European retail clients don’t react kindly to unnecessary delays. Where can these companies go for compensation? The first port of call is undoubtedly the insurer – though the short-term insurers we spoke to hadn’t noticed and increase in strike-related claims at the time of going to print. These insurers will probably try to squeeze some compensation from riot, political risk and strike insurer of last resort, Sasria. Typical short-term insurance policies include Sasria cover as default. The insurer’s 2008 claims mix comprises political riot (17.48%), non political riot (33.57%), labour disturbances (2.28%) and strike (46.67%). Although managing director Phyllis Mabasa views the modern-day Sasria as “a ‘catastrophe’ insurer concentrating on terrorist threats,” the group will undoubtedly entertain some claims stemming from the Transnet debacle. “There’s no reason for anyone taking on the risk of getting your property destroyed [through strike action] when you have the alternative of paying R1.80 per month.” South Africa breathed a sigh of relief when the striking unions accepted Transnet’s offer. Most businesses will recover cash losses from their insurers; but the loss to reputation will be much harder to recover.

Private businesses caught up in the three-week work stoppage face cash flow crises and the daunting task of making up massive operational backlogs. Fred Jacobs, corporate affairs executive for Safmarine South Africa, said delays caused by the strike affected the entire supply chain. “The normal cost infrastructure has obviously been affected by the missed sailings, the provision of additional vessels, the need for trans shipments and costs associated with inland storage,” he said. The group would implement a recovery surcharge to claw back some of its lost revenue.

“Beyond the overall statistical

Transnet’s loss is dwarfed by the real losses and long-term damage to reputation suffered by fruit producers, mining houses and other

like transport and agriculture!”

aggregates lie the devastating effects the strike is having on companies and workers in sectors

INTER-SYSTEM CONNECTIVITY

Cementing Intermediary Sustainability with Inter-system Connectivity – A New Order in Competitiveness

by Dimitri BaliosGM Systems and IT Renasa Insurance Company Limited

In 1984, John Gage of Sun Microsystems coined the phrase “The network is the computer”. At that time, networks as we know them were proprietary technologies reserved for large corporations, and the phrase would not have made sense to many people. In the ensuing years, networks have become commonplace, and indeed since the proliferation of the internet, the network has spread to all corners of the world and right into our homes. The possibilities and opportunities presented by the proliferation of the network has not been lost on business, and many enterprises have capitalised on the benefits the internet offers. However, only recently have enterprises begun to realise that their systems need to change their character. Traditionally, corporate systems were constrained by the boundaries of their corporate surface area. This is in direct contrast to the manner in which companies interact in the business world. Companies deal with clients, agents and service providers outside of their corporate space, so why then should their computer systems not extend outside of their corporate space in a more aggressive manner? It is clear that different business models lend themselves to different strategies when it comes to computer system design. Enterprises with vertical integration within the corporate structure, which is a model prevalent amongst direct insurers, could conceivably stay as they are for the rest of their lives, but those enterprises with an intermediated supply chain, such as the independent broker model of short-term insurance, have an opportunity to radically alter the way they interact with each other from a system point of view. From an insurance industry perspective, the two primary streams of product delivery consist of the intermediated broker model and the direct carrier model. The direct carrier model has generally given greater control to the carrier because there are fewer links in the chain between the insured and the insurer. With the introduction of far-reaching networks, the broker model which is operated on independent systems can obtain the benefits offered by scientific underwriting and enhanced claims cost control through the

introduction of integrated data processes which span the delivery channel. Now the tools required by the broker to offer competitive, sustainable business can be delivered to him whilst continuing to operate on an independent policy administration and claims system. This will allow the broker to leverage on his knowledge of the client as compared with a call centre agent with whom one deals on a random basis given that, armed with the required tools, the broker can compete fairly with direct insurers. From the insurer’s standpoint, the allure of retaining the services of specialised intermediaries such as brokers, UMAs, administrators and their chosen service providers (experts in their fields enjoying equity ownership) while at the same time enjoying the efficiencies and risk management advantages offered by systematised data interchange cannot be ignored and should be embraced. In the insurance business, the trend towards entwined systems is likely to be adopted earlier than in most other industries as the insurance industry is highly intermediated and the stock-in-trade of insurance is information. The primary obstacle to this connected world has always been the lack of a suitable lingua franca to enable the efficient movement of computer messages between systems. Already some proprietary data standards and protocols have been adopted, and in future the industry - wide XML messaging standard of which ACORD is the custodian is likely to be adopted by industry bodies. However, inter-system connectivity need not await the definition of the Accord standard and the inter-system mapping which this requires such is the need in the hunt by brokers for defences against the onslaught of direct insurers. The competitiveness of direct insurers is bolstered by their ability to price scientifically and to control their claims costs efficiently. This ability stems from the focus of their processes and data on centralized systems which gives them absolute control over the underwriting and claims processes. However, similar results can be achieved by independent brokers if their independent systems are inter-connected to the underwriting and claims modules of insurer systems. This way, independent brokers can enjoy the best of both worlds. Maintain control and the service levels of their businesses by operating on their own independent systems and guarantee the sustainability of their business by using insurers’ systems (by interconnection) to ensure that their pricing is competitive and the cost of their claims is efficiently contained. 26 years after John Gage envisioned the notion that the network is more dominant in the relevance of the computer, the practical implementation of that vision is being seen more frequently and in a wide variety of places.

FUNDS

Increasing Losses see Retirement Funds resort to Fidelity & Trustee Indemnity Covers by Brian Gillespie of Alexander Forbes Risk Services a member of the FIA

The last few months have seen insurers increase their premiums for fidelity and trustee’s indemnity covers by up to 25% as the number of claims lodged by retirement funds has skyrocketed.

Occasionally administrators fail to properly reconcile or reconstruct records, resulting in considerable costs to the fund.

“While some retirement funds’ assets have grown, most have shrunk, some by up to 20%, over the past twelve months. Trustees are also increasingly aware of stricter oversight by the Pension Funds Adjudicator who has cut trustees little slack in recent adjudications” says Brian Gillespie of Alexander Forbes Risk Services. Fidelity claims account for many of the losses suffered by funds. That said, insures don’t carry the entire burden as they are entitled to some relief. For example, once an insurer has paid a fund’s claim they are entitled to recover their outlay from the responsible person and/or their employers in the funds name. However, “recovery processes are often lengthy and can be complicated by collusion between the guilty parties” says Gillespie. In cases where the individuals involved in the fraud are without recoverable assets or have squandered their ill-gotten gains by the time insurers are in a position to sequestrate, recovery is impossible. To avoid this, Gillespie warns that “insurers should always institute recovery action against the guilty person and their employers without delay to improve their chances of recovery”.

Of ten tr ustees mistakenly believe that the fund can just claim for these increased costs under their fidelity policy. Unlike claims following fraud, however, the fidelity policies are not triggered following loss due to negligence until a quantified claim is made against the fund or its trustees – typically by members or their dependants or beneficiaries. The same principle applies “following incorrect (though not necessarily dishonest), distribution of fund surpluses where, if no member claims from the fund or its trustees, the policy is not triggered” explains Gillespie. Finally, losses are not always recoverable from service providers. For example, a few administrators have recently gone into liquidation, leaving the funds which they had administered to carry the additional costs of appointing new fund administrators. Under these circumstances if a claim is made against the fund it will have to rely on whatever indemnity is available under the insurances previously arranged” explains Gillespie.

Recently there has also been an increase in claims following negligence. Whilst loss due to negligence is more frequent the sums involved are not nearly as large as those following fraud. Moreover, losses resulting from negligence are often the fault of the service provider. These can, for example, arise from inefficiency in the registration of new members of funds and withdrawal benefits, along with the payment of death claims without properly identifying beneficiaries etc. “These losses are, however, recoverable from the service provider, as long as their liability is not limited under contract and assuming they are still in operation” says Gillespie.

“While some retirement funds’ assets have grown, most have shrunk, some by up to 20%, over the past twelve months.

HUMOUR

Laugh and the World Laughs with You... Humour from the Insurance Conference

Heaven or Hell?

On the Monday afternoon at Sun City at the Insurance conference, Mark Winkler Vice-Chair of the East Rand Branch attends the session on Solvency Asset Management.

A little girl was talking to her teacher about whales. The teacher said it was physically impossible for a whale to swallow a human because even though it was a very large mammal its throat was very small. The little girl stated that Jonah was swallowed by a whale. Irritated, the teacher reiterated that a whale could not swallow a human; it was physically impossible. The little girl said, "When I get to heaven I will ask Jonah". The teacher asked, "What if Jonah went to hell?" The little girl replied, "Then you ask him".

Immediately he feels completely lost and has no idea what the speakers are talking about!, however he soldiers fidgeting on for over an hour. In the rend he can’t take it any longer. He passes a note to Paul Strutt. I’m going to get on my hands and knees and slide under the tables, and crawl to the back of the hall. Have you got any suggestions how I can get from the end table at the back of the hall top the door? Paul writes back: Yes! Breathe in deeply and run with a table cloth over your head!!

Financial Planner Someone told his three sons when he sent them to university: 'I feel it's my duty to provide you with the best possible education, and you do not owe me anything for that. However, I want you to appreciate it; as a token, please put R1,000 each of you into my coffin when I die.' And so it happened. The sons became a doctor, a lawyer, and a financial planner, each very successful financially. When they had to see their father in the coffin one day, they remembered his wish. First it was the doctor who put ten R100 notes onto the chest of the deceased. Than came the lawyer, who put five R200 notes there. Finally, it was the heart-broken financial planner's turn. He dipped into his pocket, took out his cheque book, wrote a cheque for R3,000, put it into his father's coffin, and took the R2,000 cash.

A walking economy This guy is walking with his friend, who happens to be a psychologist. He says to this friend, “I'm a walking economy." The friend asks, "How so?" "My hair line is in recession, my stomach is a victim of inflation, and both of these together are putting me into a deep depression!”

ENGINEERING

ENGINEERING INSURANCE – ELECTRONIC EQUIPMENT by Willie Greryling a member of The FIA Most independent brokers don’t make enough use of the Electronic Equipment products offered by specialist underwriters, thus their clients are being deprived of the opportunity to get the benefits of well structured insurance arrangements and most likely, a better rating offer. These products are suited to medium and large commercial businesses with electronic equipment schedules of R1,5 m upwards. Retention capacities will not be a problem as huge exposures of R40m or more per risk can be accommodated.

Because policy wordings are governed by local and overseas reinsurers the terms are standard and used universally, but the difference lies in the way the cover is structured. Equipment can be insured on a blanket basis, where the total sum insured is linked to an acceptable inventory kept up to date at the client’s end only, or on the traditional basis where items are described in detail. When working on the blanket basis, brokers should urge their clients to make sure that only those items of an electronic nature are reflected in the inventory, otherwise they may land up paying premium for goods that were not intended to be covered in the policy, like fridges, furniture or plant not forming an integral part of electronic equipment.

ENGINEERING

The basis of valuation to set sums insured should always be new replacement value for the latest model in a specific range. It is obvious that in an industry where exchange rates and fierce competition play a major role in determining prices, clients should review the adequacy of sums insured more regularly than once a year. This policy covers all types of computers, including micro-processors, word-processors, telecommunication equipment, machines used in the medical and research fields, film and studio equipment and the like. It must be equipment designed with the capability of receiving, transmitting, calculating or storing electronic data. Some of the specialist underwriters will allow brokers to select only certain sections of cover. For instance, the Fire and allied perils cover may be dropped and only theft and derangement (accompanied by physical damage) cover can be taken. The theft cover should be on a first loss basis, but the mechanical/electrical derangement premium will always be calculated on the full value. Comprehensive policies can be linked to Consequential Loss cover on a gross profit basis, taking into account seasonal and growth trends.

Brokers need to stay in regular contact with their clients so that they are aware of factors which might influence the turnover of the business, e.g. relocation to more prominent premises with the prospect of attracting more passing trade or the landing of large new contracts. When claiming under the Consequential Loss policy the insured will have to prove that not only did the interruption cause a reduction in turnover, but that the gross profit was actually affected. Clients with very large schedules could achieve substantial savings in payaway premium by considering own insurance funding by means of a captive cell with say, a stop-loss arrangement after R300 000 or R500 000. The benefits of tax relief on accruing reserve funds and the wider interpretation of own fund cover, like â&#x20AC;&#x153;maintenance risksâ&#x20AC;? make this a very attractive alternative.

APPOINTMENTS

Recent Appointments SAU Johann Mynhardt (photo 1): SAU is pleased to announce the appointment of Johann Mynhardt as CEO. Johann's main focus in the past has been the actuarial function at SAU where he contributed to all of SAU's operational and underwriting functions. He thus enjoys a thorough understanding of the various facets of the company. The board wishes him well in his new position. Pat Hill (photo 2): Congratulations to Pat Hill who has been appointed as Head of Fulfilment. We believe Pat's dedication to service delivery accompanied by her 30 years experience in both personal lines and commercial insurance will enhance our commitment to our brokers in providing outstanding service. Justin Munckton (photo 3): SAU would also like to introduce Justin Munckton as the new Group Leader â&#x20AC;&#x201C; Broker Support. Justin brings with him significant experience in managing call centres in the sales and insurance environment. Justin has also been responsible for in- and outbound marketing campaigns from development through to implementation which will have great value for SAU in expanding our product offering.

BoE Private Clients Paul Finlayson (photo 4) has been appointed Managing Director of leading private clients wealth management company, BoE Private Clients. His appointment comes in the wake of the decision by Nedbank to buy out Old Mutual's 50% stake in BoE Private Clients. It is an exciting time for Private Wealth management businesses given that they are emerging from a global recession that has caused many High Net Worth individuals to re-evaluate the way in which they live, think and make decisions.

SAIA Viviene Pearson (photo 5) was appointed as the new South African Insurance Association (SAIA) Manager: Motor, from 1 April 2010. This position was created as a result of a SAIA Board decision to address the sustainability of motor insurance through an approved SAIA strategy.

Zurich Zurich South Africa has appointed Sharon Hough (photo 6) as its new Chief Marketing Officer with immediate effect. She will become a member of the South African Executive Committee, reporting into Guy Munnoch, CEO South Africa and will play a vital role in leading the implementation and delivery of Zurich's new strategy.

January 2010. With Santam's specialist, corporate and Centriq businesses continuing to assume increasing strategic importance.

New PF Adjudicator and FAIS Ombud Finance Minister Pravin Gordhan has approved the recommendation of the Financial Services Board (FSB) on the appointment of Mr Charles Pillai (photo 10) as Pension Fund Adjudicator (PFA). Mr Pillai, currently serving as Financial Advisory and Intermediary Services (FAIS) Ombud, will assume this post on 1 April 2010. He will take over from the Acting PFA Dr Elmarie De la Rey. The board of the FSB has also appointed Ms Noluntu Bam (photo 11) to succeed Mr Pillai as FAIS Ombud, effective from 1 March 2010. Ms Bam has served as deputy FAIS Ombud for the last six years.

ACE Insurance Specialist insurer ACE is giving its commercial and industrial division a boost with the appointment of Samantha Allen (photo 12) as Senior Commercial Underwriter. In the insurance industry, commercial and industrial insurance is the line of business which slots in under corporate, and is known in other industries as 'small to medium enterprise'. ACE Insurance South Africa, a provider of specialist insurance, has appointed Gary Jack (photo 13) as its new manager of Accident and Health Division.

Metropolitan Metropolitan Retail announces the appointment of Aletta Immelman-Schade (photo 14) to take up the position of Regional Manager: IFA Tygervalley with effect from 1 April 2010. Aletta brings many years of experience in the broker division, direct division, networks and corporate brokerages.

SANLAM Sanlam Personal Finance (SPF) has appointed Anton Gildenhuys (photo 15) as chief executive of SPF Actuarial. Gildenhuys, a qualified actuary, previously held the position of chief executive of SPF Strategic Business Development.

Mutual & Federal Mutual & Federal appointed Vuyolwethu (Vuyo) Lee (photo 16) to the position of General Manager: Strategy and Marketing with effect from 1 May 2010.

Cannon Council of Medical Schemes Doug Turvey (photo 7) joined Cannon Asset Managers after spending 10 years in London, the last six years as a Senior Wealth Manager at Sable Private Wealth Management, where he helped build the successful wealth management company.

The Minister of Health has appointed Dr Monwabisi Gantsho (photo 17) to the position of Registrar of Medical Schemes and Chief Executive of the Council for Medical Schemes (CMS) with effect from 1 June 2010

Santam

CIB

Santam is pleased to announce the following appointments to the Executive Committee: Yegs Ramiah (photo 8), Executive Head: People and Brand, and Quinten Matthew, Executive Head: Specialist Business.

CIB Insurance Solutions has appointed Wilhelm von La Chevallerie (photo 18) as Director of Actuarial & Risk Services. Wilhelm holds a BCom (Hons) in Actuarial Science and is a Fellow of the Actuarial Society of South Africa & the Institute of Actuaries in the UK. He joins the CIB Executive team from EMB SA Actuaries & Consultants

Quinten Matthew (photo 9) joined the Executive Team with effect from 1

INSURER CHOICE

Which is the Wisest choice of Insurer: Direct, Traditional or Hybrid? by Gari Dombo - Managing director at Alexander Forbes Insurance, a member of the FIA Most people are not aware that there are three different types of insurance providers out there. Understanding the difference can, however, affect the quality, cost and effectiveness of any insurance purchased. Traditional insures have been around the longest. They deal with clients through brokers who develop close relationships with their clients and tailor the cover to best suit their needs. Direct Insurers cut out the broker to deal directly with the client, usually through call centers and internet sites. Hybrid insurers on the other hand provide a personalised insurance service more efficiently by using in-house professional service consultants. This cuts down on the costs of dealing with the broker and allows the client direct contact with the two people managing his insurance service. “In a nutshell the difference between the three is their business models and how they service clients” says Gari Dombo, Managing Director, Alexander Forbes Insurance. With traditional insurers the broker provides the client with a personalised route to the carrier. Direct insurers deal directly with clients using mass media to market their products. They claim to save money by eliminating broker costs and offering lower premiums. Direct insurers have also developed a strong media presence through strong marketing and advertising initiatives. Since direct insurers “have larger advertising budgets than traditional insurers, eliminating the broker does not necessarily result in reduced

premiums” adds Dombo.Dombo believes that consumers should look for insurers that combine the best elements of the Traditional and the Direct business models. In short, insurers providing both claims and service consultants effectively provide consumers with “their own broker who is also the insurance provider” says Dombo. While insurers compete on price, the current price war raging between direct and the other insurers tends to disguise other differentiators, like the actual content of the offering - along with the ability of the insurer to deliver. “Using price as the sole guideline while ignoring the content of cover, or not investigating the payment history of a provider, is looking for trouble” warns Dombo. Instead Dombo advises consumers to consider price only once they “fully understand the small print along with what is being covered, what excess they will be carrying and whether they are getting the best advice.” Dombo believes that a hybrid business model “combining the strong relationship and trust characteristics of traditional insurance with the efficiency and convenience of a direct insurer is the best way to structure an i n s u r a n c e business in the current market.”

C O M PA N Y P R O F I L E

Interview with Gerrit Lambrechts Vice-Chairperson of the Southern Cape Branch of the FIA and CEO of Adfinity by Clive Franks

FIA: Preamble: With the desire of finding out more about what the FIA Branch Chairs & Vice - Chairs do besides devoting their valuable time to the FIA; FIA INSGHT will be conducting interviews with them in each quarter. Our seventh interview is with Gerrit Lambrechts a ViceChairperson of the Southern Cape Branch of the FIA. Gerrit is the CEO of Adfinity FIA: As a Vice-Chairperson of the Southern Cape Branch of the FIA and the huge responsibility and amount of time it consumes and your passion to see the success of the FIA, do you find that this has had an adverse effect on the time you are able to devote to Adfinity. Yes, it has a large effect on the time I can spend on Adfinity. My goal is to expand the branch in the Southern Cape and to increase membership. We have had a huge success with the 4x4 day, which was held at Vleesbaai. These arrangements took a lot of my time. The next on the programme is a hunting weekend and the arrangements for the golf day in October are also in progress he declared. FIA: In what way do you feel that you are making the most contribution to the FIA? To inspire brokers to be more involved in the activities of the FIA of the Southern Cape FIA: What incentives are there for young people in your area to join our industry and how do you think we will be able to attract them? The greatest attraction for young people to start a career in our industry is the existing brokers that create jobs within the family structure. We, here in the countryside, try to make our business a family matter. However, it is very difficult for any young person to find their feet in the insurance industry he stated. FIA: What do you think are the main challenges facing the Southern Cape Branch and its members? The survival of our Southern Cape branch. If the branch ceases to exist, about 160 brokers would be without FIA leadership. FIA: What is the most important message that you have for your members? Gerrit emphasised the fact that if we can increase the membership of the FIA nationally, we will have a stronger voice and will be able to have a positive influence on the FSB and other role players in the industry.

FIA: What is Adfinityâ&#x20AC;&#x2DC;s mission statement? To provide clients with independent, comprehensive and ongoing financial advice, regarding their Risk and Investment Management in order to create wealth. FIA: Who is Adfinityâ&#x20AC;&#x2DC;s main target market and what is the most valuable advice you can offer to the consumer? We are big in the investment market and the Cape branch has a pretty large investment book. The George area is doing big business in risk and resource marketing. My most valuable piece of advice to the consumer is to ensure that the advice he receives is supported by a comprehensive financial and retirement analysis said Gerrit. FIA: Are you willing to share a brief CV and a glimpse in to the private life of Gerrit Lambrechts when you are not involved with the business of the FIA Southern Cape Branch and Adfinity? I am married to Alda and we have a daughter who is married and have 2 beautiful grandchildren. Relaxation enjoys a high priority with me, so I am a big proponent of a good hobby to improve your quality of life. I love camping and therefore bought a caravan. I handle the repairs and maintenance of the vehicle in my private time. I also modified our vehicle to make it more comfortable for my wife and me. We are also keen on waterskiing and spend a lot of time on the lake at Wilderness. My other love is cars, especially the make with the 3-pointed star. I collected some of the Mercedes-Benz's series sports cars. I also like the coupe models and am currently restoring a 450 SLC. I love motor racing, and where possible, I attend motor racing events or watch it on TV. I am also a member of the Mercedes-Benz Club of South Africa and, by being a member I can further enjoy my hobby. Squash is one of my favourite sports, and I was fortunate to represent my Province at National level. The South African Masters Squash tournament is held annually in SA and is the largest squash tournament in the world with about 850 players entering. For the past 14 years I have been a participant in this game concluded Gerrit.

SPECIALIST BROKER

New Class of Specialist ‘Principal Broker’ Promises to meet Today’s Business Needs by Walter Cronje Executive General Manager Glenrand M.I.B. Risk Services a member of the FIA Insurance brokers have never been more challenged – legislative, statutory, business and moral imperatives such as those contained in King 111, the revised Companies Act, FAIS, the Financial Services Charter, the Consumer Protection Act etc, have created a demanding operating environment for the short term sector and its clients. Moreover, the broader business enterprise risk scenario has arguably never been more complex and the pressure is on corporates to curb costs while remaining adequately insured in the face of shrinking margins and cost cutting. In a climate such as this, identifying and dealing with existing and emerging enterprise risk cost effectively is increasingly problematic, requiring sophisticated bespoke insurance solutions, melded with commoditised insurance products where appropriate. That’s according to brokers Glenrand M.I.B. who have introduced a new generation of specialist, senior ‘Principal Brokers’ to meet what they describe as a distinct need in the market place, while simultaneously creating a new career path for individuals with a particular interest and ability in a specialised field. “Re-evaluating and optimising business models while securing assets is key to the survival of business going forward” says Walter Cronje, Executive General Manager, Glenrand M.I.B. Risk Services. “In this context, today’s short term insurance broker has a vitally important role to play in scoping and formulating covers to maximise protection while minimising and transferring risk where possible, using a combination of traditional and new generation techniques” he adds. “It’s an environment that requires innovation, specialisation and consultation of the highest order and in response we have taken the initiative in the short term sector and created a new cadre of ‘Principal Brokers’ who bring to the table new levels of excellence and expertise. “Principal Brokers may be likened to partners in, say, legal or auditing firms where such individuals specialise in particular fields and enjoy senior status and a rewarding career path that does not necessarily oblige them to follow the management route to personal and business achievement. “We have applied a similar premise to our first group of Principal Brokers within Glenrand M.I.B. Risk Services, in a pioneering move that sets new precedents for our sector. “It’s early days of course but we are convinced the Principal Broker concept will gain increasing acceptance in South Africa as, indeed, it has done, internationally. “Basically the idea is to raise the expertise bar if you will, to meet modern business needs while opening the door to seniority, paralleling the conventional management route, without necessarily being burdened with the demands of management.

“Importantly, these new career paths will in no way be at the cost of our existing capacities and service. Rather, the idea is to supplement those capacities with complementary, specialised excellence, offering key deliverables that are above and beyond those of the competition, thus tying in neatly with our other strategies in terms of high end clients. “We see this premise working on many levels. Typically in our industry if a talented, productive broker wished to advance his career, his only option would be to move into management. “While making a valuable contribution in a management role, due to their responsibilities such individuals may not have the opportunity to realise fully the potential of their talents in a particular field or fields. “The Principal Broker route, on the other hand, allows them to define a new, heavily consultancy orientated role that allows both the time and the opportunity to develop particular expertise, while adding real weight to Glenrand M.I.B.’s well of intellectual property and, for that matter, the knowledge base of the short term industry itself. “The ‘streaming’ of individuals in this sense is analogous to academic choice where an individual identifies his strengths and chooses to specialise in an area of study or practice that makes the most use of those attributes. “A further key facet of this approach is that it enables Glenrand M.I.B. to compete for the ‘best-of-the-best’ talents, thus helping to address an acknowledged weakness of the short term insurance sector, compared with, say, law, engineering, accountancy, or indeed, even the investment/long term side of insurance per se. “For now, the Principal Broker structure applies in our Risk Services division, but could be rolled out across our other divisions.” Adds Leo Morwe, Glenrand M.I.B.’s General Manager, Human Resources, “We have not entered into this lightly. We researched internally and found considerable support for the new approach. Moreover, the selection criteria are strict – participating individuals are required to have at least ten years international or local experience in the short term industry or related sectors, five of which must be at account management level and they will be encouraged to further their studies and training within the scope of their specialised area of expertise. “Importantly, implementation of the new structure positions Glenrand M.I.B. uniquely relative to the rest of the market while allowing us to attract and retain talented individuals, thus helping to address the endemic skills shortage in the short term sector. “All this is very much in line with our thinking that, in order for us to continue to be a successful company, it’s critical to align individual talent with overall business objectives. “At the same time it will ensure that we continue to be a company where employees are proud to work and where they are fully engaged in their business and passionate about their careers.”

“The Voice of South Africa's Tow Truck Industry”

The world cup has united the country like never before bringing South Africans of various cultures together as one nation. Our mission is to provide the highest standard of towing and recovery services to consumers on a local and regional basis and to continuously strive for flexibility in servicing the consumer and our member's needs in an expedient and cost efficient manner. We strive to make continuous improvements to our services and the upliftment of our service providers by: • Encouraging our members to uplift their company operating status, improve dispatching technology and driver professionalism. • Facilitating, aiding and investigating new technologies to improve dispatch systems and to enhance administrative and financial functions. • Continuing to contribute to improve our towing and recovery sectors to provide greater uniformity of service in all regions. !• The forming of workshops with government and the insurance fraternity on the question of Regulation within the industry. This is a contentious issue where all needs, concerns and aspirations of various towing communities and the public need to be addressed and accommodated. “The significant problems we have, cannot be solved at the same level of thinking with which we created them” Albert Einstein

FOR ALL YOU ROADSIDE ASSISTANCE NEEDS

CALL 0861 1 UTASA 0861 1 88272

H E A LT H C A R E

New Force in the Healthcare Industry In line with Sanlam’s strategic focus on growing its medical fund

leveraged aggressively in the South African healthcare market. This will

capabilities and becoming a more significant player in this industry,

create an advanced and robust organisation, offering an alternative to

Sanlam Healthcare Management (SHM) announced that it will merge

funds and members seeking flexible services and products.”

with medical fund administrator Eternity Private Health (Eternity) (subject to regulatory approval). Eternity is a well-established provider of

Sanlam re-entered the medical scheme industry in 2007 and has since

administration, health risk, managed care and information technology

been actively growing its market share and the scope of its business. It

solutions in the medical scheme industry. The transaction will increase

currently administers BESTmed, an established open scheme in the

the number of lives under administration at SHM to approximately 175

South African healthcare funding industry, and in January, Telemed was

000, will significantly bolster SHM’s IT managed care and administration

amalgamated into BESTmed, a move which significantly grew SHM’s

capabilities and will further broaden Sanlam’s involvement in the affluent

member-base.

and professional markets through Eternity’s administration of the Chartered Accountants Medical Aid Fund (CAMAF).

Eternity’s IT arm, Cumulus Integrated Solutions, will form part of the new group but will retain its independent identity and will be offering its

Anton Gildenhuys, Chairman of SHM, says, “The merger will deliver both

products and services in healthcare administration and employee

growth and diversification to SHM. The administration of the 45 000

benefits to the rest of Southern African and African markets.

CAMAF lives, previously administered by Eternity, will not only provide for growth in SHM, but also represent significant progress in our strategy to offer diversified solutions to the market segments in which we operate – in this case specifically the professional market where we are growing strongly through our Cobalt for Professionals solution.” Gildenhuys says, “Eternity’s IT capabilities will strengthen SHM’s ability to offer a differentiated and superior service to its clients. Sanlam also identified that Eternity, through its excellence in risk and clinical management, has a very unique and successful approach to managing medical schemes benefits. This is done by working collaboratively with providers to achieve the best cost-effective quality outcome for the members.” Grant Newton, Eternity’s current group chief executive, who will be heading up the consolidated new entity going forward, says, “In an everchanging healthcare environment in South Africa, consolidation is necessary to ensure cost-effective excellence. After discussions with a number of the major players, our obvious choice was to merge with Sanlam. The investments and advances Eternity has made in systems and healthcare risk management locally and internationally can now be

HUMOUR

Laugh and the World Laughs with You... Humour from the Insurance Conference

Heaven or Hell?

On the Monday afternoon at Sun City at the Insurance conference, Mark Winkler Vice-Chair of the East Rand Branch attends the session on Solvency Asset Management.