MoneyMarketing Short Term Insurance Supplement

SHORT-TERM INSURANCE SPECIAL SUPPLEMENT

HOW TODAY’S UMA MEETS MODERN-DAY INSURANCE NEEDS PAGE 17

CYCLONE IDAI AND THE IMPORTANCE OF RESILIENCE PAGE 16

BL O C KC H A I N T R A N SF OR M I NG HOW I NSU R A NC E WOR K S PAGE 18

SHORT-TERM INSURANCE SUPPLEMENT

VANESSA OTTO-MENTZ Head: Group Strategy Unit, Santam

31 May 2019

CYCLONE IDAI AND THE IMPORTANCE OF RESILIENCE

T

he vulnerability of developing African nations came under the spotlight again during the humanitarian tragedy caused by Cyclone Idai.

At the time of writing, the cyclone and flooding had displaced 134 645 across Mozambique, Zimbabwe and Malawi, affected a total of 1 118 896 people, with a death toll of 820. Science is clear that climate change is causing more frequent – and more devastating – natural disasters like these.

In the Southern African context, we know society faces several challenges: Increasing local risk levels due to climate change, lack of protection in terms of limited physical and institutional infrastructure, as well as a very low penetration of insurance cover.

All of these taken together increases vulnerability and loss exposure for individuals, business and government.

We’ve seen the impact of this over the last few years where South Africa was hit by a series of extreme weather events, for example the prolonged drought – the worst to hit in 100 years. It affected the country in numerous ways – some predictable, others less so. For example, we could predict farmers’ harvests would be at risk. A less obvious effect was the hardening ground causing walls and floors to crack. Another impact was rising tensions and small incidents of social unrest which, if the drought was prolonged, would most likely have exponentially worsened.

It is vital that the global insurance industry takes its role as risk manager, risk carrier and investor seriously, given the uncertainty we face globally due to rising environmental, social and governance (ESG) risk. First and foremost as an industry, we must make our contribution to narrow the risk

protection gap by shifting our role to be more organisations should strive to do. We also need to influential in our advice and covers that protect give people the platforms to proactively innovate. our customers and society at large. That’s why, as a The Santam Safety Ideas Challenges does just that, group, Santam has chosen to play an integral part encouraging Insurtech and FinTech start-ups to in creating the ESG guide for the global insurance find sustainable solutions to the challenges South industry, which was launched at the 2019 PSI Africa collectively faces.

(Principles for Sustainable Insurance) Allianz Event.

Finally, working with decision-makers is vital.

We know that the time to begin building the Supervisors and regulators are under pressure foundations for a sustainable future is now, in a to improve societal resilience, reduce disaster time of unpredictability, in reflecting on what and risk, reduce unemployment and improve poverty how we underwrite the transactions in our global statistics. We need to partner with them on this economy. We encourage all journey. By helping them to better participants in the general understand climate risk and the insurance sector to engage IT IS VITAL THAT THE sustainable ESG solutions required, with the guide, which is open be able to set national-level GLOBAL INSURANCE they’ll for public comment until 30 targets and incentivise the activity INDUSTRY TAKES June 2019. The ESG guide is necessary to reach these goals. We an opportunity to streamline are therefore delighted that South ITS ROLE AS RISK information requests and Africa’s Prudential Authority is MANAGER, RISK build knowledge within the engaging with the industry on the CARRIER AND insurance industry, making it Task Force for Climate-related easier for business partners to INVESTOR SERIOUSLY Financial Disclosures in relation carry out ESG due diligence on to the physical and transition risks clients and transactions. a changing climate implies for South Africa and the Through our role as partner, adviser and broader financial sector. community rebuilder, the insurance sector is Idai has shown, once again, that the world well positioned to play a role in helping society is changing, extreme weather events are become more resilient. Community partnerships increasing, and, as a global society, we’re woefully are also vital. We’ve seen the power of these underprepared for all their implications. As through Santam’s Partnership for Risk and insurers, we have the responsibility to protect Resilience (P4RR) Initiative, which equips some people’s lives. This means also protecting their of the country’s most vulnerable communities homes, businesses and other assets. Ultimately, our through disaster management training and role is to help people prepare for the worst and then resources. Partnering for sustainable development rebuild once it’s over. This means joining hands and is one of the global SDGs and something all building resilience in every way we can.

TAKING THE REINS AT IING

N

ewly-appointed president Commenting on the industry, of the Insurance Institute of Graham notes that it’s a time of huge Northern Gauteng (IING), change. “New technology, a tough Natalie Graham, says the South economy and stringent regulatory African insurance industry must requirements are combining to create focus on training, transformation a highly challenging market right and service if it’s to now. The only weather the changes way we’re going to IING IS ABOUT buffeting the sector. move forward as an Graham, partner industry is to make GETTING of the broker channel sure that we evolve LIKE-MINDED at King Price – or, as our skills, offerings INSURANCE she’s known at King and service levels to Price, the queen of stay relevant to our PROFESSIONALS broker business – clients and society TOGETHER TO GO succeeds Santam’s at large.

BEYOND SIMPLY Anton Coertzen at “IING is about IING. “My passion is getting likePUTTING IN THE service,” says Graham. minded insurance HOURS NEEDED TO “Anton’s tenure was professionals firmly focused on together to go EARN CPD POINTS training, and I’d like beyond simply to combine his legacy with my expertise putting in the hours needed to earn to create an organisation that’s relevant CPD points,” says Graham. “It’s to our members going forward.” about finding presenters who make

16 WWW.MONEYMARKETING.CO.ZA

our members think, and providing training on aspects we might not touch on very often – because you don’t know what you don’t know, until you do. And it’s also about sharing new experiences and insights that fundamentally change the way we think about insurance, and building a community within the industry.”

Graham says she’s well-supported by a “vibrant and diverse” IING committee, which includes national brokers, smaller independent brokers, industry suppliers, and various insurers, with a combined total of more than 100 years’ experience in the industry. Some committee members, she notes, have been involved for years, and that’s experience she’s grateful to have on her side. But she’s also excited about the ‘newbies’ who were voted in this year. “Younger people bring a fresh perspective and teach us to look at

things differently. One person can’t manage everything, but collectively we’re a strong and confident team.”

While most of Graham’s 21 years in the insurance industry have been in the broker space, she believes her experience across a range of disciplines – including claims, service, training, and even a brief stint as a motor accident loss adjuster – will stand her in good stead as she prepares to lead IING into the next two years.

Natalie Graham, President: Insurance Institute of Northern Gauteng

SHORT-TERM INSURANCE SUPPLEMENT

31 May 2019

MARTIN LE ROUX Managing Executive, Outsourced Business Solutions, Centriq Insurance

I

f there ever was an industry that has recently been the subject of much change and dynamic fluidity, it’s the South African insurance industry. From Solvency Assessment and Management (SAM) right through to the changes in binder regulations and premium collection considerations, the industry has and will continue to be a hub of constant regulatory transformation.

It is only human to wonder from time to time whether the Underwriting Management Agency (UMA) model is still a viable option for brokers wanting to provide the best possible insurance outcome for their clients. And while my answer may be perceived by some as biased, given Centriq Insurance’s current involvement and ongoing commitment to the UMA, it has always been and will continue to be an unequivocal ‘yes’ – the UMA is a favourable solution that meets the needs of modern-day insurance buyers for the following reasons:

HOW TODAY’S UMA MEETS MODERN-DAY INSURANCE NEEDS

Unequivocal expertise and business support Many, though not all, UMAs operate in niche or specialised areas of insurance and often represent the best of breed in their markets due to their specialised skills and expertise in focused classes of insurance business.

This provides brokerages with the ability, assurance, assistance and support they need to provide their clients countrywide with expertise in fields that they (the brokers) may not necessarily specialise in.

Well-positioned to service complex needs The fact that most UMAs are entrepreneurially-based, smaller operating, owner-managed businesses usually make them more agile and able to respond to some of the more complex or specialised broker requirements (i.e. bespoke policy wordings, etc.) in a quick and efficient manner. This agility and

manoeuvrability of UMAs typically manifests in superior service delivery across policy administrative (i.e. policy issuance) and claims issues, benefiting the broker and its clients in various ways. In many instances, the typically smaller nature of most UMAs means that it’s usually easier for the broker to get a decision made on complex claims, for example, which has a positive impact on all subsequent processes and procedures that need to be adhered to.

a unique selling proposition in the market place, and remains as relevant for brokers as it has ever been.

Flexible service and product delivery, quality skills and an unprecedented hands-on approach to doing business in a modern yet traditional market are all key components of most of the UMA models we see in the South African insurance industry today.

Ability to provide out-of-the-box solutions The UMAs’ ability to operate with a reasonable degree of autonomy allows them to be more flexible and efficient than some of the larger, more typical corporate insurers when it comes to providing brokers and their clients with out-of-the-box insurance solutions in a time-efficient manner.

As such, our sense is that the UMA has managed to carve out for itself

In an uncertain financial climate, our client-centric approach of developing strong relationships with partners and clients, while boasting a deep understanding of their business, helps us to create unique solutions. With expertise in Alternative Risk Finance, UMA’s and Alternative Distribution / Affinity Solutions, it’s little wonder why so many companies are using us for their insurance solutions.

PARTNER WITH AN INSURER YOU CAN TRUST.

011 268 6490 | www.centriq.co.za Centriq’s insurance subsidiaries are authorised financial services providers

WWW.MONEYMARKETING.CO.ZA 17

SHORT-TERM INSURANCE SUPPLEMENT

THOMAS KIECK Business Development Director, Tial Technologies

T

echnology is rapidly transforming the insurance industry, but there’s one technology that is standing out more than any other.

Blockchain technology is overturning the industry, from better risk visibility and faster claims processing to collectively fighting fraud – blockchain can provide comprehensive benefits across the insurance value chain.

Insurers that leverage blockchain have the potential to dramatically reduce operating costs by automating the manual tasks involved in requesting, exchanging and entering data in areas such as underwriting, claims and reinsurance.

By automating these manual tasks, it will also speed processing, improve data quality, reduce fraud and provide real-time transparency into the status of transactions for all parties.

Obstacles to overcome Insurances companies face a number of challenges related to complex

31 May 2019

BLOCKCHAIN TRANSFORMING HOW INSURANCE WORKS

compliance issues, limited growth in mature markets, fraudulent claims, third-party payment transactions and handling of data.

With the arrival of connected devices and increasing growth of data generated by the Internet of Things (IoT), insurers have to sift through the data that matters in order to deliver tailored solutions of services and products.

The move to digital transactions has left many insurers wondering how to streamline processes and secure sensitive information.

Stepping into action There are many opportunities surrounding blockchain and, while it might not be the answer to all obstacles faced by the industry, it does provide foundational technology that promotes trust, transparency and stability.

Blockchain is in the early stages of adoption, however there are already a number of ways that insurers are leveraging the technology to mitigate obstacles:

• Automatic verification of the authenticity of identity, medical or police records, ownership and location history, the supply chain of a product, etc. The administrative costs associated with verifying policyholders’ identities, claims and third-party data can be reduced by automating the operation.

• Automated claims handling using blockchain-based smart contracts can automatically pay out based on the conditions set in the smart contract.

Claims don’t require assessment, as they are publicly verified.

• Smart contracts that automatically update tariffs based on the policyholder’s verified data.

• Improved insurance fraud detection by automatically checking the data required by the insurer to ensure the customer is properly covered. This can also prevent customers from accidently filling in quote forms incorrectly, and paying for inadequate cover or more cover than they actually need. By minimising the potential for fraudulent activity, customers can

benefit from lower premiums.

• Preventing multiple claims with various insurers from being made for a single event, as data is shared cross-industry.

• Connecting the IoT with smart contracts, which will automatically trigger a pay-out should a connected device detect the occurrence of an insured event.

Summing it up Insurers need to get into the blockchain game – familiarise themselves with the technology, identify promising use cases, and gain experience of collaboration within emerging ecosystems – so that they are not left behind as blockchain networks take shape and form across the industry.

Blockchain has the ability to help insurers save time and money, as well as improve customer satisfaction. And, as higher levels of trust are established between the insurer and the insured, stronger relationships will be built, ensuring loyalty and future success.

SASRIA CONFIDENT OF MEETING CLAIMS DESPITE RISING PROTESTS

S

asria is confident it is more than adequately community upliftment projects spanning from capitalised to meet rising service-deliveryeducation, and building houses for elderly and other related and all other claims. The business is vulnerable members of society, to contributing a state-owned insurer established 40 years ago to towards community self-sustainability projects. protect organisations, businesses, municipalities Sasria – like all financial institutions – is and individuals from losses related to riots, strikes, accountable primarily to two regulatory bodies, the terrorism, civil commotion and Prudential Authority as well as public disorder. the Financial Services Conduct “Though we have THE ORGANISATION’S Authority (FSCA). Together with experienced a considerable rise Sasria’s own robust governance FINANCIAL POSITION framework, these two institutions in the number and severity of REMAINS EXTREMELY ensure that the business stays claims in the recent past, the organisation’s financial position a considerable distance from HEALTHY remains extremely healthy,” harm’s way. says Cedric Masondo, Managing Director.

“We have also benefited in recent times from “Since the initial modest capital injection to set up growth in premium income, which grew on Sasria’s operations, the business has been self-reliant average by an inflation-beating 9% per annum,” and continues to maintain a solid balance sheet.” adds Masondo.

He adds that Sasria’s solvency ratio is more than double the ratio required by the regulator of shortterm insurance businesses in South Africa – and since the business was established in 1979, Sasria has never asked for capital injection from the state or, more specifically, South African taxpayers.

“Instead, we have contributed over R1bn in dividend payouts to the fiscus over the past seven years,” he states.

Masondo believes it is this continued financial stability that has allowed Sasria to gradually take on a more expanded role in society, including

18 WWW.MONEYMARKETING.CO.ZA

“Sasria is a pillar of the community in many ways, as we ensure business continuity – we restore individuals, organisations and municipalities back to their financial position following a disruptive incident.”

Masondo says that what is less acknowledged is the fact that Sasria also gives comfort to the international investor community in that should they lose their property or assets during a period of social instability, their assets will be protected at a reasonably affordable rate.

“Sasria premiums (cost of risk cover) have remained largely unchanged for 10 years,” he points out.

He urged all individuals, businesses and municipalities to ensure they have adequate cover for special risks on key assets, as the country is expected to continue to experience an increase in incidents of social instability resulting from service delivery protests.

Cedric Masondo, Managing Director, Sasria

Developing and delivering software solutions for the insurance industry

SystemA

Tial Technologies flagship insurance management system has been around since 2001 and has continually evolved to keep up-to-date with technology, legislation and the ever-changing insurance landscape.

Our comprehensive solution portfolio integrates the entire insurance value chain and it supports data transparency, integrity and powerful analytics.

“Since our inception, Tial has been at the forefront of technical and service innovation.”

For more information about our product and service offerings, contact us today to schedule a meeting. +27 (0)11 807 1030

•

info@tial.co.za

•

www.tial.co.za

SHORT-TERM INSURANCE SUPPLEMENT

ROSS SIBBALD Commercial Director, Striata Africa

INSURERS NEED TO EMBRACE CUSTOMER COMMUNICATION

T

raditionally, insurers have lagged behind other industries when it comes to customer communication. If customers did receive communications from their insurer, it would most likely be after they’d filed a claim, or if it was time to renew their policy.

But in a world where customers are used to other companies placing them at the centre of their experience, that’s no longer viable.

If established insurers want to avoid being usurped by new, disruptive players, they need to embrace customer communication.

Importantly, that messaging needs to be highly personalised and tailored to each customer. Fortunately, technology means that it’s possible to provide that kind of personalisation in a way that’s automated and, more importantly, effective.

The need for improvement The insurance industry’s issues with customer communication aren’t just related to the infrequency.

Stats show that more than 90% of insurers worldwide do not communicate with their customers even once a year and that 20% to 40% of their customer base will not receive a single communication all year.

Even when insurers send an appropriate amount of communication, they often send out the wrong kind of messaging.

According to Oliver Borner, principal business solutions manager for global customer intelligence at SAS, “The typical insurer’s customer communications are 90% to 99% sales-focused and 1% to 10% service-focused, but the goal should be 70% of communications directed at serving the customer and building trust, and only 30% aimed at sales.”

With new, disruptive players – who understand the need for customer communication – entering the insurance space, business as usual simply isn’t an option for traditional insurers.

The power of personalisation The most important step insurers can take when it comes to improving customer communication is using the considerable data at their disposal to ensure that messages are as personalised as possible.

MESSAGING NEEDS TO BE HIGHLY PERSONALISED

That doesn’t just mean knowing a customer’s name, or what products are best suited to their needs. It also means being able to communicate with them on the channels they’re most comfortable with and that they can access at any time.

Insurance customers want to interact at a time and via a channel of their preference.

They require real value from the interactions they have with their insurers. They expect both marketing and services to be highly personalised, from content to pricing.

Communication must be seamlessly crosschannel, consistent and delivered in real-time.

Embracing automation Of course, this kind of personalised communication wouldn’t be viable if it had to be done manually.

Automation, enhanced by artificial intelligence (AI) and machine learning (ML), allows even the biggest insurers to provide their customers with personalised, relevant communication.

This combination of automation and personalisation has the chance to fundamentally change the way insurance works.

It’s already possible, for example, to have an automated buying experience, using chatbots that can pull on customers’ geographic and social data for personalised interactions.

Carriers will also allow users to customise coverage for specific items and events (known as on-demand insurance).

According to McKinsey, automated customer service apps that handle most policyholder interactions through voice and text will ensure that claims are resolved in minutes rather than days.

People-centred insurance Ultimately, combining personalisation with automation results in insurers that aren’t just customer-centric, but people-centric.

Insurers who embrace this approach must, however, commit themselves to a cycle of continuous interaction with constant adaptation.

Those who get it right stand the chance to realise serious benefits, turning customer experience into a significant competitive advantage.

As Commercial Director of Striata Africa, Ross Sibbald is focused on leveraging the power of digital communication to achieve the desired results for Striata clients. Ross is also responsible for guiding and managing client retention and growth, defining strategy and execution plans, resourcing and incentivising appropriately and managing performance against business goals.

16 WWW.MONEYMARKETING.CO.ZA

31 October 2019

GROWING LIABILITY RISKS THREATEN BUSINESS SUSTAINABILITY

T

he liability risks that South African businesses face as a result of possible product defects are increasing by orders of magnitude with each passing year, and SHA’s Specialist Risk Review has revealed that as many as 21% of businesses have been faced with a product liability claim in the past five years.

Nevertheless, many businesses are still not applying appropriate risk management measures against possible liabilities.

This is according to Manisha Chiman Executive Head: Liability Underwriting at SHA Specialist Underwriters, who says the market is becoming increasingly litigious, and that claim amounts have steadily increased in recent years. “The advent of the Consumer Protection Act and the rise of social media have had a particularly significant effect on this trend. Customers are not only becoming more aware of their rights in the event that they suffer damages, but social media platforms have enabled individuals to connect and become involved in class-action suits at an unprecedented rate.”

Looking at examples from SHA’s own claim data, Chiman says that product liability claims have shot up from an average of R1.65m per claim in 2016, to around R14.25m in 2018. “During that same time span, personal injury claims have grown from an average of R172 600 per claim in 2016, to R270 690 in 2018.”

With this in mind, Chiman says that it is absolutely vital for businesses to make sure that their liability risks are adequately managed. “A single liability incident has the potential to cripple a company, which is why having adequate insurance cover in place is critically important. In addition to broad-form liability cover, product liability cover (which only an estimated 30% of businesses currently have) is crucial as well.”

She adds that businesses have an obligation to mitigate their risk of incurring liabilities as much as possible, by putting the correct procedures in place within their organisations. “SHA’s research has found that just 44% of businesses conduct their own quality-control audits and only 43% ensure that their supplier and client risks are managed through adequately worded contracts, and even fewer (36%) conduct due diligence to confirm that their suppliers have sufficient liability cover.

These measures are absolutely vital in protecting one’s business interests and insurers are increasingly going to insist on seeing proof that their policyholders are doing that.”

Having a product recall strategy is another often neglected element of risk management that insurers will increasingly focus on. According to Chiman, it is still far too common to see businesses with no recall strategy in place, with the prevailing sentiment being that one only needs to think about it when it happens. However, when there is a major product defect that could cause litigation in future, recalls need to be put into effect as rapidly as possible, leaving no time to develop a plan.

“Liability is currently the biggest risk to the long-term survival of any business, and having a single insurance policy in place to cover the growing risk landscape is simply not good enough anymore. Business owners need to have the conversation of broad-form liability with their broker on a regular basis, Manisha Chiman, and ensure that all necessary Executive Head: Liability risk management measures Underwriting, are effectively implemented,” SHA Specialist Chiman says.

Underwriters

DSY_DBI_MoneyMarketing_PrintAd_85x305mm_curves.pdf

31 October 2019

1

SHORT-TERM INSURANCE SUPPLEMENT

THE TALE OF THE TAIL: CLAIMS-MADE MEDICAL MALPRACTICE INSURANCE

M

edical malpractice insurance is a special type of professional indemnity insurance – a form of liability insurance.

It provides insurance for healthcare professionals and healthcare facility operators for their legal liability to a third party, for losses proximately caused by their negligence in the conduct of their professional business.

Like any liability insurance, it does not absolve the practitioner or facility of their liability to the third party. It is, however, a way of shifting the financial burden of any liability subject to the limit of indemnity and payment of any deductible.

Traditionally, medical malpractice cover has been provided through a claims-made policy, which covers claims, as defined, arising after the start and retroactive dates of the policy in force, first brought against the insured while the policy is in force. Various claims-made policies may provide for extended reporting periods and deeming provisions where an event is first notified while the policy is in force, but the claim is made against the insured after the policy is ended.

There is also available occurrence-based cover, which provides cover for events that occur during the period of insurance, even though the claim is made after the end of the insurance. An occurrence-based policy protects against claims arising from incidents occurring while the policy is in force, no matter when they are reported, even if the claim occurs years after the end of the insurance. Under a claims-made policy, the insured is protected for incidents, which both occur, and are reported, while the policy is in force.

Whether the policy will respond to a claim will be informed by the terms of the policy, the retroactive date, any notification obligations of the insured to the insurer, any deeming provisions and any extended notification periods.

Medical malpractice claims are usually made by a patient (or their dependants) against the healthcare practitioner or healthcare facility sometime after the treatment is provided and an adverse health event occurs. The ‘tail’ refers to the time period between the adverse event occurring and it being reported, and a medical malpractice claim being made. There may be a delay between the adverse incident occurring and the patient becoming aware that they have suffered harm and have a claim. Adult patients have three years within which to institute a claim. The running of the three years commences on the date on which the patient becomes aware that they have suffered harm and are aware of the identity of their debtor.

It is rare that claims are made soon after the adverse event occurs.

To protect the insured under a claimsmade policy, this delay is dealt with by way of ‘tail’ cover or ‘run-off ’ cover – or under

extended reporting provisions in the event of the insured’s death, permanent retirement, immigration or ceasing to work due to permanent ailment or ceasing to practice as a healthcare practitioner. An extended reporting period usually may be obtained without payment of additional premiums. Where there is tail cover, there is the benefit of protection in perpetuity for claims arising from that particular period of practice without the need to acquire, with or without an additional charge, the run-off cover.

It is possible to move between claims-made insurers without purchasing a tail where the new insurer will take over the predecessor’s insurance responsibility for writing the policy retroactively over the previous insurer. It picks up the retroactive date offered by the previous insurers. Where the new insurers provide protection for a former practice, it is known as nose coverage. Tail coverage refers to medical malpractice coverage for a claim that may arise a given number of years after that practitioner discontinues the medical malpractice insurance policy.

The retroactive date is the date from which the insured held uninterrupted indemnity insurance, even if the insured has changed insurers in that time, or from the date where the insurer has agreed to cover the insured.

Any claim that arises prior to the retroactive date would not be covered. The retroactive date would normally be from the first day the healthcare practitioner or facility started practicing or, if the insurer has changed and there is an existing professional indemnity policy in place, the date that the existing policy started.

The start date of the policy is the inception date, but work done by the healthcare practitioner/facility before the inception date of the policy with the insurer, back to the first date of the retroactive period, would be included under the cover. Under a claims-made policy, the retroactive date serves to exclude claims for events which occur prior to that date, even if the claim is first made during the policy period and may be used to eliminate coverage for events that give rise to claims in the future and to prevent obsolete claims which arise from events following the past. Where a claims-made policy is renewed or insurers change, it is important to preserve the policy’s original retroactive date.

Tail coverage does not cover the healthcare practitioner or facility for active practice but for events that occurred while the policy, since discontinued, was active. It is usually a built-in feature of occurrence-based policies.

C

M

Y

CM

MY

CY

CMY

K

Donald Dinnie, Director, Norton Rose Fulbright South Africa Inc

WWW.MONEYMARKETING.CO.ZA 15

9/16/19

SHORT-TERM INSURANCE SUPPLEMENT

31 October 2019

EVERYTHING IN ITS PLACE: TECHNOLOGY VS THE HUMAN TOUCH

W

hen Unimate, the world’s first programmable robot, was sold to General Motors in the early 1960s to handle hot metal, a world swept up in the Space Race fell hard for the idea that a robot could be used whenever and wherever the task was too dangerous for a person. The romance quickly faded; in fact, the more dangerous a situation, the more likely you were to need a person calling the shots.

Sixty years on and we find ourselves in a similar place. We have the most phenomenal automation and artificial intelligence technology available to us: from chatbots to robotic surgeons to machines writing their own languages. But there are still some very real limits to what technology can do, and if the likes of Amazon are publicly admitting to having problems with their own artificial intelligence implementations, how on earth does an ordinary South African small Innosys ad.pdf

1

2019/09/09

business decide what calls for smart technology and when to leave things in the hands of a good old-fashioned human?

• Value, not cost. Just because technology can reduce the cost of a business process, doesn’t mean that it will necessarily improve the process or the result. If having a person rather than a bot means you will produce better value for the customer, and ultimately your business, have the person.

• If a customer is upset, the robot can’t pass the tissues. When Honda tasked its ASIMO robot with leading museum tours, it failed dismally because it wasn’t able to differentiate between people raising their hands to ask a question and people waving hello to it. Technology is bad at correctly handling abstract concepts and emotions. In any scenario where your customer is likely to be 16:56

upset (complaints or claims), giving immediate and easy access to a welltrained person will do far more for a positive customer experience than a prompt auto-reply purporting to be sorry for their loss.

• Fifty shades of (decision-making) grey. As good as software is at handling complexity, the sorts of systems we work with in the business environment are not yet adept at understanding nuance.

Situations that ask for equal parts rule book and judgement, like the underwriting of large and nonstandard risks, are best left to the professionals for now.

• Meet or manage expectations to exceed them. I don’t mind chatting to a service bot, I don’t mind if it’s been given a human persona, but I do like to know it’s not a real person on the other side of the messenger box when I start the conversation. If your customer would otherwise be

expecting to interact with a person and you’ve introduced technology, or even vice versa, make sure to set their expectations correctly, and in advance. Zero value is achieved for anyone if the customer abandons an interaction.

You don’t need super intelligence, artificial or otherwise, to spot the theme in the points above: your customer. If you keep focus on providing them with the best possible value, and the most positive experience, choosing between humans and machines becomes much easier.

Claire Wood, Managing Director, Innosys

We build, With tried-and-trusted modules for insurance and deep

software expertise, we customise a solution for your business.

C

M

Y

CM

MY

CY

CMY

K

You own,

No annual licence or per-user fees.

Built for your business, uniquely yours.

We upgrade.

Improvements and updates. We evolve your software to match your business needs.

INSURANCE SOFTWARE info@innosys.co.za +27 11 532-8300 @InnosysZA

18 WWW.MONEYMARKETING.CO.ZA

SHORT-TERM INSURANCE SUPPLEMENT

31 October 2019

DEX MACHIDA Senior Manager: Insuretech Management Consulting, KPMG

N

ew mobility models like ride hailing will impact personal car ownership.

Ride hailing services like Uber and Taxify processed over two million rides between them in South Africa last year. The average SA consumer is estimated to save R14 000 annually by utilising mobility services like Uber. Insurance plays a critical role in enabling both consumers and corporations to engage with the mobility ecosystem. It is vital that insurers recognise the needs within the market and transform to cater for the shift from asset to access-based mobility.

Despite the expected decline in personal ownership, the need for personal mobility remains and will be satisfied by other service providers. It is incumbent on financial services companies to identify these segments and design appropriate products.

Fewer insurable cars and lower margins are expected from increased competition for insurers competing for a declining insurable pool. Also, the declining use of current vehicles will negatively impact newer insurance models like usagebased insurance. However, there is potential for developing alternative insurance models,

THE IMPLICATIONS OF NEW MOBILITY MODELS ON INSURANCE especially those that leverage technology to determine risks at a granular and personal level.

Although the use of telematics for individual driver behaviour is well known, it is also possible to create specific profiles of segments with similar driving characteristics. Telematics can measure the length of time spent in different risk-rated areas – hence be able to measure risk more accurately at a granular level. These risks are dynamically adjusted and reflected in pricing. Drivers will now be able to decrease their premiums by changing their driving behaviour – which leads to more accurate risk rating than generic actuarial calculations. A natural consequence is the ability to transparently calculate month-to-date premiums in real time; which provides an additional incentive to modify driver behaviour.

Driver-assisted technologies are expected to reduce the number and severity of accidents – which may also drive down premiums. These cars are sensor-rich and have detecting abilities that are superior to the average human and it is expected that there will be a significant reduction in accidents. Together with increased ride-hailing

trends and shared ownership, it is inevitable that premiums will decrease, presenting a challenge for insurers. This may be counterbalanced by insurance companies using technology to drive down costs of assessment, e.g. use of drones for assessing accident damage. It follows then that with reduced personal car ownership, cars used for ride hailing will be on the road for a lot longer every day, creating the need for preventing and estimating the risk of accident, breakdowns and theft.

The pricing of insurance for automated vehicles is challenging. The moral debate of who is ultimately responsible for accidents and collateral damage is complex – how does one apportion or attribute negligence to an autonomous vehicle, which effectively is the equivalent of a robot? Or is it shared between the owner, the operator and the manufacturer of the vehicle itself? New models will need to be developed that move away from the traditional notion of personal liability. This is best described as a scenario where two identical autonomous vehicles crash into each other, due to a malfunction in one of them. A possible scenario would be a no-fault incident where each ‘driver’ is responsible for their own damages.

In an uncertain financial climate, our client-centric approach of developing strong relationships with partners and clients, while boasting a deep understanding of their business, helps us to create unique solutions. With expertise in Alternative Risk Finance, UMA’s and Alternative Distribution / Affinity Solutions, it’s little wonder why so many companies are using us for their insurance solutions.

PARTNER WITH AN INSURER YOU CAN TRUST.

011 268 6490 | www.centriq.co.za Centriq’s insurance subsidiaries are authorised financial services providers

WWW.MONEYMARKETING.CO.ZA 17

Liberty Lifestyle Protector

Liberty Lifestyle Protector is not just life insurance, it’s

In a world filled with what-ifs, your clients want to feel secure as they progress through their lives. Knowing that Liberty pays out 100% of all valid claims, gives you the assurance that your clients’ lifestyle is secured should they become critically ill or disabled. It also gives your clients comfort in knowing that their families are provided for, even when they are no longer around. Search Liberty Lifestyle Protector today to advise your clients on the right cover.

ADVICE

INSURE

INVEST

Liberty Group Ltd is the insurer of Lifestyle Protector and an Authorised Financial Services Provider (FAIS no. 2409). Terms and conditions apply.

TBWA\HUNT\LASCARIS 916426

YOUR CLIENTS’ LIFESTYLE SECURED

S H O R T-T E R M I N S U R A N C E S PE C I A L

GARETH STOKES Stokes Media

PREVENTION OVER CURE

An insurance policy is the last line of defence against commercial fire risk.

Typical risk mitigation strategies against fire events include: Introducing a hot work permit system that manages the exposure of welding, grinding or cutting on the premises; not stacking arge commercial fires are in the news once goods too high to reduce the fire load and make it more following the death of three firefighters easier to fight a fire; installing smoke detection to while fighting a blaze at the Bank of Lisbon raise the alarm at the incipient phase of a fire; and building in central Johannesburg. The fire started actively managing process waste such as plastic, on the 23rd floor and it took three days, from 5 to 7 cardboard and pallets to reduces the fire load and September 2018, before it was fully extinguished. minimise the areas where a fire can start. Aside from Around the same time firefighters contained a major on-site mitigation efforts, the risk management plan fire at a glue and paper factor in Kya Sands, an should consider the state of municipal infrastructure industrial suburb of Johannesburg. as it pertains to water supply, water pressure at site South Africa’s short-term insurers have come and local firefighting capacity. under pressure in recent years due to larger than The insurance policy is the last line of defence expected commercial property claims, often due against risk and only kicks in after all efforts to to fires at commercial complexes. In 2017-18 Old prevent a fire loss have failed. According to Bryte Mutual Insure received large claims for fire damage Insure, the claims process begins with the insurer to an abattoir, a school (damaged by the June 2017 gathering relevant information as soon as possible Knysna fires), a pack house in the Northern Cape following the loss event to enable them to validate and a church in KwaZulu-Natal. “Although each and accept the claim. “Once the claim is accepted, of these were unfortunate events, it is a privilege we determine the costs required for mitigation and to be part of the process to help our clients get business continuation and make an interim payment back into the position they were in before the – the initial actions are crucial because they have catastrophe happened,” WP Pienaar, Head: Quality an impact on the business interruption part of the Underwriting at Old Mutual Insure, says. claim,” said Reynier Rautenbach, Head: Claims Santam has reported a sharp rise in large Operations at Bryte Insure. Complex commercial commercial claims over the past three years. claims, especially the business interruption Two of the largest claims assessed component of such claims, can take by the insurer in 2017-18 occurred 18 months or longer to finalise.

THERE ARE at luxury thatch lodges. “Fires cost Old Mutual Insure discussed the South African businesses millions claims process with reference to VARIOUS WAYS annually – from acres of vineyards type of loss. “The damaged church FOR INSURERS to industrial property, fire remains generated a significant property TO PREVENT a huge and growing risk,” says John damage loss while the business Melville, Head of Risk at Santam. interruption was not material,” said CLAIMS FROM There are various ways for Pienaar. “The composition of a pack SPIRALLING OUT house loss would depend on the time insurers to prevent claims from spiralling out of control, beginning of the fire – if the loss occurred after OF CONTROL with better risk selection during the the packing season, the material underwriting stage. “Insurers need to ensure that they damage would contribute the largest share of the loss provide insurance to policyholders who practice good with limited impact on the business interruption. But risk management and adhere to the Occupational if the loss occurred just prior to the packing season or Health and Safety Act,” Melville states in an interview early in the packing season, the business interruption that took place prior to the Bank of Lisbon fire. claim would be substantial as the insured would According to Melville, all large property risks lose most of their income and may even incur a should be surveyed by the insurer before being substantial increase in their cost of working too.” placed on cover. It is also important that each Insurers are unanimous in acknowledging the stakeholder in the process – including the insurer, importance of setting correct premiums (prices) for insurance broker and insured – understand both the the level of risk exposure. Santam concluded that type of risk being covered and the losses that might large property risks should be priced according to arise following a loss event. the exposure that they carry in terms of the type of This survey should go beyond inspecting the business that is being undertaken at the premises. activity and infrastructure at the insured’s premises Most importantly: Insurers must refuse risks that to include surrounding businesses that may create a are not accurately priced and walk away from those danger to the risk insured. “Detailed risk reduction that are poorly managed. requirements should [then] be communicated to the Gareth Stokes is a professional freelance journalist and writer who insured and their broker and compliance with these specialises in the financial services industry. He recently teamed up requirements should be monitored to ensure they with Liz Still to publish a comprehensive guide to the local shortare carried out,” says Melville. term insurance sector. The second edition of ‘Everything you need to Bryte Insure agreed that all stakeholders know about non-life insurance in South Africa’ is available online at www.analytica24.co.za should take responsibility for risk assessment and risk mitigation and that closer collaboration, engagement and TO WIN A COPY OF THIS innovative use of technology and data BOOK, SEE PAGE 20 can make this process more efficient and effective.

L

WIN

{II}

31 October 2018

SAIA CONSUMER EDUCATION INITIATIVE COMMENDED The Belgium-based Global Federation of Insurance Associations (GFIA) has commended the South African Insurance Association (SAIA)’s long-standing consumer education programme as the ‘best practice’ initiative in Africa and among the top five globally – the other four came from the Americas, Europe, Asia and Oceania.

Zanele Gigaba, SAIA Transformation Manager, says: “We realise how this has become a priority for the industry, policymakers as well as regulators. As the short-term insurance industry in South Africa, we remain committed to a holistic financial inclusion strategy that seeks to reach and educate stakeholders of all walks of life.

“Through our interventions with pupils in high schools, students in tertiary institutions and ordinary adults within the targeted consumer market segment, the intention is to ensure that financial education is entrenched at an appropriate stage and that the contents are relatable and relevant to individuals’ financial needs at that stage.”

The SAIA has therefore continued to foster positive partnerships with the public entities such as the Department of Basic Education and the institutions of higher learning to successfully advance the objective of reaching the pupils and students. The association has been innovative in increasing the reach for ordinary current and potential consumers by using media platforms such as community radio stations, that allow for the use of local languages to convey the messaging to listeners, while they have the opportunity to call in during an interactive session with industry experts on the questions they may have.

The association’s TV programme (Next of Next Week, which is in its successful third season) will air on SABC to contextualise the contents from a visual perspective.

Themba Palagangwe, General Manager for Transformation and Governance at the SAIA, says: “The aim is to pitch our programmes to the right audience level and ensure the impact of our interventions lead to an improved level of financial literacy within our society. It is imperative that we endeavour to remain innovative with our content development and delivery modes to touch and impact on a wider population within the targeted consumer market segment.

“SAIA is also continuously looking for opportunities to collaborate with appropriate partners, including government agencies and other industry bodies, in developing and implementing programmes with a wider range of financial literacy content in order to advance our objectives of delivering world-class programmes to our consumers.”

S H O R T-T E R M I N S U R A NC E S PE C I A L

31 October 2018

MAGCINO GULE Senior Manager, travelsure, Old Mutual Insure

HOW CORPORATES MITIGATE TRAVEL RISKS

A

s South African corporates continue to globalise their operations at a rapid rate, it is becoming increasingly important to manage the risks that come with doing business on a global scale. One of these risks is traveling to far-flung locations to do business. South Africa’s oldest insurer, Old Mutual Insure, has recently launched travelsure Corporate, an exciting travel insurance product that allows corporates to mitigate this risk by purchasing an annual travel policy that covers their employees’ local and international business travel needs throughout the year.

This new, specialised insurance product comes with a comprehensive list of benefits, value-added features and excellent service. It is designed to put corporates and their employees at ease by making sure that, no matter where in the world their business takes them, they’re always in good hands.

THE PRODUCT HAS BEEN DESIGNED TO SUIT THE NEEDS OF VARIOUS CORPORATE CLIENTS AND HAS A RANGE OF COVERS TO CHOOSE FROM

The product has been designed to suit the needs of various corporate clients and has a range of covers to choose from.

Key benefits travelsure Corporate offers local and international travel insurance solutions designed to meet the specific needs of any business. Clients are covered for: • Medical expenses • Lost baggage and money • Delays and missed connections • Personal liability • Cancellation and curtailment • Political evacuation.

CAROLINE THEODOSIOU Director, Norton Rose Fulbright

INSURANCE INDUSTRY AFFECTED

BY EXTREME WEATHER EVENTS

O

Value-added features include: • Automatic cover for accompanying spouses and dependents • Telephonic medical advice and medical foreign language translation • Arrangements for medical repatriation • Travel management system integration.

How will travelsure Corporate benefit you or your company?

Through client centricity, systems integration and excellent service, travelsure Corporate enables Old Mutual

ur climate is changing and we need look no further than the last few years’ catastrophic weather events to see evidence of this.

Although there are some denialists, scientists tell us that South Africa is heating up at twice the rate of the rest of the globe. Whether these extreme weather events can be attributed to climate change or whether we are simply going through changing weather cycles, the effects on the insurance industry are significant.

One of the factors to consider in this environment is the increased potential for liability on the part of professionals, particularly those involved in design and construction. These professionals would be well placed to take into account the changing weather patterns in their design parameters. While the law and standards applicable to buildings are often slow to change, the professionals themselves could take steps in order to mitigate any claims that may be made against them as a result of the impact of the weather on their designs.

Directors and officers of companies who are involved in construction or similar projects would

Insure to make it easy for both brokers and corporate clients to do business with it. The insurer has also announced exciting partnerships with Europ Assistance and iJet, to differentiate the value-added benefits in the market, with enhanced risk management capabilities and technologies.

The world can be a dangerous place, yet it is filled with unlimited opportunity. Let Old Mutual Insure cover you as you travel to seek out these opportunities.

also be well placed to consider their governance obligations. Directors need to take steps to consider the changing weather patterns. They also need to avoid any actions, for example inappropriate dumping of debris, that may result in increased losses to the company. Where directors have failed to take such steps or have acted inappropriately, their actions or omissions may well cause losses to the company that may in turn result in losses to their shareholders and creditors. In such cases, the shareholders and creditors may ultimately bring claims against such directors for those losses.

Professionals and directors need to be more aware of the changes in climate and the impact on their company, profession and society. They need to consider taking appropriate steps to mitigate that impact now rather than waiting for laws to change.

Serious thought must be given to how their actions will affect the company, their profession and society in the future if the climate continues to change.

Taking appropriate action now may result in a small increase in costs in the present but may well result in significant savings in the future. {III}

S H O R T-T E R M I N S U R A N C E S PE C I A L

31 October 2018

ADDING VALUE FAR BEYOND A GOOD PRICE

S

antam has been in the business of insurance, good and proper, for 100 years. During its time, the company has seen, firsthand, how the expert advice of intermediaries transforms the lives of policyholders and their businesses.

“An intermediary plays a pivotal role in supporting clients by simplifying complex terms, assessing and addressing risk, providing expert advice and negotiating competitive pricing. In our increasingly complex business world, the intermediary has become incrementally relevant,” says Andrew Coutts, Head Intermediated Distribution at Santam.

The following, Coutts says, are some of the reasons why clients need to have expert intermediaries at their sides.

Simplicity, personalised service, choice and cost Contrary to many misconceptions, extensive research exists that shows that intermediated policies are not more expensive than those sold direct. Brokers have access to a wide selection of some of the best insurers in the country, many of whom do not sell directly to the public. Once {IV}

a broker has properly assessed your individual insurance needs they do the shopping for you, to find you the right coverage at a competitive price.

With a broker you also deal with a dedicated individual who you get to know and trust, with the added benefit of the flexibility of face-to-face engagement or interaction via online or telephone channels of your choice.

boxes each year, but changes such as building works, acquisitions or dispositions may well affect the value of the risk. If you are insured through a broker, your broker will ask questions about possible changes to your circumstances to ensure that risk protections are still accurate and you have the relevant level of cover.

Claims experience and Expertise and advice advocacy Brokers provide expert, unbiased Claims time is crunch time and an advice on your individual insurance intermediary provides invaluable needs. Unlike other providers who support throughout the process. are focused on selling you something, As a partner and advocate, an with a broker your intermediary works interests come first. with an insurer, BROKERS PROVIDE on an insured’s It is this focus on customer needs EXPERT, UNBIASED behalf, to try and rather than their speed up the claims ADVICE ON YOUR own that sets process as much as the broker apart possible. Experience INDIVIDUAL from all other INSURANCE NEEDS also shows that a insurance options. broker’s knowledge Brokers are free to make impartial and contacts can often help settle a recommendations, have access to disputed claim. specialist underwriters, help ensure Certain claims can be stressful your assets are correctly valued and for clients/businesses when they help you through the fine print.” have to provide information and When it comes to renewing a documentation in support of their policy, many people simply tick the claim. This is a time when clients

realise why an intermediary is such an essential part of their business advisory team.

Powerful support for intermediaries As a leader in short-term insurance, with over 100 years of experience, Santam continues to work very closely with intermediaries, in delivering insurance good and proper to their clients.

“We offer a wealth of support, which includes ongoing professional education through workshops and conferences, constantly innovating technology platforms, an extensive decentralised footprint and alwayson claims support solutions.

Intermediaries are and will remain our preferred distribution channel,” says Coutts.

Andrew Coutts, Head Intermediated Distribution, Santam

31 October 2018

S H O R T-T E R M I N S U R A NC E S PE C I A L

HARDENING AVIATION INSURANCE PREMIUMS CAN BENEFIT THE INDUSTRY

P

remiums are hardening in the aviation insurance industry as capacity, both locally and abroad, is contracting. Although this is not great on the pocket at first, it will ultimately benefit clients, says Reon Wiese, an aviation insurance specialist at PSG Insure, part of JSElisted PSG Konsult.

Over the last 10 years, insurers have been adding aviation to their offerings and newer, smaller aviation brokerages have been offering cheap coverage. This resulted in a glut that drove premiums down to unprecedented and, in Wiese’s opinion, unsustainable levels.

Wiese, an aircraft owner and pilot himself, admits that low aviation insurance premiums are attractive, especially considering the overall cost of this pursuit. “But while low premiums are attractive, what’s more important is that your claim is ultimately settled as expected.”

In the last couple of years, insurance companies began realising losses from their aviation lines.

“This wasn’t as a result of increased claims, but rather due to premiums becoming unsustainably low, resulting in insurers losing money,” says Wiese. Insuring a flight school with six or more aircraft for a minimal premium is good for the client in year one. However, claims will negate the premium with the first loss. Insurers then have no option but to substantially increase the next year’s premium, failing which the sustainability of the insurance line is threatened.

As a result, a number of aviation insurance carriers started offloading their aviation books.

In Wiese’s view, this process is only halfway complete, particularly in the general aviation segment. In insurance parlance, airplanes with over 50 seats are classed as airlines, while those with less are classed as ‘general aviation’.

Because prices were driven so low, increases will have to be fairly substantial going forward.

Wiese says that in both general aviation and airline insurance, prices have already gone up between 10% and 15%, depending on the insurer.

“In both segments we expect similar increases for the next CLAIMS IN five years to bring AVIATION premiums back to levels where clients INSURANCE are getting good CAN BE coverage from reliable MASSIVE underwriters who, in turn, are able to settle claims and still make an appropriate profit,” he says. To put the increases required to return to sustainable premium levels into perspective, it is worth noting that rates 10 years ago were more than triple compared to today’s levels.

Claims in aviation insurance can be massive.

Therefore, it’s important that your insurance company has good credentials and your brokerage is able to service and support you to the expected standard, he adds.

“When smaller aviation insurers or brokers exit the market because they accepted the risk at an unsustainably low rate, they tend to leave behind unsettled claims with difficult reinsurance structures and no payment. Alternatively, the claims only get half-settled with the insurer refusing to pay the claim in full. This is clearly neither to the benefit of clients, nor the aviation industry.”

South African law requires advisers to first try to place a policy in the local market. There are now only a handful of South African insurance companies that provide aviation insurance. PSG supports solid local companies with the risk they are comfortable in covering. Bigger risks are placed through a combination of syndicates within Lloyds of London and/or A-rated international insurers. “Risk sharing is a vital feature of aviation insurance,” Wiese says.

PSG Aviation is one of the biggest aviation insurance brokerages in South Africa, and the only one that provides a full-service offering across all classes of short-term insurance (commercial and personal lines).

Reon Wiese, aviation insurance specialist, PSG Insure

JAY PAGE Senior Associate, Bowmans

INSURERS MUST TAKE CARE WHEN PROBING CLAIMS

I

f it is not already high on the agenda, becoming familiar with the requirements of the Protection of Personal Information Act (POPI Act) should be a priority.

In the UK last year, a firm of loss adjusters was found guilty of unlawfully disclosing personal data illegally obtained by senior members of its staff and by private investigators. Sentencing took place earlier this year and fines of more than EUR 150 000 were imposed in terms of the UK Data Protection Act. The POPI Act is largely based on its UK counterpart.

The perpetrators were found to have illegally obtained the private bank records of an individual who they were investigating. The loss adjuster, acting for an insurer, had illegally obtained the financial information in order to ascertain whether the insured had the funds to bring legal action if cover was denied.

In the course of investigating a claim, loss adjustors routinely, if it is merited, conduct a thorough investigation not only into the circumstances of the claim, but also into the insured. The investigation, rightly or wrongly, can be particularly intensive when there is a suspicion of fraud or a suspicion that the claim has been exaggerated. According to the South African Insurance Association, fraudulent claims are estimated to account for as many as 32% of all claims submitted in any year, so there is cause to investigate.

While it is justified in certain cases to investigate further, insurers, loss adjustors and their employees must be wary of falling foul of data protection laws, as well as their duties to treat customers fairly.

One of the practices that was not sanctioned was ‘blagging’. This involves calling up an organisation that holds private information and posing as an employee or as the actual individual under investigation in order to obtain private data. This would be crossing the line. Phone tapping and intrusive surveillance likewise cross the line.

Searching online social media sites, as well as surveillance such as video recording, on the other hand, can be justified so long as there is no invasion into the individual’s private space. {V}

Client’s reaction to a stolen delivery truck.

Santam is an authorised financial services provider (licence number 3416).

KINGJAMES 43687

Together we make it right.

Intermediary’s reaction to a stolen delivery truck.

We know how important the intermediary’s role is in the world of insurance.

You can never put a limit on the value of an intermediary. From making sure our mutual clients are properly covered to providing simplicity in a world of complexity. It’s a partnership that always has and always will be very important to Santam, and why we will continue to support and invest in their success. And when things go wrong, we work together to help make it right. Santam. Insurance good and proper.

Insurance good and proper

S H O R T-T E R M I N S U R A N C E S PE C I A L

NTHABISENG MOLOI, Head of Marketing & Brand, MiWay

WHY INSURANCE POLICIES ARE CANCELLED

Policy cancellation is not something insurers carry out lightly, but it is sometimes unavoidable. It is important to understand why it happens, as cancellation can have a detrimental effect on the future ability of consumers to obtain insurance.

W

31 October 2018

hen an insurance policy is cancelled, many consumers tend to see it as unfair.

In most cases, this is because they have not fully realised that an insurance policy is actually a contract between two parties: the insurer and the insured. The contract aims to protect the insured against certain risks in exchange for a premium, and the insurer relies on the insured to provide an accurate and honest picture of the nature of the risk, based on the answers given to a set of questions.

The insurer does its best to assess what the risk is and bases the premium on that assessment. It stands to reason that if the risk changes or the insured breaches some of the terms of the policy, it has the option to cancel the policy. If, however, the risk turns out to have been higher than originally assessed, the insurer can void the policy, in which case it is as though it never existed, and all premiums will be returned.

By the same token, the insured is also at liberty to cancel the policy if he or she is dissatisfied in any way or has found a better deal with another insurer.

In that case, the insurer might make a counter-offer and if it is accepted, the contract would be amended to reflect the new terms and conditions. If not, it would be cancelled, and the insured would enter into a new contract with another insurer.

Most policies allow for a 30-day notice period of cancellation, which gives both parties time to seek a solution. If, however, there has been dishonesty or fraud, the insurer can cancel without notice.

So, what would lead an insurer to cancel a policy?

There are three main causes for policy cancellation: • Dishonesty. This would be when it transpires that the insured was not truthful about the nature of his or her risk profile, or he or she has made fraudulent claims. Most people would accept that honesty is fundamental to any business relationship – and especially in insurance, where uberrima fides, or utmost good faith, is legally considered to be the default position on both sides.

• Altered risk profile based on changed behaviour.

Some people take the attitude that once they are insured, they can take less care of whatever has been insured, on the basis that it is insured, and the insurer can just pay. This reckless behaviour would obviously result in a greater number of claims than the insurer had anticipated based on the original risk profile. In other words, the contract or policy would no longer be an attractive business proposition for the insurer. In such a case, a reputable company would first contact the insured and advise him or her to modify their

behaviour to bring their risk profile back into alignment with the policy. Only if this did not mend the issue would the policy be cancelled.

• Non-payment of premiums. When an insured party does not pay his or her premiums for three consecutive months, the insurer is entitled to cancel the policy.

Consumers should remind themselves that by behaving in a way that leads to excessive claims does not affect just themselves, but everybody who insures with that company. It is rather like a stokvel member who constantly borrows money from the fund – soon enough, the other members would request that person to leave the group as his or her behaviour is jeopardising everybody else’s chance of benefitting from the communal funds.

If consumers are unfortunate enough to have policies cancelled and they believe they’ve been unfairly treated, their first port of call would be the insurer’s own dispute-resolution team. Insurers have a vested interest in keeping their clients happy, after all. In the unlikely event that the matter is not resolved, the Ombud for Short-term Insurance will provide an objective, specialist assessment of the case and offer relief if it is warranted.

A contract must work for both parties. Once there is an understanding on the part of the consumer that the contract with their insurer is based on a certain risk profile, they will be better placed to act accordingly, and the contract will continue to provide the cover required.

STRUGGLING FOR CORPORATE CAPACITY? Don’t forget the options and benefits presented by good and proper risk finance, or alternative risk transfer, says Alfons van der Vyver, executive head of risk finance solutions at Centriq Insurance - a member of the Santam group.

C

oal, furnace risk, oil premises other combustible chemicals, plastics recycling, sawmills, textile manufacturing, (the list goes on…).

Corporate capacity is currently demanding significant price increases.

That is if you can get it in the local market at all. The shakeout in the corporate market (e.g. Plum) and lowering of reinsurance referral levels for certain direct insurers, has resulted in carefully deployed capacity. And, a significant hardening in rates.

In these circumstances, the tried and tested approach of a proper ‘self- insurance’ and/or alternative {VIII}

risk transfer (ART) strategy, could be what’s called for. At Centriq we believe that the answer is almost never only conventional insurance or ART. A properly structured corporate placement should involve a comprehensive needs analysis on the client’s risk portfolio whilst the final programme for a corporate placement should definitely cater for an element of ART or at least a documented consideration thereof.

But how should the intermediary, who has to deliver a thorough record of advice to their client, go about this?

As I we often tell brokers: “Cut the tree from three sides…”

1. Discuss with the client their risk appetite and ability to fund a formal risk retention structure.

2. Test the market at different attachment points (deductibles/ excesses).

3. Obtain indicative pricing and structuring options from your insurer.

“And then circle the tree a few times.”

Some brokers think that when they can “renew as per expiry” or reduce deductibles for their client and ‘fill the slip’, it’s a job done.

However, as the best corporate brokers know, negotiating an insurance renewal or new placement is an iterative process.

The corporate market responds to significant changes in deductible structures. It responds to loss limits instead of total sum insured.

Converting a commercial multiperil policy into a corporate wording makes a difference. Incorporating an annual aggregate deductible instead of on ‘each and every’ deductibles, makes a difference.

Reconsidering the need for conventional insurance whatsoever on certain perils, makes a difference.

(For example, a corporate with a number of premises, fairly spread apart, might not need to buy electronic equipment cover. Think group contingency policy where all subsidiaries pay the normal rate into a central structure, from which claims are settled.)

Then, an element of funding in a formal structure may give the conventional market the confidence of complete and accurate claims reporting in structure where the client has ‘skin in the game’.

Incorporating ART into a corporate programme should not result in a reduction in brokerage or commission. If the intermediary has the client’s best interest at heart, the optimally structured programme for the client will pay off in the long term.

Or think about ART like this: If you don’t offer it to your client, someone else will. And we still sell lots of what we do in this environment.

Alfons van der Vyver, Executive Head, Risk Finance Solutions, Centriq Insurance

31 October 2018

S H O R T-T E R M I N S U R A NC E S PE C I A L

THE TIME IS NOW TO DO BUSINESS BETTER

Manage and administer your customer’s policies anywhere, anytime at a single touch with MyOMinsure. You can now register and track claims, upload documents and obtain an indicative quote for personal lines within 3 minutes.

INSURE DO GREAT THINGS EVERY DAY All products are underwritten by Old Mutual Insure, an Authorised Financial Services Provider (FSP 12)

118863L

To register, speak to your senior portfolio manager or visit ominsure.co.za