African Insurance Association (SAIA)
An industry
proud of!
to be
The short-term insurance industry is an industry to be proud of. Not only does short-term insurance make a difference in the economy of our country, but it also makes a difference within communities, and in the lives of individuals. Shortterm insurance is mainly about insuring your property and/or assets. This includes motor, homeowners’ and household contents insurance. Other types are insurance that you typically take out over a short (renewable) period of time, and include travel insurance, personal liability insurance and personal accident insurance.
Economy The insurance industry, as part of the financial services industry, makes a very important contribution to the gross domestic product (GDP) of South Africa. For instance, the total contribution to the annual GDP of South Africa by the insurance sector is in the region of five per cent. The short-term insurance industry specifically contributed 2.5 per cent to the GDP in 2005, and 2.1 per cent in 2006. If one considers that in 2006 (the latest available published figures), the short-term insurance industry paid R31 686 million in claims to individuals and businesses in South Africa, it proves that this is an industry the economy could not very easily do without. R3 932 million of this figure was commission paid to brokers, and a total of R21 720 million was paid to individuals and/or businesses who claimed for losses due to fire, theft, accident, floods and other causes. The total of investments of the short-term insurance industry in 2006 was R65 888 million.
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Other sectors would find it difficult to operate without short-term insurance. For instance, banks will often give loans to people only if they have security such as motor insurance on the car for which you take the loan out. People and companies in the trade, manufacturing, tourism, agriculture, retail, construction and engineering, marine, aviation and other industries also rely on insurance to cover the risks of their business operations. The insurance industry provides many jobs to people in our country. A wide spectrum of job opportunities is on offer, from actuaries to brokers, from engineers and lawyers to administrative clerks, from public relations experts to receptionists, and many more. A world without short-term insurance at the level of the bigger economy is almost unimaginable. Suppose that farmers in the country could not rely on insurance pay-outs when they have lost all their livestock in a fire, or in a drought, or had a huge hailstorm destroy their crops. These farmers will not be able to continue with their businesses and might very possibly go bankrupt, which could in turn lead to a shortage of food in the country! If a big store or shopping centre burns down to the ground, and the companies affected were not insured, how would they rebuild their shops and restock their shelves?
Community The insurance industry creates opportunities for all, and is committed to the transformation of South African society. In fact, the financial services sector was the first sector that voluntarily undertook to address transformation issues through the Financial Sector Charter that addresses ownership, job creation and skills development, development of small, medium and
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micro enterprises, making financial services products available to all people, educating consumers in financial matters, as well as social responsibility. The short-term insurance industry, for example, has spent a total of R32.7 million on consumer financial education in the lower income group. The projects that the industry have embarked on include financial literacy workshops in rural and other disadvantaged areas, financial literacy awareness creation at taxi ranks, in taxis and trains nationally, as well as inclusion of financial literacy concepts in the curriculum material for schools in South Africa. Topics taken to consumers include budgeting and money management, debt management, saving, insurance, and rights and responsibilities of financial services products consumers. Insurance companies invest millions of Rands each year in upliftment projects within the corporate social investment budgets. A world without insurance at community level would look very different. Motor vehicle crime figures, etc. would have continued to rise, many people would have not been financially literate, and financial services products might not have reached all consumers in South Africa if it weren’t for the short-term insurance industry’s efforts in these areas.
Fightingcrime The insurance industry is also very active in the fight against crime. Since 2002, when the industry suffered because of very high motor vehicle theft and hijacking figures, the short-term insurance industry donated between R2 and 3 million per year to Business Against Crime to use against vehicle crime. This money was well spent as – although vehicle crime is still too high – the figures since the interventions starting in 2002 show a steady decline and are still on average 25 per cent lower than prior to the interventions.