in this issue 10
The future of energy: insuring renewables in SA
- Renewable energy and the insurance industry
Finance and insurance
Enterprise risk management
- Risk factors: what you need to know - Green geysers 24
Understanding the risks of green buildings
Iâ€™m so sexy: Making medical aid attractive to the young
Electric avenue: insuring an electric car
Providing for retirement after divorce
Sting in the scorpionâ€™s tail: meet the Green Scorpions
A cold shower from Treasury
@Lunch with Barry du Plessis
Publisher & editor Andy Mark Managing editor Nicky Mark Copy editor Margy Beves-Gibson Feature writers Hanna Barry Grant Cyster Nicholas Krige Bianca Wright Angelique Ruzicka Art director Gareth Grey Design and layout Dries van der Westhuizen Herman Dorfling Vicki Felix Regular contributors Jenny Handley Kirsten Halcrow Clem Chambers
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riskSA from thepublisher Dear reader, It was with some pleasure that I accepted an invitation to Carl Greaves Brokers’s 50th birthday celebration last month. To be honest, Carl hasn’t owned the business for the entire 50 years (he would have to have purchased the business when he was still at school) but Carl Greaves Brokers has grown from strength to strength under his custodianship; and this through some trying times indeed. We at RISKSA extend our warm congratulations to Carl and his team. If your business is celebrating a milestone or other achievement, we’d love to hear from you. Please drop Nicky a line on nicky@comms. co.za telling us all about it. Space permitting we will try to publish your story in an upcoming issue of RISKSA. Last year we published a story on acid mine drainage. Our piece quoted various experts who warned of severe flooding and we predicted that the mineshaft at Gold Reef City would be flooded by the first quarter of this year. While this hasn’t happened (current thinking is that the acid mine water is rising a little slower than originally anticipated, giving Gauteng residents a 12-month reprieve), the solution mooted by government may be as dangerous as the original threat. Experts are saying that the government’s plan to pump partially treated acid mine water into our rivers is short-sighted and is going to create environmental mayhem with our river systems. The partially treated water will carry concentrations of salt and other pollutants at many times the safe level. One expert discussing the issue on a recent Carte Blanche episode reckons as much as seven 20-ton trucks worth
of salt per day will be dumped into our rivers with devastating results. This green debate continues and, while only the most naïve will still argue that climate change is a conspiracy, the various arguments and counter-arguments tend to obfuscate the real issues. For instance, in my opinion carbon tax is just another way to fleece travellers. Another misconception is that printed magazines are somehow depleting natural forests when the opposite is in fact true. RISKSA is printed on paper that comes from sustainable forests that have been specifically planted for the purpose. In fact, most timber suppliers to the paper industry plant many more hectares of trees than they cut down each year. If paper demand ended tomorrow, this land would probably be used for other forms of agriculture, agriculture with a far larger carbon footprint than the carbon-neutral forests the pulp industry plants every season. We hope this green issue of RISKSA helps to stimulate thinking around the environment and that you enjoy reading it as much as we enjoyed putting it together for you.
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The future of energy Hanna Barry
insuring renewables in SA
The sun is at the centre of our solar system for good reason. Mankind’s insatiable desire for energy – whether illustrated through the worship of solar deities for their perceived power and strength, or our attachment to countless electronic devices – has marked myriad cultures throughout history. In the International Energy Agency’s World Energy Outlook 2011, a new policies scenario predicts that the world’s prime energy demand will increase by one-third between 2010 and 2035.
This highlights the need to drive investment in clean energy or face heightened energy security concerns and rising expenses in combatting climate change. The South African Government has made its own renewable energy commitments, which is critical in the context of a very tight supply margin and heavy reliance on fossil fuels. The drive towards renewables is heightened by the need to create jobs and government views the renewable energy market as a means of addressing this need. This has seen exciting developments in the power procurement space and reconfigured insurance solutions to go with it.
Renewable energy and the insurance industry South Africa has some of the highest renewable energy potential in the world, particularly in solar. In 2003, the Department of Energy (DoE) released the White Paper on Renewable Energy with a target of 10 000 GW-hours of energy to be produced from renewable energy sources by 2013. At 2012, very little of this target has actually been achieved, apart from a few small renewable energy projects and the department’s solar water heater initiative. Enter the Renewable Energy Independent Power Producers Procurement Programme (REIPP), which is far more substantial and has been designed to contribute to the target of 3 725 MW to be generated from renewable energy sources, which the minister has determined is required between now and 2016 to ensure the continued uninterrupted supply of electricity. The REIPP is also aimed at contributing towards socioeconomic and environmentally sustainable growth, and to stimulate the renewable industry in South Africa. It is broadly in accordance with the capacity allocated to renewable energy generation in the government’s Integrated Resource Plan, issued in 2010 and laying out the government’s commitment to invest in renewables until 2030. The IRP proposes that renewables amount to 42 per cent (17 800 MW) of new generation capacity through REIPP, allocating different output levels to various types of renewable technology, with solar energy and wind energy assigned the largest portion of that, at 8 400 MW each. Other renewable energy sources, such as biogas, natural gas and hydro energy are included, but to a much lesser extent. Bidders for these projects are required to bid on tariff and the identified socio-economic development objectives of the department. By the end of 2011, the department had received 53 submissions in the first round of REIPP bids
The IRP proposes that renewables amount to 42 per cent (17 800 MW) of new generation capacity through REIPP.
and 28 contracts were awarded. The second round closed with 79 bids in March of 2012, of which 19 were successful. Engineering News reported earlier this year that over 1 000 MW is still available for bidding in the third round, and further capacity could be made available should any projects from round one fail to reach financial closure. The date for this window is not confirmed, as DoE and Treasury intend to undertake a review of the REIPP process before inviting bids for the third round.
So we have had to persuade the lenders to be more flexible and accept Global Credit Rating (GCR) and Fitch ratings to allow South Africanbased insurers to participate in the risks,” says Nivison. “The internationally utilised FA/CTA template in its original format technically precluded even our major insurers with GCR AA ratings and impressive BEE credentials from participating, unless permission is specifically granted by the lenders. This is clearly an unworkable situation in South Africa.
Insuring the bidders The bidders, or independent power producers, are raising their own funds for these projects, and South Africa’s major banks have loaned billions to the projects, with Nedbank Capital and Standard Bank funding the lion’s share. Hence bidders are very concerned to ensure that they have sufficient insurance cover in place. “We have been working with the banks to make sure that our policy meets their requirements,” says Mike Robson, CEO of C&G Underwriting Managers, which formed a partnership with global renewable energy underwriter, GCube Insurance, last year. The partnership aims to develop renewable energy insurance solutions that are tailored for the Southern African market. C&G has seen the majority of the 28 preferred bidders from round one and quoted on them, having already issued several policies. The loan agreement commonly referred to as the Facility or Common Terms Agreement (FA/ CTA), between the lenders and borrowers, or power producers, contains detailed insurance requirements. “The arranged insurance must comply with the insurance schedule in the FA/ CTA and it is up to lenders’ insurance advisers (LIA) to undertake due diligence analysis, which includes factors such as ensuring that required lenders’ endorsements are included in the policy. A broker’s letter of undertaking (BLU) from the project insurance brokers requiring them to report material issues relating to the insurances arranged, such as non-payment of premium, material adverse variances in coverage, or cancellation of coverage, is also required,” explains Chris Nivison, renewable energy practice leader at Willis South Africa. The FA/CTA template commonly utilised internationally needs to be tweaked to cater for the South African situation. “The FA/CTA makes reference only to international credit ratings, such as Standard & Poor’s (S&P), and no South African insurer has the stipulated international financial strength rating (FSR) of S&P A– or the equivalent.
“In 2003, the Department of Energy (DoE) released the White Paper on Renewable Energy with a target of 10 000 GW-hours of energy to be produced from renewable energy sources by 2013.”
“After all, our market has the ability, skills and sophistication, capacity and financial strength to underwrite these risks, without having to rely on overseas risk carriers not registered in South Africa, which ultimately results in the exportation of significant premium volumes to non-admitted markets.” Significant local content requirements make it vital for major underwriters to participate. At a recent renewable energy conference in Johannesburg, 60 per cent was quoted as the minimum local content requirement for round three. C&G can play a role in that local content requirement by using its local capacity, together with GCube’s capacity, being Lloyd’s of London. Unfortunately, not all local insurers are at this level and there is some concern that unregistered overseas insurers are seeking fronting arrangements with South African insurers. “The risks and exposures relating to renewable energy can be very high. Many local insurers are wary of taking on these exposures and leave it to the larger international players who have more experience with these types of risk,” says David Kirk, partner at KPMG.
The good news is that some of the major manufacturers and suppliers are thinking of opening facilities in South Africa in the near future, which will assist in meeting local content targets. AEG Power Solutions recently constructed an assembly facility in Cape Town for its utility-scale solar inverters and skytron combiner boxes. Inverters convert the DC energy from solar panels to AC energy to put back onto the grid. The factory, based in Montague Park in Milnerton, is 3 400 square-metres, with the capacity to produce at least 200 MW per annum. Due to start production on 1 June this year, the facility was ready 15 days ahead of schedule and has already produced the first five or six MW of solar inverters. As solar parks and wind farms begin springing up across the country, bringing the need to ship overseas equipment along with them, seamless insurance solutions are paramount.
Cradle to grave C&G’s journey in the renewable energy insurance sector began two years ago when Robson identified that renewable energy was going to get off the ground in a big way in South Africa. “Having been in the engineering construction insurance field for almost 40 years, I had the sense to understand that underwriters in South Africa don’t have any experience in writing renewable energy projects because we don’t have them here,” he explains. After investigating global players in this space, he and his son James, a qualified civil engineer and a member of the C&G team of experts, went over to London in February 2011. After meeting with several companies, they decided to enter into a partnership with GCube, a niche renewable energy underwriter that has been underwriting renewable energy risks for 24 years and does
not write any other form of business. “They have an excellent track record, have extensive statistical data on renewable energy risks and know the business inside out,” says Robson. “They have developed tailored products and policy wordings, which have grown over 24 years to be exactly what the renewable energy industry needs from an insurance provider.”
“Securing cover for a delay in start-up for example, is vitally important for lenders. Lenders are less likely to fund a project that doesn’t have seamless insurance coverage.”
What the industry needs, according to Robson, are all-encompassing, cradle-tograve solutions. This is especially true in South Africa, where much of the technology and equipment is shipped from overseas. In light of this, GCube and C&G’s underwriting partnership provides cover for marine cargo; inland and marine transit; marine delays in start-up; construction all risks; advance loss of profits; operational all risks; mechanical and electrical breakdown; business interruption; third party liability; and employer's liability. Since many of the solar panels and wind turbines
are shipped from Europe, America, China and India, if there is an incident in the shipment, this would cause a delay in the start-up and hence a delay in generating electricity and receiving revenues. During the construction phase when turbines are erected and panels installed, there could be a major insurable incident on site, which could ultimately delay connection and result in an advance loss of profits and the inability to repay loans. “We can cover that aspect, as well as the public liability at that stage,” says Robson. Nivison agrees that from an insurance point of view, the key to satisfying project lenders is to have a principally controlled insurance (PCI) programme, covering all the phases of the project. Willis Group is one of the leading renewable energy insurance brokers in the world and is directly involved with 12 of the 28 projects that received preferred bidder status in the first window process. “It becomes very messy if you separate the different insurance covers as there are grey areas in between the various phases, which could result in gaps and/or duplications in cover at different stages. This could leave your client in a situation where a loss falls between two stools, making seamless insurance solutions especially crucial for the larger projects,” says Nivison. “Securing cover for a delay in start-up for example, is vitally important for lenders. Lenders are less likely to fund a project that doesn’t have seamless insurance coverage.” Some of the benefits of a PCI programme include more effective centrally controlled risk management, wrap-around protection for the benefit of all interested parties, cost savings and the avoidance of delays due to claims disputes, as a result of confusion or duplication of cover.
In a presentation he gave at a the fourth Wind Power Africa Conference in May this year in Cape Town, Nivison outlined some of the key factors to take into account when placing renewable energy insurance: • Renewable energy is not new. Learn from the experience and mistakes made by others; be a trail blazer at your own risk. • New technologies without track records and accreditation present new and unique challenges to insure. Insurers are not prepared to be the test bed for research and development, and expect design defects to be covered by original equipment manufacture (OEM) warranty. • Seamless cradle-to-grave PCI coverage under one policy is strongly recommended and provides lenders and borrowers with a great deal of comfort. • Effective risk identification, loss mitigation and robust risk management is a fundamental prerequisite and facilitator of financially viable projects, whether at the financing, construction, handover or operational stage. • Selection of EPC (engineering, procurement and construction) and O&M (operations and maintenance) contractors and other professional services is of vital importance to both lenders and insurers. • The security of the risk carrier is paramount. Insurers need to be able to pay claims. • Early engagement with an insurance broker and underwriter is strongly recommended. Project owners frequently engage in dialogue with brokers and insurers in the latter stages of a project, missing out on valuable input. • Insurance programmes must be aligned with the lenders insurance requirements stipulated in the FA/ CTA.
Engineering News reported earlier this year that over 1 000 MW is still available for bidding in the third round, and further capacity could be made available should any projects from round one fail to reach financial closure.
On the reinsurance side, the basics of technical underwriting apply to renewable energy projects. “The technical merits of the specific projects, the scope of cover requested and the interests of the stakeholders involved must be understood to come to the risk-adequate premium for such risk transfer. As renewable energy projects rely mostly on components and methods of proven technology, the demand for new insurance products hardly exists,” says Boniface Chiwota and Peter Jakszentis of Munich Re. “Tailor-made products are more driven by the risk appetite of the stakeholders involved than by the technology of renewable energy projects.”
“The key to satisfying project lenders is to have a principally controlled insurance (PCI) programme, covering all the phases of the project.”
The current boom that South Africa is experiencing in the renewable energy market has seen C&G extend its cover at two ends, adding both marine and operations cover to its offering. “Through identifying the needs of local renewable energy projects, we have extended our local treaties to include marine cover and 12 months’ operational cover after the construction phase, which ordinarily wouldn’t be required for local construction projects,” says Robson. This ensures that there is no gap in cover between the completion of construction and placing conventional assets coverage. Although larger claims tend to arise when something is already in operation, a way of managing this increased risk is by doing thorough checks on manufacturers and, according to Robson, GCube has a reliable database of manufacturers that assist in managing this risk. Having worked on renewable energy risks for 18 months, which has involved two trips to London and meetings with GCube underwriters to understand project risks, C&G believes it is the local market leader in this area.
The transportation logistics associated with wind energy projects also present risks. Wind turbines need specialised transportation equipment and cranes, and there may be a shortage of these.
what you need to know While brokers donâ€™t necessarily need an engineering background, they do need specialised knowledge of renewable energy. The major brokers in South Africa are generally owned by international companies and there is a certain amount of skills transfer from overseas teams that have been working in the renewable energy market for some years. However, the South African insurance market has always been very sophisticated and the major local brokers have specialist construction and engineering teams, which CEO of C&G Underwriting Managers, Mike Robson, believes possess the necessary skills to place cover for renewable energy risks. There are major risk factors to consider when it comes to what have been pegged as the two major sources of renewable energy in South Africa: wind energy and solar power.
Transporting turbine blades 65 metres in length from harbour to site is a huge operation.
Wind turbines Equipment supply is critical when it comes to wind turbines and equipment has to be proven equipment to be insurable, with accepted accreditations and certifications. Overseas bodies similar to the SABS are able to provide this type of accreditation. The transportation logistics associated with wind energy projects also present risks. “We’re in a situation where in two weeks’ time we could potentially have 28 projects all starting at the same time, of which eight are wind projects,” Robson told us on 2 July. “Wind turbines need specialised transportation equipment and cranes, and there may be a shortage of these.” Transporting turbine blades 65 metres in length from harbour to site is a huge operation. Each turbine, including the tower, nacelle, blades and hub, can take four or more separate trips to transport. Certain traffic furniture, such as overhead road signs, will have to be removed to accommodate this transportation. Fortunately most wind farms are coastal and are therefore closer to ports, but many of these are on farms and will require construction of access roads. A further risk faced by turbines is the electrical or mechanical failure of gearboxes, as well as blade damage as a result of lightning strikes and fire. While a failed gearbox can be replaced and undamaged blades reused, if the turbine sustains extensive fire damage, a total loss could result. On the plus side, the east, west
and southern Cape coasts where many of these wind farms will be, are not prone to lightning, which is perhaps of greatest concern when it comes to wind turbines.
“Ongoing technological development of photovoltaic systems serves only to increase the risks of long-run design failure.”
With a single wind turbine costing between R20 million and R25 million, depending on size and manufacturer, these are big ticket items. Defective welding can also cause tower collapse, highlighting the importance of quality manufacturing and tested technology and equipment, not least because asset damage will likely result in business interruption and a resultant loss of revenue. Although big wind farms have 30 to 40 wind turbines, and the loss of one or two won’t necessarily make a major difference to output, lengthy lead times pose a challenge. Replacing a wind turbine can take anything from six to 12 months. However, Robson’s son, James, notes that as more projects come online, more local parts and components manufacturers will start springing up and this will reduce lead times significantly.
Solar panels While hail is a major peril facing solar panels, the majority of solar farms are in the Northern Cape, in areas such as Upington, Prieska and De Aar, where temperatures are high and there is little rain. There are a few in Limpopo and Rustenburg in the North West, but panels are generally built to withstand hail under a certain size. Unexpected hail storms, however, remain a risk. In terms of freezing overnight temperatures in some of these areas, James Robson explains that technology in the solar panels caters for this and that generally the operating range of a photovoltaic solar panel, the dominant model in South Africa, is from about -40 degrees Celsius. Fire and particularly copper cabling theft present the most significant risk exposure. Large solar farms will comprise of hundreds of thousands of panels. This is why it’s imperative to ensure that the project has state-of-the-art security measures in place. “In the South African environment, theft of photovoltaic panels may become the biggest claims risk from solar energy installations,” says David Kirk, partner at KPMG. He adds that another real danger in the solar panel market is concentration of risks from technology or manufacturing that proves to be flawed for long-term use. “If there is a fundamental problem with a particular panel design, there could be wide failures and it’s quite possible that the manufacturer could crash quickly into insolvency. The insurer would then be picking up
the tab for systematic problems across a significant portion of their book,” says Kirk. “However, the market is relatively stable and it is unlikely that there will be a large number of manufacturers who would produce faulty panels, but price competition could result in sub-standard products entering the market, which could potentially cause issues for the industry.” “The modular nature of photovoltaic solar parks and wind farms (i.e. many units of the same technology or type) does aggravate the accumulation risk of serial damage due to design flaws and the accumulation exposure to natural perils, like hail or storm, compared to the typical fire or machinery breakdown losses of single units,” agree Boniface Chiwota and Peter Jakszentis of Munich Re. Ongoing technological development of photovoltaic systems serves only to increase the risks of long-run design failure. “The technology in this space is rapidly evolving, and some of it has fine engineering tolerances for equipment that will be left outside facing the elements for at least a decade,” says Kirk. “Insurers operating here need to carefully manage diversification of risk across geographic areas, across manufacturers and across technologies.”
The Department of Energy’s Green Heater Project plans to roll out one million solar water heaters by 2014. The insurance industry is firmly onboard and the South African Insurance Association’s (SAIA) Green Geyser Replacement Project (GGRP) received approval from the SAIA board early last month. This has enabled the association to table its proposal for the solar water heater steering committee in government.
Since green geysers can be twice as expensive as ordinary in-roof geysers, the need for government subsidisation is evident. For example, Santam launched a solar geyser initiative in 2010, giving clients the opportunity to replace damaged geysers with solar geysers, but found uptake slower than expected due to the initial replacement costs involved. Despite the slow uptake, Santam continues to offer the opportunity to its clients, but moved the initiative up to industry level through the SAIA, in order to pool resources. “The benefit to consumers of replacing their geyser with an energy - efficient alternative when they have a valid geyser claim is that they can use the proportionate value paid for their electric geyser claim towards the installation cost of an energy
efficient system,” says Debbie Donaldson, general manager of strategy and planning at the SAIA. “This, coupled with the potential to save on electricity enables the consumer to pay back their capital investment in a much shorter period of time. So instead of a consumer funding approximately 82 per cent of the energy efficient alternative, this could potentially reduce it to 57 per cent, based on an average priced installation.” However, despite the potential cost savings down the line, Donaldson says it is not at all viable for the insurance industry to pursue a programme of green efficiency alternatives without the subsidy being in place. While Eskom is granting rebates to insurers for installing solar geysers, some insurers have expressed concerns over Eskom’s
ability to administrate the rebate process to meet the needs of the insurance business model. “This is a critical opportunity, as well as a concern to insurers. The rebate system needs to be electronically based for the insurance industry to facilitate a real time and high volume processing rebate mechanism,” says Donaldson. “Our preliminary investigation has established that we need to allow for a staggered increase in volumes of energy efficient alternative systems so as to facilitate supply chain readiness, specifically of installers, who would need to be suitably qualified,” she adds.
Green geyser risks Hail risk aside, solar geysers can potentially have more failure points than an ordinary in-roof geyser. Direct models have tubes with water flowing through them that is heated via solar power and used directly in homes or buildings. While this is efficient, should the water inside the pipes freeze, the geyser could fail catastrophically. Furthermore, chemicals found in water can erode the pipes, panels, and the geyser, meaning that the parts need to be replaced on a fairly regular basis. Indirect models, on the other hand, utilise anti-freeze liquids to indirectly heat water via a heat exchange that is protected from external freezing temperatures. “Whether insurers will cover direct models in areas that are known to have freezing overnight
temperatures is debatable,” says David Kirk, partner at KPMG. “There are cases where brokers and underwriters have refused to cover a home because of a solar panel installation. It’s an unknown and it doesn’t appear in the underwriting guide so it’s just automatically excluded. Other underwriters don’t even factor in the possibility that a solar geyser may have different risk characteristics from an electric geyser and often don’t charge a different rate at all.” Kirk says that the risk involved with the installation of a solar geyser for a householder is not significant so it’s probably more reasonable not to adjust the rate. The risks may even be considerably less. Head of brokers at Auto and General, Shaun Rademeyer, makes the point that the subsequent damage to home contents caused by a burst in-roof geyser can be
extensive. Since solar geysers are located on top of the roof, they do not pose this risk. This offsets the hail risk to some extent and could prove less costly for the insurance industry in the long run. On a slightly unrelated note, Kirk thinks it would be interesting to look at how homeowners who install solar geysers differ from other homeowners and whether this could be a rating factor for other risks. “I haven’t seen many insurers looking to analyse this yet. As more data becomes available, this will be an interesting line of investigation.” With electric geysers accounting for 45 per cent of a household’s electricity bill, the push towards renewable energy alternatives – both from government and the insurance industry – bodes well for South African consumers over the long term.
“In this electric atmosphere, the insurance industry needs to continue to diversify, while offering high security capacity and new product lines to the market.”
The future of renewable energy in South Africa
is equal to the cost generated by renewables and the industry is no longer reliant on a tariff from government, it will really start to boom and big industrial and commercial companies will invest in power for their own use, in order to get off the Eskom grid,” he adds.
Although the renewable energy market in South Africa still has some way to go, the future looks bright and the industry is positive about government’s contribution and commitment to renewable energy. “The general consensus of everyone involved is that the [IPP] process has worked very well and been very transparent,” says CEO of C&G Underwriting managers, Mike Robson. “The IPP is the enabler,” agrees Trevor de Vries, managing director of 3W Power/AEG Power Solutions South Africa. “Once we reach grid parity, we will see a fast uptake of renewable energy in the country. When the cost of electricity generated by Eskom
“We have a very exciting and sustainable new green energy industry evolving on our shores with a long life span. As proud South Africans, let’s ensure that we reap the benefits to the fullest possible extent by creating local jobs and boosting our economy in all the relevant sectors. Let’s actively promote a ‘local is lekker’ approach where it is professionally acceptable on all the renewable energy projects in the pipeline,” concludes renewable energy practice leader at Willis South Africa, Chris Nivison.
“We see considerable growth potential in risk solutions for renewable energy within the next
years,” said Munich Re board member, Thomas Blunck, after GCube entered into a partnership agreement with Munich Re early this year. This was reiterated by GCube’s chief executive officer, Fraser McLachlan, “No-one is under any illusion that 2012 is going to be another significant and game-changing year for the international renewable energy markets.” In this electric atmosphere, the insurance industry needs to “continue to diversify, while offering high security capacity and new product lines to the market”, McLachlan adds. If past centuries and future predictions are anything to go by, the global demand for energy shows no signs of abating, nor does the acute need to feed this demand sustainably. Simply put, the necessity for dynamic insurance solutions to protect and sustain renewables has never been greater.
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ing ild ebu info l ic lace h e sv orkp w Valuable 23 riskSA Magazine
nsuring green buildings brings its own set of challenges, so it is imperative for both business owners and insurance brokers to be aware of the unique features associated with green technology so the correct policy can be written to ensure that all the bases are covered.
Eskom’s recent price hikes have made energy efficiency a priority to everyone, even those who aren’t particularly fussed about the environment, and the growing interest in decreasing greenhouse gases among the people who do care about the environment have made green buildings a hot trend in the commercial real estate space. “The onset of the green building revolution will also mean that new products and building materials will be developed and designed in order to be eco-friendly as well as aesthetically acceptable. While it is clear that the green building concept will have drastic and positive influences on the environment, it is also likely to have far-reaching effects on the short-term insurance industry,” says George Jennings, senior engineering manager: underwriting at Lion of Africa Insurance Real estate investors and companies occupying the buildings are setting goals for greater energy efficiency to save money and show the public that they care, and the cherry on the cake is that the South African Government has written it into law that all new buildings and refurbishments will need to meet minimum standards of energy efficiency. As more and more companies address the unique characteristics of green buildings and building owners move
toward green certification and qualifying for the special tax incentives, insurance companies will have to move with the industry and develop better and more specific services for this emerging market. Determining a proper valuation, as with insuring most things, is critical for insuring green buildings effectively. Any special coverage that is added needs to be in line with that property’s cost and value. Coverage limits that are set too high, due to ignorance of the broker or the building owner, will make premiums unnecessarily high and will have a detrimental impact on the investment’s profit margin, which makes understanding the unique risks of insuring green buildings imperative for everyone involved. Recovery following a loss is limited to the actual loss sustained, so buying a higher-than-necessary limit will not generate a higher claim payment from the insurer. Because green properties have many unique qualities, enhancements will need to be added to standard property insurance forms and values must be attached to coverage provisions to make sure that the building can be made whole again after a loss. The insured value for these provisions needs to be specifically calculated and the client must be made aware that the value must be determined when the policy is purchased and not when a loss occurs. Premiums are charged on the insured limit that is set, so owners and brokers should seek out the most accurate valuations available to avoid paying premiums on uncollectible limits, or the client may find themselves lacking full coverage after a loss. Sustainable building standards, such as SANS 10400 part XA developed by the SABS and the Green Star Awards, utilise strategies that may mitigate risk, like improving indoor air quality but they can also create new risks; air-tight buildings are likely to have increased potential for mould liability claims. To ensure that their clients’ investments in green buildings are protected, brokers must recognise and resolve numerous insurance challenges that aren’t an issue in traditional buildings.
The amount of sunlight that falls on the Earth’s surface in one minute is sufficient to meet world energy demand for an entire year.
Financial risk The biggest concern to building owners should be the financial risk of going green. If proper research is not done before a new green building project or refurbishment, there is a risk that overall profitability of the project could be affected. The cost of the project and the ability to complete it on time and to a specific budget are concerns as the availability and cost of the required materials is not as guaranteed as more traditional building materials. This, in turn, leads to uncertainty about the availability and affordability of insurance solutions and this is where the broker should reassure the client with well-researched insurance solutions that are tailored specifically to green buildings.
Legal risk As green buildings are a relatively new concept in South Africa, the legal fraternity is working out who carries what liability; what the compensation should be if goals are not met; and who should pay. For example, let’s say an architectural firm is contracted to construct a building worthy of the Green Star Awards handed out by the Green Building Council of South Africa (GBCSA), which requires a certain performance in terms of energy and water use, but the building uses too many resources. All the liability cannot land on the architects as they have control only over the design of the building, the rest is down to the competence of the contractors and how the building is used by the owners after it is completed. Even the most well-designed building can use incredible amounts of water and energy if it isn’t properly operated, or if lights and air conditioners are left on consistently. Then there is the issue of shoddy workmanship: is it the designer’s fault if the people who are hired to build it are incompetent?
“Because green properties have many unique qualities, enhancements will need to be added to standard property insurance forms and values must be attached to coverage provisions to make sure that the building can be made whole again after a loss.” Inferior materials This has the potential to become more of a problem as the green building sector gains momentum. Manufacturers of key building materials like paint and flooring will be increasingly rushed to supply green products to market. We have to consider who will cover the cost if the products don’t live up to what the manufacturer promised and need to be replaced, or even worse, if the poor quality isn’t recognised soon enough and a major incident happens as a result of poor building products.
building. Materials and products manufactured and used in the green construction process will be more natural and recycled materials, for example, panelling made from recycled boarding or paper, wooden structures, bamboo and straw, are likely to be widely used. This has an immediate impact on the risks of fire and other hazards or perils such as wind, storm, hail and even earthquake or earth tremors,” Jennings says. It is imperative for designers to make sure of the quality of the materials, and any additional risks involved with using the green materials to construct green buildings, and it is important for building owners to be made aware of this risk when the insurance policy is being written. When an insurance policy is being written for a new green building or a non-green building that is due to be refurbished, the insurance professional must understand green-building certification to be able to effectively review the endorsements, coverage limits and sub-limits. It is critical for the insurance industry to recognise the special needs of energy-efficient properties and to make sure that insurance brokers and agents are aware of all the new features and risks green buildings bring to the table. It is perhaps advisable for brokers to meet directly with the underwriter to discuss modifications to the standard policy form so that the coverage purchased provides maximum recovery to the property owner following a loss. Accurate value disclosure of all the unique features of the property are vital, as is reviewing potential loss scenarios with underwriters before going to the client with a policy so as to best understand exactly what is and what isn’t covered.
“Insurers and reinsurers may need to carefully review or reevaluate their risk exposure when it comes to insuring a green
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2012/05/09 9:33 AM
THE IMPACT OF DRIVERLESS CARS ON THE INSURANCE INDUSTRY N i c k K r i ge
“Most accidents are caused by human error.”
he latest word from Google is that the testing of its driverless car has been a success, with over 200 000 kilometres clocked without a crash. It will likely be a while before the first pilot-less car hits the road in South Africa, but what will the consequences of the concept be for the insurance industry?
The benefits of driverless cars Assuming the system is perfect when it is released and adopted across the board the instant it is commercialised, the amount of accidents, and therefore deaths, on the road should drop to just about zero. That would be a major breakthrough for South Africa, which typically sees more than 13 000 deaths a year on its roads. “Most accidents are caused by human error, so the driverless system should certainly help eradicate careless and negligent driving behaviour. This concept should also allow for greater capacity on our roads, by allowing more cars to drive closer together and in a more unified manner. Furthermore, these robotic drivers should be able to react faster than humans, not get distracted, not become tired or intoxicated and, more importantly, should have a 360-degree perception with no need to blame an accident on the blind spot,” says Warwick ScottRodger, marketing manager at MUA Insurance Acceptances. As there are fewer requirements for human interaction with the car, they might be less complicated with significantly less room for manufacturer error. Fewer accidents will mean less need for safety features, allowing the cars to be built lighter and more fuel efficient. The extra utility value the cars could offer would also make people’s lives easier. The car could pick the kids up from school without the owner having to leave work; pick up the in-laws from the airport while the owner cleans up the house; or take itself for a service. The options are almost limitless.
13 000 The impact on the insurance industry If driverless vehicles do prove to be less dangerous than traditional vehicles, insurance premiums will naturally come down. In fact, third party insurance would become obsolete as there is effectively no driver of the vehicle. “In theory, this would make the industry even more competitive, forcing insurance companies to include additional value-added services to make their respective offerings more attractive,” says Scott-Rodger. Since insurance policies are a contract between the insurer and the insured, certain terms and
conditions will have to be revisited. “There may be a need to tweak the insuring clause to ensure that the cover is not compromised and certain exclusions may need to be removed or introduced,” adds Scott-Rodger. Traditional methods of underwriting insurance systems for motor vehicles will have to change as certain restrictions will no longer need to be taken into account, such as the age, sex or driving experience of the vehicle owner. It would remove a lot of variables when calculating and writing vehicle insurance policies, making the process easier and ultimately cheaper for the vehicle owner.
“The principle behind driverless technology is very positive and so far the technology appears to be a success. However, the phasing in of this type of technology will take a long time, especially in emerging markets where older cars remain on the roads for far longer.” On the other hand, the car manufacturer’s product liability insurance will go through the roof as blame for accidents involving driverless cars will most likely fall on the manufacturer or the system designer. Ultimately, if an accident does occur in a driverless car, blaming the
The number of deaths on South African roads annually.
owner would be like trying to pin the liability of a bus accident on one of the passengers. All of which sounds great for the car owner in terms of insurance, but the price of the cars themselves could become very expensive because of the level of insurance the car manufacturers and system creators would need to take to mitigate their risk in case of a problem. It’ll also be interesting to see if there is an insurance company that would be willing to take that risk on if and when these cars are first introduced, as any potential mishap could be catastrophic.
Profiling driver behaviour to mitigate your risk. Tracker is leading the way in driver behaviour, accident management services and predictive modelling of accidents including accident damage. By helping reduce the costs of insurance claims, which is just one of the ways we demonstrate our commitment to our insurance partners.
The impact on transport laws Courts will need to decide who is liable in the event of a crash involving driverless cars. Will the responsibility still lie with the vehicle owners? That is doubtful, in which case a decision would need to be made as to whether the fault lies with the driverless system creator or the car manufacturer. This will be a complicated process to say the least. There will also no longer be a need for exclusions on driver’s licenses for poor eye sight or automatic transmission; there may not even be a need for a driver’s license at all in fact. People who were previously dependent on others to get around, such as people with disabilities, would be mobile. “Premiums will no longer be based on human driving behaviour and criteria like age, gender and period of having a driver’s licence. Furthermore, the model and engine size will have little influence, as the speed of the cars would most likely be governed by the speed limit demarcated on the maps installed in the system,” says Scott-Rodger. Laws banning people using cellphones while at the wheel of a car or driving while under the influence of alcohol would become obsolete, as everyone in the car would be a passenger.
Problems faced by driverless car designers For this technology to have any real impact on the insurance industry it will need to be adopted wholesale, across the board, because what insurer would reduce the premiums for someone who owns a driverless car when there are still plenty of human-operated vehicles out there? The risk, and therefore the need for third party insurance, would not be reduced at all. “There will certainly be little improvement to these ‘robotic’ vehicles’ total risk exposure should there still be a large number of vehicles on the road driven by humans, who would not be able to pick up the signals and react like these cars. Compatibility of all vehicles to enable constant cross communication with each other is the crux here, as the sizeable benefits offered by such a system would otherwise to be obsolete. As a result, a major concern for any insurance company that opts to provide a reduced premium in response to the driverless system being implemented is that a sluggish take up of this technology would mean that the risks posed by other drivers on the roads would remain as rife as before,” adds Scott-Rodger. He admits that even with a high take-up of driverless vehicles, without a universal solution the risks of driverless cars are unlikely to be reduced that much. “As an underwriter you also don’t want to be caught in a situation where you have reduced the premium in response to the driverless system being implemented but because of its sluggish take up, the risks posed by other drivers on the road are still as rife as before. Some critics argue that the human touch could be catered for in the system design, but then surely the vehicle is no longer driverless and the whole object is defeated.” And without trying to sound too pessimistic, the chances of this technology being accepted and utilised by everyone straight off the bat is very low.
“There will certainly be little improvement to these ‘robotic’ vehicles’ total risk exposure should there still be a large number of vehicles on the road driven by humans, who would not be able to pick up the signals and react like these cars.”
Anyone who has watched Terminator will have an issue with allowing a machine to drive their kids to school unsupervised. There would be plenty of nervous parents around the first time a driverless school bus took a bunch of children on an excursion. As with most new technologies, everyone would be waiting for someone else to take that first leap of faith because, as mentioned above, the consequences of it going wrong could be unimaginable. Then there is the fact that people just like driving cars; petrol heads would have more than a few unkind words for any person who tries to tell them they are no longer allowed to drive themselves around. Adopting driverless cars across the board would also destroy the market for expensive, fast cars. If they do not come with a steering wheel and you cannot drive them yourself, what is the point of an expensive car? “This system may destroy the car culture. People like to drive their cars, they have developed a love for a brand, like to work on their cars and often show them off. Are people buying luxury vehicles or high performance vehicles only to test it on a race track or would you also want to showcase it on public roads? I guess the true debate would be whether driverless cars will reduce the speed of some people’s luxurious lifestyles and be disruptive for the automobile industry or whether it will transform our modes of transport to one that is safe, reliable, economical and environmentally-friendly? The future will certainly tell all,” concludes Scott-Rodger. The concept of driverless cars is a good one, and there is little doubt that we will see a few of them popping up in the not-too-distant future. They will have a lot of far-reaching and very positive effects on the world. But the impact they will have on the insurance industry is likely to be fairly minimal, as it is difficult to see the traditional driver-operated vehicle disappear for good, which is the cause of most of the liability on the roads.
Enhance your offering to clients Andre Krause | National Manager | Distribution | Glacier by Sanlam
In order to build a sustainable business that will continue to deliver quality service into the future, Glacier realised the need to offer a diversified solution set to meet the needs of its affluent client base. This coincided with the launch of the Glacier brand in 2006. At the time, we predicted that financial intermediaries would come under increasing pressure to meet a broader set of client needs, and also to diversify their income-earning capacity.
ne of the offerings in our diversified solution set is shortterm insurance from Glacier Asset Protection.
Glacier Asset Protection is underwritten through Associated Insurance Brokers (Cape) 2006 (Pty) Ltd (AIB), a subsidiary of Glacier Financial Holdings (Pty) Ltd. AIB is a licensed financial services provider which was established in 1983 and is one of the largest independent brokerages in the Western Cape. The focus of AIB is on building long-term client partnerships for short-term products, based on professionalism, integrity and personalised service. These are some of the benefits of placing your clients’ insurance with Glacier Asset Protection:
Open architecture Glacier Asset Protection offers access to a range of blue-chip, short-term insurers including, but not limited to, Mutual & Federal, Santam and Zurich. This allows your clients to compare different offerings and personalise their cover through their insurer of choice. The open architecture nature enables you to provide a comprehensive offering to your clients while retaining the backing of a large, reputable company.
process, from the completion of forms – where applicable – to the appointment of assessors through to the claim settlement, is managed by a dedicated claims technician who is personally assigned to your client’s account. Competitive pricing We have long-standing relationships with all our partners and are therefore able to obtain competitive rates and terms in the short-term insurance market.
Liaise with a team of specialists A team of specialists is on hand to guide your clients through the process, so that they can make an informed decision based on the options available in the market, and against their particular risk profile. The entire claims
Additional revenue for your business The costs of acquiring new clients continue to increase, together with a decrease in fees and commission. By selling more to your
existing clients, your business can enjoy enhanced profitability by reducing acquisition costs. By meeting more of your clients’ financial needs, you can solidify your relationship with them and experience improved client retention and sustainable business growth. No advice risk to your business
The perfect fit. Looking for a system that suits your needs?
For those who are not short-term specialists, it makes business sense to call on the experts. The truth is, the moment you start talking to your clients about their shortterm insurance needs, you expose yourself to advice risk. Legislation requires that the policy and insurance terminology be explained to the client in detail. As an example, if a client is about to open a business, what advice should you give him? Is he covered if something happens to one of his suppliers? What about lease agreements – do you know what your client is responsible for?
“The truth is, the moment you start talking to your clients about their short-term insurance needs, you expose yourself to advice risk.”
A custom built solution can be faster and more cost-effective than you ever thought possible.
This offering is specifically aimed at financial intermediaries who don’t have in-house short-term expertise or the necessary accreditation to give advice on short-term products. As Glacier Asset Protection operates on a referral basis, we take the advice risk and handle all claims and administration on your behalf, allowing you the time to focus on your business. Access to niche insurance providers Specialised cover can be arranged for artwork, jewellery, water craft, franchise operations, engineering, marine and personal liability. Once again, an example highlights the need for specialist advice. Art has a changeable value and the client may therefore be exposed to under-insurance issues. Proper art insurance will ensure there is no disagreement about the value at the time of loss.
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In addition to domestic insurance, Glacier Asset Protection also offers a range of products for commercial and industrial insurance based on your client’s risk status, this includes body corporate insurance, marine insurance, directors’ and officers’ insurance and small craft insurance. Through our diversified solution set, we aim to provide a single service point for the financial needs of your affluent clients, and at the same time provide tangible benefits to both you and your clients.
Innovative systems for innovative insurance ideas
The importance of Directors’ and Officers’
Liability Insurance, in spite of the new Companies Act and King III
lucian carciumaru | camargue senior underwriter
The introduction of the Companies Act No. 71 in 2008 and the subsequent King III Report have left directors and officers in a far more onerous position than ever before. The Companies Act in particular has changed the business landscape substantially.
ollowing international standards of personal liability for directors, there are numerous sections of the act which look at directors’ accountability, liability and duties:
S ection 76 codifies the existing common law duties of directors towards the company, increasing awareness of a directors’ liability among potential plaintiffs. S ection 157 introduces the concept of class actions into law, meaning that any class of persons mentioned in the act or affected by the company will be able to potentially claim against a director.
S ection 218 (2) introduces civil remedies, which holds any person who contravenes the act liable to the person who suffers a loss as a result of the contravention.
S ection 76 (4) introduces the business judgment rule for directors who have acted in good faith, or in the best interests of the company, according to their duty of care, skill and diligence, and have avoided conflicts of interest. It is the view of some law academics that if these requirements have been carried out, the director would have complied with the common law duties.
In support of the Companies Act, the King III Report was released, advising that a new
corporate governance code for South Africa was to be developed. Applicable to all companies – private and non-profit – a much wider range of directors is now affected by the code.
“When considering contradicting and synergetic interests of stakeholders, it advises that this be done on a case-by-case basis.”
Compliance with the code is on an apply-orexplain basis, which means that corporate governance should not be based only on compliance, but rather on the consideration of the manner in which principles and recommendations can be applied. Therefore, directors acting in the best interests of a company should consider whether or not a recommendation in the report should be applied and to what extent. Compliance would then eventuate in the explication of how the report was applied or not. With a clear stakeholder-inclusive approach, the report in general demands that the board of directors consider the interests of the company’s stakeholders and not just its shareholders. When considering contradicting and synergetic interests of
stakeholders, it advises that this be done on a case-by-case basis. New subjects dealt with in the report cover IT governance and alternative dispute resolution (ADR). Not just about operations, IT is a tool that can be used to gain a competitive advantage. It’s therefore necessary to implement strategies that safeguard IT platforms from losing confidential information. It is the responsibility of directors to take reasonable steps to mitigate IT risks, or be held liable at law, if the company suffers a loss. The report recommends that ADRs be inserted into all business contracts, as they allow for fast and cost-efficient settlements, which protect a company’s reputation before matters go to the courts. The board of directors should therefore ensure that disputes are resolved efficiently, inexpensively and without media attention, as this is in the best interests of the company. In light of these new legislative and governance changes, no company in South Africa should be without directors’ and officers’ (D&O) liability. Camargue Underwriting Managers offers a range of D&O liability products to suit every need. An SME scheme option is now available, too. It’s easy to sell and quick to underwrite with a simplified proposal form.
Pressure to cut cost mounts for motor industry
Motor component manufacturers have to drastically cut production costs in order to remain competitive against foreign companies.
No relief in sight Shatterprufe is not the only automotive supply company taking strain. Government’s automotive production and development programme (APDP), which will govern the industry from January next year, is not expected to bring much relief. It will replace the motor industry development programme (MIDP), in place since 1995.
utomotive glass producer Shatterprufe SA, told the Financial Mail early last month that it must cut production costs by at least 30 per cent over the next three years. Rising domestic labour and energy costs are putting pressure on the company, says chief operating officer, Dave Coffey. Pressure is building as local motor companies, in an attempt to prove to their multinational parents that South Africa is an economically worthwhile production base, are leaning on their suppliers. And Europe’s economic crisis, expected to reduce new-car sales by up to seven per cent this year, continues to hurt export demand for South African companies. Shatterprufe exports 36 per cent of production to Europe and has had cutbacks of 20 per cent. These challenges are causing it to rightsize its local production.
Unlike the MIDP, which restricted incentives mainly to vehicle manufacturers, the APDP is supposed to be more evenhanded and encourage investment by suppliers. But Jean-Jacques Wiroth, MD of Goodyear, says the new programme does not provide the required investment support for new production and product technology. “Investment support is aimed at increased production volumes, and this is currently constrained by manufacturing cost escalation in South Africa, driven primarily by electricity and labour inflation,” he explains. Raw material costs are also a major challenge. Schaeffler SA group MD, Len Terblanche, whose products include clutch assemblies, says imported steels are becoming more common. Fifty to 60 per cent of Schaeffler SA’s costs are raw materials. Since local prices can be 50 per cent more expensive than imported equivalents, Schaeffler is importing more of its raw materials.
APDP planners, who believe the programme will encourage suppliers to source more of their subcomponents and materials from within SA, should take heed. “We can’t continue indefinitely to absorb the costs coming through,” says Coffey, particularly at a time when China, India and other Asian countries are becoming increasingly cost-competitive. He adds that the supplier market is more competitive than ever before. Shatterprufe is about to spend R40 million on new doorglass technology. Contrary to the commonly expressed view that the APDP will encourage vehicle manufacturers to buy more components locally than they have under the MIDP, Terblanche thinks there is less pressure to localise components. He adds that the new programme is more complex than the MIDP and will require extra administration. Coffey says that in real terms, the company will be in a similar position to where it is now. However, with only six months to go before the changeover, there seems to be a lot of uncertainty. The Department of Trade and Industry and South African Revenue Service officials are still undecided on many of the details and definitions. Components and vehicle producers are hoping for clarity by the end of the year.
rma Stern’s paintings are no stranger to multimillion Rand price tags – her Still Life with Gladioli sold at auction for R7.57 million and at the time was a record for South African art. Other well-known proponents of local art and highly desirable pieces include works by Pierneef, Boonzaaier and Laubser. “The theft of cultural objects and works of art affects developed and developing countries alike and the FBI and Interpol have established dedicated units to deal with this escalating threat. The growing trend in illicit trafficking of cultural heritage and art is a transnational crime that is sustained by the demand from the arts market, the opening of borders, improvement in transport systems and, in some instances, the political instability of certain countries. South Africa has not escaped the
growing incidence of art theft and with the growing love affair between collectors and South African artworks, it’s a trend that art owners should be concerned about,” says Mandy Barrett of Aon South Africa, leading insurance brokerage and risk consultants.
depreciation. The reality is that as prices soar, art and cultural property theft is a rapidly growing criminal enterprise in South Africa, the magnitude of which has been highlighted by the recent thefts of valuable and culturally symbolic art pieces.
It is a source of pride to all South Africans that the art and culture of the country is receiving increased interest both at home and abroad, but the hard reality is that the more something costs, the more likely someone will want to steal it.
“Thefts are taking place from galleries, museums and private collections by highly organised syndicates who are finding fertile markets for their stolen pieces. South Africa has been hit recently by two highly organised
It’s a view echoed by Gordon Massie, managing director of specialist underwriters, Artinsure. “Fundamentally risk arises from theft, loss or damage and typically cover involves the likes of all risks, away from premises cover, transit cover and
“Thefts are taking place from galleries, museums and private collections by highly organised syndicates who are finding fertile markets for their stolen pieces.”
syndicates that deal in sought-after, commoditised art and are playing on buyers’ greed to ply their trade.” It is therefore imperative that art owners receive specialised insurance valuations for expensive art pieces, as a general valuation will not take into account the complexity that surrounds these appreciating assets. “A specialist insurer knows how to effectively manage any potential claims in respect of art and, most of all, understands that your asset is an appreciating asset,” says Massie. Aon’s Mandy Barrett adds: “Among other factors, art prices are determined by the nature of the piece, the size of the collection and the risk management applied to protect the item or items. Factors such as the value of pairs and sets have to be understood and correctly priced to ensure adequate cover.” Thirty-two artworks have been placed on Artinsure’s theft register for South Africa in the last three months and, according to the FBI, art theft is a lucrative criminal enterprise with estimated losses running as high as $6 billion (about R40 billion) annually worldwide. “Moreover, the art world has been rocked recently by cases of fraud and it has become necessary to provide for defective title cover for ownership dispute to protect against cases such as this. “It’s all about specialised knowledge and experience. This market is very different when compared with insuring everyday household items or physical assets such as vehicles or property. It’s all about providing a true value proposition based on a working knowledge of the art business. With thousands of South Africans now owning art collections and their importance as asset portfolios growing, there is a need for world-class insurance solutions for those who collect, sell, create, restore, exhibit or transport works of art, antiques, collectables and other high value memorabilia,” explains Barrett. “More and more risk is being written locally and that has helped to contain premiums. The old practice of insuring art as part of the contents of a home or an office is long gone. In light of the appreciating values of so many local artworks and the demand for them, specialised cover for rare, valuable or collectable pieces is essential,” concludes Massie.
s d l o h e s u o h n a ic r f A h t u Are So ep away from one st
l a i c n finaster? disa old ISA Househ N /U m tu n e ts financial in o p The Mom in p x e d many ellness In Financial W typical characteristic of a instability as ouseholds. nh South Africa
omentum, in conjunction with UNISA, recently launched the Momentum/ UNISA Household Financial Wellness Index. The index will be an ongoing snapshot into the financial wellness of South African households. It is the first independent, credible and comprehensive research of its kind to present an invaluable benchmark in understanding the state of the nation’s financial wellness. The research was undertaken by the Bureau of Market Research (BMR) and the Personal Finance Research Unit (PFRU) at UNISA. The research presents financial advisers with a benchmarking mechanism against their own clients’ financial wellness, which would ultimately assist them to render appropriate financial advice. The data below, presented by an index score of four categories, indicates a dismal household financial wellness state: Anchored Unwell, at 4.8 per cent of the population, indicates that a household is deeply rooted in a financially unwell position with little chance of improvement, without major outside assistance. Drifting Unwell, the largest sector at 48.5 per cent, represents a household that is unstable and leaning towards negative circumstances or is influenced by adverse events. With some attention to positive influences, the household can shift upwards to a Wellness category.
Drifting Well, the second largest category at 30.5 per cent, is again unstable with the potential to drift downward into a negative footing. Again an adverse event can be seen as a catalyst to a downward spiral. Equally with a small amount of application, this grouping can move towards being financially stable.
The data indicates that an adverse financial event could immediately drift/place a person into a lower category.
It is anticipated that the index will provide financial services professionals, consumers and policy-makers with a meaningful overview to better understand and interpret the current state of financial wellness of South African households. With the right plan in place, peace of mind and assurance of coverage, more families may become financially secure.
Pieter Erasmus, head of marketing, sales and distribution at Momentum Short-term Insurance, says, “Such occurrences are very likely to happen in the absence of appropriate short-term insurance cover. House and business break-ins, theft and vehicle accidents are some of the common risks we face at any point in time and they can cause a major dent in a person’s financial wellness state.”
Once the journey towards financial wellness has started, clients will be able to assess if they are anchored well, or drifting towards a situation of irreversible risk. This awareness provides a starting point towards a considered, long-term plan, with the urgency to seek out professional financial advice. As part of that plan, adequate short-term insurance can offer an essential safety net in times of trouble.
Erasmus advises that if comprehensive cover is not affordable to the client, brokers must advise their clients to consider cost-effective cover that is now widely offered in the industry, in both personal and commercial spaces. The objective of adequate short-term insurance cover is to restore a client to the exact state as before the incident.
The index has shown, that the drifting categories, which are the most populous, are where consumers need the most help and stand to benefit the most, by seeking out solid financial advice. Momentum wants to use the Financial Wellness Index to encourage consumers to seek out professional financial advisers.
Anchored Well is where everyone would like to be. With 16.2 per cent of the population secured in this category, households here are firmly financially well.
Christelle Fourie | Managing Director of MUA Insurance Acceptances
THE ART OF ENTERTAINING AT HOME
Making sure your clients are covered during those special events Hosting a function such as a birthday party, wedding, charitable event, or work-related occasion at their house or on their property is becoming an increasingly popular choice for many clients, not only because it saves on costs associated with renting a venue, but it also provides a more intimate environment with fewer restrictions when it comes to decorations. However, many homeowners may be placing themselves at risk of a number of liability issues if they do not fully understand their insurance policy. Therefore, it is a good idea to inform your clients that they need to ensure that they have adequate liability cover in place before hosting their big event. Once they are certain they have sound liability cover with the required sums insured in place, there are a few key tips you can provide to your client ahead of their event to ensure it is not remembered for the wrong reasons.
Employing trusted services If the event involves outsourcing services such as entertainment, catering, waiting staff, a cleaning company or other service providers, it is crucial that your client takes the time to ensure the supplier is licensed and insured. It is always best to use a service provider that has the required workers compensation insurance that covers their staff before, during and after the event. Remind your client to ensure a signed contract that clearly describes the services to be provided by the vendor is kept for record purposes. A very large or complex event might even necessitate the advice of an attorney to assist in the negotiation process when the contract is drawn up, as well as specialist liability events insurance.
Parking considerations Not only will your client’s guests be impressed by an organised parking schedule as it makes their lives easier and safer when they arrive and leave the event, but it mitigates the chance of collisions on your client’s property while assisting in the prevention of traffic violations due to the blockage of roads or thoroughfares. An effective parking plan must be made well in advance to ensure compliance with local zoning restrictions. Tell your client to consider hiring a valet service or parking attendants for very large events, to avoid the stresses of managing the process. It is important that your client ensures that adequate lighting is provided in the driveway and parking areas to ensure the safety of guests and vendors.
Safe entertainment facilities are a must
“It will ensure that their party remains a happy memory and they will be grateful for the insight you have provided ahead of an already stressful situation.”
Ensuring a fool-proof venue Injuries that result from slips or falls – typically on stairs or polished floors – are one of the leading causes of liability claims arising from events hosted at a house or residential property. Therefore, it is essential to ensure any walkway, high traffic area or staircase contains no obstacles, ice or debris that could result in someone becoming injured. Ahead of the event, it is a good idea to place a rug or another type of temporary non-slip covering over a polished floor in order to create traction and to also put up signage at the top and bottom of all staircases alerting guests to mind their step. Another preventative measure is to ensure sufficient lighting is always available in high traffic areas and staircases.
While entertainment for an event can range from a ballroom floor, marquee tents, inflatable children’s play structures, waterslides or equipment such as paint ball guns, it is critical that all safety precautions are adhered to and supervision, when appropriate, is present at all times to best mitigate injuries or accidents. Before hiring entertainment equipment, your client must always consider the ages of participants in order to take necessary precautions. It is important to ensure that all the appropriate safety equipment is readily available. Sometimes professional supervision, such as lifeguards or security guards, may be necessary. For clients with expansive properties where all areas are not easily monitored, it is essential to advise them to store all-terrain vehicles (ATV) such as quad bikes, in a locked facility as these can often result in injury.
should a guest become injured as a result of another guest’s intoxication, the injured person may file a law suit against the host. As a result, your client must adhere to the law at all times and never serve alcohol to minors. Your client also has the right to decline to serve alcohol to any guest who has already had too much to drink or intends driving home. Perhaps suggest they hire a bartender who can monitor drinking behaviours and always ensure good lighting in food and beverage serving locations to ensure guests can be easily observed for over-intoxication. By keeping your clients informed, it will ensure that their party remains a happy memory and they will be grateful for the insight you have provided ahead of an already stressful situation.
ensure your client’s event is safe • •
T ell your client to invite only people whom they know. A lways ensure the food provided is filling and there is an availability of non-alcoholic beverages. A void activities or entertainment that revolves around alcohol, as guests are more likely to get overly intoxicated, placing everyone at risk. Transportation or overnight accommodation should be arranged for guests who are too drunk to drive home. S top serving alcohol well before the end of the party. Inform your client to always stay alert and remember their responsibilities as a host.
Cautionary measures for serving alcohol Most events are hosted in order to celebrate an occasion, so naturally your client will most likely be serving some form of alcohol. It is important to make them aware of the fact that
kzn taxis to be fitted with electronic fare collection DigiCore Holdings has concluded an agreement with Translog Management, which will see the installation of its electronic fare collection solution into approximately 3 000 taxis in KwaZulu-Natal over the next two years.
he project will initially target all taxis and commuters within the Grange and Westgate, Ridge Park, Buffer, KwaNyamazane, Alexandra Road Extension, Richmond Crest, Pelham, France and Napierville areas. After a test period and once the system has had any issues ironed out, the project will be extended across the District of uMgungundlovu. The current cash-based system employed by taxis has meant that issues such as vehicle condition, driver behaviour and passenger safety have been difficult to manage, monitor and enforce, and this new system could revolutionise the industry for the uMgungundlovu Regional Taxi council, its 40 taxi associations and the 500 000 people who travel with them on a daily basis.
Boy Zondi, regional chairperson of the Taxi Council, says: “The time has come for our commuters and citizens to see our taxis as a safe, affordable, convenient and eco-friendly means of commuting. The taxi industry has grown over the years, and the District of uMgungundlovu is proud to be among the first in the country to embark on a project that will see the implementation of controls and rewards for good driving behaviour within the taxi industry.” Pierre Bruwer, managing director of TAP-IFARE (DigiCore’s associate company), states: “The DigiCore group is very pleased and proud to be part of this exciting initiative with Translog and commends the executive team at Translog and the regional taxi council for the bold initiative. Our technology enables and supports the convenience and safety
factors around electronic fare collection for both the owner and commuter. We expect to make similar announcements in other provinces in the very near future. Having partnered with Absa and MasterCard obviously makes things so much easier for us, in providing the transit industry with a solution that meets all government and legislative requirements,” concludes Bruwer.
The project involves the following: •
The Benefits of the fleet management system •
riving behaviour will be monitored at a central control room and D owners of vehicles will be notified by SMS of any violations by their drivers. Through this management system, driver profiles will be managed and good driving rewarded. The provision of a 24-hour commuter call centre that allows commuters to register queries regarding the new system. The KwaZulu-Natal project follows the successful pilot project for electronic fare collection in the public transport environment in Cape Town.
itting a fleet management/ F tracking system to every taxi that will alert operators and the management centre regarding speeding, route violations, accidents, theft and hijacking. Fitting a smart card (EMV) system, administered as part of their social development mandate, by DigiCore, Absa and MasterCard. It requires no FICA (hence it is ideal for schoolchildren, rural commuters and pensioners), and commuters can use it to purchase goods at retail outlets with a personalised pin. Fitting onboard cameras to ensure the safety of passengers with real-time viewing of drivers, routes and passengers. This is the critical tool monitoring the safety of all passengers.
The importance of proper declaration Jimmy Fermor | Risk Manager | Renasa Insurance Company Limited
Because of the huge crime problem in South Africa, many people purchase insurance protection for their valuables. In doing so, they get peace of mind by transferring the risk to the insurer. At the same time, at the insistence of the insurer, they often must incur expense to have their homes, valuables and vehicles secured. Insurers play a big part in the South African economy and provide jobs for many. They are in business and operate with the intention to make a profit for their shareholders while maintaining a reasonable solvency margins in order to pay claims, as well as their business expenses and employee salaries. The basic requirement for a client to effect insurance is the submission of a proposal form or a memorandum, either directly to the insurer or via an intermediary. These documents give full details of the risk which forms the basis of the contract for insurance cover. It is expected that prospective clients will exercise the basic principles of good faith. They have a duty to disclose all the material facts (including that the property to be insured does, in fact, exist). The underwriter will evaluate the risk and ascertain if the basic principles have been respected. The evaluation of physical and moral hazard also plays a big part in the acceptance of a risk by the underwriter.
In the event of a claim, many factors are taken into consideration before it is paid including proof of loss, cause of the loss (insured peril), contribution, insurable interest, underinsurance and average. The practice of submitting a proposal form has evolved. A client can now communicate telephonically with certain insurers or brokers to request cover, thereby dispensing with the need to submit any form of documentation at application stage. Many insurance companies also accept the telephonic reporting of claims. It has become very important, if not essential, that the conversation between the client and the insurer is voice recorded and easily recoverable if needed in the future. The basic principles of insurance are equally applicable with this method of insuring. In the event of a loss, the claim will be examined very carefully, including any of the voice recordings, for any inconsistencies. These could include proof of loss; insurable interest; underinsurance; physical and alarm protection of the property; security of the vehicle, which differs from what was disclosed (for example, where the vehicle is kept during the day and at night); who the usual driver
of the vehicle is; and what the vehicle is used for. When insurers provide the client with the policy document and schedule, it makes sense to also provide a copy of the proposal form or memorandum that was submitted, and to recommend that the client check the contents carefully, to avoid any problems should a claim arise. If the client changes any detail, this should be conveyed to the broker or insurer so that they may amend their records which will form the basis of the insurance contract. Claims are often rejected because the client has neglected to observe the basic principles of insurance when effecting cover. Obviously, this has a negative financial impact on the client, but it also contributes to the poor perception of the short-term industry. Misleading and untruthful statements are normally detected by the insurer only when a claim is submitted. By then, the client has often forgotten what they disclosed at proposal stage. But, it is the small print in the insurance contract that is blamed. What a wonderful world it would be if declarations were accurate at both inception and claims stage.
will ski enable industry to fly? Software company, Genasys Technologies has adapted its Ski (software key to insurance) enterprise system to help brokers manage their insurance portfolios better, using a simple Internet connection and PC. as per binder regulations. The technology solution enables brokers to be FAIS compliant when it comes to system management and control. “SKiHost is focused on the provision of cloud computing capability and distribution channels of selected blue chip and niche insurance products, which are sourced and approved by these product providers. It is aimed specifically at the brokers, falling within the binder regulations, and conforms to the data access requirements,” says Symes.
Brokers can access both the domestic and commercial products of several blue chip insurance brands using the system to manage quotations, underwriting and claims fulfilment. The quotation process is electronically enabled and fulfils underwriting requirements, allowing brokers to provide clients with a full policy schedule immediately and in an electronic format.
Added value for brokers
Premium collection and the commission disbursement process are priced in an allinclusive pricing model, which enables the earning of additional fees through agreements
Automated renewal processing applies automatic renewal rules, such as escalation, NCB management and client lifetime values, according to the product provider’s specification, which is used as the basis for renewal negotiations. With various automated processes, such as task management, rules processing and Personal Lines Compare Quote, brokers can increase productivity for multiple insurers on a single platform. SkiHost and its products have been approved by the major insurance companies.
Added value for insurers SkiHost gives insurers new marketing opportunities to promote products through the broker channel. Standard processing and product configuration increases the level of skill of the broker, guarantees consistent underwriting, reduces errors and omission and ensures product integrity and ease of access. Some of the key offerings: • Tight integration into insurer line of business systems and access to information. • Improved quality of information for underwriting specific risks. • A choice of products presented through a comparative quoting tool. • Supply of a centralised and autoprovisioning framework for billing and premium disbursement. • Enables insurers and brokers to access modern distribution channels for obtaining and maintaining new business.
“Can’t happen to you?” Regrets and “if only’s” won’t see to your or your family’s wellbeing in the event of your disablement or death in a motor accident. But we will. For further information call us on 021 872 8782 or visit us at www.vipinsure.co.za Vehicle Injury Protection (Pty) Ltd – Acting as a juristic representative for Infiniti Insurance Ltd an authorised financial services provider and short term insurer – FSP 35914.
Underwritten by Infiniti Insurance Limited
DID YOU KNOW?: Every month more than 1 000 people die and more than 23 000 are injured on our roads. 70% of accidental deaths in SA result from motor accidents. Source: RAF Annual Report 2010 & National Injury Mortality Surveillance System
“The system is now accessible by small- to medium-sized brokers via the web and gives them the ability to manage their portfolios of insurance clients in a hosted environment without the need to invest in expensive computer infrastructure,” says André Symes, Genasys Technologies group brand manager. The broker has to capture information only once, while the system interacts with insurer and product providers, ensuring the free-flow of information.
The importance of valuing vehicles correctly
t is vital that consumers make sure that their insurers are not only reducing the value of their insured vehicle during annual policy updates, but also that the correct value is chosen.
Recent comment that South Africa’s insurers routinely rip clients off by failing to reduce vehicle values during annual policy updates is only partially correct. Many insurers do in fact automatically revalue vehicles downwards each year, using data published in the Mead and McGrouther Auto Dealers’ Digest. But if a vehicle does not appear in the digest, insurers will not know what it is worth. In this instance, vehicle owners will need to advise their insurers of the amount that their vehicle’s value should be reduced by each year, advises Gari Dombo, managing director, Alexander Forbes Insurance. While the basis of settlement values will vary from insurer to insurer, most will use either retail
replacement value or an average between trade and retail values as published in the digest. Apart from paying too high a premium, correctly valuing your vehicle is especially important in the event of write-offs, hijacking and theft claims. For accident write-offs, Alexander Forbes policies state that a vehicle will be written off when the cost to repair damage exceeds 70 per cent of the retail value, or 70 per cent of the sum insured if that is less. “So, if the sum insured on the vehicle policy is less than its retail value, the insured stands a higher chance of having the vehicle written off, with the settlement amount being less than what the vehicle can be replaced for,” says Dombo.
again come into play. “Should the vehicle be repairable following a hijack and some damage, we will authorise repairs.”
In the case of hijacking and theft, especially where there is no quick recovery, the insurer will pay out as if written off. If, however, the sum insured on the vehicle is less than its retail value, the settlement amount will be less than what the vehicle can be replaced for, warns Dombo. If there is a quick recovery and the vehicle has been damaged, then the write-off factor could
These instances will show that a seemingly simple thing like valuing your vehicle correctly, or at least correctly understanding how it is valued, can help consumers avoid unpleasant surprises as well as ensure that they receive the best and most reasonable vehicle cover from their insurers when they update policies and revalue their vehicles each year.”
I’m so sexy Making medical aid attractive to the young B i anca W r i ght
From gym rebates to discounted movies and money off your grocery bill, medical schemes are coming up with interesting and innovative strategies to attract the young and healthy and secure their loyalty. We take a look at who is doing what and how successful they have been. Plus, we speak to the young and healthy themselves, and get the skinny on what they think and know about medical aid.
Youth, they say, is wasted on the young. One of the pitfalls of being young is often a sense of invulnerability, a notion that often means that young people do not consider it necessary to opt for medical aid, save for retirement or invest in life insurance. Recognising this common idea, many medical aids have introduced a variety of incentives and rewards to appeal to the young and healthy and, hopefully, secure their business.
Seeing the logic “Understandably, young adults are inclined to see cars, computers, gadgets and the latest cellphones as more attractive choices, confident that a medical aid plan is something they don’t need at this point in their lives,” says Dr James Arens, clinical operations executive at Pro Sano medical scheme. For this reason, medical aids have had to introduce targeted approaches, options and incentives to attract the youth. “The need to provide holistic healthcare and well-being to young, up-and-coming members has forced medical schemes to rethink and restructure their offering. To appeal to this market, it has become vitally important that medical schemes include value-added benefits to their overall healthcare benefits while including lifestyle and loyalty benefits that cater to the live-fast-and-live-now generation,” says Mark Arnold, principal officer of Resolution Health Medical Scheme.
“The need to provide holistic healthcare and well-being to young, up-and-coming members has forced medical schemes to rethink and restructure their offering.”
He notes that the dawn of Generation Y, and more recently Generation Z, brought with it a strong focus on instant gratification, fast and efficient customer experiences and a move towards holistic well-being.
Resolving to target the youth Resolution’s approach is to offer enhanced programmes that include additional benefits of particular relevance to young adults. Through Agility Channel’s Zurreal wellness and loyalty programme, members of Resolution Health have access to three tiers of wellness and lifestyle benefits, with the entry level option, Zurreal4life, being available to all Resolution Health members at no additional charge. “Providing basic loyalty benefits at no additional charge forms part of Resolution Health’s Embrace Life strategy and serves to position the scheme as a leader in areas that matter to the youth, namely education, environment and entertainment,” Arnold says. It also allows all income brackets to enjoy the benefits of a loyalty programme.
Another example is that Resolution Health offers discounts on educational courses as well as access to a debit card facility for dayto-day healthcare expenses which they can fund simply by ensuring they monitor their health annually. The debit card facility can be used at any healthcare provider and is ideal for young adults who are seeking hospital cover and want to make some provision for day-to-day cover without making a substantial financial commitment. Arnold says Resolution Health is furthermore embracing technology in the form of web-enabled portals, websites, electronic and mobile communication as well as advanced systems which streamline the claims experience for the member. “The scheme currently has an excellent age profile with the average age of beneficiaries only 32.56 years, which is among the youngest in the industry, indicating that we are definitely moving in the right direction,” he says.
“Young people are our future. The better we care for their health, the more we set them free to make the world a better place. As care is at the heart of what we do, we take time to listen to their healthcare needs and to respond meaningfully.”
At liberty Liberty Medical Scheme (LMS) has also targeted the youth as a specific market. “Young people are our future. The better we care for their health, the more we set them free to make the world a better place. As care is at the heart of what we do, we take time to listen to their healthcare needs and to respond meaningfully,” says LMS executive principal officer, Andrew Edwards. LMS has introduced a number of efficiency discount options – the Select range of options, tailor-made for the younger market. “LMS wanted new members to have the same access to quality care as other members, but in a way that was even more affordable,” Edwards says. The introduction of these three discounted Select options will save new members 10 to 13 per cent on their contribution. The Select options, which are more cost effective, have the same benefits as the full options, with the exception of chronic medication which is obtained from public facilities, and planned in-hospital procedures for which a select LMS network of private hospitals is utilised.
“Momentum Health’s Health Platform Benefit was the first of its kind to cover a range of preventive screening tests and check-ups. This assists those who are currently healthy with the opportunity to monitor their health without having to deplete their savings account,” he says, adding that a range of maternity benefits is also included in this benefit, making Momentum Health very attractive to young families. “Our unique HealthSaver benefits also give members the flexibility to design their day-to-day benefit to their needs.”
Maintain the momentum Dr Craig Nossel, head of Vitality Wellness, says, “Several peer-reviewed research papers in leading health journals have shown that highly engaged Vitality members have lower healthcare, shorter stays in hospital, and fewer hospital admissions overall compared to Vitality members with no or low engagement. In addition to the tangible financial benefits of a decrease in healthcare costs, Vitality has also served as competitive advantage and differentiator for Discovery and has engendered loyalty among our members. The programme provides significant customer value from both a financial and health perspective.”
Momentum Health’s Mobisite provides easy and quick on-the-go access to Momentum Health members when having to track, update or authorise certain medical aid information. Its “search for a provider” functionality furthermore enables a member to find a service provider. This is particularly convenient in the event of an unforeseen illness when the family may be travelling away from home.
Momentum Health offers its members a number of incentives. One of these is the option to save up to 30 per cent on your contribution without sacrificing any benefits by using Momentum’s preferred providers. Members of Momentum’s wellness programme, Multiply, receive discounts from more than 30 providers, such as Virgin Active, NuMetro and Garmin. Members can also earn up to R5 400 in cash from Momentum’s HealthReturns programme if they follow the required steps such as going for a free health assessment, complying with appropriate treatment, where applicable, and being active.
“It’s a case of: what benefits and cover do I get for my money versus: is it the cheapest medical aid.”
Johan Lombard, actuarial specialist at Momentum Health, describes Momentum’s HealthReturns programme as a one-of-a kind innovation which enables members to earn up to R1 800 a year simply by taking ownership of their health status and being active. Those who elect to have their HealthReturns paid into their HealthSaver account (which supplements members’ medical savings accounts) can earn double HealthReturns (up to R3 600 per year) to fund any uncovered healthcare expenses, including things like cosmetic surgery and Lasik surgery.
From the mouth of babes While schemes have started targeting this important youth market aggressively, it is unclear what the youth think of these approaches. Thirty-year-old Chris Kitsopoulos, who battled cancer in his twenties and is now cancer-free, says that incentives and rewards, while a nice-to-have, are not the core focus in his decision-making process. “For the most part these rewards require you to pay an additional fee but then need an obscene amount of effort on your part to see any savings. So I don’t attach too much value to them,” he says.
Kitsopoulos adds that, for him, price is important. “It’s a case of: what benefits and cover do I get for my money versus: is it the cheapest medical aid,” he says. Honours student Ceba Mlandu, 24, talked through the medical aid options with his mother when they joined a medical aid seven years ago. “As for tactics attracting the youth, I sometimes forget they exist. Many of my friends are on Discovery as they pay for gym memberships and supplements which will appeal to the men,” he says. “Bonitas is the one we’re on now as it offers the best plan for the premiums paid.” Twenty-six-year-old Waldo Oosthuizen also considered price in his choice of medical aid. “I chose GEMS because I receive a higher subsidy from my employer because of this,” he says. “It is very important to me that I will not be financially ruined if I were to become ill or injured. I chose an option with good hospital cover as well as chronic illness cover.” He adds that while he cannot change his medical aid because of the subsidy he receives, he would like to have incentives that reward healthy living. “It would be nice to have a medical aid that would reward me if I lost weight or lived healthier. Incentives are only attractive if they are sensible and aid good service, cover or lower costs. Rewards and incentives make me feel appreciated. It is also unfair if people who are reckless with their health pay the same as people who try to be healthy. Car insurance rewards you for taking care of your car; is your body not more important?” Marketing and reward gimmicks may attract initial interest but it is value that ultimately wins the consumer, even the young consumer. As Arnold says, “Purchasing medical scheme cover is a grudge purchase. Ultimately, what sets one scheme apart from another is its benefit richness, affordability, value-add offering and client service. It is by ticking all these boxes that medical schemes can attract younger members, which ultimately bodes well for the risk of the scheme and the customer satisfaction of its members.”
Mountains lie ahead for
medical schemes S outh African medical schemes cite a number of significant challenges in the coming years, including the government’s ambitious National Health Insurance scheme, increased regulation and the demarcation between health insurance and medical scheme cover, according to a survey.
PwC’s first edition of the Strategic and Emerging Issues in the Medical Scheme Industry Survey 2012 was carried out among principal officers of 20 schemes registered in South Africa and one from Namibia, covering 53 per cent of the South African industry, based on 2010 average principal members.
allenges “Several ch ical for the med r y ust schemes ind if ed were identifi is stem the NHI sy ed.“ uc to be introd
National Health Insurance Medical schemes believe that National Health Insurance (NHI) alone is not the solution to South Africa’s healthcare problems as working conditions first need to be improved and a total overhaul of basic resources should take place before the new system is implemented. Only a quarter of the participants agreed that the introduction of the NHI system would change the current state of healthcare if it was
implemented in accordance with the focus contained in the NHI Green Paper.
allocated to healthcare, and lead to better consumer protection.
The NHI is viewed favourably by a majority of respondents when asked whether they think that NHI will increase access to healthcare, improve service delivery to the previously disadvantaged, and improve medical risk cover for the entire population. However, medical schemes do not believe that the NHI will reduce the cost and complexity of compliance, improve financial integrity across the industry, result in the better use of funds
Several challenges for the medical schemes industry were identified if the NHI system is to be introduced. These include the maintenance of membership of younger and healthier members, changes in the conditions of employment of members, the affordability of cover provided to members, sustainability of current funding levels and cost structures, and the consolidation of medical schemes.
M Medical scheme operating costs The issue of medical scheme trustee compensation made headlines last year when the Council for Medical Schemes (CMS) accused trustees of lining their pockets. Steven Mmatli, the head of compliance and investigations at the CMS, says that payments to trustees had increased dramatically, had deviated from the original idea of a stipend, to a full-on salary, and that being a medical scheme trustee was now considered a career and not the part-time job originally implied. In spite of this, only 24 per cent of medical schemes thought their trustees were paid too much. Sixty six per cent of respondents believed that a zero to five per cent reduction in current operating costs was the only realistic figure that could be achieved.
“A significant percentage of participants (70 per cent) expect the intensity of regulation of medical schemes to increase substantially over the next three years.”
Scheme performance A significant percentage of medical schemes (71 per cent) had contribution rate increases of between five per cent and 10 per cent for 2012, with hospital and specialist expenses driving these increases. South Africa’s Competition Commission is considering an investigation into healthcare costs and most medical schemes are in favour of this. More than half of medical schemes were of the opinion that such an investigation could be useful, while 38 per cent believe that such an investigation is long overdue. The majority of participants (95 per cent) were of the view that Prescribed Minimum Benefits (PMB) paid in full result in excessive benefits being paid by medical schemes to the detriment of members. Respondents said the absence of tariff controls meant the provider could overcharge schemes. Members’ benefits may be at risk due to possible unwarranted, uncontrolled expenditure.
Information technology Schemes cited managing data and data quality as the major technology weaknesses within the industry. Almost half of the schemes have considered the role of e-health in reducing costs and improving accessibility.
Regulation A significant percentage of participants (70 per cent) expect the intensity of regulation of medical schemes to increase substantially over the next three years. This is likely as a result of the pending Medical Schemes Amendment Bill, as well as the increasing scrutiny of schemes by the Council for Medical Schemes. French says this is also not unexpected given the recent developments in respect of the payment of PMBs. Half of the schemes surveyed currently spend between one and five per cent of their annual gross contributions on compliance. This is expected to grow with the increase in intensity in regulation.
Solvency and risk management The majority of participants (81 per cent) believe that the current solvency margin calculation is inappropriate and are in favour of a more risk-based solvency approach. Furthermore, a significant percentage of schemes (62 per cent) are not in favour of the new insurance contract accounting standard (IFRS 4 Phase II).
Market environment In March 2012, National Treasury issued draft regulations on the demarcation between health insurance policies and medical schemes. The purpose of the regulations is to define more clearly what is classified as health insurance and ensure that consumers understand the nature of the service being provided to them in instances where there appears to be uncertainty and ambiguity in the legislative framework. PwC medical schemes leader for Southern Africa, Ilse French, says that the proposed regulations are likely to lead to a review by most providers of medical insurance to ensure compliance.
Top-ranked risk challenges include member attitudes towards medical cover, which may indicate that the target market may not realise the need for cover or is not be willing to purchase cover. Compliance and regulatory requirements were also recognised as significant challenges. Medical schemes face a daunting list of changes to deal with over the short to medium term. The NHI may expand coverage, but the question is: can the stakeholders lower the cost of treatment in South Africa to make medical schemes and NHI sustainable into the future?
â€œThe majority of members with chronic conditions will be accommodated through this process as formularies are not vastly different across most schemes.â€?
hen companies shift medical aid providers, the company may be getting a better deal but what of the staff member who may not receive cover or is excluded for a period of time because of a pre-existing condition? When employers move from one medical scheme to another, certain of their employees’ chronic medication and treatment protocols may be undermined if the receiving scheme does not offer the same benefits. While the majority might benefit, one or two individuals may end up having to fork out an extra R300 a month for chronic meds. We investigate why this happens, how medical schemes could help clients avoid this dilemma and how brokers should advise employer groups that are considering switching schemes. An important role According to the Council for Medical Schemes, the employer may determine whether or not the employees are entitled to belong to one or more schemes or whether the employees have total freedom of choice of scheme. “The employer also determines, generally within the framework of conditions of service, negotiations between the workforce and organised labour, such as trade unions, personnel organisations or staff, what level of subsidies will apply to different categories of employees or in general. Therefore, employers are not admitted to membership but they play an important role in collecting contributions and ensure payment to the scheme concerned,” the CMS says. Kenny Williamson, a financial adviser and a member of the Institute of Business Brokers, says that employers may wish to change medical schemes for a number of reasons, including poor claims payment experience, billing issues or the desire to have one provider for all company benefits. Another reason may be that specific products have benefits that your staff members want to use. Medical schemes are faced with the constant balancing act of accommodating the needs of new membership while ensuring they protect the existing membership from additional risk. This is particularly true in the case of taking on multiple members through employer groups where membership transfer includes members with pre-existing conditions as well as higher pensioner ratios.
Regulatory framework Johan Lombard, – actuarial specialist at Momentum Health, explains that the underwriting protocols that medical schemes may utilise are strictly regulated by legislation (Medical Schemes Act). “Depending on the duration of previous medical scheme cover (less or more than 24 months) and whether there was a break in membership of more than 90 days, medical schemes may impose either a three-month general waiting period or a 12-month condition-specific waiting period,” he says. This would exclude claims relating to a particular pre-existing condition(s) for a 12-month period. Section 29A(6)(b) of the Medical Schemes Act of 1998 states that medical schemes cannot impose waiting periods when the application is for an employer group transferring medical scheme membership of all covered employees if: • The transfer occurs on 1 January each year. • Reasonable notice is given to the new medical scheme. • The move takes place inside 90 days from the date of termination of the previous scheme. Lombard adds that, for those joining a medical aid for the first time after age 35, schemes can also impose a late-joiner penalty on their contribution, based on the number of years without cover since age 21. A balancing act Momentum Health accommodates groups moving onto the scheme with underwriting concessions (i.e. no or lesser underwriting) if the health risks presented by the group as a whole looks favourable, compared to that of the scheme currently. “Meeting the needs of members coming onto the scheme while ensuring the overall risk of the scheme is not adversely affected can be tricky,” says Mark Arnold, principal officer of Resolution Health Medical Scheme. It is for this reason that communication between the broker and the scheme plays an important role in providing the employer group with a quotation that is based on risk, age of the membership as well as pensioner ratios. “Where these factors are in line with that of the scheme, a decision could
be made to forego individual underwriting and provide group underwriting which may include waiving the waiting periods for members with some or all pre-existing conditions,” says Arnold. Examining the options The next step would be to have a look at the chronic breakdown of the membership and compare the medicine formularies of the current scheme with that of the scheme the members are moving to. “The majority of members with chronic conditions will be accommodated through this process as formularies are not vastly different across most schemes. However, where members are on medications not on the formulary, the scheme will contact the doctor to discuss whether the member in question can be treated with a medication on the formulary. The final decision in this regard rests with the doctor,” adds Arnold. On the rare occasion that all members are not accommodated through these processes, the scheme will consider the condition of the member as well as other factors and will decide whether it will fund the medication of the member. “The same process applies to cases where the current treatment protocols of the member differ from those of the scheme,” Arnold says. “Ultimately the transition to the scheme is made as smoothly as possible by accommodating the new member and protecting the existing member pool to the benefit of all concerned.” It is vital, therefore, that employees obtain all of the information prior to any change and that the unions are involved in the negotiation of changes to the medical schemes so that the best interests of the members as well as the employer are served.
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defies tough economy Nick Krige
The South African automobile industry has resisted a faltering global economy by posting consistent growth since the end of 2011. We take a look at how it has defied the odds.
FI The used vehicle market
The new vehicle market
Used car sales were up 12 per cent in 2011, which was to be expected as tough financial conditions will force people to look at more affordable options. According to TransUnion Auto Information Solutions, the used vehicle market experienced a further increase of between 10 and 12 per cent in the first quarter of this year.
Despite indications that the domestic economy is slowing, perhaps even stagnating, new vehicle sales have performed remarkably well so far this year.
This is in large part thanks to a value gap that appeared between new and used cars at the end of last year, which allowed used cars to represent significant value for money. However, the rate of decline of used vehicle prices is slowing down, while new vehicle prices remain stagnant. “The value gap between new and used vehicles, which opened up briefly through the last quarter of 2011 driven by diverging price level changes, appears to be closing again,” says Mike von Höne, CEO TransUnion.
Like the used car market, new car sales are helped by low interest rates, improved demand for credit by households and businesses, and an increased willingness from the banks to supply credit. The new car market is also being spurred on by pre-emptive buying by customers looking to take advantage of the weaker exchange rate in the beginning of the year, and the continuing affordability, in real terms, of new cars thanks to a highly competitive trading market.
Despite that the used car market is in good shape. “Market sentiment is steady and volumes are improving with around 40 000 to 45 000 vehicle financing contracts signed every month,” Von Höne notes.
“The recent sharp depreciation in the exchange rate is also likely to cause pre-emptive buying over the next few months as consumers seek to purchase vehicles to avoid the possible impact of the lower exchange rate on new vehicle prices,” according to NAAMSA. “Continued growth in consumer expenditure and public sector infrastructural investment would also support domestic new vehicle sales,” the organisation said.
TransUnion is expecting steady growth of between eight and 10 per cent in the used vehicle market throughout 2012 thanks to the continued recovery of consumers’ financial health, banks being more willing to lend money, the continued low interest rate and renewed consumer interest in buying cars.
The ongoing introductions of new models, especially in the budget car section, will support the demand of domestic sales and simultaneously promote growth in the industry. A swarm of new entry-level vehicles, boasting an array of features found previously only in more expensive cars, have also provided a push to the entry-level new car market.
However, Von Höne stressed that it was just a prediction and the volatility of the global market could cause the situation to change, “A further international economic crisis (bought on by renewed sovereign risk worries or perhaps even by conflict in the Middle East) could derail current expectations for both business and consumer confidence with negative spill over to the new and used vehicle market.”
“According to information received from TransUnion Auto, the inflation on new-car prices has been significantly reducing and is currently well below the national consumer price index figures,” says WesBank sales and marketing executive head, Chris de Kock
Encouragingly, the fuel price coming down by nearly R2 a litre in the last couple of months and news of the diminishing threat of additional tolls on South African roads will help to fuel growth in the sector going forward.
The vehicle export market Traditionally Europe is the major destination for the exporting of South African cars, which puts the market in a precarious position as the situation in Europe seems to be sitting on a perpetual knife edge. “As far as export sales are concerned, there remained some uncertainty regarding the extent of the potential impact from economic turbulence in Europe and softer growth in other international markets,” says the National Association of Automobile Manufacturers of South Africa (NAAMSA). The first quarter of the year still showed seven per cent growth in vehicle exports overall, but that growth could disappear quickly if things get much worse in the Eurozone. Thankfully South Africa has managed to make inroads into the African export market, despite intense competition from Chinese and Indian vehicle exporters, as well as second-hand vehicles supplied by Japan. The anticipated high economic growth projections for Africa should support growth in South African vehicle exports to African countries, but that is likely to be offset by the recession in Europe impacting negatively on export sales to the Eurozone.
“Couple this with a couple of salary increases for the average Joe since 2009 and it almost seems that new cars have become more affordable. Vehicle manufacturers have also made new cars a lot more attractive by adding maintenance plans to lower segment levels and by trade-in assistance programmes which have also become an industry norm,” he adds. The first quarter of 2012 recorded an improvement of 10 per cent in new car sales, or 10 109 vehicles, compared to the first quarter of last year, which is well ahead of NAAMSA’s prediction of 7.5 per cent for the year. “Domestically, sales of commercial vehicles over the balance of the year could surprise on the upside, supported by the roll-out of infrastructural development projects,” NAAMSA says. The future looks bright for the South African automotive industry as the next few months are traditionally when the car rental industry begins to re-fleet, so an additional boost to the industry is expected from that sector. But with reports that the South African economy is beginning to stagnate, it would not be a massive surprise if the impressive numbers the industry has posted already this year begin to dip throughout the rest of 2012.
Insuring an Bianca Wright
“The electric vehicle could cost the consumer more to insure compared to a traditional motor car.”
eing environmentally conscious should not mean that you are punished. On the contrary, green consumers should be rewarded for their eco approach, but will South African electric car owners benefit from their green choice or pay a premium?
Electric cars are not currently available in South Africa, despite the fact that our country is ranked 13th or 14th (depending on which stats you choose) in the world in terms of carbon emissions. Our own electric car, the much-touted Joule by Optimal Energy, is dead in the water with little hope of revival, according to latest reports. This means that South Africans looking for an environmentally-friendly electric car will have to wait for the likes of the Nissan Leaf or Chevy Volt to reach our shores. With the current green trend, though, it seems likely that electric cars will be an option for South Africans sooner rather than later. As in most other industries, insurers around the world have been accommodating increasing demand for environmentally-friendly products. The question is whether the insured party will benefit from their sustainable choice or not? Shaun Rademeyer, head of brokers at Auto and General, says that when you look at vehicle insurance you need to take into account the following risk: regular driver, area, theft and the repair of the vehicle in the event of an accident. “With an electronic vehicle, your normal process on rating for regular driver, risk area, write-off and theft will probably remain the same,” he says. “However, when you take into account that less than two per cent of motor claims are actual write-offs, you need to start looking at what the cost to repair the electric vehicle will be.” The cost will include the entire repair process from towing, assessing, parts supply, actual repair process, car hire and so on. Rademeyer says that it is possible that these vehicles will need specialised staff for assessing and repairing them. “Your vehicle could also take longer to repair as manufacturers might not have the parts available, resulting in an overall higher claims cost,” he says. “The electric vehicle could cost the consumer more to insure compared to a traditional motor car.” He advises that, despite this, there are insurers like ibuyeco that can assist customers with ecologically-friendly vehicles with affordable insurance premiums. South Africa’s first green insurer, ibuyeco, is underwritten by Dial Direct and offers eco-friendly insurance products for cars, homes and offices. While the products do not currently offer incentives for choosing environmentally-friendly vehicles, two per cent of an ibuyeco policyholder’s monthly insurance premium will be paid into a trust and the funds from this trust are then donated to various eco-charities and organisations.
Internationally, niche green insurance products like ibuyeco have also sprung up. Pluginsure, a UK electric car insurer, for example, provides cover for the latest electric car technology from Mega, Dalys Electric Vehicles PLC, Tesla, GEM and G-Wiz, as well as new battery electric cars such as the Mitsubishi i-MiEV, the Vauxhall Ampera, the Nissan Leaf, Renault’s Twizy or ZE and the Smart Electric Car. Information on insurance for electric cars is often conflicting. A 2008 study by Insure.com found that it was more expensive to insure a hybrid vehicle in the US than a non-hybrid. A Honda Civic compact that gets 15.31 kilometres per litre on the highway costs $412 more a year to insure than a Honda CR-V, a small sport-utility vehicle that gets 11.48km per litre, the study found. Another study by the Highway Loss Data Institute found that overall insurance costs for crash damage were higher for 11 of 12 hybrid cars and SUVs than for their fuel-only counterparts. Conversely some international insurers have been rewarding consumers for choosing green options. Farmers Insurance Group of Companies offers a discount to its auto insurance customers who own a hybrid or alternative fuel vehicle. The issue is that there is little data available on the safety of electric vehicles. In April, the Insurance Institute for Highway Safety (IIHS) announced results from its first-ever US crash evaluations of plug-in electric cars, and both the Volt and Nissan LEAF earned the top rating of ‘good’ for front, side, rear, and rollover crash protection. South African data is not currently available. In an interview with TheDetroitBureau.com, Lori Conarton, spokesperson for the Insurance Institute of Michigan, says, “Insurance is just another factor which changes for drivers of these vehicles featuring cutting-edge EV technology. These owners can expect to pay a little more to insure them, compared to an otherwise comparable car. EV owners might want to shop around for insurance because some companies are offering discounts on the high-tech cars.”
“Insurance is just another factor which changes for drivers of these vehicles featuring cutting-edge EV technology.”
“By supporting an eco trust, policyholders will, therefore, offset their CO2 emissions,” explains Bradley Du Chenne, spokesperson for ibuyeco. “We have a special interest in going green as our industry will be hard hit by climate change if sea levels rise and unpredictable weather conditions escalate,” says Du Chenne. “Climate change is our concern and more should and must be done to safeguard the sustainability of our planet for our children.”
Opinion divided on driver’s Graduation year A d r i an Ka y
ew regulations which propose a graduation year for new driver’s licence-holders and biennial roadworthy tests for vehicles older than 10 years could result in lower car insurance premiums, says Helen Szemerei, CEO of integriSure. Inexperienced drivers and unroadworthy vehicles are among the biggest causes behind vehicle-accident claims. If adopted, the regulations would give new drivers a provisional 12-month licence, which may be suspended for two years if they transgress by driving under the influence of alcohol; are guilty of six traffic offenses; or drive between midnight and
04h00. Szemerei says, “As a result, we would expect newly qualified drivers to adhere more strictly to traffic regulations in order to avoid having their license potentially removed.” She says that should this graduation year assist in improving driver behaviour, with a resultant reduction in motor-accident claims among newly qualified drivers, then the upside would be a possible relief in motor insurance premiums for the rest of the insured market, as they would be at less risk of being involved in an accident. “Conversely, younger drivers who have just qualified may be subject to higher premiums.
FI In most insurers’ claims experience, it is often the inexperienced drivers who are the main cause of accidents. Although not all insurers will consider granting cover during the graduation year, those who do could possibly impose premium loadings and may then opt to remove the loading once they are fully qualified. It is general practice among most insurers that with every added year of driver experience, premiums are lowered, subject to a good claims history,” says Szemerei. The draft regulations will also require motor vehicles older than 10 years to undertake a roadworthy test every two years. More frequent roadworthy tests should also prove to be a positive for the motor vehicle industry. Currently there are a high volume of unroadworthy vehicles on the roads, which contributes to the high number of accidents in South Africa. “Poorly maintained vehicles such as those with smooth tyres or those that are prone to engine failure certainly contribute to road accidents that could otherwise have been avoided if the vehicle was regularly tested and not permitted on the road in a non-roadworthy condition,” says Szemerei. “In the UK, every vehicle must undergo an annual Ministry of Transport (MOT) test in order to be legally allowed on the roads. If adherence to such laws is applied effectively, then we are also likely to experience a reduction in the money spent on claims as a result of fewer accidents and will therefore see a likely reduction in insurance premiums.” RISKSA asked our readers what they thought about the government’s attempts to make roads safer in this country. Responses were mixed with some saying the new regulations would help create safer roads and others saying existing laws should merely be enforced to ensure road safety. “First-time drivers are not necessarily the real culprits. They are not completely at ease nor experienced and drive very defensively in the beginning,” says Pieter de Milander of Parklands Insurance Brokers, based in Cape Town.
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“It will make new drivers responsible for their actions.”
De Milander urges motorists to get back to the basics. “If road users simply abide by the rules of the road, there will be no need for new laws.” He says that road safety is often a matter of respect for fellow road-users. “Respect your co-road users’ rights. They have the same rights you have. They can’t be blamed when you are late or in a hurry.” He adds that drivers need to control their tempers. One respondent who preferred to remain anonymous accused the government of barking up the wrong tree. “Rather get rid of all the unlicensed drivers on our roads and vehicles that will never pass a proper roadworthy test. That will be positive action to reduce accidents on our roads. Let them get the traffic officials out from behind desks and out of parked vehicles onto the roads with road blocks all over the show and watch the result.” Joanne Christensen of CMH Datcentre Highway, supports the government’s proposed regulations and applauds any attempt to make South African roads safer. “There are too many school leavers who start partying up a storm in the first year of having their license and there are far too many deaths as a result. It will make new drivers responsible for their actions,” says Christensen. Road safety is an ongoing issue with accidents, deaths and damage to property unacceptably high. The knock-on effect is higher claims on insurance and higher premiums. South Africa has made progress in road safety and we can only benefit from having further discussions on how to reduce the carnage on our roads.
new car sales
ccording to the National Association of Automobile Manufacturers of South Africa (NAAMSA), new vehicle sales showed solid growth by registering double digit growth in June compared to the same month in 2011.
Aggregate industry domestic sales improved by 7 015 units – a 15.6 per cent growth – to 51 891 vehicles from 44 876 units in June last year. Total domestic sales for the first half of calendar 2012 remained 10.5 per cent ahead of the first half of last year. Export sales registered more modest growth at seven per cent, rising 1 767 units to 27 061. Overall, of the reported industry sales of 49 108 vehicles (excluding Mercedes-Benz South Africa (MBSA)), 86.2 per cent (42 340 units) was sold by dealers, 5.9 per cent was sold to the vehicle rental industry, while 4.1 per cent was bought by government and 3.8 per cent by industry corporate fleet sales. Sales to car rental companies will increase in the middle of the year as that is when the rental industry traditionally starts to re-fleet. Assisted by new model introductions, aggregate sales in June remained relatively strong at 35 918 units (including MBSA),
reflecting an improvement of 4 480 units or 14.3 per cent compared to the same period last year. Year-to-date new car sales were 11.8 per cent ahead of the same six month period in 2011. Including estimates for MBSA commercial vehicle sales by segment, sales of industry new light commercial vehicles, bakkies and mini buses had reflected strong growth at 13 421 units during June, with an increase of 2 425 units, or 22.1 per cent, compared to last year.
“The disappointing figures could be a sign of underlying economic weakness, a lack of business confidence and certain inventory constraints.”
Sales of vehicles in the medium truck segment also boast double digit growth at 11.7 per cent, while heavy truck sales growth was at a much more stagnant 1.4 per cent.
South Africa exported 27 061 locally produced motor vehicles, including MBSA export sales data, in June, which represents a seven per cent increase from the 25 294 vehicles exported in June 2011. The outlook for the export of South African vehicles looks good as well with momentum of the industry expected to improve over the balance of the year as various vehicle export programmes are ramped up. The industry’s export performance will rely heavily on the direction of the global economy, but a drop in vehicle exports to Europe could be offset by higher exports to African countries and Australia. New vehicle sales have performed remarkably well in the face of the Eurozone crisis and further slowing of the domestic economy. The factors in favour of the domestic market for vehicles are historically low interest rates, continuing improvement in vehicle affordability in real terms, improving demand for credit by households and businesses, as well as further pre-emptive buying by consumers in response to the weaker exchange rate in recent months. The highly competitive trading environment and ongoing new model introductions would also support demand. In terms of domestic sales, the industry remained on track during 2012 for single digit growth in the range of eight to 10 per cent over 2011.
on used car market intensifies
The slowdown in new car price inflation has increased the ongoing pressure on the pre-owned car market, according to TransUnion’s second quarter Auto Vehicle Pricing Index (VPI).
he VPI reveals a statistically insignificant 0.1 per cent upward move in used vehicle inflation to 2.4 per cent, while new car inflation slowed from 3.6 per cent in the first quarter of the year, to 2.9 per cent in the second. “The new car market continues to be relatively strong as consumers are enticed by excellent new car deals,” says Mike von Höne, CEO of vehicle risk intelligence company, TransUnion Auto Information Solutions. “However, this is placing even more pressure on used dealers, particularly the independents, as more consumers are choosing news cars over used vehicles.” The VPI measures the year-on-year price inflation of new and used vehicles, drawing on data received from all the major banks and vehicle finance houses, as well as monthly sales returns from thousands of dealers throughout the country.
Used vehicle financial registrations for May 2012 reveal year-on-year growth of around seven per cent, but used car dealer profit margins are still under pressure, which means that dealers are being forced to buy in stock at less than the trade value indicated in the Auto Dealers’ Guide. This means consumers are getting progressively less for their trade-ins. “Dealers have to do this in order to be able to maintain sustainable margins. We do not anticipate this trend reversing in the foreseeable future,” Von Höne adds. Most pressure is being experienced in the high-volume, low-margin, budget end of the used car market where competition with new car sales is fiercest. There is also considerable pressure in the premium end, where dealers traditionally could rely on solid margins, but where demand has declined as consumers continue to buy down.
F&I Auto Insurers get thumbs up from consumers According to the JD Power and Associates 2012 Auto Insurance Study, overall customer approval with auto insurance companies has reached an all-time high thanks to satisfaction with policy offerings, and billing and payment practices. The study measures customer satisfaction with auto insurance companies across five factors: interaction; price; policy offerings;
billing and payment; and claims. On the 1 000-point scale, overall satisfaction with auto insurance companies is 804, up 14 points from 2011. Satisfaction levels in 2012 are the highest since the study was launched in 2000. “Although satisfaction with price remains consistent from 2011, auto insurance companies have made great strides in all other areas,” says Jeremy Bowler, senior director of the insurance practice at JD Power and Associates. “Among customers whose insurers meet or exceed all their service
expectations, modest rate increases appear to be well tolerated.”
customers. The study was fielded between March and May 2012.
Discussing rate increases with customers and offering options seems to have a positive effect on satisfaction. Of auto insurance customers receiving a rate increase, 56 per cent were not notified prior to the renewal notice and satisfaction was markedly lower than customers who were notified prior to a rate increase and had a discussion with their insurer. The 2012 US Auto Insurance Study is based on nearly 35 000 responses from auto insurance
Toyota building taxis again Toyota South Africa Motors (TSAM) is officially reviving its minibus taxi assembly in South Africa after a request by government to restart local minibus production, which was halted in 2007. The R70-million investment will enable TSAM to produce the semi-knockdown (SKD) 16-seater Quantum Ses’fikile and create 90
direct jobs at Toyota, and 210 jobs at suppliers and service providers. About 40 taxis will be assembled a day on a single shift operation, which amounts to 10 000 units a year. Trade and Industry Minister, Dr Rob Davies, noted at the opening of the assembly line at Toyota’s Durban plant that the investment would receive government support under the Automotive Investment Scheme (AIS). He added that a local taxi assembly industry could feed vehicles into a broader African market, especially under a pending free trade agreement, still being negotiated, between 26 countries on the continent. His department was also pushing for preference to be given to locally assembled taxis under the Department of Transport’s taxi recapitalisation programme, which provided financial support to the taxi industry in replacing their vehicles with newer, safer products. South African National Taxi Council (Santaco) general secretary, Philip Taaibosch, notes that it had always been the council’s ambition to again see taxis assembled in South Africa, especially as it contributed to job creation. “We must compliment Dr Van Zyl and Toyota on the decision they have made to again assemble taxis locally. We are delighted.”
“Products manufactured abroad might sometimes be cheaper than their locally manufactured counterparts; however, approval of the products mentioned is measured against the requirements of the relevant compulsory specification and the monetary value of a product is not considered during the approvals process.”
All vehicles must conform to same standards All vehicles and automotive components will need to meet the same specific standards if they are to be used on South Africa’s roads, according to National Regulator for Compulsory Specifications (NRCS) automotive technical specialist, Dries van Tonder. If companies are going to choose to import parts from overseas because they are cheaper than locally produced products, they will need to ensure that they are of a suitable quality to meet industry standards. “Products manufactured abroad might sometimes be cheaper than their locally manufactured counterparts; however, approval of the products mentioned is measured against the requirements of the relevant compulsory specification and the monetary value of a product is not considered during the approvals process,” Van Tonder explains. Each model of vehicle destined for operation on South Africa’s roads has to go through the NRCS’s verification process to ensure that it meets the requirements set out by government. This means a sample of the new vehicle, along with the necessary test reports to verify that the vehicle complies with the standards, has to be presented to the NRCS. Additionally, the test results will be valid only if the testing facility itself meets the regulator standards. The process does not end after the initial approval has been granted; the NRCS sends inspectors unannounced to the sites where the vehicles and components are manufactured or imported to ensure the products are of the same standard as the approved sample. If vehicles or components are found not to comply with the standards, corrective action will be taken.
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â€œBrokers could recommend a preservation fund.â€?
Providing for retirement after divorce Angelique Ruzicka
In South Africa, around 50 per cent of marriages end in divorce and one website claims that between 28 924 and 37 098 couples got divorced each year between 1999 and 2008.
hen couples head to the divorce courts, particularly if they are married in community of property (COP), assets generally get divided equally and increasingly even pension funds get divided between the member and the non-member spouse. While the number of absolute divorce orders submitted to retirement fund administrators is still very low, Alexander Forbes says it has seen an increase in the number of divorce orders; 43 per cent on average over the past three years. John Anderson, head of national consulting strategy at Alexander Forbes, says the increase can be attributed to changes in the legislation affecting retirement benefits on divorce and increasing awareness by non-member spouses of their rights to a share of the benefits. Under the Pension Funds Act, the non-member spouse has the right to decide how the pension interest award should be paid. On presentation of a valid divorce order, the fund has 45 days to request that the non-member spouse decides how the pension interest due must be paid. The non-member spouse has 120 days in which to make a decision.
“A retirement annuity is different as there is no such thing as a withdrawal benefit and, if you don’t get divorced, you are entitled to your benefit only at the age of 55.”
What a pension fund pays out to the non-member spouse also depends on the type of fund. Macpherson explains that with pension, provident or preservation funds, what you see is what you get. However, when it comes to a retirement annuity, pension interest includes all the contributions that the member paid from inception of the contract plus gazetted simple interest at the date of the divorce. “A retirement annuity is different as there is no such thing as a withdrawal benefit and, if you don’t get divorced, you are entitled to your benefit only at the age of 55,” she adds. The trend of non-member spouses accessing a member’s pension fund is likely to increase. “We have estimated that funds receive divorce orders in one out of 10 divorces at present. Divorce orders are increasingly being used to access retirement benefits; that is, people get divorced purely to access retirement funds,” Anderson says.
the divorce decree. “I would suggest that the agreement be correctly structured. The three things that should be included are the reference to pension interest; the name of the pension fund; and the portion that the person is claiming. At payment they should again be advising the client that the money be transferred into another pension fund and not be drawn down as cash,” says Sore Cloete, legal manager for Old Mutual Life Assurance Company (personal financial advice). Not all spouses who claim a pension fund will heed this advice. However, Cloete suggests a way around this. “Brokers could recommend a preservation fund where clients have one withdrawal option should they need the money before retirement. The amount they can withdraw from a preservation fund is subject to the rules of the fund so they must choose carefully.” Brokers will have to guide the member spouse too as there will be a gap in their pension savings. “The member spouse will need to save to make good on the retirement. Even though there will no longer be two people living off the income, things like inflation could knock the remaining benefits,” explains Macpherson.
Pension interest means that non-members can share in the withdrawal benefit at the date of the divorce. Non-members can access any kind of pension fund including a provident fund, annuity fund or government employee pension fund. However, this depends on how the couple is married. “If your client is married in community of property or antenuptial with accrual, they have a right to share in the member’s pension interest. If they are married antenuptial excluding accrual, then they don’t have any rights to the fund itself,” advises Geraldine Macpherson, legal adviser at Liberty. “The marital regime would logically dictate what the non-member spouse is entitled to. For example, in community of property, the non-member spouse is entitled to at least half. But couples can decide prior to the divorce to a greater or lesser amount.”
The broker’s role Divorces can get very emotional and messy and brokers may feel inclined to give their clients space during this very tumultuous time. However, experts believe that it is crucial for brokers to step in and provide advice to both parties regarding their financial well-being. Some brokers are privy to news of such proceedings very early on. While couples may be hiring lawyers to deal with the divorce proceedings, brokers have a vital role to play. “Very often not all attorneys are as aware about members’ rights when it comes to pensions. A broker can advise clients on what could happen, where the exposure lies and how much they are entitled to,” says Macpherson. While experts guard against accessing pensions before retirement, the reality is that non-member spouses often choose to take the pension fund money as cash instead of preserving it in a fund to ensure their financial well-being on retirement. “We tell brokers not to become too personally involved as they usually have to advise both parties. But the broker is obligated to encourage the non-member spouse to preserve the money and provide guidance on how to access the money when the divorce is finalised and where to invest the money in a tax-efficient way,” says Macpherson. Brokers can also help to ensure that the divorce agreements are correctly structured. Claims on a pension can be rejected as a result of the wording in
Changes to the rules While clients can claim from each other’s respective pensions, the government is looking to change the rules. The reason is that most people do not take steps to preserve their money when getting divorced. “Only 2.87 per cent of non-member spouses who receive a share of a former spouse’s retirement savings are preserving the money in retirement-savings vehicles; the rest are taking the cash,” says Anderson. The government wants to limit the amount of pension interest that may be awarded to non-member spouses. “In May, National Treasury issued one of its first discussion papers on retirement reform and one of the key findings was the lack of preservation when it comes to retirement funds. It made specific reference to those who get divorced and who don’t preserve. I think in the future, clients will no longer be able to withdraw the whole benefit,” says Macpherson. With rules changing only in the distant future, the broker’s role will be vital during and after divorces are finalised.
What will be, Any person of sound mind over the age of
is able to draw up a valid will
WILL BE Angelique Ruzicka
The topic of death is often a touchy subject to bring up in conversation as it’s not something that people generally want to talk about. However, as a broker, it is vital to ask your client whether they have a will and what the contents are. This helps to ensure that you are giving the client the best advice and that they have enough savings and insurance for their dependants should the worst happen.
“If the client is a varsity student they probably don’t have much need for a will. However, as soon as they have accumulated some kind of wealth, liabilities or started working, it’s essential to have a will to bring some clarity.”
“If you don’t create a will you will be dying intestate. Without a valid will, you will have no control over who inherits your assets and the executor will have to decide what to do with it.”
rokers need to be involved in the estate planning as they are aware of the client’s financial situation and could advise if there are any gaps in coverage or savings products. Clients can be approached about a will at any age. “Any person of sound mind over the age of 16 is able to draw up a valid will. If you have something to leave and someone to leave it to, you should have a will. Wills are thus not limited to wealthy or married individuals,” says Tiny Carroll, fiduciary specialist at Glacier by Sanlam. “There are also certain life stages where it’s critical to have a will; once clients get married or have children, they should create a will. And it should have a testamentary trust in it if the children are still minors,” adds Geraldine Macpherson, legal adviser at Liberty. If clients are hesitant to talk about their passing, the consequences of not having a will should be laid bare. “If you don’t create a will you will be dying intestate. Without a valid will, you will have no control over who inherits your assets and the executor will have to decide what to do with it. If you don’t have an executor, you put your loved ones in the difficult position of having to find an executor and follow intestate succession, which is completely undesirable,” says Lizl Budhram, advice manager at Old Mutual. There may be some instances where a client may not yet need a will, says Macpherson. “If the client is a varsity student they probably don’t have much need for a will. However, as soon as they have accumulated some kind of wealth, liabilities or started working, it’s essential to have a will to bring some clarity.” Under intestate succession law, spouses could lose out. If your client is married, the spouse will get the greater of R125 000 or a child’s share. “They are guaranteed R125 000. If the spouse is young and has children it’s not really that much at all,” says Budhram. If there is no spouse everything will go to the children and if there are no children, the estate assets will go to the parents. Following that, it will go to brothers or sisters or if there are no siblings, to other family members. If there is no-one to claim from the will, the estate will be forfeited to the State, which is again not ideal and should be avoided.
The role of The adviser There’s no denying that the will is an important instrument and link to the estate plan. “They [brokers] must ensure that the will adheres to all the requirements, that the testator has signed on every page, that there are competent witnesses that have signed and witnessed the document. They need to ask if the will is being kept in a safe place and that it is accessible in the event of a client’s death, that clients know where the document is. Then in terms of all the considerations that a client needs to think about when constructing a will the adviser should be able to go through the pertinent points with the client. If the client has children, it is important that the issue of trusts and guardianships are discussed and the disadvantages and advantages of creating a trust is conducted,” says Budhram. This is why the broker needs to be familiar with its contents and who needs to be provided for in the event of a client’s death. “Financial advisers are there to ensure that there is sufficient money left over for the surviving spouse and children and that there is enough life cover to pay for the bond in the event of a client’s death. They need to ask if the client’s liabilities will be addressed at the time of death. Brokers will ensure that the will coincides with the estate plan and that it’s a valid document,” explains Budhram. The role of the executor It’s essential that the client picks someone as an executor to ensure that the wishes of the will are carried out. There’s nothing stopping a client from appointing the broker as the executor, however, experts are generally against the broker being appointed to this position. However, brokers must cast a critical eye over the documents to ensure that there are no errors. “Brokers need to make sure that when a will is read that it is understood. It must be set out in plain and simple English. Brokers should ensure the will is signed by independent witnesses, that it is dated and that their client and the executor know where the will is lodged or kept,” Macpherson concludes.
A HOT TIP FOR FINANCIAL ADVISERS AND THEIR SELF-EMPLOYED CLIENTS When considering disability cover, financial advisers need to be more aware that the real risk to income for their self-employed clients lies in frequent temporary interruptions rather than a single long-term disabling event. Standard disability benefits don’t cover temporary or illness-related claims and tend to carry a three-to six-month waiting period which means an obvious gap in the conventional financial planning process.
ata compiled by income protection specialists, FMI, shows that three out of 10 people before the age of 60 are likely to suffer some kind of temporary disability which could seriously affect their ability to meet routine financial commitments. The same data shows that temporary income protection (TIP) is alarmingly undersold in South Africa with only six per cent of disability cover in this space. Brad Toerien, FMI’s CEO, says the industry is not paying nearly enough attention to vital TIP cover. “The truth is that temporary interruptions to cash flow from illnesses and accidents can have huge knock-on effects for the client’s financial wellbeing as they damage credit ratings, upset small business stability and can force people to return to work too soon for their own long-term good.” Toerien believes that it’s in the interests of both clients and advisers to reassess disability portfolios and ensure a proper weight of temporary cover in
the disability cover mix. “At FMI, we have a number of examples where temporary disability cover has proved if not a life-saver then, at the very least, a lifestyle saver. A commission-earning salesman suffering from disabling depression for several weeks; a fitter and turner with something as simple as a broken finger which prevented him from working until it healed; a car mechanic who was the gunshot victim of crime and needed eight months to recover; and people from almost every sector who have suffered debilitating back ailments and were unable to earn essential income were supported during these crises by their FMI policies.” For the small business owner or self-employed client, a commonplace temporary disability might mean an interruption in cash flow or sacrificing expenditures such as insurance, investments and medical aid cover, which can result in business failure or future insurability problems. Toerien’s view is that generic industry thinking on disability is reinforced by most current FNA
Three out of 10 people are likely to suffer from some disability before 60.
tools which are used to simply calculate a client’s disability needs, with an emphasis on permanent cover. “Consideration is rarely given to understanding the impact of a temporary interruption of income which means that temporary disability income continues to be misunderstood and undersold.” The obvious solution for self-employed clients (and wage earners with standard disability benefits seeking extra cover) is to have both temporary and permanent disability insurance, especially as the TIP offerings have increased markedly in flexibility and ease of payment in the past few years. There is now a range of policies which offers great security and rapid response for clients on the full spectrum of premiums and benefits. Toerien emphasises that effective TIP cover is also in the interests of advisers because it means less risk for them as insurance premiums are protected and lapse rates are minimised while ensuring the long-term financial health of their valuable clients.
TREATING YOUR CUSTOMERS FAIRLY? Rob Rusconi Rob Rusconi is General Manager of Lombard Life, a licenced long-term insurer that seeks to meet customer needs through partnerships like BrightRock and FMI. Lombard Life is a member of the Lombard Insurance Group.
ost regulatory developments come with incomprehensible names that collapse neatly into three-letter acronyms. Treating Customers Fairly (TCF) meets one of these standards but expresses itself so clearly that one suspects a catch. No, no surprise. TCF indeed aims to ensure that … well, that insurers treat their customers fairly. We have to wonder how this might affect you and your customers, but need to address a more fundamental question: will it make a difference at all? OUTCOMES-BASED REGULATION Key to understanding and assessing TCF is an appreciation of the philosophy behind the initiative. While TCF will stipulate a number of rules, it is fundamentally principles-based. The regulator will expect of insurers demonstrable evidence that outcomes have been achieved rather than task boxes ticked. Six such outcomes must be in evidence: • Confident customers. Insurers must be able to show that their clients are positive that their interests are central to all of the decisions and actions of the insurer. It is not sufficient for an insurer to run a sound customer-care function and to create products
that put the customer’s needs first, pay out claims quickly and answer the phone promptly, preferably with a real voice not a computer. These customers must believe that this and everything else that the insurer does puts them first. Furthermore, because regulatory success depends on the outcome, the insurer must provide unambiguous evidence of this customer belief, so it must make the effort to ask its customers the right questions and receive the right answers. It follows that the insurer should be able to demonstrate exactly how it would respond to customer responses that are anything less than satisfactory. This will take quite some doing. Five more outcomes are to be demonstrated: • P urposeful products. The products that insurers design and sell must meet the identified needs of the specified targeted customers. • Enlightened clients. Disclosure to customers must be clear. These customers must be appropriately informed at all stages in their interaction with the insurer; before, during and after the sign-up point. Remember that insurers will need to be able to show that this is the case. • Appropriate advice. Not all customers are given advice, but where they are, this assistance must be suitable to the recipient, taking account of their circumstances and the match of the product – and any alternatives – to their needs. • Performing products. The insurer’s offering must perform in line with the expectation that it creates in the mind of the customer. • Smooth modification. The customer must be able to change their product smoothly, switch away from the insurer without undue hardship and find it easy to complain or claim. SUBSTANTIAL CHANGE Why is TCF needed? Surely, insurers are already behaving in the interests of their customers; in an efficient market, the penalty for failing to do so would be severe. The Financial Advisory and Intermediary Services
Act (FAIS) already puts a significant emphasis on the quality of advice and products. Is this not sufficient? A glance at the personal finance pages suggests that the reputation of long-term insurers, perhaps not at the lows of a few years ago, could do with further polishing. A recent Financial Services Board (FSB) report on its assessment of TCF readiness suggests that there remains a gap between perception – of the insurers themselves – and reality. Many of the insurers claimed compliance with the first outcome in terms of their attention to client care. This is not sufficient, responds the FSB in the summary of its findings; you must make an effort to establish whether the customer believes that their interests are core to your activity. Second, international best practice demands an initiative like TCF. In this regard, countries like the UK and Australia present significantly more challenging environments for insurers – and advisers, I daresay – than South Africa. What does all of this mean for advisers and their customers? It really is hard to tell. Insurer costs will probably rise, as the burden of evidence under the principles-based TCF regulations lies on these insurers. It is hard to predict, however, whether the additional cost is marginal or, as some suggest, really substantial. If the additional expenditure is significant, then shareholders may wish to see some of this passed on to customers. I haven’t seen any analysis by the FSB assessing the risk of this happening. For the adviser, though, TCF is surely good. For those who suggest a somewhat adversarial relationship between insurers and their intermediaries, TCF should bring some focus. Prioritising the customer surely helps to align the interests of the insurer and intermediary. A tough road lies ahead of us all as the FSB determinedly drives through an extraordinary set of changes. It is difficult not to worry about collateral damage. Those who focus on their customers and can demonstrate that they do so, will thrive, and the same is to be said for the intermediaries who behave similarly.
he number of smokers in Southern Africa is steadily declining. Therefore, it is important that brokers make sure their ex-smoking clients are aware that they might be overpaying for their life insurance. Statistics from the Tobacco Institute of Southern Africa show that there has been a 30 per cent decline in the number of adult smokers over the past 10 years, and government’s plans for stricter regulation of smoking will only result in even fewer smokers. However, many of these people may be overpaying for their life insurance if they have quit for over a year, but have not informed their insurance provider. If someone has stopped smoking and ceased to use nicotine-replacement products for over 12 months, they should qualify for a reduction in the cost of their life insurance, according to Gavin Came, chairman of the financial planning committee at the Financial Intermediaries Association of Southern Africa (FIA). Came says smokers are likely to pay a higher cost than a non-smoker due to the associated health risks. “The actual premium a smoker would be required to pay is dependent on a number of factors, including the number of cigarettes they smoke each day. On average, however, a smoker is likely to pay between 25 and 120 per cent more for life insurance than a non-smoker.”
ER INSUR TERMPRODUCT G N O FIA L – RISK 2012 HE YEAR OF T
Quit smoking and save
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“Smokers pay a far higher price for their life cover, as well as other ancillary benefits. In the current environment, with costs such as electricity, fuel and food constantly increasing, it is vital that former smokers take the time to advise their broker or life insurer of a change in their circumstances as it could make a significant impact on their finances,” he adds. Came says it is also important for consumers to evaluate other changes they may have made to their lifestyle such as regular exercise as this can have a positive impact on the cost of financial services products. “Consumers who make an active decision to lead a healthier lifestyle should speak to their financial adviser to determine exactly how this can benefit them financially. For example, a heavy drinker will likely pay higher premiums due to the health risks this would pose. However, if they have stopped drinking for a sustained period of time, they should be able to review any loadings or exclusions.” Came warns, however, that while companies are likely to reduce the cost of premiums for clients who have quit smoking it is essential that clients do not lie to their insurer to receive preferential rates, and that they understand the risks of them doing so. It is also important for consumers to remember that if they start smoking again after informing their insurer otherwise, they must update their details or risk having a potential claim repudiated due to non-disclosure.
Public Enemy Number One In the April issue of RISKSA, we investigated how and to what extent recognised stress and mental disorders are covered by disability insurance. The results in certain cases were encouraging, but what about ‘ordinary’ burn-out? We spoke to Richard Hawkey of Equilibrium Solutions (Pty) Ltd, a man on a mission to educate and advise South Africans on the dangerous effects of stress and how to find balance in their lives. Like so many South Africans, Richard Hawkey was a man happily married with two children and a house in the suburbs, firmly entrenched in the corporate treadmill until about 18 months ago when he suffered from burn-out and slipped into a severe clinical depression. Classified “temporarily disabled” by three doctors, he went through his employer’s temporary disability claims, a traumatic and dehumanising process. After eight weeks of filling in forms and providing costly doctors’ letters, he gave up the process and wrote a book about his experiences, entitled Life Less
Lived, to create awareness. He spent the next year working with several doctors to develop a confidential, online self-awareness tool so that employees can assess the commonly ignored symptoms of excessive and negative stress in their lives.
Understanding stress Since Vitals was launched in September 2011, the results have been staggering, Hawkey said, proving that the physiological symptoms of stress are becoming more and more pervasive.
Clinical psychologist and scientific chair of the South African Depression and Anxiety Group, Dr Colinda Linde, describes the situation as follows: “If we drove our cars like we drive our bodies – 24/7, over-revving, in the wrong gears and without regular services – there would be very few cars left on the road. We need to remember that our bodies and brains are vehicles that will signal wear and tear and become less efficient if we do not actually rest and refuel them when they need it.” Hawkey explains that when we detect danger, the major systems in our bodies are readied to either fight ferociously or run away. This fight-or-flight response is a survival mechanism that floods the body with powerful hormones such as adrenaline, noradrenaline and cortisol which fundamentally affect bodily functions such as heart rate, blood pressure, digestion, concentration, immune system and sight. “The problem occurs when we experience this response for situations which are not lifethreatening,” Hawkey says. “As much as we like to believe we are sophisticated, intelligent creatures, we react instinctively before we analyse.” Most often we are not even aware of this reaction; getting angry sitting in traffic, becoming upset when guests are late or feeling nervous prior to a performance review. When the fight-or-flight response starts kicking in 20, 50 or 100 times a day, it’s easy to understand why it is estimated that as many as two-thirds of GP visits are related to stress. While many definitions of stress exist, Hawkey points out that it is important to understand that it is a stimulus to which our bodies and minds respond (events, situations or items) that is either perceived or real. As a result, what causes one person stress does not necessarily do the same for another. Nor is all
stress bad. Eustress is a positive, motivating stress that keeps humans moving forward; for example, at the start of a new project or when asking someone out on a date. However, modern lifestyles are characterised by distress, hyper-stress (over stimulation) and occasionally hypo-stress (under stimulation). “The first step on the path to managing stress and building resilience is to be aware that you are (negatively) stressed in the first place. Once you acknowledge that, you can work on identifying the causes and invoke an appropriate stress-management strategy,” Hawkey adds.
The bottom line Despite society’s conditioning that stress is just something modern man (and woman) needs to cope with, stress is a risk issue that should be addressed by every business and organisation. The Chartered Institute for Personnel Development in the UK now refers to stress as “the black plague of the 21st century”, and the World Health Organisation has stated that unipolar depression (a common consequence of stress and the disorder Hawkey suffered from) will be the second-largest cause of disability worldwide by 2020 (with HIV/Aids predicted to be holding 10th place and heart disease remaining number one). It is said that an organisation is only as strong as the sum of its parts. If then, as survey results suggest, 58 per cent of your employees are verging on exhaustion and suffering from sleep disorders, 37 per cent are experiencing unexplained chest pains, 49 per cent of your staff is demotivated and as many as 51 per cent totally disengaged and merely living for Fridays, how strong is your organisation?
Is your organisation practicing safe stress Equilibrium Solutions is offering the readers of RISKSA the opportunity to take a confidential stress selfawareness survey. It shouldn’t take more than five minutes and is free for RISKSA readers. The survey’s results will be aggregated and analysed in a future article. To take part, simply go to www. vitaltest.com and enter risk497 as the employer code and follow the onscreen instructions.
Marsh’s global industry practices and risk specialities ensure our clients receive the best solutions tailored to their particular needs, helping them MANAGE RISK FOR GROWTH. Industry Practices: Agriculture, Automotive, Aviation & Aerospace, Chemical, Communications, Construction, Education, Energy, Entertainment, Financial Institutions, Fisheries & Aquaculture, Forestry & Integrated Wood Products, Food & Beverage, Healthcare, Hospitality & Gaming, Infrastructure, Life Sciences, Manufacturing, Marine, Media & Technology, Metals & Minerals, Mining, Power & Utilities, Public Entities & Government, Private Equity, Rail, Real Estate, Retail & Wholesale. Risk Specialities: Aviation & Aerospace, Casualty, Employee Benefits, Environmental, Financial Risk Products, FINPRO, Marine, Product Recall, Project Risk, Property, Mergers & Acquisitions, Surety, Trade Credit & Political Risk. A NEW PAN-AFRICAN LEADER Marsh, the world’s leading insurance broker and risk advisor has acquired Alexander Forbes Risk Services, Africa’s pre-eminent insurance broker. MARSH AFRICA www.marsh-africa.com | 011 506 5000 An authorised financial services provider | FSB/FSP: 8414
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Environmental disasters risk At 05h30 on Saturday, 20 June 2012, Clifton First Beach on the Cape Town coast played host to an unexpected and uninvited guest. A Japanese fishing vessel, the Eihatsu Maru, ran aground, kick-starting a series of events that would trigger an insurance stand-off to the tune of R7.5 million. The South African Maritime Safety Authority (SAMSA) launched a salvage operation, deploying
“It is at this stage that the disaster management fraternity, namely the City of Cape Town’s Western Cape provincial government, as well as the national disaster management centre, is activated for the purpose of co-ordination and monitoring of the incident.”
the specialist marine services company, SMIT Amandla Marine, to render the necessary assistance. As at the writing of this article, the owners of the vessel have failed to produce a single cent. To what degree is the South African National Disaster Management Centre (SANDMC) prepared to tackle these kinds of logistical and
1. The present state of readiness “The current preparedness level for maritime disasters is adequate. The incident involving the Eihatsu Maru was not deemed to be a disaster as this accident was taken care of as a normal maritime emergency. The sectorial responsibility for shipping accidents (emergency and/or disaster) is that of the national department of transport, and specifically SAMSA. Only if the department of transport, with its own resources, is unable to cope with a specific incident, will it request that a disaster be declared (within the ambit of the Disaster Management Act). It is at this stage that the disaster management fraternity, namely the City of Cape Town’s Western Cape provincial government, as well as the national disaster management centre, is activated for the purpose of co-ordination and monitoring of the incident.”
environmental challenges? What are the insurance implications associated with this scenario? Patience Dlikilili is the head of communications at the department of local government and highlights three areas of observation.
Dlikilili says that when a disaster declaration is required, the maritime disasters contingency plan will be activated which elevates the incident to a higher level of unified command. This allows for the national contingency reserve funding to be accessed under the auspices of a disaster declaration. There are currently adequate disaster contingency plans in place for maritime disasters, and these plans are reviewed on an annual basis. During the mentioned maritime incident, officials of the City of Cape Town’s disaster management centre (DMC) monitored the situation and supported SAMSA where it was required. The head of the provincial DMC, Colin Deiner, requested that a SANDF helicopter assist with rescue and relief activities. The helicopter was made available.
“No weaknesses in disaster responses were recorded. The only problem that has to be addressed is the monitoring of shipping traffic along our coastline and the necessary risk reduction measures that will prevent a similar incident occurring in future.”
2. Weaknesses “No weaknesses in disaster responses were recorded. The only problem that has to be addressed is the monitoring of shipping traffic along our coastline and the necessary risk reduction measures that will prevent a similar incident occurring in future,” says Dlikilili.
3. Owner’s insurance Dlikilili adds, “The Western Cape has adequate resources and disaster management capacity to deal with the consequences of maritime disaster. Since 2000, the Western Cape has demonstrated a
very good track record in handling similar maritime-related incidents and/or disasters. The only aspect that might require urgent attention is the compulsory shipping owner’s insurance coverage which, according to recent news reports, is totally inadequate as currently specified in South African legislation. This is an issue that needs to be addressed by the national department of transport.”
Professional insight into marine insurance Rob Hoole, a specialist in maritime law, serves as legal
and insurance adviser to SMIT Amandla Marine. He says that there are essentially two main types of marine insurance procured by most vessel owners.
Protection and indemnity (legal liability) insurance This cover is procured on a vessel by vessel basis. Protection and indemnity (P&I) cover is provided either on a mutual basis or on a fixed premium basis. Mutual P&I cover is largely provided by mutual insurers which are part of the international group of P&I
clubs. About 90 per cent of the world’s shipping tonnage is insured via mutual insurers which are members of this group. P&I insurance covers the vessel owner’s legal liability to third parties and would include liabilities arising out of injury to passengers or crew members, damage to cargo, damage to fixed or floating objects, wreck removal and pollution. It would generally also include a ship owner’s liability for damage caused to another vessel in the event of a collision with the insured vessel.
“This liability could, however, be limited by contract and the tug owner would also, in certain cases, be entitled to a statutory limitation of its liability.” the claimant can arrest the vessel and can eventually sell the vessel in execution of its claim.”
Hull and machinery (asset) insurance This insurance covers the vessel itself (both its hull and its machinery) for accidental damage or total loss. Hoole says that in the case of salvaging operations like the one involving the Eihatsu Maru, the owner of the vessel in distress is primarily responsible for all costs related to salvage or emergency services rendered. “Salvage services can be offered on a commercial basis (such as via a Lloyd’s Open Form – no cure no pay – salvage agreement) or the appropriate state body (such as SAMSA). If the circumstances demand, it can instruct the master of a vessel in danger of polluting the South African coast to take specific actions (including the taking of an emergency tow) to prevent pollution. In the latter case, SAMSA has the necessary authority to recover from the vessel’s owner any costs it may incur in assisting the vessel or preventing pollution. Generally, in maritime law, a party which has rendered salvage services has a maritime lien over the vessel. This lien acts as security for the claimant. If the vessel owner does not provide the necessary security for the claim,
As for the cover that a company like SMIT Amandla Marine requires, given its involvement in the salvaging operation, Hoole adds, “In principle SMIT Amandla Marine would be liable to the vessel owner (of any vessel to which it renders services) for any damage it causes to that party’s personnel or property, and would also be liable to third parties for any pollution it causes, even if the services were being rendered in an emergency situation. This liability could, however, be limited by contract and the tug owner would also, in certain cases, be entitled to a statutory limitation of its liability. Ultimately this liability would generally be covered by the tug owners P&I cover, under a specific extension which allows for the rendering of salvage and towing activities.” In the view of Mike Brews, chief operating officer of Santam division, associated marine, the amount of vessels stranded along the South African coast serves as a warning to local ship owners in the business of sending vessels out to sea without the necessary insurance cover in place. It is an issue that
Brews feels could adversely affect the local maritime insurance sector. In an open letter dated 8 June 2012 to the South African Minister of Transport, the head of shipping law at the University of Cape Town, Professor John Hare, stated that limits of compensation available to European maritime states affected by oil pollution was increased to R9.3 billion. This increase in compensation was spearheaded by an EU effort, subsequent to a long list of costly shipping disasters. However, as Hare went on to say, South Africa is in a far more precarious position. Referring to the risk of future disasters, Hare says, “We still do not sleep easy in South Africa. If the somewhere is here, and the sometime is before our government gets its act together in relation to liability and compensation for oil pollution from tankers, all we will be able to claim in compensation is a paltry R180 million from the owner or insurer of the stranded ship.” Clearly, South Africa has got some way to go in readying itself for a possible shipping catastrophe that could cost taxpayers billions. Until such time that relevant legislation is modified to guarantee the necessary safeguards, our beautiful and fragile coastline remains vulnerable to a future calamity.
The sky is the limit? Says who?
Into the future means into the unknown. Many dream of braving the voyage. But it takes knowledge to get there in one piece. Knowledge is the fuel that propels an idea — like gravity pulls a satellite — forward. At Munich Re, it’s the fuel that drives us to think the unthinkable, to make the undoable doable. To find out more about how to navigate the future with confidence, visit our website at www.munichre.com NOT IF, BUT HOW
09.06.2010 18:43:49 Uhr
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f you stack the timber that South Africa produces each year from end to end, it would be enough to circumnavigate the globe at least 10 times. This is according to wood company, Cape Pine.
The SA forestry industry plants 360 000 trees every working day – more than 90 million trees annually – and contributes 8.7 per cent of the gross value of South Africa’s agricultural output. Activities and products such as paper manufacturing, charcoal and woodchip production rely on the raw materials from commercial forestry. But in 2008, 84 000 hectares of land were destroyed and instead of being the net exporter of timber, South Africa became the net importer. RISKSA takes a look at the South African forestry industry and the risk management being implemented to reduce the risk of this happening again.
“We want our system to be useful outside the fire season and have picked up on instances of timber theft, cycad theft and poaching.”
SA in the danger zone Forestry South Africa claims that over the past 25 years, our country has lost an average of 14 000 hectares of forest each year. Unfortunately most regions are situated near ecosystems, vulnerable to wildfires. Ruth Bezuidenhout, plantation manager at Safire Insurance Company Limited (Safire), says because South Africa is prone to drought, we are considered a high fire risk area, naming Mpumalanga, Limpopo, Tzaneen and Knysna as areas most at risk. The challenges of climate change pose a threat of increased incidence in fires as the decreased amount of
rainfall has been prevalent in many regions of South Africa. Mpumalanga and KwaZulu-Natal host the largest forestry plantations in the country. However, in 2008, 22 000 hectares of land in Mpumalanga were destroyed by an estimated 49 runaway fires. So devastating, it was dubbed the forestry industry’s own 9/11. Fires ruined plantations in parts of the Cape, KwaZulu-Natal and, most notably, the areas surrounding Sabie and Graskop, the main timber-growing areas of Mpumalanga. Propelled by high-speed winds, the flames jumped over fire breaks with ease. While there is debate surrounding whether these fire were caused by nature or arson attacks,
Bezuidenhout says most fires are accidental. “The arson numbers are inflated. In my experience, most fires are accidents caused by kids, who are not educated properly about fire risks, playing at the edge of the forest.” Bezuidenhout advises that charges of arson should always be followed up with an investigation. A closer look at the areas around Graskop and Sabie in 2008 revealed besmirched earth and burnt timber. Before each winter, a tour around Sabie is accompanied by smoke-filled air as foresters prepare and burn fire-belts. The high peaks overlooking the plantations are patrolled daily.
Nature vs technology While some patrols operate in the lookout areas in Sabie, others are equipped with sophisticated remote-controlled camera equipment. This equipment monitors plantations and relays images to a command centre, from where threats can be detected. A software system, developed to monitor environmental changes in Antarctica for the Space Physics Research Institute, has been used internationally to monitor potential fire threats. Managing director at Envirovison Solutions (EVS), Dr Gavin Hough, used this system to develop ForestWatch, which is being utilised by KwaZulu-Natal and Mpumalanga fire associations. A fire detection service, ForestWatch, uses multiple cameras mounted on a 100-metre tower, feeding live video streams to a control centre using satellite communications. The system’s wide performance monitoring application measures the response times to smoke alarms, the delays associated with manual inspection when an operator takes control of the camera and tilt-zooms into potential or actual fire events. Using geographical information systems (GIS) software, the camera can pinpoint the position of a fire and transmit a single frame to the control centre via satellite. The system uses high-resolution camera equipment to scan the surrounding environment; these cameras are linked to a software programme, integrating real time and space data. The programme enables the operator to detect any changes in the landscape, such as appearance or the movement of smoke, enabling the fire protection officer to evaluate the threat based on the fire’s location. While the system is used to detect fire threats, it is also resourceful in the post-mortem investigation of fires, as well as unrelated threats. “We want our system to be useful outside the fire season and have picked up on instances of timber theft, cycad theft and poaching,” Hough explains. Although technology has worked effectively for some, others prefer to use Mother Nature’s resources. The process of mulching, brushwood clearing and firebreaks has its advantages. “I’ve seen that when a fire spreads to an area that has been mulched, the fire immediately extinguishes. While I am not sure of the long-term impact on the soils, the process is neither too costly nor labour intensive,” notes Bezuidenhout. Mulching is a process of inbred fertilisation composed of certain decomposed organic materials to blanket an area in which vegetation is desired. The procedure enriches the soil for stimulated plant development while at the same time preventing erosion and decreasing the evaporation of moisture from the ground. Fire breaks involve a strip of land where vegetation has been removed or modified to contain or reduce the spread of fires before they enter a property.
“A fire detection service, ForestWatch, uses multiple cameras mounted on a 100-metre tower, feeding live video streams to a control centre using satellite communications.“
Fire management success Safire offers a wide spectrum of insurance products to the national market and services the agricultural sector. The company’s Crop Protection Co-operation is a comprehensive and tailored plantation programme to help clients protect against the financial losses of fire damage, harvesting costs when a crop is damaged and debris removal cover. While insurance cover is essential and mitigates devastating losses as a result of fires, Bezuidenhout stresses that landowners have the obligation to use the resources available to prevent fires on their property and notify fire prevention authorities and neighbours if a fire spreads. “Make sure staff members are well trained if ever you need to leave the area unattended, and ensure all fire equipment is in working order. When you plant your species, always consider the prevailing wind conditions and the layout.” South African forest fire expert and Forestry Solutions consultant, Ben Potgieter, emphasises that South African foresters need to accept that changing weather patterns are a reality. To counter the risks, land owners need to monitor weather patterns and carry out detailed risk assessments. He says that ultimately fire management success is a result of planning, readiness, early detection and a quick response. The destruction caused by fires in 2008 interrupted the 23year cycle, which is the amount of time it takes for trees give a sustainable yield. This means the industry is faced with years of replanting. But as the co-owner of Daybreak Timber Marketing, Lance Cooper, explains, “This is a long term industry and we’re already getting on with it.”
Maria Teixeira Maria Teixeira | Manager: Trade Credit, Surety and Political Risks at Aon South Africa.
olatile trading conditions have made payment protection, in the form of credit insurance, an imperative rather than a luxury, according to Maria Teixeira, manager: trade credit, surety and political risks at Aon South Africa. The looming fallout of the Eurozone, growing corporate insolvencies and extended payment delays are all factors that are exerting tremendous pressure on the long-term sustainability of businesses across the country, regardless of their size. “Bleak economic reports coming out of credit insurers are on the mark. Creditors and all suppliers should not underestimate the dire implications for their business if major debtors default. Job losses and retrenchments are on the up again as businesses struggle to maintain
Credit Insurance vital in uncertain future high sales volumes. Drastic cost reduction programmes seem the order of the day, as companies seek to avoid compromising their long-term sustainability. The lack of spending and extended non-payment of accounts by government is also exacerbating already volatile markets,” says Teixeira. “Under these conditions, credit insurance is becoming a survival necessity rather than a luxury for many companies. Despite tight cash flow controls and working capital, companies would be foolhardy not to have payment protection in place given the tough trading conditions. Business rescues are becoming commonplace, with the most recent application filed by Sanyati after its shares were suspended. Sanyati is owed long outstanding payments from three provincial governments totalling R79 million. “Statistics indicate a sharp rise in voluntary applications for business rescue from companies. Business rescue claims to various insurers average around R30 million in total. It is affecting all industries and companies of all sizes, and lately the trend is that the bigger the company, the harder it falls. There is no longer a ‘safe’ company to deal with in today’s economic climate,” warns Teixeira.
The rise in the number of business rescue applications should be of serious concern to all suppliers. When a company is placed under business rescue, payments to suppliers and creditors are put on hold, usually for months until a plan is approved by all stakeholders. This creates serious cash-flow problems for suppliers. Couple this with lack of payment or delayed payments by any other debtors and it becomes a vicious circle. “Suppliers or creditors with credit insurance will benefit in such situations from their insurance pay-outs that occur promptly after a debtor has gone into business rescue. They also benefit from the insurer’s expertise in handling the business rescue proceedings, including attending all the creditors meetings. This becomes vitally important as there are few companies that successfully exit business rescue and avoid ending up in liquidation,” says Teixeira. “In addition, many businesses are looking to the rest of Africa for growth which is hardly surprising in light of our sluggish growth, which is hovering around 2.8 per cent versus five per cent for the rest of the sub-Saharan African economies. For any business considering trade with Africa, export insurance is an absolute must along with complementary products such as guarantees. Exporters will need to do some serious homework and select markets and sectors where they are most likely to get paid. “Payment protection through properly scoped credit insurance is a non-negotiable given such volatility and threats to business sustainability,” concludes Teixeira.
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Sting in the
There is an old native American adage which says it is only once the last tree is destroyed, the last fish consumed, and the last stream polluted, that those obsessed with money will realise that their fortune cannot be eaten. It is a sentiment that often rings true in South Africa in the face of environmental protection protocols that at times appear to be inadequate at curbing the swelling tide of pollution. A group called the Green Scorpions is charged with the responsibility of monitoring and policing big corporates and their environmentally hazardous waste. We take a look at what this specialist unit has been up to over the last few years.
BB Green Scorpions is the name given to over 600 environmental management inspectors in South Africa. Its mandate is to enforce environmental law and to investigate and hold those who fail to comply with it accountable. The key areas that they are meant to enforce include pollution, waste, protected regions and biodiversity. They are also responsible for conducting marine and environmental impact assessments. In terms of legislation, the mandate of the Green Scorpions is to enforce the National Environmental Management Act (NEMA), along with its stipulated regulations like the Protected Areas Act, the Air Quality Act and the Biodiversity Act. Appointments to the Green Scorpions are limited to individuals who are employed by the Department of Environmental Affairs and Tourism (DEAT), provincial environment departments, municipal governments, or quasigovernment organisations such as Sanbi and Sanparks.
Fighting the good fight “The Environmental Management Inspectorate (popularly referred to as the Green Scorpions) is not defunct. The EMI continues to monitor compliance with and enforce the specific environmental legislation it has been mandated to enforce in the designations by the Minister or relevant MEC,” says Albi Modise, chief director of communications for the Department of Environmental Affairs. In response to a question about whether or not the Green Scorpions has been provided with the resources and authority necessary to effectively carry out its mandate, Modise went on to say, “The EMI network has experienced its own set of challenges in the past five years. Insufficient funding, capacity and resource constraints are some of the most serious challenges. The EMI also competes with the private sector for competent and dedicated staff. Managing the EMI across
“Insufficient funding, capacity and resource constraints are some of the most serious challenges.” the different institutions, while trying to ensure a national profile, has its own tribulations.” As it relates to the policing of large South African businesses and their environmentally hazardous waste, Modise says, “Depending on the nature of the waste according to the waste classification document, the EMIs within the national department would essentially be responsible for regulating industries that generate hazardous waste. Those industries which generate, store or use general waste are regulated by the EMIs within the provincial environmental departments.” In a media statement for the Environmental Compliance and Enforcement Lekgotla held in March this year, Modise said that since the last Lekgotla, which took place in February 2009, some important initiatives have been undertaken to support the work of the Green Scorpions. These initiatives were aimed at developing a framework within which the Green Scorpions and other key role players could operate,
and include the publication of an EMI Operating Manual; production of a Magistrates’ Bench book to provide guidance to judicial officers in dealing with environmental cases; an update of the Prosecutor’s Guidelines; specialised EMI courses on priority compliance and enforcement topics and 559 learners that underwent basic training through various institutions, which were responsible for training of EMIs. Perhaps one of the most significant areas of progress recorded was with regard to the effecting of legislative amendments that strengthened the powers of the Green Scorpions and also increased penalties. For example, there are now maximum fines of R5 million and R10 million depending on the offences that have been committed. In the Silicon Smelters case in Witbank, a fine of R3 million was issued in August 2011 and the facility spent R13 million on improvements to minimise the impact from the site on the community and the environment.
Healthcare risk waste The Green Scorpions has communicated its adoption of a zero-tolerance policy with regard to healthcare risk waste (medical waste) which has led to an integral transition towards compliance among companies in the medical industry. In the aforementioned media statement, Albi Modise says, “The most important criminal case in relation to healthcare risk waste is the case of medical waste buried in Welkom, which will probably come before the High Court in Bloemfontein only towards the end of this year. The clean-up operation associated with this waste (which involved the removal of 18 000 tons of waste and soil at a cost of approximately R55 million) was undertaken over a period of 10 months in line with a compliance notice issued by the Green Scorpions.”
The cost of the clean-up operation associated with 18 000 tons of waste.
The industrial sector A significant focus has been placed on proactive industrial compliance and enforcement work over the last five years. Included in this effort are the ferro-alloy, iron and steel industry; refineries; cement; paper and pulp; and hazardous waste facilities. During the original inspections, numerous non-compliances were identified and the responsible facilities were confronted with the requirement of correcting inappropriate practices. Over the last 24 months, the Green Scorpions has embarked on many follow-up inspections in an effort to determine if levels of compliance have been raised by the companies in question. In the March 2012 media statement, Modise goes on to say, “The enforcement action taken by the Green Scorpions against ArcelorMittal Vereeniging, which required the implementation of measures to address the significant fugitive emissions, resulted in the commissioning of a secondary extraction system at a cost of R220 million. Assmang Cato Ridge also commissioned its R100 million extraction system in response to enforcement action taken by the Green Scorpions back in 2007.” According to Gail Smit of the Institute of Waste Management of Southern Africa, “The greatest challenges in municipal waste management are financial management, equipment management, labour (staff) management and institutional behaviour (management and planning); the lack thereof. There is a perception that government monitoring and policing is aimed at large companies while the municipalities get away with 'murder'. Large companies are usually ISO 14000 certified in order to operate in a competitive market. One of the requirements for ISO certification is that a company needs to comply with environmental legislation. There is no similar incentive for municipalities to comply. Co-operative governance is quite often used as a scape-goat so as not to take action against non-compliant municipalities. The national waste management strategy lacks practical action plans for implementation. It will help a lot if such action plans could be formulated."
Compliance enforcement statistics The following figures illustrate the progress made in anti-pollution enforcement over the last four years: • A total of 9 404 criminal dockets and admission of guilt fines were registered. • Since 2007–2008, a total of 6 986 arrests were recorded. • The number of warning letters, pre-directives, pre-compliances, final directives and final notices issued, as well as civil court applications launched, peaked in 2009–2010 with a total number of 385 in 2008–2009 to 1 260 in 2009–2010 followed by a slight decline in 2010–2011 to 729. It is true that numerous companies in this country make no attempt to manage their toxic waste responsibly unless faced with enforcement action. However, there are encouraging indications that the Green Scorpions is actively addressing this issue; and while the battle is far from over, significant inroads are being made towards securing a cleaner and safer environment for all. For further information on the work of the EMI in the last two years, read the National Environmental Compliance and Enforcement Reports (NECER) for 2009/2010 and 2010/2011 at: http://www.environment.gov.za/sites/default/files/ docs/necer2010_11report.pdf. http://www.environment.gov.za/sites/default/files/ docs/necer2009_10report.pdf. Background information on the EMI is available at http://emi.deat.gov.za/. The Waste Classification document can be viewed at www.sawic.co.za.
Insurance for a sustainable future Hanna Barry
Aimed at propelling sustainable development, the Principles for Sustainable Insurance (PSI) present a United Nationsbacked global insurance industry initiative to support the development of a green economy and resilient communities. Launched at the United Nations Conference on Sustainable Development, known as Rio+20, which took place in Rio de Janeiro, Brazil from 20 to 22 June, the PSI are a result of a six-year global development process carried out by the United Nations Environmental Programmeâ€™s Finance Initiative (UNEP FI).
BB Close to 30 leading companies from the insurance industry, worth over $5 trillion (R40.8 trillion) in total assets and representing over 10 per cent of the world premium volume, together with insurance associations from different regions around the world, have signed the PSI. Signatory companies will publicly disclose their progress in implementing these principles on an annual basis. South African insurers, Sanlam and Santam, are among the founding signatories. “These principles are of great significance to the global insurance industry. They address systemic risk and change, and how to ensure that the sector remains sustainable in the face of profound change in, for example, socio-politics, climate, regulatory and public policy environments,” says Ian Kirk, CEO of Santam. “As a founding signatory of the PSI, we recognise that insurance plays an active role in promoting pragmatic and collaborative systemic risk management in society and the economy.”
“These principles are of great significance to the global insurance industry. They address systemic risk and change, and how to ensure that the sector remains sustainable in the face of profound change in, for example, socio-politics, climate, regulatory and public policy environments.”
The world is facing increasing environmental, social and governance (ESG) challenges changing the risk landscape considerably. As risk managers and risk carriers, the insurance industry plays an important role in fostering sustainable economic and social development. CEO of Sanlam, Dr Johan van Zyl, says that sustainability is an overriding objective of Sanlam. “We believe focusing on long-term competitiveness rather than short-term profit ensures that we do not borrow from the future. For this reason, our decisions are made to safeguard the sustainability of our business. As an industry, we could play a bigger role in driving sustainability more broadly. The global adoption of the PSI is a step in this direction, to our collective benefit.”
A road-map for risk management According to the UNEP FI, the principles provide an holistic approach to managing a wide range of global and emerging risks in the insurance business, from climate change and natural disasters to water scarcity, food insecurity and pandemics. They also represent the first-ever global sustainability framework, tailored for the insurance industry, which takes into account the fundamental economic value of natural capital, social capital and good governance.
Unpacking the principles The Principles for Sustainable Insurance are: 1. We will embed in our decision-making environmental, social and governance (ESG) issues relevant to our insurance business. 2. We will work together with our clients and business partners to raise awareness of ESG issues, manage risk and develop solutions. 3. We will work together with governments, regulators and other key stakeholders to promote widespread action across society on ESG issues. 4. We will demonstrate accountability and transparency in regularly disclosing publicly our progress in implementing the Principles.
“For years, insurers have been at the forefront of the corporate world in alerting society to the risk of climate change and, more recently, threats such as the loss of biological diversity and the growing pressures on forests, freshwater and other essential ecosystems,” says UN secretarygeneral, Ban Ki-moon. “Insurers are also increasingly recognising the need to develop products and services that address the needs of a rapidly changing world, including inclusive insurance that caters to low-income communities, people with HIV/ Aids or disabilities, and ageing populations.” “The Principles for Sustainable Insurance provide a global
road-map to develop and expand the innovative risk management and insurance solutions that we need to promote renewable energy, clean water, food security, sustainable cities and disasterresilient communities.” Official discussions at the summit focused on two main themes: how to build a green economy to achieve sustainable development and lift people out of poverty, including support for developing countries that will allow them to find a green path for development; and how to improve international co-ordination for sustainable development. Stakeholders at Rio+20 included governments, the private sector, NGOs and others.
The global insurance industry has mainly focused on refining the quantification, differentiation and pricing of the risk exposure of insured assets. However, the findings of a recently published Santamsponsored research study in the Southern Cape’s Eden district call into question a sole reliance on this risk assessment strategy, and identify the need for a more proactive risk management approach. It is in this vein that the South African Insurance Association’s Strategic Risk Forum (SRF) was established. Chaired by executive head of risk services at Santam, John Melville, the SRF is aimed at identifying some of the systemic drivers of risk in the local landscape and devising strategies to combat these. Involving a number of local insurers and insurance associations, the SRF was shared across the UNEP FI members and regions and several other associations are following SAIA’s lead, notably in South America and Australasia. The SAIA has joined as a supporting association of the UNEP FI PSI and will manage the industry response to the PSI from a collective perspective. Birthed in parallel to the PSI, the SRF shares the same overarching objectives and ethos. Melville presented on the SRF at the annual Insurance Conference in June, in an address on the sustainability of the short-term insurance sector.
“Official discussions at the summit focused on two main themes: how to build a green economy to achieve sustainable development and lift people out of poverty, including support for developing countries that will allow them to find a green path for development; and how to improve international co-ordination for sustainable development.”
PSI and SRF: Connecting the dots The SRF was formed following the recommendations of a strategic project that Santam’s executive head of strategy, Vanessa Otto-Mentz, ran for the SAIA in 2009/2010. “The project’s aim was to develop recommendations for the board of the SAIA on how to respond in a pragmatic and collective way to the sustainability challenges the industry is facing,” explains Otto-Mentz. The findings, which involved wide stakeholder consultation in the industry, made it clear that the short-term insurance industry needed to adopt a proactive risk management position in South Africa, by identifying key shared risks across the industry, where a collective response could result in shared benefits for the industry at large. Santam’s active membership of the PSI work group flowed over into the SAIA board deliberations and influenced the shaping of the mandate of the SRF and the inclusion of the PSI into its charter. “The SRF charter requires a participant in the insurance industry to identify and address relevant ESG risks to the business; work with others to address the risks across the value chain; and be transparent about its commitments and progress,” says Otto-Mentz.
In 2011, the SAIA did a survey of CEOs and senior risk executives in the insurance industry to get a sense of what they considered to be the key risks to sustainability of insurance in South Africa. Ten strategic ESG risks were identified, most of which correspond at some level with many of the key risks identified by the National Planning Commission in its diagnostic overview, highlighting the need for collaboration across sectors. “Early in the process we recognised that for any approach to strategic risk reduction to be effective and make the best use of resources, there must be strong collaboration between key role players that can act to reduce risks,” explains Melville. The SRF undertook to understand how these risks operate systemically and interact with one another on the ground. This involved engaging with other stakeholders who share some of the same concerns and establishing what kinds of partnerships could develop risk mitigation strategies that would work to reduce multiple risks and the impact of these risks, so optimising the efforts of the insurance industry. Through this process, the forum gained a deeper understanding of the risk landscape, what partnerships could impact in different areas and how the industry’s efforts should be directed, whether through initiating something
new or leveraging off and supporting an existing initiative. It then developed a framework, out of which came nine initial focus areas. These include: a sustainable agricultural insurance environment; national fire risk management strategy implementation; enterprise development; the uninsured majority; resilient buildings/cities (sustainable buildings and green geysers); insurance talent (human capital and skills development); a systemic or 360-degree view of the changing risk landscape (data and information management for tracking STI risk drivers); an extensive review of motor peril-related information; and crime. The members of the forum are nominees drawn from the leadership of members of the SAIA and Financial Intermediaries Association of Southern Africa (FIA), which established the SRF alongside the SAIA. Key stakeholder representatives have also been drawn from the Financial Services Board (FSB), the Insurance Institute of South Africa (IISA), South African Underwriting Managers Association (SAUMA), Treasury, National Planning Commission, the Department of Co-operative Governance and Traditional Affairs, which includes SALGA; and the Disaster Management Centre.
“Early in the process we recognised that for any approach to strategic risk reduction to be effective and make the best use of resources.” In addition to partnerships, some of the key principles of the SRF include playing to the industry’s strengths, drawing on its core areas of expertise, focusing on areas that have specific sustainability outcomes for insurance and limiting duplication as far as possible by refocusing or influencing existing initiatives. In other words, collaborating to increase the industry’s collective impact and in so doing reducing effort. The SRF and launch of the PSI mark the dawning of a new era for the global insurance industry, and for the billions of private individuals and entities that it insures. “We look forward to ground-breaking work and insights as we move forward on the sustainable insurance journey,” concludes Kirk.
“It is clear that we are entering a new era of knowledge about extremes, natural hazards and the vulnerabilities of the built environment and exposed populations.”
Natural disaster risk inspires new age of insurance Growing concerns about natural disasters has led the insurance industry to develop new tools, technology and solutions to protect populations and assets, according to Rowan Douglas, chief executive officer of global analytics at Willis Group Holdings. The ongoing financial crisis and worsening economic environment may reduce the ability of countries to cope with the costs of natural catastrophes and heighten the need for countries to incorporate better preparedness and financial risk transfer mechanisms. “Leaders in technology, science, finance and public policy need to develop practical ways to increase resilience against natural disasters,” says Douglas. “The insurance sector is at the very heart of this process, integrating new knowledge into decision making, setting policy standards and enabling populations to share risks at local and global scales. “That is the role that the insurance industry has played for centuries and the need has never been greater. Some may say we are entering a new ‘Age of Insurance’ in the face of growing risks and uncertainties. Harnessing the insurance mechanism and enabling us all to gain some financial security and resilience against natural disasters is critical for enabling investment and providing a platform for sustainable growth.” Speaking to an audience of 500 business and policy leaders from 85 countries at the World Bank’s Bi-annual Understanding Risk Conference in Cape Town, Douglas highlighted how we are all
united by the challenges of confronting natural disasters. “The events of 2011 showed that even the most prepared countries within the developed world are vulnerable to natural disaster, while these events impacted us all through our supply chains and dependencies on key components and commodities.” Meanwhile the growing importance of natural disaster management is evident within the agenda of national and international institutions like the G20, European Union and United Nations. “It is clear that we are entering a new era of knowledge about extremes, natural hazards and the vulnerabilities of the built environment and exposed populations,” continues Douglas. “Advances in mapping are revolutionising our ability to access, fuse and deploy data from disparate sources to manage risk and provide better services to customers. These mapping tools and technologies are at the heart of our competitive advantage at Willis and an ongoing priority for the company, together with our development partners in science and industry. “Data is now being integrated from major satellite platforms and high resolution climate models, powered by supercomputers, together with input from millions of other contributors via crowd sourcing and social networks. This fusion of macro and micro sources combined with spatial referencing and mapping is helping the insurance industry to become more resilient.” He highlights a new global earthquake model called OpenQuake, which will enable countries, companies and communities to understand their earthquake risk more clearly and make sensible choices on how to manage it. Douglas points out that the insurance market has continued to function normally despite the second-largest year of insured losses in its history. “This is due in large measure to the role of improved modelling in the last 20 years, coupled with an emerging convention that an insurance policy (and the company that backs it) should be able to tolerate at least the maximum probable loss that could be expected over a one in 200-year return period. “There is still much to do, much to learn and much to improve, but the industry is making enormous strides in this area of innovation and it is being recognised and respected by our sector’s customers and stakeholders,” he concludes.
hits insurer boardrooms Clem Chambers | CEO Advfn
he ongoing nature of the Euro crisis means Germany is in as much trouble as France and Italy, despite its reputation as the stable, economic ‘power haus’ of Europe and there is yet to be agreement on how to solve the crisis. German Chancellor Merkel amplified this tense position by arguing that the proposed solution of Eurobonds, supported by other key Euro economies, would not happen “as long as I live”. Outside the Eurozone, this creates substantial problems for both UK insurers and banks. For some banks over half of their debts are to be collected from the Eurozone; for London-based multinational insurers, such as Aviva, this adds another dimension to its current difficulties as a high proportion of its business comes from this troubled area. This creates a situation where insurers may face a lack of credit and an inability to secure revenue; a frightening situation but one that we have got used to. While the crisis seems to have become part of the everyday life of the western economies, for some shareholders things are starting to change, with shareholder revolts sweeping across the London market and leading insurers facing the anger of investors.
As Q2 ended, Aviva shareholders voted by a majority of 54 per cent to oppose the company’s remuneration report. The angry shareholder meeting lead to Aviva’s chief executive, Andrew Moss, resigning only days later. It seems not only elected politicians can be removed by protests. This emergence of shareholder activism presents listed insurers with a further headache to add to the Euro challenges. What remains to be seen is how firms can balance restoring the company to growth, in already difficult waters, while not upsetting shareholders and creating internal difficulties. Aviva says that the search for a new chief executive will last at least till the end of 2012, meaning that the company will go through a strategic review, aimed at refocusing the business, building capital and relocating funds to increase returns, without one. The clear intention of reviewing and improving the business will please existing and potential shareholders, but news of the revolt and resignation resulted in Aviva’s share price hitting a 2012 low of 251 as the quarter ended with only a mild recovery so far in Q3.
clear that there is much work to be done, with S&P warning that the company’s credit rating may see a Q3 downgrade. It is unlikely that the old expression, “The pound is sinking, and feeling quite appalling” will turn out to be true; but after so many years of financial problems, you’d be forgiven for thinking along those lines. The summer is a boring time in the market even when there are crises everywhere. We have experienced the first summer slump and in Europe and the US there has been a nice recovery. The question remains: will there be another slump in a few weeks and will Euro politicians grind through the currency crisis to unify Europe? Only until all the necessary paperwork is signed for deep fiscal unification, temporary bandages will be applied. The crisis continues, both in markets and in the boardrooms.
The lack of a chief executive at a time of reviewing the business and an unsettled Eurozone isn’t exactly the ideal conditions for a share price recovery. The company cites positive Q1 operating profits but it is
“It is unlikely that the old expression, the pound is sinking, and feeling quite appalling’ will turn out to be true; but after so many years of financial problems, you’d be forgiven for thinking along those lines.”
Centred on Gareth Beaver Centriq CEO
Recently appointed as CEO of Centriq Insurance, Gareth Beaver chatted to RISKSA about the insurerâ€™s future and some of the things that make him tick. 104
BB You’ve been at the helm of Centriq for just over three months. Has it been fairly smooth sailing? Pretty much. The business was in relatively good shape, but not surprisingly we have our challenges and opportunities and these have not changed, so it is a case of continuing the journey ahead and making things happen.
On transformation, what’s it like living in Johannesburg? Johannesburg is so vibrant and the pace of change, renewal and development has really accelerated over the last 10 years. Probably the most exciting and encouraging aspect of life in Johannesburg is the integration of people from all different cultures and backgrounds.
What challenges lie on the horizon? The market is incredibly competitive and Centriq had lost its touch in achieving top line growth as we had become very internally focused over the last three years. We need to get back onto the front foot in terms of innovating products, building closer relationships with our existing distribution channels and developing new distribution channels where appropriate in an effort to grow our market share profitably.
What have been some of the most defining experiences in your life? Having kids is probably the most defining experience. It fundamentally changes how you see the world, yourself, your purpose and responsibilities.
Do you think that increasingly onerous capital and solvency requirements mean the end of smaller insurers and UMAs? I am not yet convinced that the new capital requirements that we will see under SAM are alone going to have such a material effect. It will be the combination of the overall increased costs imposed upon insurers in order to comply with the raft of legislative changes (including SAM, TCF, POPI, etc.), as well as tighter capital requirements, which will cause a number of the smaller players who do not have minimum levels of critical mass or a highly profitable market segment to throw the towel in. We can expect to see consolidation, impacting upon both smaller insurers and a certain number of UMAs. What plans does Centriq have to diversify its current niche market position? We are currently planning to launch our own personal lines product via a community-based marketing strategy, borrowing some insight from our affinity insurance knowledge and experience. We are also considering potential options in the commercial market segment and, depending upon the outcome of these investigations and research, we may launch something where our go-to market strategy will be different to our current business model. You mention that doing insurance business from the heart and with the best brains in town is one of the ways in which you plan to lead Centriq and keep it sustainably competitive. What does this look like? If our people genuinely love what they do and it is not just a job, then we’re well on our way. The next piece of this puzzle is delivering to our customers more than just a great product, at a great price and backed by service beyond expectation. We need to delight our customers; be an inspiration to them, connect at an emotional level, be human and be humble. Why the decision to move out of an auditing environment into the insurance industry? I hated auditing. It is an important function in the lives of corporate stakeholders, but it was just not me. I like creativity and we’ve all seen how creative accountants in the US almost brought the house down some years ago. I must admit that I gave my decision to enter the insurance industry very little serious or strategic thought. The father of a good mate was an executive at a large insurance broking company; he thought I had some talent and offered me a job to start up their alternative risk financing venture. He drove nice cars, lived in a nice house, had a lovely holiday home, but importantly seemed to have a lot of fun. He was not one of those very rich but overworked, dull bankers. That was my consideration at the time. As co-founder of black-owned and managed Dipeo Investments, what are your thoughts on transformation in the insurance industry? I believe we still have a long way to go, not only in the insurance industry, but across all industries in South Africa. Unfortunately, we lost many precious years as the focus in the early stages of BBBEE was on the wrong objectives. That said, we must recognise what has been achieved by the industry and take cognisance of the fact that businesses have had to transform without any respite from shareholder return expectations. Government has also failed dismally in its duty to deliver the expected improvements required in educating our youth and I find this sad as knowledge brings real empowerment.
Would you recommend a career in the insurance industry to your kids? Absolutely. It is such a dynamic industry; risks evolve and with that the required products to solve these problems. The industry plays a significant role in creating security and stability for a large percentage of the world’s population, in a world that is more complex, and sometimes more fragile, than ever. We hear you’re something of a health freak. What does the family eat when it’s your turn to cook? Eating healthy food and exercising regularly is just a way of life, but I am not that rigid and I indulge quite regularly. I love cooking, but hardly find the time to do so. Work, kids, cycling, golf and socialising make it difficult. I will cook the odd curry (if I have time to buy all the ingredients), but simple things like hamburgers or a fillet steak on French baguettes will do for now. You recently took part in the Pondo Pedal Cycle Tour. Was it as gruelling as it looks? Are you quite the mountain-biking fanatic? On day two it took us seven hours to cover about 24 kilometres; we hiked for 20 kilometres carrying our bikes and rode for four. It was an adventure and you learn about yourself when faced with these kinds of challenges. Mountain biking is a great way to keep fit. You get fresh air, you experience beautiful parts of South Africa, which you will never see or experience by car, and it is a great way to spend time with friends and make new friends. What about rugby and cricket? I played rugby, hockey, cricket, golf and tennis at school. After school I continued with hockey for some time and still play golf. I am a disillusioned Lions supporter and will always support the Sharks if the Lions are not playing. I am terribly competitive and hate losing.
“The insurance industry plays a significant role in creating security and stability for a large percentage of the world’s population.”
And your passion for renovating houses? Where does this come from? I’ve never renovated an old house, but every house I have bought to live in (four to date) has been a new house and I’ve been intimately involved in each building project, in terms of design and all the detailed finishes. This fulfils the creative side in me and I love seeing something go from an idea, to a plan and then into reality. Off the back of a successful career and personal life, would you say you have a fear of failure? Success is a relative concept as it is all dependent upon whom or what you measure yourself against. If I measured my career achievements against Ivan Glasenburg (founder and CEO of Glencore), then I am a failure. As a result, I don’t see myself as successful and that creates a whole lot of ongoing pressure but it keeps me relatively humble. I do have a fear of failure and that holds me back because it has meant that too often I have not taken on personal risk in terms of business opportunities. This is something I need to overcome.
Ombud for Short-term Insurance: Some key points for insurers Carol Holness | Associate at Norton Rose SA
â€œThe ombud can also consider certain commercial insurance complaints by policyholders who are juristic persons, sole proprietors or traders, partnerships or trusts whose annual turnover does not exceed R25 million.â€?
The Ombud for Short-term Insurance aims to resolve disputes between policyholders and shortterm insurers who are members of the ombudâ€™s office by way of recommendation, arbitration, mediation or conciliation. The ombud is a voluntary scheme recognised in terms of the Financial Services Ombud Scheme Act, 2004, and the short-term insurers who are members of the Office of the Ombud have agreed to be bound by its terms of reference and decisions.
instructs an attorney or institutes litigation relating to a pending complaint, the ombud must withdraw from the matter.
he ombud is required to operate within the framework of its terms of reference. Currently, the ombud can hear complaints only where the amount in dispute does not exceed R2 million in total, except in respect of home owner or building policies, where the amount in dispute must not exceed R4 million. The ombud can also consider certain commercial insurance complaints by policyholders who are juristic persons, sole proprietors or traders, partnerships or trusts whose annual turnover does not exceed R25 million. The Ombud for Short-term Insurance may not formally consider a complaint which has become prescribed either in terms of the Prescription Act or in terms of an enforceable time bar provision contained in the applicable insurance policy. One significant consequence of a complaint being lodged with the ombud is that this interrupts any contractual time bar provision contained in the insurance policy. From the time that the complaint is lodged until the complaint is finalised, the contractual time
bar provision in the policy will not run against the insured and if litigation is subsequently instituted, the insurer cannot rely on the contractual time bar clause against the insured for that period. Once the ombud has dismissed a complaint or made a ruling, the insured has either 30 days or the balance of the contractual time bar period (whichever is longer) to institute legal proceedings. Significantly, the lodging of a complaint with the ombud does not affect prescription in terms of the Prescription Act and the insured must institute legal action within the applicable statutory time limit.
The ombud’s rulings must be based on the law and equity and the factors to be considered include prevailing case authority, legislation and legal policies; the policyholder protection rules; fairness and equity; proper insurance practice; and the facts of each individual matter. The ombud can make a ruling only where all the material facts have been agreed or established on a balance of probabilities. The rulings are binding on the insurer and cannot be appealed or reviewed. They are not binding on the policyholder who is entitled to institute legal proceedings against the insurer before or after the ombud has
made a ruling or dismissed the complaint. The ombud’s rulings are not binding precedents, so the ombud is not obliged to follow previous rulings. However, a review of the rulings suggests that the ombud will tend to follow previous formal rulings. The rules of natural justice require consistency from the ombud. Policyholders seem to be referring more complaints to the ombud and so it is important for insurers to be reminded where they stand as members of the office of the Ombud for Shortterm Insurance.
“Once the ombud has dismissed a complaint or made a ruling, the insured has either 30 days or the balance of the contractual time bar period (whichever is longer) to institute legal proceedings.”
Accordingly, if an insured makes no effort to pursue the complaint, it is in the insurer’s interest to ask the ombud to make a ruling or dismiss the complaint so that the contractual time bar provisions can start to run again. The ombud may also not hear a complaint if it is the subject of existing litigation or in the hands of an attorney for contemplated ligation, unless the attorney is simply assisting the policyholder to prepare the complaint. If the policyholder
A cold shower from Treasury Hanna Barry
t was called a “cold shower” by Munich Re Africa CEO, Junior Ngulube. He reiterated what many were thinking at this year’s Insurance Conference, after Ismail Momoniat, Deputy-Director General of the National Treasury, gave his address. Momoniat said that the market conduct practices of the short-term insurance industry were poor and even disgraceful and industry supervisors must be much tougher than they have been in the past. He pointed out that while prudential compliance is critical, the industry needs to remain customer-focused. “The insurance industry will be exempted from the Consumer Protection Act only if the industry adopts higher and tougher standards.” He questioned whether the industry has really made an effort to provide more affordable policies and said there needs to be greater transparency, as well as more simplified products with standard terminology and comparability. “Most short-term insurance companies are not really prepared to incorporate TCF (Treating Customers Fairly) principles into their practices, and are still stuck on a compliance-based approach,” Momoniat noted. “The short-term insurance industry is behind the curve on its focus on the fair treatment of customers.” He went on to say that insurers should be obliged to publicly disclose claims received and claims rejected. “Why should government consider compulsory insurance for say motor vehicles if the industry is not transparent about its costs and claims procedures? The principles of proportionality and fairness are not applied in many cases, as the system is designed to reject claims in total.”
Reforming the ombud system Treasury doesn’t believe that the industry ombudsman is sufficiently independent. “Governance and funding of the ombud must be free, and be seen to be free, from any interference.” This includes the appointment and reappointment process of the ombud. Treasury is considering a system of compulsory levies to fund the operation of ombud offices, together with minimum norms and standards. “The number of complaints reflects on the failings of internal complaints procedures of companies.”
Beyond market conduct Momoniat questioned whether the short-term insurance industry has transformed to reflect new South African realities. “Are short-term insurance products appropriate for the needs of township dwellers and the younger market? Are pricing models really free from redlining and who subsidises whom?” He said there is insufficient diversity in the sector, no new blood and not enough expansion into the continent.
Industry speaks out We asked people in the industry about their views on some of the issues that Momoniat raised. Does the industry have poor market conduct practices? “Some of the comments made by the National Treasury during the 2012 Insurance Conference were off the mark, especially when it comes to the industry’s alleged poor conduct practices and lack of transformation and innovation. Auto & General has a strong culture of service excellence that has been entrenched with our service charter for customers and brokers. The company also has an internal initiative in place which measures our customer satisfaction on a daily basis. Our score is above international benchmarks and the initiative receives continual focus.” − Leon Vermaak, CEO of Auto & General Insurance “Mr Momoniat is one of many in the country who have this perception of the insurance industry. If this is not true, the industry should not take a reactive stance on the matter, but should set about ensuring that there is a more positive public perception.” − Gay-Lynn Rheeders, Rhed Oliv Insurance Brokers “Yes, there are those insurers that do not act fairly. We should see this published by the OSTI, so that consumers can see which insurers these are. All that is needed [to address poor market conduct practices] is that the existing FAIS Act and general code of conduct be applied.” − Arnold van der Linde, vice-president of the FIA “The members of the South African Insurance Association abide by a code of conduct which upholds fair treatment of its customers. In addition, the short-term insurance industry is regulated by
various pieces of legislation, including market conduct-related legislation, and all financial services providers must comply with such legislation.” − Kwanele Sibanda, SAIA communications manager Is the OSTI independent and what does an increase in claims with the OSTI suggest? “As far as I am concerned the Office of the Ombudsman is in fact totally independent from the insurance industry.” − Dennis Jooste, Ombudsman for Short-term Insurance “No. Having insurers on the OSTI board makes no sense. They even give themselves awards, which is crazy. The increase in claims is mainly due to the OSTI being more known to the consumer as a watchdog.” − Van der Linde “If companies sort out complaints reasonably with clients, these will not get to the OSTI. I find it absurd that the OSTI gives an award to the company that subsequently resolves the most of its own OSTI complaints. If the company was so good at resolving complaints, why did they get to the OSTI in the first place? Would it not be more appropriate for the OSTI to recognise publicly those companies which have the least number of OSTI complaints?” − Rheeders “The ombudsman is an independent body with representatives from the industry, the Financial Services Board as well as several consumer representatives on its board.” - Sibanda, SAIA “When one considers how much legislation and regulation already exists and how purposefully it has been implemented to date, criticism of our regulators may be unfair. In our opinion, there
is sufficient legislation and the regulators are all doing a very reasonable job of supervising the South African insurance industry.” − Jurie Erwee, CEO, Marsh Africa Does the industry need to simplify its products and become more accessible to the low-income market? “There are a variety of offerings for all the different markets. The challenge is to carry them into the market, for which we need to develop more representatives and advisers.” − Van der Linde “Companies need to understand the markets they are selling into and whether the products are appropriate to these markets. Financial services providers need to communicate with clients and manage their expectations. One of the big risks is that all the disclosure happens upfront and then none takes place further down the line.” − Leanne Jackson, head of TCF, FSB “The SAIA and its members are committed to providing affordable insurance products to all markets in South Africa; however, premiums are linked to risk and cost. In this regard, we are committed to collaborate with all relevant authorities to address factors that influence risk and cost in order to find a way to serve all South Africans.” − Sibanda, SAIA The SAIA has since initiated actions in order to address the concerns expressed, either through information or change. “The SAIA is proud of the contribution the short-term insurance industry makes to society to our economy, and will do everything in its power to address any perceptions and/or shortcomings which may have a negative impact on the image and reputation of the industry.”
Balanced scorecard for a short-term insurance company: financial metrics objectives. Thus the metrics measure the actions required to achieve the ultimate strategic goals.
Karen Miller | Executive: Underwriting at Mutual & Federal
s mentioned in last month’s contribution, utilising a balanced scorecard (Kaplan and Norton, Harvard Business School Press, Boston Massachusetts, 1996) approach to establish and monitor key metrics in a short-term insurance company facilitates the balance between medium to long-term strategic goals. It also provides lead and lag indicators of the organisational performance. This article deals with the financial metrics, which are one of the four key categories of the balanced scorecard. Financial metrics should encourage business divisions to align their business unit strategy to the medium to long-term corporate strategic aspirations. The metrics utilised in the financial category should encourage the implementation of appropriate actions to ultimately achieve the financial
Typically in short-term insurance companies, financial metrics measure revenue (retention and growth), underwriting profit, asset utilisation and operational efficiency (expenses, productivity and risk). Financial objectives are linked to the company or business unit life-cycle stage. Accordingly, a business unit may wish to aggressively grow market share, or it may wish to retain market share without much growth, and the tactics to achieve these goals differ from revenue and profitability perspectives. In terms of the current life-cycle stage of the business unit, we should consider the bigger strategic picture, so investment may be required to fund a start-up which produces profit only after three years. Businesses may follow growth, turnaround, stability or divestment strategies. Growth strategies may pursue: • market penetration • market development • product development • diversification strategy • integration strategy • strategic alliances
Turnaround strategies may downsize a company, in order to ensure economic sustainability of the organisation. Stability strategies may right-size an organisation and focus on efficiency gains in order to improve or sustain economic viability. Divestment strategies may occur when a business is insolvent or when a business exits a segment. It is important to consider the dynamic nature of strategy. Business may move between growth, sustain and harvest stages in the business life-cycle. In addition, core competencies within a business change over time and the business operates within a changing economic environment. Accordingly, business strategy should be a living dynamic process, which adjusts to the environment. Similarly, the business should focus on building skill-sets and capability within the business to achieve future success. The key areas of financial focus are around revenue growth and mix of business; expense management and efficiency improvement; as well as investment strategy including asset deployment. The following table provides an indication of key areas of measurement for a short-term insurance company.
Revenue – growth and mix metrics
Expense management and efficiency improvement
Assets and investment strategy
Measurement focus areas and metrics
New business from existing channel relationships; new business from new markets and relationships; business retention; casual factors for business growth or decline; loss ratio from attritional, large and catastrophe losses; rate strength
Cost to serve ratios; level of automation and IT enablement; head count ratios; organisation structure and span of control; operational risk; branch and head office structure
Asset utilisation; return on capital; economic profit; investment risk and reward appetite; reinsurance and capital structure
Dependency revenue – growth and mix metrics
Pricing approach; product mix; distribution model; lifecycle stage; target segments
Business operating model; processes; systems; structure; distribution model; geographic footprint; centralised/ decentralised models
Credit rating requirements; appetite for volatility and return; diversification benefits/risks; capital adequacy
We will examine these metrics in more detail in future articles.
Spread loss insurance provides enhanced protection
Palesa Mafoko Client Manager at Centriq Insurance
n a hardening traditional insurance market, many companies may not be able to get the insurance cover they require as higher deductibles may be imposed, for example, forcing them to retain more of the risk themselves, or the cost of traditional insurance cover may be too expensive for them to absorb. In such cases, companies may opt for alternative risk transfer (ART) solutions in the form of finite risk insurance programmes. Palesa Mafoko, client manager at Centriq Insurance, says finite risk or spread loss insurance provides continuous and full protection to a client from inception of the insurance programme for a multi-year period of time at a premium that is payable annually in advance. She explains that these programmes are multi-year and multi-risk contracts in which premiums are tied to anticipated losses over the fixed period of time. The intention is to insulate the company’s balance sheet against massive losses in any one year, by spreading the risk over the fixed term of insurance. “Finite risk arrangements are complex, both legally and in terms of accounting rules,” Mafoko says.
RISK PROFILES AND CLAIMS HISTORY Mafoko explains the prediction of the expected losses is a critical component in the structuring of the finite risk policy at the right level. Therefore, loss trends and exposures to provide suggested risk retention and risk transfer attachment should be carefully analysed. “The optimal attachment point, with reference to reinsurance pricing and the client’s capacity and appetite to retain risk should be tested
and verified.” The optimal solution – structured according to each client’s unique requirements – may be to integrate the finite risk with a conventional insurance programme, or to structure it as a stand-alone to complement and provide additional insurance cover where needed. “An understanding of the exposures and their relationship to the historical losses is essential to the structuring process.”
Finite risk insurance programmes are ideally suited for:
CREDIT RISK AND CREDIT RATING
Credit worthiness is a vital factor in the shaping and pricing of the finite risk programme. Information required for the credit assessment is the client’s latest audited financial reports as well as their credit rating, if available. You should be aware of the following when considering finite risk programmes as an ART solution: •
T he premium charged on this type of programme is significantly higher than traditional insurance premiums. • Due to the credit risk, the client requires cash and income statement strength. • The insurer in consideration needs to have balance sheet strength, the required technical skills in accounting, actuarial and underwriting.
Insuring high severity and low frequency losses where losses are expected to occur once or twice every three to five years, for example, but where the premiums are spread over a three-to five-year period to accommodate the estimated cost of risks identified. Insuring excess buy-downs where there are substantial deductibles, for example, a client who has a high deductible but who can afford to finance losses only up to a certain amount without impacting negatively on their balance sheet. Clients who want to build up retention over time but need capacity from inception. Net account protection for wholly owned captives.
“The programme has great benefits for companies seeking financial protection and budget certainty,” concludes Mafoka.
SMEs should beware of relying on big clients
“Municipalities owed their creditors R9.7 billion at the end of the third quarter of 2011 and that figure had risen as much as R1.4 billion by March this year, showing that those debts just aren’t being paid.”
The trend is as rife in South Africa as it is abroad and statistics released by the National Treasury from March 2012 show that in the Free State, 63 per cent of debt owed to creditors was older than 90 days; in Limpopo 56.3 per cent was older than 90 days; and 44.7 per cent was older than 90 days in the North West. Municipalities owed their creditors R9.7 billion at the end of the third quarter of 2011 and that figure had risen as much as R1.4 billion by March this year,
showing that those debts just aren’t being paid. Due to their lower overheads, SMEs are generally more competitive in their pricing and, as a result, they are often considered in preference to larger companies. When an SME is approached by a large customer or by government to quote or tender, they will do so at the best possible price. However, what the SME often does not taken into consideration is the cost of credit should the terms be extended. If the customer contributes a large percentage to the SME’s turnover, and delays payment or, even worse, defaults in payment entirely, it will have a detrimental effect on the business. This is not only applicable to SMEs, smaller companies are particularly vulnerable because they generally do not have the cash reserves to fall back on in the event of non-payment. The effect on the SME’s business is further aggravated because management’s focus is on collecting the money that is overdue, making it easy to lose focus on the day-to-day business. In tough economic times, sales and ultimately growth are top priorities for businesses to cover overheads and make profits. It is important to ensure that sales and growth are not chased at the expense of profit, to try make sure that the company doesn’t rely too heavily on one or two big clients and to take the cost of credit into account if payment for services are delayed, especially in the case of SMEs.
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global trend of large companies and government organisations taking longer to pay small and medium enterprises (SME) for their services is putting small companies at significantly higher credit risk, according to Jacqui Jooste, operations director at Coface.
Business evolution is paramount
days of If you’ve always wanted to be more creative with your company’s website, that day has finally come. The well-known domain names of .com, .org and .co.za, may soon be replaced by .cocacola, .nestle, and perhaps even fly. mango.
are numbered M i k ha i la C r ow i e
The impending expansion of the global web address regime by the Internet Corporation for Assigned Names and Numbers (ICANN) may initially cause confusion among South African consumers. However, it can also be seen as a significant brand-building opportunity for many local businesses. ICANN’s board of directors approved the generic top-level domain suffix program (gTLDs) and this may mean greater marketing exposure for the insurance industry. However, it might compel insurers to apply for domain names such as the term ‘.insurer’ or its equivalent in another language, as this is a sought-after keyword for advertisers.
“Now every business and brand can be represented at a global level, based on their type of business or product offered.”
turn computer-readable into human-readable and memorable names. “Most of the more obvious choices – ‘car.insurance’, ‘pet. insurance’ and ‘home.insurance’ – will be snapped up fairly quickly, so getting in early would be a good idea.” If two parties apply for the same domain name, the user who has completed the process before the second party will be delegated the name on a firstcome, first-serve basis.
13 However, while ICANN has received thousands of application worldwide, only 13 were received from South Africa
Internationally, the American Bankers Association and Financial Services Roundtable of America have made a bid to take control of the pending ‘.bank’ and ‘.insurance’ top-level domain names.
The impact of the addition of hundreds of new top-level domains (TLD) – the concluding part of an Internet address which informs you about the sort of site you are visiting – needs to be carefully considered by South African businesses. John Ginsberg, marketing director of Ensight, an international multichannel marketing company, says there will be more TLDs instead of just a handful. He explains the goal of the domain names is to
Ginsberg says the benefit of this approach is that over time, consumers can be taught to trust advisers whose address ends in ‘.insurance’ or ‘.bank’ and to reject communication from all others. “This may help to reduce the global phishing pandemic, while opening up new channels of communication that the insurance industry has typically shied away from.” He says South African consumers will turn to search engines and social media to help them work
out which is the most reputable source. “Companies like Google, Facebook and Twitter are going to score the most from this change, as anything that makes Internet addresses more baffling will drive people to type information into a search box.” From a business perspective, Ginsberg says the expansion of the global web address regime will be a benefit to certain local brands who want to own a TLD rather than be stuck with a country-specific option. “Now every business and brand can be represented at a global level, based on their type of business or product offered.” However, while ICANN has received thousands of applications worldwide, only 13 were received from South Africa and none were from insurance companies. “South African firms should spend some time looking through the list of proposed domains to see which one may impact their businesses or industry, and plan their domain strategy so they are ready when the first few registrars are appointed in the next 18–24 months.” The application fee for a TLD will cost R1.5 million. Once the application is approved, a further R204 985 is needed annually to attain the domain name.
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Green worth it?
Are building tax rebates N i c k K r i ge
Government is offering businesses tax rebates for greening their buildings. We find out how the rebates work and what else is being done to make South Africa’s buildings more energy efficient and sustainable.
n November last year, the South African Government set a minimum standard of energy efficiency that is compulsory for all new buildings and refurbishment projects to adhere to. This standard is called the SANS 10400 part XA, developed by the SABS. It was a massive step towards creating a more sustainable future as buildings represent a substantial percentage of energy usage around the world, and it was the first time a minimum requirement for energy efficiency in buildings has been set in this country. Manfred Braune, technical executive at the Green Building Council of South Africa (GBCSA) explains that SANS 10400 part XA addresses the way buildings are built and refurbished by setting requirements for things like shading, insulation, air-conditioning, glazing, hot water and lighting. There are a few options for compliance, so constructors will not be completely limited, but any building plan will need to be submitted to a municipality for approval. Green building regulations have transformed the construction industries in countries like
Germany, which first introduced a green building standard in 1975. South Africa can learn from those nations’ 37 years of experience and hopefully circumvent any teething issues. The GBCSA uses the SANS 204, on which a lot of the SANS 10400 part XA regulations are based, as the minimum energy requirement for projects wishing to be granted a Green Star SA certification. The GBCSA’s Green Star SA certification isn’t the only thing up for grabs for buildings looking to be greener; the South African Government has instituted a rebate for companies that make an effort at cutting energy consumption in their buildings. The SANS 10400 part XA and SANS 204 documents can be purchased from the SABS website (www.sabs.co.za). Under the National Energy Act, 2008 regulations on the allowance for energy efficiency savings, companies can submit certificates of energy savings, issued by accredited persons, to SARS for a credit on their tax return, providing even more reasons to cut down on energy consumption along with the Green Star SA certification and the ever-increasing price of electricity in this country.
“This is a sector where the GBCSA hopes to play a significant role through its Operational Energy and Water Benchmarking Tool, currently under development and set to be launched in mid-2012.”
But this is where it starts to get a little bit more complicated; interested parties will need to register with the South African National Energy Development Institute (SANEDI). They will then need to appoint a certified measurement and verification professional to put together a report of all the energy-saving methods being employed and how successful they have been. This report must be submitted to SANEDI, which will send back a certificate. This certificate is submitted to SARS which calculates the relevant tax return. All of this suggests that the process could be relatively time consuming and expensive since extra personnel is required to complete the process, and that’s before the cost of the green technology is factored in. Another problem with SANS 10400 part XA is that it doesn’t really offer anything for pre-existing buildings, which is where most of the energy is used anyway, and the GBCSA sees its Green Star SA certification as a plug for that hole.
“For many, being able to see a tangible monetary reward or return for energy efficiency is the ultimate ‘carrot’ and the catalyst that will afford change.”
“This is a sector where the GBCSA hopes to play a significant role through its Operational Energy and Water Benchmarking Tool, currently under development and set to be launched in mid-2012. “The GBCSA sees this tool working hand in hand with the SANS 10400 part XA which addresses design of new and refurbished buildings, while the GBCSA’s benchmarking tool will apply to existing buildings,” says Braune. Brian Wilkinson, CEO of GBCSA, says it fully supports the initiative by government as it further incentivises SA businesses to reduce their energy consumption. “For many, being able to see a tangible monetary reward or return for energy efficiency is the ultimate ‘carrot’ and the catalyst that will afford change.” But is it enough of an incentive for companies who own existing buildings to rip out expensive, perfectly workable technology just for the sake of a tax bump and a certification? Fred de Wit, operations executive, Summit Management Services, the company who owns the building where Zurich is headquartered, doesn’t think so, because greening buildings at the moment is still too expensive. “We’ve done what we can. We installed air-conditioners that utilise an air-cooling system, rather than water-cooling, and installed energy-saving bulbs throughout our buildings. But most of our buildings are between 20-and 37-years old. It is incredibly
expensive to replace systems that have been in place for that long,” says De Wit. There are certain elements that are easier to incorporate in buildings such as replacing normal light bulbs with LED lighting or energy-saving light bulbs, but wholesale changes to existing buildings do not seem like a viable option at this stage. “We have torn out technology that wastes electricity, but for now the most cost-effective way for us to save energy in our buildings is just to make sure lights and air-con units are turned off in rooms that aren’t being used,” adds De Wit. There are some technologies that are beginning to emerge as stand-out options in the quest to save energy, such as LED lighting. “Obviously LED lighting is the future, and we have seen a notable difference in the buildings where we have incorporated LEDs, but it is too expensive to be viable as a wholesale option, especially for buildings that have existing light fittings,” continues De Wit. The vast majority of existing structures use energy inefficiently. Reducing energy consumption of existing buildings is essential to making a real impact on South Africa’s carbon footprint. But persuading owners to spend thousands, or even hundreds of thousands, to replace perfectly functioning equipment in their buildings, will probably be quite difficult. Building owners are often hesitant to spend limited resources on projects for functioning products, especially in cases where the building is not owner-occupied, so the benefits of more energyefficient buildings go directly to the tenants rather than the owners who have to fork out the financial investment. Additionally, since green construction is a relatively
new industry in South Africa, quality controls and standards haven’t quite caught up with the demand for green products. “It is worrying that there doesn’t yet seem to be any SABS or Eskom standard for LED lighting, so even though we are using them in our buildings, there is a safety concern until a standard quality can be established,” concludes De Wit. It is a positive step towards South Africa reducing its carbon footprint, but at this stage that is all that it is. At the very least new buildings will require far less energy, but there needs to be a lot more thought and discussion about how to reduce consumption of older buildings or how to incentivise their owners to implement green technologies, if South Africa is going to take going green seriously. To find accredited persons who can verify energy savings according to the SANEDI regulations, visit the Council for Measurement and Verification Professionals of South Africa’s (CMVPSA) website at www. cmvpsa.org.za.
less energy D ebb i e B olton
In line with this month’s green theme, we’ve put together a list of ways to go green in your office, and we are not talking about eating bad sushi, wearing a green scarf, being jealous of your co-worker’s new stapler or growing grass on your desk.
Be bright about light Lighting can account for approximately 20–30 per cent of an average company’s carbon footprint. However, there are ways to reduce light usage and at the same time reduce electricity costs. Investing in energy-efficient lighting such as LEDs or energy-saving light bulbs could reduce electricity usage by up to 90 per cent. Make it a habit to turn off the lights when leaving any room for 15 minutes or more and take advantage of natural light when you can. Natural light is energy efficient and cost-effective and can energise employees and lift their moods.
“Making your own cleaning supplies can be very effective and non-toxic. It saves money and time and improves the quality of air indoors.”
Be wise, digitise According to Sappi, South Africa recovers over 1.1 million tons of waste paper each year, representing a recovery rate of about 58 per cent. Although recycling is starting to gain momentum through municipal programmes, more can be done. It seems fitting that since we are in the digital age, we should take
advantage of technology that is readily available to us. However, offices are still consuming an enormous amount of paper, but why use paper at all? The greenest paper is no paper. The more you do online, the less you need paper. •
eep files on computers K instead of in cabinets. This makes it easier to make backup copies or take them with you when you move to a new office.
BB Commuting to work Using cars to get to work is time consuming and, with the skyrocketing petrol price, expensive. Getting people from point A to point B using trains, buses, bikes and on foot is much more environmentally-friendly and considerably cheaper. Unfortunately, not enough South Africans use public transport; therefore, there is not enough investment by the government to improve the quality of service and capacity to support large volumes of commuters. Start nagging your public transport network to implement changes. If everyone puts the pressure on, it will make a difference. If you are dead-set against public transport, carpooling is another option. Whether you’re going to the same office or the same neighbourhood, carpooling will save you money and save the environment from harmful CO2 emissions.
eview documents onscreen R rather than printing them out. Send e-mails instead of letters.
Lunch time The greenest, not to mention healthiest way to eat at work is to bring food from home in reusable containers. Takeouts inevitably result in mini mountains of wasted packaging. However, sometimes you just yearn for take away food. Inviting co-workers to join you will result in a large order, which is more cost-effective and will minimise waste. Investing in reusable cutlery, crockery and napkins (ditching the paper plates and cups) will also result in less wastage.
Smart printing Instead of throwing your printer cartridge away when it runs out of ink, use recycled printer cartridges. They not only lessen businesses’ carbon footprint, but many recycled printer cartridge stores and online stores will give you a discount on a replacement recycled cartridge. This will help reduce the amount of printer cartridges that end up in landfills. Printing on both sides of the page will decrease the amount of paper usage.
Business travelling tips Not all business trips need to involve flights, rental cars and hotels. It can sometimes be easier, cost-efficient and kinder to the world to partake in video conferencing or telecommunication. Hold meetings through technological advances that were created for this specific reason. Make it a policy to invest in videoconferencing and other technological solutions that can reduce the amount of employee travel. Teleconferences mean less aeroplane trips, which create a huge CO2 burden. However, if you can’t avoid the travelling, try to use public transport instead of hiring a car. If hiring a car can’t be avoided, then choose a rental agency that offers hybrids and other highmileage vehicles.
rummaging between paper and plastic is no-one’s idea of a good time. Make it simple to recycle at work. Get as many recycle bins as possible and set them up in areas of the office that are readily accessible and logical. Recycling is so much easier if you hire someone to collect it all for you, and there are companies that do this. Recycling companies have become more and more popular and a quick Internet search will point you in the right direction.
Green clean Maximise computer efficiency
Making your own cleaning supplies can be very effective and non-toxic. It saves money and time and improves the quality of air indoors.
For many businesses and employees the computer is the central tool for work. It should be a habit to turn off your computer, as well as the power strip it’s plugged into, at the end of the day. You are still burning energy even when electronics are switched off but plugged in.
Mix a half a cup of vinegar and a quarter cup baking soda into two litres of water to make an allpurpose cleaner.
During the day, setting your computer to go to sleep automatically during short breaks can cut energy use by 70 per cent. Remember, screen savers don’t save energy.
Recycling To encourage employees to recycle, it needs to be made easy. Faffing around in a dirty bin
Home-made cleaning supplies can provide less harmful substitutes for many commercial products. They are less expensive and a safe alternative.
Sharing tips with your colleagues will boost morale and lighten the atmosphere. Utilise more natural light and use the stairs instead of the lift; you will feel better for it. Working towards an achievable goal can be fun and save you money.
the perfect pitch Georgina Hatch New You Image Consulting
Imagine that you have just got into an elevator and the only other person inside is your ideal investor. You have tried to arrange meetings with this person to no avail. You have left countless messages with his secretary without results. Yet suddenly, here is the perfect opportunity to speak to this very important person. You have about 60 seconds to think of something to say that will blow their socks off. What do you say?
ll business people need an elevator speech – the perfect pitch that you can deliver in just 60 seconds that will impress the heck out of the VIP and convince him to spend money on your business. An elevator speech is a short description of what you do, or the point you want to make, presented in the time it takes an elevator to go from the ground floor to the top floor (or vice versa). We may prefer to just stand there looking sheepish, speaking to no-one and yet we have a captive audience for that very short period of time. The idea of having an elevator pitch is to have a prepared presentation that grabs attention and says a lot in a few words. By relating your core message, you will be marketing yourself or your business in a way that makes people want to know more about what you do.
New You Image Consulting is based in Cape Town. Formerly an award-winning journalist, owner Georgina Hatch held several senior positions in the publishing and communications industry before forming the company. Georgina’s passion is working with people to enhance their personal image and personal brand, thus empowering them to present themselves positively and confidently. Apart from offering personal and professional one-one-one image consultations to both women and men, Georgina is a popular public speaker and also runs workshops and seminars on personal branding and corporate image, style and presentation. Georgina trained as an image consultant with the renowned Colourworks International and is affiliated to the South African Image and Style Academy. She is a member of the Professional Speakers Association of Southern Africa and the author of the book, Change your Image, Revamp your Life.
For example, my elevator speech goes something like this: “Hi, I’m Georgina Hatch and I am a personal image consultant and public speaker. Because I believe that personal image is more than skin deep, I help people believe in themselves and feel confident about who they are, so that they can look great, feel good and attract personal and business success. Everyone is entitled to feel better about themselves. Could we exchange business cards and perhaps set up a meeting?” When I deliver this pitch, nine times out of 10 the answer is: “Well that sounds interesting – yes, let’s get together to chat.” I could just say that I am a consultant but that would mean nothing. Your elevator speech should answer the following key questions:
• W hat is your product or service? • Who is your market? • What do you do that sets you apart from your competitors? An elevator speech is a mini business presentation and you get one chance to get it right. In the interests of all who would like to wow with words, here are my top seven practical tips for capturing your investor’s attention with the perfect pitch. 1. Find a hook: Open your pitch with astatement or question that piques the other person’s interest. 2. Keep it short: Your speech should not be longer than 60 seconds – that’s no more than 225 words. 3. Keep it simple: Don’t overwhelm with technical jargon or statistical terminology. 4. Be passionate: Investors expect passion and energy. 5. Make a request: At the end of your pitch, ask for something – a business card, a meeting or a referral. 6. Listen: Know when to stop talking and listen to the other person’s response. 7. Practice: Rehearse your elevator speech so that when the opportunity arises, you can deliver it smoothly. An elevator speech is not meant to be a full-blown business plan. It’s an introduction, an overview to capture the attention of the potential investor. It’s handy for any occasion where a concise presentation is appropriate; you can even use it in an e-mail. Challenge yourself. An elevator ride is a short one but who knows, you could turn it into the ride of your life.
Managing Director: EMPS (PTY) LTD | (011) 678-0807 firstname.lastname@example.org | Visit www.emps.co.za
Interview for success
well-structured interview can tell you more than a CV and any other screening tool used in the recruitment process. Any person who is doing interviews should run them as an informationgathering process. All the information gleaned from an interview helps in the final decision to hire. Prior to any interview, the interviewer must have a clear picture of what they are looking for in the candidate being interviewed in relation to the job requirements. A good idea is to have a clear list of what the candidate must have and a list of wants which would strengthen the candidate’s chances, but are not mandatory. Now the interviewer has to gather information, form an impression, pinpoint unique characteristics and study physical appearance as an accurate expression of personality and establish whether or not the person can express himself or herself; learn something of the person’s desires, needs and motivation. Assess whether or not the candidate is compatible with the company and the team. Take your time to work through the applicant’s past, as well
as opinions and ideas related to leadership, work ethic, dependency, adaptability, stability and motivation. Always remember that interviewers, like the job applicants are human. As a result, their objectivity can be swayed by the personal interplay within the interview situations. To help you maintain a balanced overall view of the candidate in relation to the employment position, take caution. be as pleasant as possible to establish an early rapport. If you are going to make notes tell the interviewee the reason and reassure the applicant that all information will be treated in professional confidence. Ask your questions clearly and concisely, while keeping your tone conversational. Interview, don’t sell. Don’t ask questions that can be answered by a yes or no. Probe for in-depth answers, but avoid leading or loaded questions. If you find contradictions in the answers, probe to find the reasons. The most important rule of all is keep your own personal opinion, bias or prejudices out of the interview.
rewarding, as you watch former applicants transformed into productive, achieving employees. Therefore, follow these guidelines to constantly improve your interviewing techniques.
“If you are going to make notes tell the interviewee the reason and reassure the applicant that all information will be treated in professional confidence.”
In interviewing, as with any worthwhile skill, practice makes perfect. Conducting a good interview is demanding, yet the results are
What your client needs to know (Part iv)
Did you note everything I presented as a client?
C ha r ma i ne Koch
ne of our most common problems is that we are far too trusting of everyone having played their part in the insurance process, whether it is the client, broker, insurer or UMA. We take it for granted that because we told someone something that they will not contest it later and that we can resolve all matters on a gentleman’s handshake. Although that was how the business of insurance started, society at large has changed. Now unless everything is documented there is very little hope of resolving matters on a gentleman’s handshake.
Documenting conversations with clients I had a personal experience recently in which I received a quote from a broking company. On the quote the vehicles were stated, but there was no mention of whether the vehicles would be covered for market value or retail value. When I queried this with the broker, he stated that it would be retail value. I asked him where that was indicated on the quote, and he replied that it isn’t, but that vehicles are always covered at retail value. Being the sceptic that I am, I took this further to reconfirm this with the executive of the company, upon which I was told that vehicles are not covered for retail value only for market value. With this confirmed, I decided not to place my business with this company as I could just see there would be a dispute if a vehicle claim was necessary. The FAIS Ombud and court approach is that if there is no record documented, then it is
as good as the issue never having being discussed. Therefore, from an industry perspective it has become critical to ensure that we document all discussions we have with clients, or send a summary of the discussion to the client, confirming the detail of the discussion. This would provide the client with the peace of mind that all the detail has been noted, as well as provide the industry with peace of mind that all we needed to say has been said, explained and documented.
Where will documentation stop? It won’t. We have accepted the practice of documenting details and conversations at point of sale. To a large extent, however, when we do renewals we tend to go back to our gentleman’s handshake. Please remember that it is necessary for your client to be reminded of basic insurance principles again at renewal. Matters of non-disclosure, updating of values, and the risk of being underinsured are all issues that we need to remind the client of again, and record the details of the conversation. It is so easy to forget that our clients are not insurance regulars, and therefore they do not know the meaning of concepts that are perceived to be basic insurance principles.
Retrieving of records Many of us make use of e-mail, client files, client documents or broker notes to take notes and record details. However, some use telephonic voice logging systems, or third parties to help us keep records. Test your retrieval system and call for a client record,
to ensure that you will be able to recollect the record. There have been a few instances in which records were not available for retrieval, either due to unco-ordinated filing practices of third parties, or technological difficulties in retrieving telephonic conversations. It is one thing to put systems in place, it is another thing to test those systems and ensure that they work, especially during critical times of investigations. For both the protection of the client and ourselves, we need to test these systems and ensure that we will be able to retrieve the details for queries, complaint investigations and regulatory inspections.
Transparency Do not be shy to send clients copies of the notes you have made for confirmation, and to share your records with your client. It only helps your client to know that you have all the important details noted, and they are certain of the advice and cover you have recommended.
Keep it simple Lastly, it all seems so onerous, but peace of mind is priceless. Make your record-keeping process simple. Find an easy method that you can use to ensure documented records are made, stored and retrieved for the convenience of your own day-to-day process and for the benefit of your clients. Look out for Part V next month on Continuous Professional Development.
WHAT CONSTITUTES A GOOD COMMUNICATOR? “Think like a wise man but communicate in the language of the people.” – William Butler Yeats, Irish poet and dramatist
omeone who is verbose, long-winded or tells a good story or joke is not necessarily a good communicator. Entertaining is not communicating in the business world. You need to provide information. Here are some thoughts about what contributes to becoming known as an effective communicator: • Being able to discuss disputes, not just exchanging pleasantries. • Meeting the needs of an audience once their needs have been established. • Working out why people say things and learning to read between the lines. • Managing to package a message concisely and succinctly. • Defining a key message. • Stimulating action and reaction rather than just a gentle response, creating a good level of understanding.
You have to learn to speak the language your audience wants to hear. In turn, you need to give them the information they want, not merely communicate what you want. Some people are accessed more easily when language is visual, others numeral, some sensory. Some need to have their left brain accessed to appeal to the logical side of their nature. The opposite applies to those who are more creative. Right-eared people listen more to content; and left-eared people to the emotion that underpins the verbal word. Music and participation provide added interest in the delivery of a message. Most importantly, you need to speak the language of solutions. Ask yourself what your customer, client, staff or boss wants. Provide a solution to their needs, not just yours.
One of the aspects of my work which I love is the diversity of industries in which we are invited to operate. The exciting challenge for me is to find out what happens in their world, what language do they speak? What is important to them, their trade associations, publications, competition, pricing structures, and governing bodies? In addition, if possible, before presenting a proposal I like to know something about them as individuals and their learning modality. Do they want me to present face to face without auditory or visual distractions, or do they love PowerPoint? Perhaps a combination will be best. Determine what type of animal you are presenting to so that you offer your brand to the audience appropriately.
there are some rules about the language of self-talk. They are: • Tell yourself often how good you are and how good you can be. • Focus on what you can do rather than on what you have not done. • If you keep on giving yourself good messages, it will resonate in your actions. Start speaking the language of self-belief. Then start listening to that inner voice called intuition and learn to respond to it. It is a wonderful tool.
Monkey see, hear and do: See – give visuals, bright pictures. Use PowerPoint, look the part and present visual examples of your work. Hear – use your voice effectively in terms of tone, volume and pitch. Add music. Don’t forget silence, pause. Do – tactile people like to feel. They connect emotionally and like to create rapport. I say use gut feel with these prospective clients or employers. I never allow a situation in which they can turn straight to the page of costs. Those get handed out later, once I have outlined the return on investment for them. Sadly in the pursuit of business one can present a proposal that includes an intellectual property clause and it may be ignored. The only way to guarantee confidentiality and trust is a non-disclosure agreement. The optimum situation is to balance these with times when you really want the business and are prepared to take a risk. Aim to utilise your credentials, experiences, case studies and testimonials instead of having to pitch for business. Always communicate honestly and clearly and become known as a person of your word. My favourite words are “yes” and “now”! My least favourite words are “no” and “wait”. Think about yours. In addition to the ABC rules of good communication (accuracy, brevity and clarity),
Jenny Handley is a brand specialist and owner of a brand and performance management company. A member of the London Speaker Bureau, Jenny has addressed a wide variety of international audiences. She offers unique individual brand management consultations for top executives, leaders and entrepreneurs, based on her book Raise your Profile. Jenny facilitates brand and performance management, leadership development and communication workshops, with a focus on social media strategies. She has her own weekly column in the Cape Times. Visit www.jennyhandley.co.za for details.
news Genesis reaches Level 1 BBBEE status
Genesis Healthcare Consultants (GHC) announced that it has achieved a Level 1 BBBEE status. Genesis said in a statement that it will continue to support the idea of creating a more equitable distribution of wealth, skills and resources in South Africa. The healthcare consultancy has improved its standing from Level 4 in 2011 to Level 1 in 2012. Level 1 recognition is awarded to companies who score greater than 100 points against the BBBEE Codes of Good Practice. The codes assess management control, employment equity, preferential procurement and socio-economic development. GHC says it has worked closely with the National Empowerment Rating Agency (NERA) over the past few months to ensure it fulfils all the requirements.
S&P gives Lion of Africa A- rating A prudent investment strategy and reasonable return on investment were among the praises Standard and Poor’s (S&P) Ratings Services credited to Lion of Africa Insurance (LOA), after it adjusted the short-term insurer to a zaA- financial strength rating on its
South African national scale (BB+ by international standards).
M&F achieves Level 2 BBBEE rating
According to Adam Samie, CEO of LOA, the company has firmly established itself in its market and has the highest rating of any South African short-term insurance company that is wholly run on black empowerment principles.
Mutual & Federal, a member of the Old Mutual Group, has achieved a Level 2 BBBEE rating on its implementation of Broad-based Black Economic Empowerment. This rating is the second highest level out of a possible nine levels as set by the Department of Trade and Industry.
S&P says that the company’s high status as a verified Level 1 contributor differentiates it from the competition and indicates that it has a supportive shareholder with the same empowerment ethos. This competitive strength helps to offset certain weaknesses.
Vuyo Lee, executive of brand, customer and transformation at Mutual & Federal, says: “We are proud of reaching this level as its shows that our plans to become a truly transformed South African company are bearing fruit. We have moved from a Level 4 in 2008 to Level 2 for our performance in 2011. This is a major achievement for us, as for the first time it puts us on the same level as the rest of the Old Mutual Group, namely Old Mutual and Nedbank.”
S&P says that LOA is well placed to benefit from Solvency Assessment and Management (SAM), although it is concerned over the significant burden that it expects the new regulatory framework will impose on companies. The ratings agency says that the stable outlook on the company reflects its opinion that the company will continue to develop its competitive position in the South African market in both new and existing lines of business, as well as grow its presence in the wider African market. “We also expect Lion to maintain its capitalisation at least at a good level, with interest and coverage ratios maintained within current tolerances.”
“We also expect Lion to maintain its capitalisation at least at a good level, with interest and coverage ratios maintained within current tolerances.”
Lee explains that achieving Level 2 means that companies that procure from Mutual & Federal receive R1.25 worth of recognition for every Rand of their BEE spend. The areas where Mutual & Federal scored particularly well coincide with the areas of strategic importance to the business. These include the socio-economic development (SED) and skills development pillars.
Lee explains: “Our SED contribution, through our corporate social investment programme, has seen us becoming more involved in community upliftment initiatives focused on education, social welfare and agricultural socio-economic development.” Mutual & Federal has been previously recognised in the short-term industry as having one of the most progressive skills development programmes for its staff, including training and employing people with disabilities.
Automated risk management comes to SA “CS Stars, a subsidiary of Marsh, has launched the STARS Enterprise platform from an automated claims handling system into a business-wide, predictive, risk-intelligence, management and delivery tool,” says Louisa de Freitas, sales director, CS STARS, EMEA, Marsh (Pty) Ltd. Risk in any modern business is constantly shifting, with the business, with global events and across geographies. Risk is also varied, ranging from the very simple to the hugely sophisticated. Recognising this, “The STARS Enterprise, risk, claims and compliance management system can have as few or as many functions as a business requires,” explains De Freitas.
O’Keefe and Swartz scoops seven awards Telemarketer O’Keeffe and Swartz has scooped seven awards at the 2012 Contact Centre World EMEA Regional Awards held recently in London. As a finalist in the first online round, O’Keeffe and Swartz was invited to present at the awards in London, where the company and its candidates walked away with six gold awards and one silver. The gold awards included Best Outbound Campaign; Best Workforce Planner Professional; Best IT Support Professional; Best QA (Quality Auditor); Best Sales Professional; and Best Supervisor. The silver award was for Best Sales Campaign. The ceremony benchmarks entrants against the best in the Europe, Middle East and Africa region and are considered by many in the industry to be the ultimate awards. The company’s regional winners now qualify to present at the finals of the Contact Centre World Awards in Las Vegas in November 2012, where they will compete against the best in the world.
At the most simple level, STARS Enterprise can act as an online risk management system, allowing businesses to track incidents, risks, claims and policies, and conduct compliance audits depending on the nature of the business and its need to input and track risk trends. A slightly more sophisticated use allows companies to record incidents relating to safety, health or environment and quality, in real time, allowing businesses to follow and support post-incident care, response or rehabilitation in line with company risk policy or legislation.
World Risk Day’s virtual portals well attended With 1 200 delegates participating in over 18 hours of live and pre-recorded presentations, panel discussions and question-and-answer sessions, the first ever World Risk Day was the largest ever online event for the risk industry. The virtual summit involved 12 live webinar sessions spanning multiple time-zones, starting in Australia and ending in the USA, and 25 speakers from around the world and across industries. The presentations and content from the day – featuring submissions from Institute of Risk Management South Africa Exco – is now available for on-demand viewing at www. worldriskday.com/virtual-summit/. World Risk Day will remain live at www.worldriskday.com and a World Risk Day Resourses Centre, including a new enterprise risk management readiness guide, is available. World Risk Day 2013 will be held in May 2013.
Munich Re hosts Lagos energy seminar Munich Re hosted a symposium on renewable energy in Lagos on 28 June 2012. The audience included 50 high level insurers, and speakers Boniface Chiwota (Munich Re of Africa), Thomas Pohl (Munich Re, Munich) and Peter Jakszentis (Munich Re, Munich) were inundated with questions from a highly engaged audience. This was the second in a series of symposia covering renewable energy by Munich Re. In February a similar size group was presented to in Addis Ababa, Ethiopia, and the next one will be in Johannesburg on 2 August 2012.
Speakers at the symposium, from left to right: Junior Ngulube, Munich Re Africa CEO; Peter Jakszentis; Boniface Chiwota; and Thomas Pohl.
NEWS In memoriam: John Hill (9 March 1943 – 08 July 2012) Nautical Underwriting Managers, acting as agents for Centriq Insurance, is saddened to announce the passing of John Hill. John greatly contributed to the insurance industry, working in the sector for 50 years, of which 40 years was in the marine field. The knowledge, insight and skills he gained from serving in London, Nigeria, Hong Kong and South Africa (for the last 20+ years) put him in a class of his own. As one of the founding members of Nautical Underwriters in the Centriq stable, John will be sorely missed by all at Centriq and Nautical who had the privilege of knowing and working closely with him. Always willing to share his knowledge with those around him, John was an executive member and past-chairman of the Association of Marine Underwriters in South Africa (AMUSA) and lectured part time at UNISA in marine insurance.
PROFIDA’s latest software displayed at conferences Software developer, PROFIDA has completed exhibitions of its latest products on the industry conference circuit this year.
LMS rated AALiberty Medical Scheme (LMS) claimspaying ability has earned it a rating of AA- from Global Credit Rating (GCR). The scheme rating outlook has also been upgraded to reflect a stable position which confirms the sustainability going forward. “The scheme also comfortably maintains reserve and solvency levels well above statutory requirements, all of which will give members the assurance that their money is in good hands and managed with care and diligence,” says LMS executive principal officer, Andrew Edwards. “Despite difficult trading conditions, the high claims payment capability remains firm, which translates to high levels of protection of members’ benefits. This rating not only affirms the commitment to the well-being of LMS members, but its solid financial performance sets LMS apart from other industry players,” Edwards stresses. Plans are underway to ensure that LMS reaches more markets and that its product offering caters to the needs of all income groups, tailor-made for the different stages of peoples’ lives.
With exhibits at the FPI Annual Convention and the Insurance Conference 2012, both of which were well attended, PROFIDA was able to take its products directly to the market to demonstrate the capabilities of its software and to promote enhancements to the latest editions. Most product enhancements this year were around data integration and the sharing of data between insurer and binder holder, as well as between financial advisers and investment firms.
AUM to change to in-house claims model Aquarius Underwriting Managers (AUM) will move to a more traditional in-house claims model, replacing its existing model of outsourcing. The changes took effect from 1 July 2012. AUM believes that the more hands-on approach will be more proactive, while at the same time enabling it to manage claims costs and service providers more directly. AUM will handle all motor and non-motor claims from its Randpark Ridge offices.
new appointments ACE Insurance
ACE Insurance South Africa, a provider of specialist insurance, has appointed two new members to its management team.
International legal practice Norton Rose South Africa announced that Charles Ancer has joined the Johannesburg office as a director in the corporate mergers and acquisitions department. Ancer specialises in the mining and energy sectors and has extensive experience in advising both domestic and international clients in relation to corporate, regulatory and transactional matters.
Mike de Jong has been appointed senior manager of ACEâ€™s accident and health division, while Neil Beaumont takes on the position of manager of the classic unit within the accident and health division.
to our loyal sponsors for making this year's conference such a Charles Ancer Mike de Jong and Neil Beaumont
Centriq Insurance Shawn Lombard has been appointed as client manager at Centriq Insurance, while Faiza Maasdorp takes over as client service representative. Lombard worked as part of Constantia Insurance Company Limitedâ€™s technical accounting team before joining Centriq as client manager. Maasdorp holds a senior diploma in paralegal studies and was key accounts manager for Telesure. She is currently studying towards a BCom in general management.
Faiza Maasdorp and Shawn Lombard
PPS Holdings Ebrahim Moolla has been appointed the new chairman of the PPS Holdings Trust Board. Moolla, who first joined the board on 11 March 2002 and was appointed as the deputy chairman of the board on 23 June 2004, is an attorney and senior partner of EB Moolla and Singh. Dr Sybil Seoka has been appointed the new deputy chairman for the PPS Holdings Trust. Dr Seoka first joined the board on 15 August 2005, holds a PhD in pharmacy, and is currently the managing director of Ample Resources (Pty) Limited. Dr David Presbury, who has served as chairman with distinction from 23 June 2004 to 11 June 2012, has stepped down as chairman of the trust, but remains on the board as a trustee.
Ebrahim Moolla, Dr Sybil Seoka and Dr David Presbury
Changing mind-sets: FPI Convention 2012
he Financial Planning Institute (FPI) hosted several local and international speakers in various fields at the 2012 Annual FPI Convention, from 20 to 21 June at the Sandton Convention Centre. This year’s message to delegates was, ‘Put yourself a decade ahead of the pack and learn how you can adapt your mind-set and embrace change to succeed in an ever-changing world’. Godfrey Nti, CEO of the FPI, says he is especially excited that this year’s convention followed on the launch of the FPI’s new strategy and introduction of a designated consumer advocate, educating consumers on the benefits of financial planning, as well as the importance of seeking advice from certified financial planners. The FPI has also relaunched its magazine, the Financial Planner. Digital copies can be downloaded on the FPI’s website and hardcopies subscribed to. “In addition, we are proud to announce that we have recently been admitted as an affiliate member of the Organisation for Economic Development’s (OECD) International Network on Financial Education,” adds Nti. “This, coupled with our representation on National Treasury’s Consumer Education Steering Committee, not
only creates a strategic partnership for the FPI and its members, but helps put the FPI at the forefront of reinventing the financial services sector to serve all South Africans better.” A forum for provocative and informative discussion, the largest annual event on the South African financial planning calendar attracts just under 1 000 delegates each year. The keynote sessions covered a wide range of financial planning topics and included practical workshops and panel discussions. An exhibition afforded companies the opportunity to showcase their products. This year’s speakers included: - Dr David Rock, one of the thought leaders in the human performance coaching field, addressed delegates on transforming thinking and performance through neuroleadership. - UK strategy consultant Phil Billingham shared useful tips on building better and more profitable relationships with clients. - Motivational speaker and internationally recognised professional surfer, Shaun Tomson, shared the story of his success. - Celebrated mountaineer Sibusiso Vilane
Top: Front row, from left: Shaun Latter, JanCarel Botha and Colin Long. Back row from left: Godfrey Nti, Solly Keetse, Laura du Preez, Wessel Oosthuizen and Paul Rabenowitz. Above: Paul Leonard (second from left) was announced as the 2012 Media Award winner, which highlights him as the most media active CFP professional who carries the FPI and CFP designation in all media communication.
challenged delegates to reach the top of their mountains. - Barrie Brambley provided insights into what social media can do for business. - Scenario planner Clem Sunter provided a rare gaze into the future. Other expert speakers included Errol Meyer, Jerry Botha, Walter Geach, Gerhardt Meyer, John Campbell, Kim Potgieter and Marius Botha.
Jan-Carel is the cat’s whiskers Here’s to the FPI of the year 2012, Jan-Carel Botha. As the FIA’s Long Term Risk Insurer of the Year 2012, Altrisk is proud to be associated with Jan-Carel and we congratulate him on this great achievement. So from one winner to another... Well done.
Altrisk is an authorised ﬁnancial services provider (FSP 9869) and a Hollard associate company.
Louis van Vuuren received the 2012 Chairman’s Award, which recognises an individual who has made life-long significant contributions to the FPI and the financial planning profession. They must embody the FPI’s ethics and principles of client first, integrity, objectivity, fairness, professionalism, competence, confidentiality and diligence.
Financial Planner of the Year announced The FPI announced Jan-Carel Botha, a CFP at Ultima Financial Planners, as Financial Planner of the Year 2012. A finalist for three years running, Botha holds a BCom degree in economics (UNISA) and a postgraduate diploma in financial planning (UFS). He has been a guest on Summit TV’s, The Summit Investor, and regularly features as a studio guest of Wealth through Financial Planning on local radio station, Impact Radio 103FM. Botha believes that constant improvement and adoption of global best practices in financial planning is vital to stay relevant and offer clients lifelong peace of mind. As the national winner, he will be appointed as the 2012 FPI and CFP professional brand ambassador, effective 20 June 2012, and receive media training to serve as the brand and industry spokesperson. His prize includes a return economy air ticket and attendance costs to attend an international financial planning conference of his choice, as well as free attendance at one FPI annual convention.
“On behalf of the FPI I would like to extend a warm thank you to the judges for ensuring that the judging process progressed smoothly, under the guidance of their insightful expertise.”
The competition comprises three rounds. In the first round, an independent panel of judges marks a detailed financial plan based on the FPI’s six-step financial planning process. Round two involves a visit to the entrants’ businesses and assessments on all aspects of FAIS compliance, practice management, as well as all client documentation and the financial planning processes. The financial plans are further authenticated during these visits. The final round requires entrants to present on a selected topic to the panel, who then questions each finalist on a variety of industry trends, topics, technical information and legislative changes. The other finalists for the award were Shaun Latter and Colin Long. Latter founded Quaestor Wealth Management, which specialises in retirement planning and investment advice. He is actively involved in the FPI and currently serves as vice-chairperson for the client engagement industry sector group (ISG). After eight years at Old Mutual, Long joined forces with Craig Kiggen to start the firm Consolidated Financial Planning. In 2007, Consolidated Financial Planning merged with another financial planning business to become CONSOLIDATED. Long has served on the KwaZulu-Natal regional committee of the FPI for the past nine years. He is currently vice-chairperson of this committee and the investment planning ISG committee. “On behalf of the FPI I would like to extend a warm thank you to the judges for ensuring that the judging process progressed smoothly, under the guidance of their insightful expertise,” says Nti.
On a chilly Tuesday morning on 26 June, over 100 IRMSA members gathered at the Johannesburg Country Club for the ninth annual general meeting. The institute has been under the leadership of CEO, Gillian le Cordeur, for exactly a year.
On 28 June, legends of the insurance industry braced the cold and gathered at Pimentos in Illovo, Johannesburg to network with peers, reconnect with old acquaintances and make new friends. Hosted by Collective Dynamics Administration, the event was supported by various underwriters, brokers, insurance- and banking-related companies.
Amendments to the constitution were interrogated at length and later put to a vote. The majority of members were in favour of the amendments, which are in line with the Companies Act. Chris Hart, the chief strategist from Investment Solutions, shared his views on the nature of the tribulations affecting financial markets and the unfolding opportunities. A number of high ranking industry officials were nominated to join the IRMSA exco and the following nominees were voted onto the executive committee, pictured below, from left: Chris Brits, Faizel Docrat, Bheki Gutshwa, Sheralee Morland, Mark Robins and Hennie Thessner. They will join the four remaining executive committee members who did not have to stand down for this election: Nico Bianco, Berenice Francis, Alicia Swart and Philip Tillman.
Legends was started about two years ago by a group of friends and colleagues aiming to reconnect on a quarterly basis. Growing beyond expectations, each new event brings new faces and businesses into this circle of friends. The evenings are informal with the usual suspects keeping the spirit of Legends alive until midnight. If you are in Johannesburg during September, contact Janine (email@example.com) for details of the next legendary evening or to receive updates on future events.
Pieter le Roux, chairman of the education and technical committee, did not stand for re-election and was thanked for his service to the committee and the institute. Legends having a good time with great friends.
â€œCarl Greavesâ€? turns 50 Carl Greaves Brokers celebrated its 50th birthday in July with a lunch at the Devon Valley Hotel in Stellenbosch. Hidden in a peaceful corner of the Stellenbosch winelands, the hotel proved the perfect venue for this significant occasion. Clients, suppliers, staff and friends were treated to a three-course meal and enjoyed connecting with one another and celebrating with Carl.
From left: RISKSA publisher Andy Mark and Carl Greaves.
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International News Round-up premiums between 2013 and 2017 and adds that the premiums could drop by up to 26 per cent between 2018 and 2023.
SCOR wins reinsurer first prize
Crash avoidance technology could lower premiums
SCOR has won the Reinsurer of the Year award at the London Market Awards 2012. The awards are based on votes cast worldwide by insurance and reinsurance professionals and was organised by Reactions magazine. The good news continues hot on the heels of its ratings upgrade between March and June to A+. Recently, SCOR has been a regular winner of awards internationally, which it puts down to its strategic plan “strong momentum V1.1”, which has included the successful integration of the Transamerica Re business acquired in August 2011, and the good Non-life renewals conducted by SCOR since the beginning of 2012.
Motor injury claims on the rise Motor accident injury claims in the UK have risen in spite of less accidents taking place this year. Claims totalled R5.2 billion last year, although vehicle accidents fell by 11 per cent during the same period. Personal injury claims were up by 18 per cent and the new figures suggest an insurance premium rise is on the cards for drivers. Most bodily injury claims last year came from people in northwest England, with this area overtaking the worst regions of the US in terms of the proportion of accidents involving a bodily injury claim.
Crash avoidance features on cars which warn drivers when they’re at risk of an accident appear to be working, according to a study by the Insurance Institute for Highway Safety. Experts believe that this will result in lower insurance premiums in future, once the success of the technology is quantified. “Our new study shows that some of these features are, in fact, preventing crashes,” says David Zuby of the Insurance Institute for Highway Safety. Forward-collision avoidance systems, which hit the brakes before you crash, show some of the biggest crash-reduction successes, while adaptive headlights, which automatically shift direction going around corners, have also shown a significant drop in night-time crashes. “The interesting thing is that only a small proportion of all crashes involved multiple vehicles at night on curvy roads, so it’s a little surprising that we are seeing such a large effect in the insurance data,” Zuby adds. Fewer crashes mean fewer damage claims and that could lead to insurance discounts for drivers who use the new technology. But that’s not going to happen right away. At least one research company, Celent, predicts lower rates in the next five years. The company projects a nine per cent drop in
Cambodia Western insurers sink teeth into Cambodia British insurer prudential will follow Canada’s Manulife as the first totally foreign-owned insurers in Cambodia. Prudential will open offices in the Southeast Asian country as it attempts to build its footprint in the region, considered to be essential to future growth. Unlike other Southeast Asian governments, which place limits on foreign companies, Cambodia allows foreign insurers to own 100 per cent of their businesses. Manulife, which once leaned on Canada and the United States for the bulk of its revenue, now derives a third of its sales from Asia. For Prudential, the region became the largest contributor to its operating profit last year. As the developed economies in Asia become saturated, insurers such as Manulife and Prudential are flocking to Southeast Asia, drawn by its young populations and lack of insurance policyholders. Until now, the industry has largely ignored Cambodia, a country with a population of 14 million and a per capita GDP that the World Bank estimates at $750 (R6 000). But the disproportionate number of young
people in the country – with the majority of the population under the age of 30 – coupled with the pace of economic growth, will continue to lure western insurers.
Malawi Marsh acquires Alexander Forbes Risk Services
Singapore Asian business rush for new markets, credit insurance Asian businesses are increasingly venturing into foreign markets to grow and are fast taking out credit and business risk insurance to cover their bases. The International Credit Insurance and Surety Association (ICISA) says some US$1 billion to US$2 billion was spent in Asia for such cover last year, and it expects this to grow 15 to 20 per cent in the coming years. Kheng Keng Auto, a Singapore autorecycling SME, has ventured into East Kenya, Libya and Botswana, exporting used engines for buses and vans. With 11 offices and a marketing network spanning 54 countries, the company’s expansion strategy has been supported by trade credit, shipment and operational insurance. According to managing director, Cher Kwang Siong, the trend for SMEs in Asia taking up trade credit insurance is on the rise, with more companies venturing offshore into riskier markets.
Marsh has acquired Alexander Forbes Risk Services in Malawi. This transaction follows Marsh’s acquisition earlier this year of Alexander Forbes’ South African insurance broking operations, Alexander Forbes Risk Services (AFRS). Marsh also acquired its ancillary operations, as well as Alexander Forbes’ insurance broking operations in Botswana, Namibia and Uganda. Jurie Erwee, CEO of Marsh Africa, comments: “Our previously announced plans to expand our presence across sub-Saharan Africa are advancing and we are very pleased to welcome Malawi into the Marsh Africa family. With its impressive economic growth rate and expanding appetite for insurance products and services, Malawi is an attractive market for us and we look forward to building a leading presence there.” Brian Blake, vice-chairman of Marsh Africa, says that Malawi’s rapid development, especially in such important sectors as telecommunication, mining and energy, increasingly requires companies to adopt more advanced insurance solutions and risk management practices to meet their particular needs.
part of the strong management team at Marsh Africa. My colleagues and I look forward to making Marsh Malawi the country’s insurance broker of choice as we harness Marsh’s exceptional resources to provide Malawian clients – from multinational companies to indigenous enterprises – with the innovative, industryspecific risk management support they need to succeed.”
nigeria Old Mutual heads for Nigeria Old Mutual is to start operations in Nigeria before the end of the year, according to group finance director, Phillip Broadley. Old Mutual plans to acquire Nigeria’s Oceanic Life. Broadley noted that the West African region showed the strongest growth on the continent with Nigeria and Ghana showing the fastest rates in Africa. “Our current focus is on being able to start our business in Nigeria and then we will look beyond that,” says Broadley. Old Mutual has 1.2 million customers in Namibia, Zimbabwe, Kenya, Swaziland, Malawi and Botswana and 3.3 million in South Africa. Old Mutual’s African market contributed three per cent of its R12 billion pre-tax profit last year.
Donbell Mandala, who has been appointed head of Marsh’s operations in Malawi, says, “We are excited at becoming
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RISKSA and Global Choices enjoyed premium steak at The Grillhouse in Sandton, together with managing director of Trustco Financial Services, Barry du Plessis. Barry told us about his wife’s (and his own) cooking skills; what it’s like to be a Bulls supporter in Johannesburg; and his advice to young blood in the industry.
Tell us about your fanatic love for golf. Have you been playing from a young age? I would not call it fanatic, but I do have a passion for the game. My father’s passion for the game rubbed off on me and one of my brothers. As children, we used to carry his bag on Saturdays for some pocket money and then I started playing when I was in the army. I try to play every Saturday morning. We have a family four ball teeing off between 07h00 and 08h00. Between my brother and I and our sons, we normally manage to get some competition going. We hear that you’re given a hard time for being a Bulls supporter. Did you play rugby at school and in the army? t school and even in the army I A could never play rugby. I was too
small and a year younger than all my peers. I actually played provincial hockey while I was in the army. As a passionate Bulls supporter I am always in the wrong place at the wrong time. I work in Johannesburg and although my colleagues are a good mix of Bulls, Cheetahs, Lions and Stormers, I usually play golf with Lions supporters and I get invited to Lions games at Coca-Cola Park too. When you don’t have a beer and biltong in hand, what’s your favourite dish as prepared by your wife? I am fortunate in that my wife is a very good cook and loves making food. She comes from a big, traditional family where everyone had to cook and sew. My two favourite dishes, which are always in high demand, are Malva pudding and ‘pampoen koekies’.
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ow do you stay in such good shape H despite her delicious meals? iscipline is a key factor. I get up at D 04h10 in the morning to fit in my exercise programme and get to the office before 07h00. I train at home where I have a fully equipped gym. I must be honest; my wife does not enjoy it when I get up early over weekends as well. But it’s a habit that you cannot switch on and off.
I learnt a lot about people’s behaviour. Depression and stress are a lot more dangerous than we make them out to be. A lot of people simply cannot cope and start looking for some form of relief. Alcohol is not the answer to help you cope. The message is that there is always hope and a solution. You also ran an indoor sports arena around the same time. What was that like?
Are you much of a whiz in the kitchen? I started cooking at a very early age as my mom got very sick when I was 11 years old. I was the eldest of four children and with a father who had a demanding job, I had to do the cooking. I can cook up a great three course meal in no time. I still get my turn in the kitchen, but my favourites are braais, potjies and baking bread.
“The attraction was the opportunity to do marketing and part of the satisfaction was to do it for a worthy cause. I learnt a lot about people’s behaviour. Depression and stress are a lot more dangerous than we make them out to be.”
T hat was fantastic. The Springs Indoor Sport Centre was the first of its kind at the time and I was privileged to get it going. I started the centre as part of an ongoing fundraising project in 1984. We had indoor soccer, hockey, cricket, netball, bowls and a fully functional biokinetic centre. We had rock concerts, musical shows and even choir competitions where 12 000 people took part. It was hard work but very rewarding. efore opening your own brokerage, you B worked as an agent’s assistant. Tell us a bit about your journey from assistant to MD; what would you say to new blood in the industry with similar aspirations?
L et’s talk a bit about your career. How did you become the public relations officer of a clinic for alcoholics and how has this experience equipped you for the work you do today?
When the sport centre started losing sponsors (the conservative party tried to prevent black people from using the centre and that was the end of it), I had to find another means of income. I started finding leads for an agent selling short-term insurance. In 1991, I started working for a big brokerage as a sales manager but with very little knowledge of the industry. That was great fun and a big learning curve. Two years later I was on my own specialising in commercial insurance.
I was very unhappy with my job at the time and received an offer from the head of the organisation. The attraction was the opportunity to do marketing and part of the satisfaction was to do it for a worthy cause.
Short-term insurance can be a boring business for people with no ambition. It is, however, very rewarding if you are eager to learn and if you put in the effort to get to know your product. My message to new
blood is to build a good reputation from the start. There are no substitutes for smart, hard work, honesty and integrity. Speaking of new blood, what’s it like having grandchildren? I love every minute of it. I have been blessed with five of the most beautiful grandchildren in the world. I have always loved children. I love their fearlessness and absolute trust and zest for life; they are inspirational.
“In 1991 I started working for a big brokerage as a sales manager but with very little knowledge of the industry.“ Photography has recently become a favoured pastime of yours. What do you most enjoy taking pictures of? I would say scenery. Mountains and water fascinate me. I have recently taken some awesome pictures in Clarens. I also enjoy portraits of people. What else do you do for fun? I did skydiving, bungee jumping and motor racing earlier on in my life. Now, when I get a chance, I do a bit of abseiling, 4x4 trips and quad biking. If you could plan a holiday anywhere in the world, where would you go and why? I would like to go on a proper tour of the Americas. I have been to Argentina, Chicago and New York. That was just enough for me to want to see more of these vast continents with all their diversity and beauty.
Green going Bianca Wright
The buzzword for the 21st century has to be ‘green’. As we become more aware of the significant and costly impact that we are having on the Earth, the need to make significant changes has become all the more apparent. Our techno-addiction has been one of the core factors influencing the destructive impact of human beings on the planet and it is vital that sustainable, ethical and eco-friendly alternatives are explored at every level, from the neighbourhood townhouse to the office to the industrial park. The question is, just how green are green gadgets? The choice of ecofriendly devices is growing and consumers are able to make socially conscious choices that don’t break the bank and still offer the functionality of traditional items. Here we explore a few of the options. 138
Please call me
Living without a cellphone in this day and age seems like an impossibility, but mobile phones are not environmentally-friendly. The actual manufacturing of the phone, power usage during its lifetime and its disposal all have a negative impact on the environment. A study published in the International Journal of Life Cycle Assessment found that 40 to 50 per cent of the environmental impacts over the life of a cellphone – including its production, use and disposal – occur during the single process of manufacturing printed wiring boards and integrated circuits. It suggested that extending the service life of the phone from one to four years decreases the environmental impacts by about 40 per cent. Recycling and extending the life of the phone is important, but so is choosing the right phone in the first place. Eco-friendly phones are not as common as their non-green counterparts but they can be found, even in South Africa. The Sony Ericsson J105 Naite is part of Sony Ericsson’s Greenheart range, which means reduced packaging, recycled plastics, waterborne paints, and an electronic in-phone manual instead of a paper booklet. It’s not the sexiest but it is one of the most eco-friendly options. It retails for just under R1 900 at CACell (www.cacell.co.za).
Wooden you like it?
Plastic gadgets are not environmentally-friendly; choose paper or wood instead. Iamgreen (www.iamgreen.co.za) stocks a range of USB flash discs made from renewable bamboo or natural wood. The company will do bulk orders of 200 or more. These gadgets make a good investment for the office or as corporate gifts for clients as they can be branded. Another option is the Eco Friendly Computer Mouse from Eco Friendly Gifts (http://www.ecofriendlygifts.co.za). This mouse, with retractable cord, has a power-saving key enabling sleep mode. It also stocks an optical mouse made from bamboo. The Impecca Designer Keyboard, available from Want It All (www. wantitall.co.za) for R1 208, is hand-carved from 100 per cent natural biodegradable bamboo material and connects via USB port. It is compatible with Windows 2000/Windows XP/Windows Vista/Windows 7 and Mac. If you’re looking for portable computing power, Asus has produced a range of bamboo notebooks; its Asus Bamboo series which retails for just over R10 000. At the time of going to press, Kalahari.com was out of stock of this item.
“...It is vital that sustainable, ethical and eco-friendly alternatives are explored at every level.” riskSA Magazine
Reliance on computers is a reality of business, but it does not mean you cannot choose to go green in this area, too. Green computing can save a business up to 50 per cent in energy costs, according to Intersect Computing Specialists. One option is to choose Intel’s Xeon processor 5600 series, which automatically regulates power consumption and intelligently adjusts server performance according to application demand, thus maximising both energy cost savings and performance. Intel claims that its T and S series Core i5 processors offer incomparable processing power while saving energy. In addition, all second generation Core i5 and i7 processors have a graphics processing unit on-die, which not only reduces the need for additional chips on the motherboard, but if you are not a graphics intensive user, it seriously reduces your carbon footprint by negating the need for an additional add-on graphics card altogether.
Ask the right questions
How do you know that a product is truly a green offering? Mason Complete Office Solutions suggests the following guidelines for assessing your purchases: • The lighter a product is, the fewer raw materials are used to produce it. • The longer a consumer can use this product, means that it will be some time before he has to replace it, so fewer raw materials are used. • Local manufacturing shortens the supply chain for products, resulting in less transportation fuel and less environmental impact. • Recycled products use fewer raw materials from non-renewable sources. • Recycled plastic for the writing instruments and recycled paper for paper based accessories.
As Intersect states on its website, “Not only are you using less power in general usage, but when you buy one of these lower power chips, you are sending a message to Intel that people are willing to do their bit for a greener world, and that its innovations have not gone unnoticed.”
It is important to research the manufacturing process to determine whether the energy efficiency or other eco features are negatively offset by the environmental damage as a result of manufacturing. Also look for energy saver or energy smart labels and choose electronics that are PVC-free. PVC stands for polyvinyl chloride and is one of the most often produced types of plastics. Many organisations offer products that comply with PVC regulations. For example, HP has an eco-range of printers that are PVC-free.
Following your (carbon) footprints
Green products may cost more upfront but often save money in the long run, while also saving the planet. Switching to green alternatives is not only the right thing to do, it’s the smart thing to do because of these long-term savings.
Knowing exactly what impact your business is having on the environment is an important step in going green, but it can seem impossible or at the very least like a great deal of hassle. To take the trouble out of the process, SustainableIT (www.sustainableIT.co.za) has developed the Carbon Report, a cloud-based offering designed to enable participation by all businesses, large and small, in measuring their carbon emissions and producing a carbon footprint audit report. According to SustainableIT, “The solution is designed to take a business through a defined process of ring fencing the boundaries of the audit, identifying its emissions-producing activities, data gathering and finally the production of a report based on the Greenhouse Gas (GHG) Protocol Corporate Standard.” Visit www.thecarbonreport.com for information.
Guarding the power
Leaving devices and appliances plugged in and on when you are not using them is wasteful. One option is the Power Guardian Smart Switch, which reduces electricity consumption by switching appliances off when no-one is in the room. The process is automatic and applied to each workspace individually; it is also linked to workspace occupancy, rather than to time. According to Sustainable, “On detecting a person in the workspace, an electronic unit is activated. This device controls the lights, air-conditioner, heater, fan or any other selected electrical equipment. As long as the workspace is occupied, the electrical supply is not interrupted.” The Power Guardian Smart Switch – which must be installed by a registered electrician – retails for R1 600 including tax from Sustainable (www.sustainable.co.za).
Where to shop
Finding green gadgets can be trickier than it should be, but there are a few great sites that make choosing eco-friendly that much easier: • The Green Shop (www.greenshop.co.za): It offers a range of eco products, from LED lighting to clocks and rechargeable batteries. • Mason Complete Office Solutions (http://www.mason-cos.co.za/): Mason stocks a range of solutions for offices wanting to go green, including green cleaning products and recyclable office consumables. • Sustainable (www.sustainable. co.za): Billed as the oldest South African environmentally-conscious store online, Sustainable offers the eco-consumer a range of home and office options in solar, wind and other alternative energy sources, as well as products that cut environmental damage in other areas as well. • Faithful to Nature (www.faithfulto-nature.co.za): It offers a section dedicated to green gadgets and ecofriendly toys as well as a variety of ethical clothing ranges, organic food and other environmentally-conscious products.
Green gadgets are popping up every day and while not all of them are available in South Africa, here are a few we’d love to see here: Greensmart laptop bags Greensmart takes plastic bottles and turns them into trendy, stylish laptop bags in a range of colours. They are pricey but certainly worth the investment for the eco-friendly consumer. Visit http://www. greensmart.biz/index.html for more information.
The Infinit Solar Charger Bag A 2.4W photovoltaic solar panel on the outside of the bag harvests the Sun’s rays and then stores the power in a high capacity 2000mAH lithium-ion battery, housed inside a pouch. The battery can then be used to power everything from a Nintendo DS to a GPS or iPhone.
The Eco ATM premiered at the Consumer Electronics Show (CES) this year, the Eco ATM incentivises recycling by giving the consumer money in exchange for recycling. It is an automated self-serve kiosk system that uses advanced machine vision, electronic diagnostics and artificial intelligence to evaluate and buy-back used electronics.
The Samsung Replenish The first eco-friendly Android phone designed for Sprint, the Replenish is built with recycled plastics and organic packaging, but offers the same functionality as traditional smartphones. South African consumers can import the phone through Want It All (www. wantitall.co.za) for just over R2 000, but this means additional carbon emissions from transporting it from the US and the need for an adaptor as it comes fitted with a US plug.
The Table Bay Hotel The best address in the Cape
ocated in the heart of the vibrant Victoria & Alfred Waterfront, Sun International’s Table Bay Hotel exerts a magnetic pull on visitors to one of the world’s most picturesque harbours. Opened in May 1997 by President Nelson Mandela, guests have included the likes of Charlize Theron, Richard Branson and, most recently, Michelle Obama. Celebrating its 15th birthday this year, the Table Bay was admitted to the exclusive ranks of the Leading Hotels in the World within six months of opening. A directory that includes the Ritz in Paris, the Plaza in New York and London’s Claridges, the Leading Hotels of the World brand is internationally recognised as the definitive mark of excellence in hospitality. The Table Bay’s more recent accolades include the World Luxury Travel Award for Best Luxury Coastal Hotel in South Africa and the Condé Nast Traveller’s Top 20 Hotels of the World in 2011. The hotel has weathered the past 15 years graciously and the maritime spirit extends to each room. Designed to inspire, its beauty is marked with a liberating sense of luxury, ensuring your every comfort and convenience. Added to the beautiful boudoirs and excellent personal service, the Table Bay hotel is a premier conference and incentive destination for global achievers. Catering for the business traveller, it offers conference facilities for groups of up to 350. The 195-square metre Victorian-style pavilion is the ideal venue for banquets and receptions, accommodating up to 120 people for a cocktail function and 60 seated at tables. A spectacular ballroom, complete with crystal chandelier, can be divided into two separate areas, each 150 square metres. Undivided, the ballroom will seat 200 for dinner. An a la carte dining experience in the Atlantic Grill Restaurant features freshly prepared and locally inspired cuisine in a stunning, turn-of-the-century setting. Indulge yourself further at
the Camelot Health Spa, staffed by personal trainers and experts in holistic treatments, which include Shiatsu, sea-wrapping and aromatherapy. High tea is served daily in the lounge, where a sense of occasion is combined with delectable treats and a traditional Viennese Sachertorte takes centre stage. Only a minute’s walk from some of the city’s finest restaurants, shops, galleries, boutiques and other major attractions, the hotel is an ideal base from which to get a taste of the scenic winelands, enjoy coastal drives to Simon's Town with its colony of penguins and explore the delights of Cape Town itself. The Table Bay Hotel’s appeal is worldwide, but it also takes its corporate responsibility seriously and gives back to the community regularly. It is a prime supporter of the upliftment of Cape Town’s street children; gives monthly financial support to the Little Feet Soup Kitchen in Lotus River; donates goods to Athlone North Primary and Green Point Clinic; and plants trees at schools. Tel: 021 406 5000 E-mail: firstname.lastname@example.org
The Put Foot Rally 2012 wrap
A nd y M a r k
It was always going to be about more than the rhinos. What we didn’t realise is just how much impact we were going to make. The emotion caught us by surprise, too. There we were, the three Team RISKAFRICA boys, swallowing hard to keep the tears from rolling down our cheeks.
art of the Put Foot Foundation’s work was to donate school shoes to needy kids en route. We ended up paying for a new borehole pump, laying floors in classrooms and painting the walls inside the rundown school buildings in this remote Zambian village.
Everyone was there; politicians, elders from the surrounding villages, and even a local beauty queen. It was when the politician, dressed in her finest, fell to her knees in the dust in front of all of us with tears of genuine gratitude in her eyes, that I felt a little guilty at just how little we had done; and a little irritated at our politicians back home with their seven series BMWs, missing school books and Sandton mansions. I found myself sitting on a chair in the sweltering sun trying to find a pair of shoes for the chapped and dusty feet in front of me. Once, when I managed to find a particularly scarce size that we thought had been ‘sold out’, I was rewarded with a spontaneous hug from a little girl who will never remember my name, but whom I will never forget.
“We heard that our efforts would make it possible to equip antipoaching teams with ground-to-air communications; pay for a pilot to fly surveillance over critical areas; and equip ground crews with badly needed equipment.”
The Put Foot Rally was about all of this and more. When news came through that we had cracked the R500 000 mark for foundation causes and Project Rhino (with the help of an Etana donation which nudged the final tally over the half a million mark at the Malawi checkpoint), and when we heard that our efforts would make it possible to equip antipoaching teams with ground-to-air communications; pay for a pilot to fly surveillance over critical areas; and equip ground crews with badly needed equipment for the anti-poaching teams back home, we were especially grateful to our sponsors Pro Sano Medical Scheme and Altech Netstar for making our incredible adventure possible. Of course, there was also the fun and adventure of taking a 17-year-old Land Rover through Africa. The old girl never gave us a second’s hassle, rumbling into life and running for up to 10 hours a day without complaint. Okay, so maybe there was that water
crossing in Mozambique where I tried to drown her during spring high tide, but it was nothing a little Q20 water-displacing spray couldn’t fix. We made some incredible friends, delivered RISKAFRICA magazines to out-of-the-way insurance readers and made a tiny difference to one little girl and her school in Zambia. And, of course, we provided the tools for crack anti-poaching teams to win the war on rhino poaching. All-in-all a pretty satisfying three weeks’ work.
Thanks to the following for supporting RISKSA and the Put Foot initiative.
Alan Stitzer Altech Netstar Staff Andy Mark Brokersure Carel Nolte ETANA Johan Barnard Kim Gallus Nick Evans PG GLASS Sandra Dunn Steve Symes Tracy Feakes Willis SA
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