RISKSA Magazine December 2014 by COSA Media

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Publisher & editor Andy Mark Contributing editor Christy van der Merwe Production editor Nicky Mark

MOST AWARDED BUSINESS M AGA ZINE OF 2013

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Copy editor Gemma Redelinghuys Feature writers Anton Pretorius Christy van der Merwe Dominic Uys Laura Owings Luka Vracar Sarah Bassett

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Copyright RISKSA (Pty) Ltd 2014. All rights reserved. Opinions expressed in this publication are those of the authors and do not necessarily reflect those of the Publisher, Cosa Communications (Pty) Ltd, COSA Media, and or RiskSa (Pty) Ltd. The mention of specific products in articles or advertisements does not imply that they are endorsed or recommended by this journal or its publishers in preference to others of a similar nature, which are not mentioned or advertised. While every effort is made to ensure accuracy of editorial content, the publishers do not accept responsibility for omissions, errors or any consequences that may arise therefrom. Reliance on any information contained in this publication is at your own risk. The publishers make no representations or warranties, express or implied, as to the correctness or suitability of the information contained and/or the products advertised in this publication. The publishers shall not be liable for any damages or loss, howsoever arising, incurred by readers of this publication or any other person/s. The publishers disclaim all responsibility and liability for any damages, including pure economic loss and any consequential damages, resulting from the use of any service or product advertised in this publication. Readers of this publication indemnify and hold harmless the publishers of this magazine, its officers, employees and servants for any demand, action, application or other proceedings made by any third party and arising out of or in connection with the use of any services and/or products or the reliance of any information contained in this publication.

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contents DECEMBER 2014

RISKSA Newsmakers of 2014

30 |

short term

30 / Top 10 short-term insurance industry trends for 2014 42 / Travel advisory: cover that opens doors

56 |

The year according to Twitter

medical

56 / Medical aid claims trends

62 |

long term

62 / The long-term year 66 / Early detection means younger cancer patients

14 Like us on FACEBOOK / RISKSA

2014 in pictures

The year according to Facebook

72 | managing risk

84 |

career

124 |

ASSETS

72 / The worst catastrophes of 2014

84 / The value of a VAP

124 / Collecting classic cars

76 / What risks may come

88 / 10 years of FAIS

128 / Liquid treasure: how to invest in whisky

82 / Bitcoin experts welcome user alert

96 / SA employment tax incentive plan in laymanâ&#x20AC;&#x2122;s terms 110 / News 116 / Events 118 / RISKSA Regatta

138 |

travel

138 / Poles Apart: we look at two top Zanzibar resorts

Renasa knows there are no better champions for looking after the interests of clients and providing professional advice than independent brokers. But, servicing them is not easy or inexpensive and so, more and more, insurance companies are going direct and putting up

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operational road blocks that undermine broker independence. Not Renasa, the true home of the independent broker. When others say “cut out the middleman...” we say “at your peril.” And we even go on TV to say it! Call us today on 0860-RENASA

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Dearreader W

e have had an immense amount of fun putting this ‘year-thatwas’ issue of RISKSA together. Reflecting on the good, the bad and the not-so-great aspects of 2014 allowed us to focus on our inaugural Newsmakers of the Year feature. Initially, we intended to feature a single Newsmaker but ended up with ten. Did we get the selection right? I’m not sure, we could easily have missed a worthy candidate, and I am keen to hear from you if you think we did. Mail me on andy@comms.co.za with your selection. Remember that we’re looking for newsmakers from inside our industry, so Steve Hofmeyer and Julius Malema are naturally excluded (now there are two names I would never have imagined mentioning in the same sentence) and, of course, we don’t mind if your selection is completely subjective; ours was.

We’re also very chuffed with ourselves for being recognised by the Institute of Risk Management in London for the quality of our journalism – we have been short-listed in the third Global Risk Awards in the journalism category amidst some pretty stiff competition from countries around the world. I really am very proud of my team. Wherever you are going and whatever you’re doing this holiday season, please travel safely and don’t forget to pack this reflective 2014 issue of your favourite magazine with you. Readers will see a completely revamped, repurposed and reworked RISKSA across all of our platforms in 2015 – there are exciting things in the offing. Happy holidays everybody,

Christy van der Merwe

Many have said that 2014 stands out for its lack of extraordinary happenings. The tough market conditions truly took hold, and everyone in the insurance industry focused efforts into sustaining revenues and survival. But the year has not been without some noteworthy events, and more importantly, the extraordinary people behind these milestones, who are making a difference in the industry. The RISKSA team gathered around the table, racked our brains, short-listed, narrowed down, and finally came up with our inaugural Top 10 Newsmakers of the Year. And here they are, in no particular orderâ&#x20AC;Ś ď&#x192; 10 8 4

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Gay-Lynn Rheeders

Insurance as a career

he news of Ian Kirk’s appointment as deputy CEO at Sanlam in 2015, with a view to take over from Johan van Zyl as CEO in 2016, certainly caught the attention of the industry in a year where not very much out of the ordinary has happened. Ian Kirk is an incredibly dedicated and highly praised CEO who leads by example. He is in the office early and leaves late, and should you be lucky enough to meet him, you will realise that he takes the time to meaningfully interact with everyone he meets. During his time at the helm of Santam he has fostered strong relationships with the company’s internal staff, and external business partners including brokers, service providers and underwriters.

Ian Kirk

A corporate shift

Although having qualified as a chartered accountant (we won’t hold it against him), he is commercially-minded and truly passionate about the insurance industry. Having initially moved from Sanlam to Santam in 2007, he also strengthened relationships between these two companies and did much to drive the expansion into Africa by both entities. He is not afraid to travel, and his Irish roots show through his love of Bono and U2, and we hear a little Simply Red would never go amiss either. RISKSA looks forward to following his career as he moves from Santam to Sanlam in 2015.

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eeing a lack of insurance industry representation at her own daughter’s school career day in 2011, Gay-Lynn started the My Career in Insurance initiative as a way to expose what the insurance industry has to offer to scholars. With a background in education, and experience gained through work at different insurers and finally establishing her own brokerage, GayLynn’s programme informs learners of their options, highlighting that they have study choices beyond the usual doctor, lawyer route. My Career in Insurance personalises and explains the study track that can be chosen to get into insurance and shares bursary and learnership opportunities. Most of all, Gay-Lynn’s passion and energy motivates learners to discover their options. It gives insurers the opportunity to show off their company through a positive experience and reach young talent that could be the next inspired insurance industry managers. My Career in Insurance is growing at a rapid rate, and 2015 will see many new projects and programmes, familiarising and generating enthusiasm about the insurance industry among even younger learners.

etting a company ready for a Johannesburg Stock Exchange debut is no small feat and Mike was instrumental in ensuring the successful entry of PSG Konsult onto the bourse. Appointed chief financial officer in 2013 after joining PSG in 2001, he has more than 20 years’ experience in the financial services industry. He leads by example, and believes in appointing people who have complementary skills and strengths to create a thriving team-work culture. When discussing the listing, Mike makes sure to thank Stephan van der Merwe, the group financial manager for the long hours, unbelievable commitment, dedication and contribution in drafting core sections of the pre-listing statement.

Mitch Marescia

The power of knowledge

Mike is a strong proponent of structured and careful project planning well in advance to ensure that one has the capacity to deal with unexpected contingencies and events. He understands that success is a constant journey where one strives through hard work, dedication, passion and willpower to realise full potential and to attain and accomplish goals and important milestones in one’s life.

PSG Konsult JSE main board listing

escribed by colleagues as a successful, respected, energetic, empathetic, good humoured, humble, charismatic leader, zealous entrepreneur, and generous humanitarian, Camargue co-founder and MD, Mitch Marescia has ensured the culture at Camargue is dedicated to seeing the power of knowledge change the world – one person, one challenge, one victory at a time. In all things, Camargue stays true to what the power of knowledge can accomplish, the company tells RISKSA.

yber risk is an unavoidable reality today, and cause for concern among just about every business worldwide. Natalie van de Coolwijk, MD of CyGeist, started the purely cyberfocused UMA underwriting on behalf of Guardrisk just over a year ago in response to the increasing threat of cyber risks and impending privacy legislation. Since then, the company has gone from strength to strength. Growing awareness within organisations of threats and exposures has resulted in a dramatic increase in the number of quotes and their successful conversion to policies over the last few months. This trend is expected to continue, particularly given the rapid advancements in technology and the phenomenon of the ‘Internet of Things’.

Mitch encouraged the establishment of the Liability Academy for Brokers (LAB) training model, which is now CPD accredited and has trained more than 6 300 people. LAB is headed up by Mari Williams, who also leads strategic projects including INSETA and risk management. In September 2014, Camargue also launched a new eLearning platform – free online training that is IISA accredited for CPD points. There is also the company’s involvement with the Naledi Programme, an extension of the Naledi Stars life skills coaching and mentoring programme, where young Naledi matriculants are incubated at the Camargue LAB, and trained in all things insurance. Naledi facilitator, Charles Marriot, explains that Mitch has been a great believer in the programme from the very beginning, which demonstrates his willingness and inclination to see the big South African picture – to be proactive in business as well as outside of business and enable youth to help themselves.

Mike Smith

“It is not inconceivable that soon all policies will have some element of cyber exposure embedded in them,” says Natalie.

Natalie van de Coolwijk

Cygeist, the first cyber-focused UMA

Natalie has an actuarial background, but her passion lies with reinsurance, underwriting and all things cyber. She believes that when the going gets tough, it’s not motivation that is required, but passion and inspiration. “You have to love what you do, in order for it to be a success,” she says, and RISKSA knows this to be true as Natalie is always willing to explain a complicated concept, or clarify any cyber-related matter that one may ask her about. 

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Pierre Geyer, Nash Omar, Rob Hallier and Paolo Cavalieri

Hollard/Etana merge and integration

hen Altrisk paid out a R119 million life claim (the highest sum paid out since its inception in 1999), just ten months after the policy was taken out, the company was lauded as fulfilling the noble purpose of insurance. Head of claims at Altrisk is Susan Gonnermann, and she emphasises that the ultimate test of the relationship between an insurer, financial advisor and the insured is undoubtedly the claims stage. Payment of this claim just days after receiving documentation allowed the policyholders family some sense of stability in an exceptionally difficult time.

Susan Gonnermann

Altrisk’s R119m life claim payout 14 8

She acknowledges that today’s claims professionals fulfil a complex role in investigating claims, determining their extent and validity, and – ultimately – making a decision regarding payment of the claim. The complexity of assessing critical illness and disability claims has increased over the years, thanks to an increasing number of benefits, improved medical technology, and earlier disease diagnosis. Susan affirms that skilled underwriting from the outset simplifies claims settlements later and adds that all the while it is essential to manage the client and financial advisor’s expectations. Susan qualified as an occupational therapist and after years working in clinical rehabilitation in South Africa and the US, joined the insurance industry as a claim assessor. Over the past 18 years she has worked as a claims manager in areas such as group scheme insurance, assistance business, individual life insurance and niche market insurance.

ollard’s purchase of the remaining 60 per cent stake in Etana pushed it into the top three insurers in South Africa, and cemented its position as the largest privately owned insurer. The deal also resulted in the creation of the broker-focused Hollard Broker Markets. Officially announced at the end of 2013, FSB’s regulatory green light was received in January 2014 and the transaction became official. The amalgamation of the two companies was largely the responsibility of the four men mentioned above, who ensured the process went off without a hitch. Paolo Cavalieri, Rob Hallier and Nash Omar were Etana’s chairman, deputy-chairman and MD respectively and joined Hollard’s Pierre Geyer in heading up the newly formed Hollard Broker Markets. Hollard also celebrated an entire corporate identity refresh, and the “Don’t Worry. Be Hollard.” campaign kicked off with an energetic week of internal activities called ‘Nothing rhymes with purple’. This was an opportunity for Hollardites, new and old, to have fun and be reminded that the company challenges industry norms and as a brand, is about heart, imagination and quirky fun.

he entrance of King Price, led by Gideon Galloway, has certainly shaken up the market and the company now has over 100 000 policyholders on its book. Having launched its broker model in September 2013, brokers currently contribute an estimated 15 to 20 per cent towards the book. “The future looks bright for our broker channel and we anticipate that this percentage will grow further in the next year. We are working on some products and methods that we want to roll out specifically through select broker partners,” Galloway says. “This space has always been competitive – we knew and planned for it before we launched. And it’s become even more so the last two years. Criticism is part of the game…” acknowledges Galloway, adding that it actually serves to motivate the team.

Gideon Galloway

King Price broker model takes hold

“We don't take it [criticism] to heart or get distracted, we continue and stick with what we do best. We also don’t pay a lot of attention to what our competitors are doing, because we want to lead and innovate this industry. Company culture, for me, is the one key to achieving this and motivating your entire workforce,” explains Galloway.

irst spotted in the year 2000 while doing a temporary filing job at Hollard during school holidays, Justin Naylor was encouraged by Carel Nolte to join Hollard’s graduate programme. Fourteen years later, and Justin is president of the Insurance Institute of Gauteng (IIG), enlivening members with his contagious enthusiasm. His colleagues explain that Justin is driven by a passion for empowering individuals, lifting spirits and promoting innovation in all forms. He has held various leadership positions at Hollard then Etana and is currently independent broker manager at Hollard.

Justin Naylor

Revitalised IIG

Justin’s leadership has been integral in reinvigorating the IIG and bringing a youthful and fun approach to the important work that the insurance institutes do. From the inaugural dinner at Madame Zingara, to the rave at Movida, and raising over R800 000 for charity at the IIG annual charity auction. The institute also hosted four different IIG Insights educational seminars during this year and launched the IIG Class of 2014 – the first ever institute graduate programme for high potential under 35s working in the industry.

Philippa Wild

The Discovery Insure Driving Challenge mobile app

hilippa Wild is the head of Discovery Insure technical marketing, and one of the executive team behind Discovery Insure’s smart phone app, central to the Discovery Insure Driving Challenge. The app made headlines in the industry, and assisted financial advisers to provide even greater value to clients. Philippa studied BCom Maths at Stellenbosch University, qualified as an actuary in 2001 and found her passion in short-term insurance where she has been working for over 10 years. At Discovery Insure, she equips all distribution channels with the positioning and technical know-how to provide the best advice to clients. Before the app launched, she was involved with the development of the user aspects. Once launched, Philippa communicated to financial advisers, the media, and relevant industry forums. “My job was made easier by the power of the development team, specifically the intellectual aspects of designing the algorithms that make the app work, but also the advanced technology the team used,” she adds. “When times get tough, I always try to stop, breathe, and think. But after that it’s time to take the correct action, quickly,” says Philippa. She adds that it’s important to her that she leads by example, and she tries to make sure that every interaction with others is positive and helpful so that they move forward as a team. Of course, she adds, rewards are important because it’s good to have something to look forward to. Wild says, “It’s extremely rewarding, for instance, to experience the satisfaction of having done a job well. Otherwise, a glass of wine is a great reward at the end of a busy day.”

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Christy van der Merwe

The year started slowly, and 2014 will be remembered as the year that the Oscar trial dominated global headlines, and the Economic Freedom Fighters emerged and got seats in Parliament after the elections in May. Nkandlagate intensified, and the power went out once more. Here is a look at what happened in the insurance world, as captured on our Twitter timeline.

Back to work safely from vacation and news items started coming in. Among them: the insurance â&#x20AC;&#x2DC;Bonnie and Clydeâ&#x20AC;&#x2122; story of a couple who filed 147 false insurance claims; news of Pierre Korkie held for ransom in Yemen lifted the profile of kidnap and ransom insurance; extreme weather was ranked as the second greatest global risk by the World Economic Forum; and cyber was rated among the top business risks by Allianz.

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Things kicked up a gear in February when the Momentum Risk Summit was held at Sun City, the new look Hollard was revealed, and we started getting news of an alarming number of aviation accidents in South Africa.

Insurance Bootcamp spiced things up in March, coming to you through live streaming for the first time, My Career in Insurance continued broadening options for school learners, and the news of the missing Malaysia airlines flight had everyone mystified. Business carried on as usual and the South African Insurance Crime Bureau brought to our attention insurance fraud scams including panel beater heists and robber ladies of the night; the Council for Medical Schemes CEO, Monwabisi Gantsho, was suspended; and Santam acquired Brolink.

Elections month in South Africa and a busy one, with the PSG Conference at Sun City starting things off. The Insurance laws Amendment Bill was withdrawn from Parliament with alternative measures used to take parts of it forward, the Hollard broker road show also took place, as did the 2014 Discovery Summit.

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The usual winter rain and flooding took hold in the Western Cape and the Financial Intermediaries Association of Southern Africa awards took place in Sandton. Financial Services Board (FSB) CFO, Dawood Seedat’s corruption allegations made news, and PSG Konsult listed on the JSE. This month also played host to the Association for Savings and Investment South Africa (ASISA) summit, and the Financial Planning Institute (FPI) convention, where Peter Hewett was named Financial Planner of the Year.

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Insurance Conference month! What a fantastic experience for knowledge gaining, networking and prize winning. We also celebrated Madiba day and asked you to share your acts of goodwill with us, as the team from SHA Africa did. The industry was also given an extension to get their comments in on the debate over demarcation between medical aid and gap cover.

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Things got off to a shaky start with news of an earthquake in Gauteng. We also had the Institute for Risk Management South Africa’s Risk Lab, the Old Mutual defined benefit seminar, and the Board of Healthcare Funders conference in Durban. This was also the month when talk of Ebola started making headlines.

Best known as ‘medical aid month’, we heard from most schemes what their contribution increases would be for 2015. We also had the Insurance Institute of the Cape of Good Hope’s rally, which made a pit stop at the RISKSA offices, and we found out that Santam’s Ian Kirk would be moving over to Sanlam in 2015.

Compliance and regulation topped the agenda, starting off with the RISKSA Better Business Breakfast at Constitution Hill discussing compliance. The FSB released a document for comment on Outcome 6 within Treating Customers Fairly, and the FSB was cleared of any wrongdoing as a consequence of the Seedat corruption allegations. There was a horrific truck accident involving over 40 vehicles near Alberton, which gave insurers pause, and the RISKSA Regatta absolutely rocked Cape Town.

This month brought about the release of the Retail Distribution Review (RDR) by the Financial Services board. Celebratory year-end gala dinners also got underway, highlighting the achievements over the year.

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F ACEB OOK IN

Gautengâ&#x20AC;&#x2122;s Presidential Inaugural Dinner

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The RISKSA Facebook timeline certainly shows that this is an industry full of gees and vibrant personality. If there was an award for best social media post, it would undoubtedly go to the great ‘Swan-napping’ incident of 2014. The Ibiliti Underwriting Managers swan, Duffy, that accompanied them to the Insurance Institute of Gauteng rave at Movida was taken hostage by the RISKSA swannapper in June. Between Ibiliti, the IIG and RISKSA, we managed to raise over R12 500 to assist with the refurbishment of the RB Children’s home in Gauteng. IIG Breakfast Seminar

Insurance Conference Tracker Theme party

RISKSA goes racing with SAIA’s Barry Scott

CIA Roadshow – D’Aria Wine Estate, Cape Town

COSA MEDIA - Reach for a Dream, Slipper Day

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Infiniti Insurance - Lâ&#x20AC;&#x2122;Ormarins Queens Plate

Unogwaja challenge

IIG Annual Gala Dinner

IIKZN Annual Gala Dinner IICOGH Road Rally - Scavenger Hunt

FIA Awards

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Centriq Tour de Conference

SAUMA conference

Duffy-the-swan The swan-napper! Insurance Bootcamp – Legislation & Liability Seminar

AWII Mad Hatters Breakfast

RISKSA Regatta - Hollard’s sweets table

Bonitas Broker Launch

Happy Bosses Day!

International Insurance Conference Tracker Party

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C I P T UR E S According to the photographic evidence collected at RISKSA, 2014 has been a bustling, and captivating year indeed. Here is a collection of some of our favourite snapshots to remind you of the highlights over the year that was.

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P I CT U R E S

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The 2014 top 10 short-term insurance

industry trends Christy van der Merwe

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The past year has been a challenging one on many fronts, but economic pressures on clients presented opportunities for brokers to become invaluable advisors. The emerging and interrelated trends pose challenges and opportunities for insurers to develop innovative products for consumers and improve their financial sustainability and performance. RISKSA hears about developing trends in 2014 from Compass Insurance, Discovery Insure, Hollard Broker Markets, PSG Insure, and Zurich, gaining insight on how smart insurers build mitigation into their business models to cope with the difficult economic environment.

Telematics

Discovery Insure CEO, Anton Ossip, says that telematics technology is one of the key disruptive trends in the insurance industry that affords insurers the opportunity to better understand driving behaviour and manage risk. This technology makes it possible to gather and analyse comprehensive information about driver behaviour and provide tools to improve driving behaviour. Uniquely, Discovery Insure is combining telematics technologies and insights from behavioural economics to improve driver behaviour and reward safe driving. Ossip adds that telematics enables insurers to offer unique value-add services through real-time and accurate data including GPS location data. Impact alert, for instance, allows Discovery Insure to detect when an accident has occurred and take steps to ensure the safety of the client. Each such alert results in a call to the client and, if required, emergency services being dispatched.

Efficiency and claims cost control

Compass Insurance MD, Paul Carragher, explains that the tough underwriting cycle, which started in 2012, continues through 2013, and 2014, and premium growth remains under pressure. Pierre Geyer, spokesperson for Hollard Broker Markets, says that greater emphasis is being placed on claims cost control and supply chain management. For instance, the cost of motor repairs remains high and Hollard has been focusing heavily on lowering these costs in various ways. Examples are innovative supply tactics; controlling claims procurement spend; using preferred suppliers for motor body repairs, auto glass replacements, car rental, towing, and salvage management as well as using buying power to greater advantage. Using preferred suppliers benefits policyholders who are guaranteed quality of workmanship while managing the supply chain and costs per claim, which is a premium control factor. Zurich South Africa CEO Edwyn O’Neill concurs, adding that service providers are critical to a positive customer service experience. The Zurich preferred supplier panel allows for the provision of cost-effective, quality services (incorporating warranties for work

completed) and, best of all, an expedient claims process. The cost-saving benefit may then be passed on to brokers and, ultimately, policyholders over the longer term. This has the twin advantage of not only enhancing the quality of the services provided to customers, but also supporting business sustainability through effective cost management and customer retention.

O’Neill says that technological advancements are having a profound effect on the sector. The adoption rate of telematics by drivers is still relatively low as personal privacy and premium costs remain a concern, however, customers do seem to favour mobile apps that facilitate usage-based auto insurance, as it allows for better integration into their already existing online lives. Internet portals have also become a core component of operations for personal and commercial lines insurers, allowing them to interact efficiently and cost-effectively with brokers, consumers and policyholders. The downside to this technology boom is, however, the looming threat of information security, adds O’Neill. Any business that has not invested to ensure that their own, as well as their customers’ confidential data, is adequately safeguarded, is at risk, cautions the company. 

Bertus Visser, CE of Distribution at PSG Insure says that to offer value for money to clients, efficiency is critical. There should be no duplication of services performed. “This can be achieved by closer alignment of intermediaries, administration services providers and insurers. The technology exists, and automation and system integration can improve efficiencies and ultimately ensure sustainability and appropriate pricing,” Visser says. He adds that the cost of claims in relation to general premium increases has been out of sync due to a weaker rand and reliance on imported goods. “Again, closer alignment and integration between insurers and claims administrators is critical to ensure that that the cost of claims is managed effectively. Finally, acquisition costs should be minimised,” Visser states.

Changing weather patterns

Greater uncertainty concerning irregular weather patterns is emerging. In 2014, this included earthquakes, hail and extreme weather which resulted in unusual storm damage, notes Geyer.

Dynamic underwriting

The traditional premium rating tools of age, gender, and other differentiating factors are no longer adequate and are increasingly combined with more dynamic, accurate, and individually specific premium rating factors, says Ossip. Using telematics, insurers can cost-effectively generate personalised data on individual clients in order to tailor premiums and packages based on the driving risk that is unique to that client, he adds.

The global short-term insurance industry must adapt to the increasing risks that natural disasters pose and the resulting impact on claims, adds Ossip. Insurers have to deal with the risks associated with extreme weather conditions and natural disasters and do whatever they can to mitigate the severity of the impact on clients. The hail storm which South Africa experienced last year is a prime example. For Discovery Insure, telematics technologies make it possible to track clients’ vehicle locations and relate them to forecasts of extreme weather conditions. The company sent out over 250 000 weather alert SMSs in Gauteng alone during 2013, saving clients over R1 million in possible damages during one large hailstorm in 2013.

RDR uncertainty

The Financial Services Board published its Retail Distribution The Financial Services Board published its Retail Distribution Review (RDR) paper for comment on 7 November. The industry now gets to work on collating comments on the 55 proposals contained in the document.

RDR will also focus on all the different binder functions. It is not always the case that all binder functions are being performed, and, therefore, it is important that any fee earned is commensurate with the functions being performed. As a short-term industry we are fortunate that intermediaries are already earning commission as a percentage of premiums, says Visser.

Big data and analysis Following from these previous trends, the need for individualised policyholder information and risk data has increased and become mission critical for most insurers, as it is essential in providing protection that really works under all conditions, says Geyer. Data equals intelligence, he emphasises. “Correct information delivers huge client benefits such as: a trends analysis, pricing, risk improvement and risk management, business tactics, strategy, consumer value, product invention, value additions – and more.” Ossip highlights that the high volume of data now available to insurers introduces other challenges. It brings in the need for sophisticated systems and processes to manage increased volumes of data. Discovery Insure has found that the data available through telematics alone increases data storage requirements by at least 20 times compared to traditional data used by insurers. Being able to quickly process and analyse data to provide meaningful results is crucial too.

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He feels that the broad principle that clients agree to fees being earned separately from products being sold, is sound. “Clients need to know what intermediaries earn and the value they receive for fees paid.” Geyer says Hollard Broker Markets welcomes the release of the RDR discussion document and looks forward to greater clarity in this regard as the process moves forward. He says that doing business within the perpetual uncertainty has been challenging. Insurers and brokers have been waiting for direction on RDR in a state of stressful doubt. Direction has been needed to plan, set goals and make critical business decisions. “Brokers are Hollard Broker Markets’ only distribution channel and we are hopeful that their uncertainties will soon be completely resolved,” Geyer says. 

YOUR CLIENT’S CAR HAS BEEN PERSONALLY CUSTOMISED. WE’D LIKE TO DO THE SAME FOR THEIR INSURANCE.

We are delighted to announce that MUA will start underwriting on behalf of Auto & General Insurance from 1 April 2014. For more information on this exciting partnership, please contact Christelle Fourie at cfourie@mua.co.za. MUA Insurance Acceptances (Pty) Ltd is an authorised Financial Services Provider (FSP No. 37947) underwriting on behalf of Auto & General Insurance Company Limited, an authorised financial service provider (FSP No. 16354)

Rise in crime and strikes

“Crime – particularly robberies and hijackings – are increasing in frequency and severity, and we all search for solutions with regard to insuring these risks at affordable premiums,” says Geyer.

Carragher notes that this also impacts the insurance industry directly, and an increase in fraudulent claims has been recorded.

Compliance and costs of compliance

Carragher also notes that the financial impact of strikes in South Africa continues to impact the market.

During 2014, advice risk and ensuring that all components of compliance are adhered to remained a big challenge, affirms Visser, adding that this will continue in 2015. It is critical that proper advice processes are put in place and embedded throughout the business, and that these can be clearly demonstrated during an audit. Having streamlined processes and automated documentation makes it easier for advisers to ensure they remain compliant. In the past year, we have seen the implementation of Binder Regulations, Treating Customers Fairly (TCF) and the Protection of Personal Information Bill (POPI). “It is difficult to keep up if you do not have the time and resources. Regulators also expect businesses to implement and report on risk management, which can be challenging – particularly in smaller businesses with limited time and resources,” says Visser. O’Neill says that the wave of regulatory changes in South Africa, however wellconceived, has contributed to increased operating challenges. “The reality is that we may see the cost of these implementations having a direct impact on expense ratios, placing pressure on profit margins even further. On the positive side, a highly regulated industry does serve its purpose in ensuring that potential risks are anticipated, and appropriate action is taken to mitigate them,” adds O’Neill. Geyer notes that Hollard Broker Markets empathises with its brokers regarding their challenges with regulatory changes which are based on volume and cost of compliance. He adds that TCF is gaining significant momentum and requires significant investment of focus and time to make it happen on all levels. The positive result is greater and beneficial connection with policyholders.

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Need for consumer education

Possibly one of the most important points, this is an area where brokers can perhaps have the most influence.

Deterioration of the rand

O’Neill notes that the South African insurance industry is reeling under the impact of a deteriorating rand. The resulting exchange rate pressures have had a significant effects on the cost of claims, hitting customers where it hurts, their pockets, as higher claim costs push premiums up. This has been particularly pertinent in motor insurance, adds O’Neill. Between July 2013 and July 2014, there has been a 20-25 per cent increase in car repair due to the deteriorating rand and the high cost of importing car parts. There is a move towards possibly using alternative parts, however, this is tricky as most manufacturers insist on only their parts being used for the warranty to remain active. “Only closer collaboration between all the stakeholders involved can ensure that more cars are repaired than written off, saving insurers and customers a considerable amount of money in the long-run,” emphasises O’Neill.

Ossip maintains that as short-term insurance products become more sophisticated, the need for consumers to fully understand their cover increases as well. Consumers are increasingly exercising the ability to purchase insurance directly without going through an intermediary. The Short-Term Insurance Ombudsman is seeing an increase in consumer complaints, but fewer that are finalised in favour of the consumer. This downward trend can be attributed to lack of consumer knowledge of their policies and highlights the importance of intermediaries as risk coaches to advise consumers adequately in a changing insurance environment, reiterates Ossip. “We mustn’t lose sight of the fact that challenges can provide opportunities for those who solve problems for their clients,” says Geyer. “With a tougher economy came added pressure on buyers of insurance regarding premiums, coupled with downsizing. This created opportunities for brokers to become indispensable members of their client’s advisory team. Brokers who wisely enlarged their role, provided specialist insurance guidance and went further by encouraging risk management such as employee emergency exercises – they ensured their clients were appropriately covered while making the most of cost – saving opportunities,” concludes Geyer.

Engineering and marine trends 2014 Christy van der Merwe

Growth and development in the real economy of South Africa in 2014 has been strained, and Lion of Africa Insurance (LOA) informs RISKSA of some of the trends that have developed over the year in the all-important engineering and marine sectors.

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Soft markets, thin rates LOA Engineering business consultant Lebogang Mashego has observed a trend towards rate undercutting by smaller insurers, leading to a misalignment between the premium return and the risks being taken, with inadequate premiums being charged. “We believe that this is a trend which cannot continue indefinitely and, at some stage, insurers will either need to return to realistic pricing or they may not survive in the long term. As an insurer of substance, we believe that we will be able to ride out the storm.” From an insurance point of view, a lack of infrastructure development means that new business growth is negatively affected. This is another trend that insurers will need to weather until development recovers. On the positive side, we do note that the government has earmarked R847 billion to be spent on infrastructure over the next three years. Spending in the private sector should add to this quantum, adds Mashego. On the upside, Mashego notes that improved technical underwriting by qualified engineers to assess and quantify the risk, means that insurers are able to improve on their service delivery, providing the best possible cover and reduce claims. By applying good technical underwriting to all accounts, insurers have seen the loss ratio improve considerably.

Crime, theft and hijacking risks LOA Marine insurance business consultant Tonderai Chirengwa says that hijackings and theft of consignments are not uncommon and negatively affects the short-term insurance sector, particularly the marine division. The continuous rise in theft and hijacking marine claims is a concern particularly since insureds do their utmost to ensure safe

shipment and arrival of goods through armed escorts, tracking of consignments and even varying voyage patterns. However, in some cases, the hijackings still occur. These criminal activities result in high loss ratios and sometimes negative underwriting results, explains Chirengwa. Insurers are, therefore, losing considerable amounts of money paying out claims as a result of the failure to fight and defeat crime. “The insurance industry should be actively involved in fighting crime or raising awareness on issues of a criminal nature that affect the industry. This should be done collectively, with all stakeholders getting involved.” LOA’s approach to this problem is prioritising risk management. This entails careful risk selection and assessments as well as corrective underwriting where necessary. It is also important for the insureds to put risk management measures in place and continuously monitor these.

Exchange rate fluctuations

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Staying one

step ahead Dominic Uys

The direct insurance market is growing at rapid pace, and an increasing amount of business is moving in that direction, to the detriment of the intermediary market. RISKSA finds out what it takes for intermediaries to improve competitiveness while keeping their independence.

ver the years Renasa has set itself apart with its insistence on sticking solely to the independent intermediary model, even as the rest of the industry has embraced the direct route. Company CEO, Jonathan Rosenberg, explains that the company’s approach has everything to do with helping the independent intermediary compete effectively in an increasingly tough market. RISKSA chats to Rosenberg to get acquainted with Renasa’s market strategy.

class business. When, by 2001, the subsidiary was put up for sale, it was bought by a consortium of shareholders and the real work began to transform the company leader.

Can you give us an overview of where Renasa began and how the company’s business model evolved?

In the meantime some business had been taken on through the broker channel. However, our systems weren’t as developed as they should have been, so it was necessary to restructure the business as well. In essence, we had to start over, and we only really began doing business

Renasa started in 1998 as a subsidiary of a foreign insurer, writing predominantly liability Renasa CEO, Jonathan Rosenberg

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Between then and 2005, the company was restructured. There were numerous factors, chief amongst which was that there was no real cohesion between the shareholders. In the end, one of the shareholders took control of the company, which formed the basis of the current shareholding structure.

in our current form in 2005, when we resolved to continue with the intermediated model. A further motivation for the intermediated model lay in the capital intensity of the indirect model. That was the birth of the Renasa everybody knows today. We initially found it very difficult to find support from brokers, and it was difficult to engage employees since most candidates wanted to work for the more renowned insurers at the time. It was also a challenge to maintain reinsurance support. We started employing retirees, which made sense since they had plenty of experience in writing commercial business. It worked out well because we could put together a good offering for the independent brokers. We commenced writing in commercial classes, but we soon realised that if we wanted to service the independent broker market, we would have to include the personal lines as well. We grew like that until 2007, when the motor market turned. At that point, we faced a decision: either we should convert the business into a specialist class business or continue to pursue the route of a general insurer. General insurer it was; but we knew that we were going to have to come to terms with underwriting motor in the intermediated market if we were going to have any success. Traditionally this segment of the market has been a big challenge for insurers because administration is performed by brokers or UMAs, on systems which are independent of insurers’ systems. As a result, it is difficult for the insurer to regulate the deployment of price or premium and it is difficult to control the settlement of claims. That was the reason why direct marketing was becoming an increasingly attractive proposition for other insurers. To overcome the problem, we set about developing mechanisms to assist us in deploying our price and controlling claims processes through third party systems. That said, our solution had to avoid becoming an

overbearing interference in the operations of the intermediary. It was a concept we would label ‘supervised independence’ In essence, since 2007 we’ve been developing a suite of cloud-based systems which integrate to all the common independent systems in the market. It enables us to control deployment of the price that we require as well as the discounts, and the claims cost in the personal lines market. In the commercial market we offer a traditional service, with brokers supported by qualified broker service agents. And that is Renasa in a nutshell. Over the years, we’ve grown our footprint significantly and now we have offices covering just about every part of the country except for the Eastern Cape. What is Renasa’s modus operandi now? Most of our brokers are operating on a 50/50 split between commercial and personal lines. To manage the personal lines we’ve employed a cloud-based system integrated to pretty much every system available in the market. On the broker’s side, they are not tasked with learning a whole new system or with changing any of their own systems to accommodate ours.

Effectively we are offering the intermediary an opportunity to operate independently. On our side, having the broker work on our integrated system means that we get to control aspects like discounts, pricing and claims. We also have our own equivalent of the Stride system. Our supervision is almost unnoticeable to the broker because it happens purely by virtue of the fact that their own systems have been integrated into ours. Control from our side comes in an automatic fashion, and in that way we reached a point where we could emulate what the direct insurers have been doing. I must add that we’ve been able to deploy our price with some success in this way, and we’ve managed to maintain a stable claims cost for the past three years. That is despite the weakness of the rand, despite inflation and while average sums insured have been rising. For the more complex commercial business, we provide the service with experienced marketing underwriters operating in the field, who are properly qualified and trained. They provide a traditional commercial service to the brokers. So they’ll visit the brokers, and if there’s sufficient business with them, we’ll place our underwriters there permanently. Our strategy of supervised independence is different from the approaches adopted elsewhere in the market, and some other insurers have imposed controls in a manner which seems to centralise the decisionmaking process, often through call centres. In our experience, this slows the decisionmaking process down significantly, both in terms of granting cover and in settling claims, which tends to frustrate the intermediary. So between those departing the segment and the frustration intermediaries have experienced with other insurers, we have seen a reasonable flow of business to us. 

So does your strategy involve meeting the demands of the brokers or is it an attempt to change the way in which the broker market currently operates? To survive against the direct insurer in the personal lines market, we believe that adaptation is unavoidable. Very simply put, the intermediary needs the same disciplines and controls that are deployed by the direct insurers in order to achieve the same performance. Without that, the broker’s books are not going to be sustainable, especially if they maintain those books purely by discounting the price; not selecting risk properly; and not controlling the claims cost. If brokers have, however, not yet realised that personal lines books have to be managed in a sustainable fashion in order to ensure a sustainable future, then the direct insurers will demonstrate this. Because the alternative is that they’re going to have to try and make a living with commercial lines only. What we are trying to do is to provide that adaptation at the cheapest cost and with the least impact on the broker. We understand that the independent broker is operating on an independent system for good reason, so we bring our systems to them.

Still, the independent intermediary market is shrinking. Are you losing business as a result?

determine the prices on a scientific basis so that his risk selection is sound, then he will be in a good position to acheive growth.

What’s surprising to me is that the intermediated market has not made more of the value of independent advice. Intermediaries excel over direct marketing in two aspects. Firstly in ensuring that appropriate cover is taken at the appropriate time and secondly, making sure that the claim is settled fairly.

Also, maintaining volumes in his commoditised business will give the broker the opportunity to compete more vigorously for the commercial business – which is absolutely won on the basis of service.

Particularly when you start dealing with the complex commercial claims – these are not things that are going to be handled well by a call centre. So you need the expertise of independent advisors to make sure that those claims are fairly settled because often there are points of debate both in the incepting of cover and settling of claims. That said, it is true that the independent intermediary market is getting smaller. As a business we are not negatively affected by that. In fact, our strategy is to grow in the shrinking sector. There is a list several names long of insurers who have departed from the sector and at least a portion of the business they leave behind gravitates towards us. What does the broker need to know if he wants to survive the market, then? I believe the opportunity lies within the broker’s existing books of business. Defending their book against the onslaught of direct insurers is a good beginning. If the broker can prevent the loss of business then at least he isn’t under pressure to achieve growth in this weak economy. Also, the mandated broker needs to deploy scientifically determined rates and control claims costs. If the broker is wasteful with claims costs, his book is going to be put under pressure in terms of the premiums that are required to make it viable. In other words, if the broker can control costs in the same manner that the direct insurers are able to, and he has the mechanism to

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Finally, what do you see in the year ahead for your company and for the industry? In terms of Renasa, we plan to open a few more branches next year. Like I said, we still don’t have a physical presence in the Eastern Cape but we plan on setting up there soon. There is also a presence in Klerksdorp that we plan on developing into a branch. Then we would like to continue with our various initiatives. As for our market expectations, we think next year is going to be just as tough as the past year – we don’t really see anything on the horison that will make things easier for either brokers or insurers. We do not yet see any light at the end of the tunnel in terms of improvement in the economy yet: if anything, we think the economic conditions will just get tougher. In the regulatory space, we don’t really foresee any more surprises. The industry is pursuing best practices as adopted elsewhere in the world, and the regulator here has shown its intent to ensure that our industry operates to first-world standards. We think that those initiatives are all laudable but much, of course, will lie in the implementation. The Solvency II regime is a big challenge for the insurers, and we believe there is still much work involved. That said, unless some surprise comes out of the Retail Distribution Review (although again, we aren’t expecting it), I would say that the road that we are going to have to travel has been made fairly clear. We know what we have to do and it is all to a good end.

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Travel advisory cover that opens doors Christy van der Merwe

Travel insurance may not be able to stop you from getting swept up in a tornado when you visit your cousin in Kansas City, but it will ensure you get the medical attention you require, emergency evacuation if you need it, and even a new pair of shiny red shoes should your bag go missing en route as well.

or many South Africans, travel insurance is a compulsory requirement for getting a visa to certain destinations, and it is either viewed as a grudge purchase made without much thought, or on the other hand, it can be something easily forgotten in the stress or excitement of planning a journey.

“Our challenge is to get consumers to see the value of travel insurance, not because its compulsory, but for the peace of mind it provides when it comes to emergency evacuations, medical expenses abroad and so on,” explains ACE senior manager A&H, Mike De Jong.

It is also something travellers think they can easily get from their bank or medical aid. However, these automatic covers often have limited levels of cover, and many exclusions, for example with extreme sports or natural disasters.

He notes that travel insurance is no different to any other insurance product, and the company is constantly looking at ways to ensure that it is adding value to the client. “This means that they enjoy benefits that go beyond cover in times of an emergency and help them enjoy their holidays.”

Uriah Jansen, MD at Hollard Travel tells RISKSA that when it comes to travel insurance, brokers have an advantage because they are allowed to provide advice to their clients, as opposed to travel agents who may not provide advice. Their expertise can prove very useful to clients. “Sell this advantage and use it to your full potential. No policy is too small as there is potential in all clients you interact with. Travel insurance is usually a small policy, and viewed as a grudge purchase, but by providing a client with great advice on a travel insurance policy, you could earn their trust and write a large personal lines policy in the future,” adds Jansen.

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De Jong says that ACE’s number one objective is to give its client the cover that truly suits their bespoke needs and profile. Younger travellers do not necessarily require the most expensive cover. Older clients or people with pre-existing conditions want more comprehensive cover. “What is important is that we ensure clients have sufficient cover should the need arise,” he reiterates. Jansen says that the company’s hands-on approach with claims is a big differentiator and a key objective in terms of risk  management.

Top 10 destinations of choice for South Africans

1 Mauritius

4 Italy

France

Thailand

7 Germany

Spain

Australia

10 Greece

Regulation & competition The South African travel insurance landscape is an increasingly competitive one. “The market is not big enough to sustain all the players,” affirms Jansen. “In the last four years, the number of travel insurance providers, other than banks, has doubled and the market has only shown marginal growth in the same period. During this time, the rand/dollar exchange rate has declined by almost 40 per cent and policy premium has increased by only 12 per cent. Although the travel insurance market appears very attractive to those that don’t operate in it, unbeknownst to many it is still a very small landscape. The continued pressure on underwriting results has and will cause some of the insurer’s to question whether they should remain in the market,” explains Jason Veitch, head of travel insurance at TIC, which is a specialist division within Santam. “Legislation remains a challenge in the travel industry. We have met with the role players and expect that there could be some changes in the near future,” notes Jansen.

One of the issues is that travel agents are an important part of the travel insurance distribution model, and yet are not certified to provide advice to clients. Should travel agents be forced to write difficult exams to offer travel insurance, and pay expensive registration fees, they could simply forgo this, as commission from travel insurance often accounts for less that one per cent of their revenue. This could force a direct model. Updates on this are expected from the Financial Services Board (FSB) in 2015, and the hope from the industry is that the FSB will not be too heavy handed, as over-regulation could ‘kill’ the market.

Travel trends Head of travel at Zurich SA, Anriëth Symon notes that consumers are increasingly becoming savvy travellers, asking brokers and travel agents all the right questions and ensuring that they are covered. There are a number of trends emerging in the market.

Symon highlights that baggage or luggage damage has become increasingly prevalent, more so than theft out of baggage. “Be it airlines leaving suitcases with designer clothes and shoes out in the rain or mishandling fragile items. Here, airlines do take on some of the responsibility, and more often than not, contribute to payouts along with insurers,” adds Symon.

ACE Insurance senior manager A&H, Mike De Jong, shares a recent claim example: In March 2014, while travelling for business in Madagascar, one of our clients was involved in a serious motorbike accident. The accident, which was caused by hitting a pothole, left our client with severe traumatic injuries requiring emergency medical treatment. To ensure our client had access to the best medical care possible, ACE authorised an Air Ambulance to transport our client from Madagascar directly to the Milpark Trauma Unit in Johannesburg. The total cost for this unexpected incident amounted to over R500 000, which emphasises the importance of proper insurance protection when travelling abroad.

The Ebola risk has not yet signalled a decline in passenger numbers, but this could change in 2015. “Although Ebola has been in the spotlight, the impact has not been as severe as expected in 2014. The full effect of Ebola is expected in 2015, when the corporate entities that conduct large-scale operations in the affected areas decide to forego exposing their operations to this risk, says Veitch.

Cough it up

Goodbye Gucci

CASE STUDY

contract Ebola, and secondly cancellation cover should they need to cancel a trip. A cancellation risk could also exist if the client travelled to a country where there are Ebola cases, and then after returning, booked to travel to Mauritius. Mauritius, however, will refuse entry to a person who has recently travelled to an Ebola risk country.

Ebola With the recent Ebola outbreak in West Africa, the cancellation of trips has become a concern, resulting in additional insurance claims. The South African Government is currently only allowing essential travel to areas that have been affected by the crisis, with further restrictions expected from other countries, especially in the US, says Symon. In these instances, cancellation and medical benefits would only apply if the policy was purchased prior to an official warning from the World Health Organisation (WHO). If a customer cancels an insured journey for fear that an Ebola outbreak may occur – without an official WHO warning – the policy will not respond as this is deemed as disinclination to travel. Jansen agrees that Ebola is currently top of mind, and the traveller is influenced in two ways: either requiring medical cover should they

Out of hospital medical expenses are also on the rise, says Symon. Travellers with everything from throat and eye infections to colds and gastro, who simply visit GPs whilst they are on their respective trips can expect hefty bills. “Medical expenses in the US are usually the most costly as doctors often insist that patients undergo all sorts of scans and tests that may, in the end, not be necessary,” adds Symon. Because premiums are paid in rands, yet claims are incurred in a foreign currency, and ultimately paid in rands, “the weaker the rand, the higher the cost of claims,” says Jansen. De Jong notes that the weakening of the rand, coupled with medical inflation has signalled increasing size of claims. “Also, with the increase in natural disasters and the ease of travel these days, we are seeing a higher volume of claims than we did a few years ago. Clients are becoming more aware of the cover they have and, therefore, what they can claim for, which is encouraging,” he adds. “Frankly, the weakened rand has made travel insurance even more necessary than before. Any emergency or medical cost abroad that is not covered can be potentially financially crippling. Also, the fact that customers medical aids are either not able to provide services abroad or setting very specific limits to the amount of cover they provide, means that holiday-makers are being left with an increasingly widening gap to fill in cases of an emergency – out of their own pockets,” points out De Jong. Brokers should understand the value of comprehensive travel insurance, particularly in today’s risky world – good advice could be the difference between a disastrous or  delightful business trip or vacation.

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1410_1052_

141 0/ 1 052 /E

LIFE | TRAVEL | CAR & HOME | WARRANTIES | COMMERCIAL VEHICLES

1410_1052_REGENT_TRAVEL_AD_RISK_SA_275mmHx210mmW_FA_R1.indd 1

2014/11/03 10:26 AM

TOP TRAVEL DESTINATIONS TOP TRAVEL RISKS FOR THESE COUNTRIES According to Trip Advisor 2014 Traveller’s Choice Awards

According to www.smarttraveller.gov.au

1. Istanbul, Turkey

Political turbulence and the threat of terrorist attacks considering the proximity to Iran and Iraq are of highest concern to travellers to Turkey.

2. Rome, Italy

During the summer and autumn tourist season, there is a marked increase in the incidence of theft, particularly bag snatching, pickpocketing, and vehicle break-ins in Italy.

3. London, England

Besides the rand/pound conversion, the biggest worry here is the ongoing potential for terrorist activity.

4. Beijing, China

There has been a rise of dengue fever, and this threat increases during the wet season.

5. Prague, Czech Republic

There are no specific warnings for the Czech Republic, besides the ongoing threat of terrorism in Europe.

6. Marrakech, Morocco

There is a possibility of retaliatory attacks against Western targets in Morocco, considering proximity to Syria and Iraq. There are reports of terrorists planning attacks against a range of targets, including places frequented by tourists. Kidnapping of foreigners is also a risk.

7. Paris, France

Besides the risk to your waistline from overindulgence, petty crime, including bag snatching and pickpocketing, is a serious problem in tourist areas and on public transport.

8. Hanoi, Vietnam

Flooding, flash flooding and typhoons are common in the rainy season between June and December. Traffic accidents occur often in Vietnam.

9. Siem Reap, Cambodia

Snatch and grab crimes against foreigners by thieves on motorcycles are frequent. Violent clashes between security forces and demonstrators are known to occur, and there have been reports of assaults and armed robberies against foreigners. Severe storms and widespread seasonal flooding, including flash floods, can occur without warning in Cambodia. Water-borne, foodborne, parasitic and other infectious diseases (including avian influenza, dengue fever, cholera, hepatitis, tuberculosis, typhoid and rabies) are common.

10. Shanghai, China

Dengue fever.

11. Berlin, Germany

Besides potentially being frowned upon for being late, the only issue raised is that of the ongoing risk of terrorism in Europe.

12. New York City, US

The US introduced heightened security screening for passengers from some countries in July 2014. Electronic devices, including mobile phones, must be powered on. Powerless devices will not be permitted onboard aircraft.

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46 8

Going places

Christy van der Merwe

Travel Insurance Consultants (TIC), a wholly-owned specialist division of Santam, has been providing insurance for 26 years and employs risk management methodologies well-suited to its business.

n the current market it is comforting to have certainty in the ability and expertise of your team because, as TIC head of travel insurance, Jason Veitch, explains to RISKSA, it is an increasingly competitive and demanding market. “We have an excellent track record in paying claims,” says Veitch, highlighting the ultimate concern of consumers who call on the cover often in an emergency, in a faraway destination. He also notes that there is a huge variety in these claims, as people certainly can get up to weird and wonderful antics while travelling overseas. “We have not experienced any significant events within the last year except for an unexpected increase in claims volumes coupled

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with a higher average claim cost,” says Veitch. This claims cost increase can largely be attributed to the rand/dollar exchange rate.

one’s health and wellbeing. Traveller’s need to take care of their health, as well as that of their travel companions before heading overseas.

Although Ebola has been in the spotlight, the impact has not been as severe as expected in 2014. It is possible that the full effect of Ebola may only be felt in 2015. For South African travel insurers this could come about by corporate entities that conduct large-scale operations in these affected areas that decide to forego exposing their operations to this risk. Leisure travel to these areas is exceptionally low, so this is of little concern to insurers.

Managing risk

Many claims result from people being hospitalised while overseas, either for illness or injury. Veitch highlights that one way to mitigate risk upfront is simply by being sensible about

In addition, communicating the operation of the policy and how the terms and conditions of the policy do or don’t work is also vital in terms of risk management. “This comes

Education and information is certainly emphasised when it comes to risk management. Veitch explains that TIC’s objective is to ensure that TIC always has a record of each and every traveller. This is not always possible since corporate policies are sold on an annual basis, and it is up to the corporate entity to declare their staff members that are travelling, he adds.

TIC head of travel insurance, Jason Veitch

bowel obstructions in excess of R2.5 million each. This has never been repeated. During the course of 2013/14 we have continued to improve our ability to cost contain on claims that happen abroad,” Veitch explains.

Market dynamics While travel insurance is often viewed as a glamorous division within insurance, it is not quite that simple. The travel and tourism market within South Africa is certainly growing, and the volatility of the rand makes South Africa an attractive destination for foreign tourists. The travel insurance market, however, focuses on individuals leaving the country, and in South Africa, that market is relatively small.

through constant training in the market,” he emphasises. TIC also makes sure that it understands the nature of the business its corporate client will be undertaking. “We then highlight the risks we think are relevant and suggest possible measures the client can put in place. Such examples would be preventative measures in known malaria areas or educating the client on the correct product for their type of business,” says Veitch. The company views the management of risk as an incremental process and therefore the identification of risk and methods to mitigate it happen constantly. “That being said we have areas of risk that are very hard to manage. In one particular year, we had claims for seven

“In the last four years the number of travel insurance providers, other than banks, has doubled and the market has only shown marginal growth in the same period. During this time, the rand/dollar exchange rate has declined by almost 40 per cent and policy premium has increased only by 12 per cent. Although the travel insurance market appears very attractive to those that don’t operate in it, unbeknownst to many it is still a very small market. The continued pressure on underwriting results has and will cause some of the insurer’s to question whether they should remain in the market,” says Veitch. The size of the market in South Africa is simply not big enough to sustain the number of insurers currently in the market. Growth of the overseas travelling South African population has remained fairly flat as the generally tough economic environment means people who might consider travelling overseas, instead opt to vacation within South Africa.

Considering this tough operating market, again, the benefits of experience are felt here, as well as having the backing of South Africa’s largest short-term insurer, Santam. Veitch affirms that he is very pleased with the balance of the TIC book of business and that the company has worked hard to achieve a favourable split between corporate and leisure travel business. During 2013, of all the policies sold to clients over the year, only 0.06 per cent of these resulted in complaints to the short-term ombudsman.

Beyond borders When chatting to RISKSA, Veitch had just returned from a conference, Risk, Resilience and African Infrastructure, discussing insurance in Africa, which tackled the topic of acceptance and promotion of insurance on the African continent. A number of role-players, including foreign guests, research councils and academics discussed strategies on how to encourage growth in these markets. TIC currently operates in Botswana, Kenya, Malawi, Namibia, South Sudan, Tanzania, Uganda, Zambia, Zimbabwe, and most recently Mozambique. Veitch adds that in 2015/2016 TIC would like to start operating in Ghana and Nigeria as discussions in these countries have already started. He notes that currently, between 10 and 12 per cent of TIC’s gross written premium is generated outside of South Africa. There are ambitions to growth this to between 15 and 20 per cent in future. Veitch’s passion for the business is clearly evident and he is driven to ensure every success of the business in future.

A niche worth

protecting Christy van der Merwe

Being a longstanding specialist in the hospitality and leisure niche, Hospitality and Leisure Underwriting Managers (H&L) take pride in getting involved with clients from the start and ensuring thorough risk mitigation during underwriting.

holly-owned by South Africa’s largest short-term insurer, Santam, the number one objective in terms of risk management at H&L is simply to involve the client or intermediary by making them aware of the dangers in and around their properties such as fire or flood and other perils that may become apparent. “In doing this we prevent the client from suffering future down time due to nonavailability of various services they provide to enable them to create turnover, and eventually profit. In our niche the protection of the clients assets is the most important priority,” explains H&L MD John Fitzpatrick. The travel and tourism industry has always been an exciting one and Fitzpatrick emphasises that today, increased attention should be concentrated on the liabilities associated to a clients’ operation, as liability has become very topical for many different reasons.

50 8 4

H&L MD John Fitzpatrick

“The proper attention to internal operations needs to be considered to protect clients from third party approaches for compensation following incidents that may have occurred at the insureds premises. In the past, it was the client who had to prove negligence by the insured, however now the roles are reversed and the insured is responsible until proving themselves innocent of any wrongdoing,” explains Fitzpatrick. The modern public is aware of this situation, and intimations of loss or damage are on the increase. The Consumer Protection Act (CPA) is anticipated to have further complications for the market once fully operational. Ensuring that all parties are up to speed on relevant changes in regulation and legislation, such as the CPA is an important way for H&L to safeguard against potential risks. Fitzpatrick maintains that because H&L operates in the South African hospitality niche, many of the risks are similar in nature, which gives the UMA the edge in offering advice and potential financial saving, or the addition of covers not already insured. Issuing of policy wordings specifically associated to the niche market H&L operates in is also a distinct benefit. The majority of risks undertaken by H&L are precisely surveyed and any potential irregularities, whether statutory or operational are identified and pointed out to the insured for correction or to be upgraded to acceptable levels. This is in line with the Santam group’s growing focus on upfront risk identification and mitigation.

Changing with the times

The unexpected visitors

H&L are always looking to improve their position in the market and continually strive to assist their partners, both brokers and policyholders, by offering the best available practices in the industry and value for premium spent by the client.

While proactive risk mitigation gives the edge where possible, there are an increasing number of unexpected catastrophic events impacting the tourism industry and subsequently hospitality and leisure insurance in South Africa.

From an underwriting perspective, H&L makes the most of technological advances, such as using Google Earth to identify and locate all of its risks, especially when these are in rural areas and thatch constructed lodges can be adequately viewed. “This gives us insight as to what is being brought to us, how the land lies surrounding the location of the risk and so on. They say a picture paints a thousand words, and in this case it is certainly true,” says Fitzpatrick.

Companies truly need to be at the top of their game to maintain underwriting profits in this tough market where increased competition adds another element of complexity to everyday operations. In 2014, as well as dealing with increased catastrophe events such as flood and fire, the industry also had to deal with claims resulting from earthquakes – almost completely unheard of in South Africa.

Globally, there have been numerous improvements in the hospitality industry as the world becomes more environmentally savvy and energy consumption becomes a big issue for the consumer.

Fitzpatrick explains that amazingly, H&L maintained underwriting profits through 2014, although at a reduced rate against the previous year’s results. Here, the security of being backed by the only Standard & Poor’s rated insurance company in South Africa certainly helps.

Renewable energy such as wind as solar power is providing energy for many hospitality and leisure companies in remote areas of South Africa, and close attention must be paid to the health and safety aspects of these.

“We have seen claims increases in certain sectors of our niche market such as motor, and all risk items mainly in the retail restaurant market including electronic equipment and portable devices,” adds Fitzpatrick.

Renewable energy components and costs are also increasing significantly and so proper maintenance and management of these is vital for survival of entities in the hospitality industry. The insurance of these items can also pose a challenge.

The loss ratio has not been helped by seasonal catastrophes such as hail and flood claims, and H&L were impacted by fire claims emanating from other properties due to the dry winter climate prevailing on the Highveld and surrounding areas. 

basis as there has been a fraudulent trend developing in this area. Fitzpatrick says that going into the busy holiday season, intermediaries should ensure a few vital things are done at initial stages: Firstly, complete a full needs analysis for the client in relation to protection of their assets and potential liabilities. Ensure a full understanding of risks associated with accommodation type risks. Secondly, have discussions with the client on the protection of the guests’ assets, which may potentially come under control of the innkeeper.

The silly season The majority of the risks on H&L’s book are spread throughout South Africa and are most likely to be fully occupied over the summer season. Hotels, lodges and restaurants in all the major centres are generally bustling during holiday time, and the claims usually come after the holiday season. In the accommodation industry, including guest houses and hotels specifically, clients should ensure that client information is received and payments of accounts are updated on a daily

52 8 6

Thirdly, understated insurance values on certain sections of policies issued is a regular problem and attention to full disclosure of all financials and property valuations must be truthfully disclosed to alleviate inaccuracies. Fourthly, risk management, including the protection of guests while staying at your premises is required and should deal with emergency evacuation procedures if an alarm is triggered. The fifth and final tip from Fitzpatrick is to obtain the proper product policy wording

training from the insurer to fully understand the benefits offered by way of extensions to the policy schedule or wording that could be applicable in offering comprehensive advice to clients. “After 16 years underwriting specifically in the hospitality insurance industry through the intermediated resource, it is great to see growth and development of the South African tourism, travel and accommodation industry. Through government-driven initiatives, the increase in small to medium enterprises and bigger project funding has contributed to the small entrepreneur prospering and growing new businesses throughout South Africa. The job creation and training developed by the hotel schools in conjunction with various Industry players can only ensure the future success of this special industry,” enthuses Fitzpatrick. Based on this growth, it is imperative that the proper protection for all stakeholders is implemented from the outset. By taking advantage of the expertise and dedication of the H&L insurance underwriting team, travel and tourism providers can rest easy knowing they have structured insurance programmes.

Buy it right. Make it right.

Consequential LOSS

policy at the customer’s premises. Similar to the supplier’s premises extension, cover is restricted to and rated according to the percentage dependency on that particular customer. This cover is required where a large proportion of the insured’s sales emanate from dependence between companies in an associate group. As with the previous extension full names and addresses of customers are required.

3 Does the cover include all the relevant extensions? Richard Stevens deputy branch manager Renasa Insurance Company

hen arranging consequential loss (also referred to as loss of profits/business interruption) cover intermediaries tend to focus on the basis of cover, the indemnity period, and the sum insured. Underwriting information is supplied and underwriters can use this to prepare a quotation in respect of the basic cover afforded by the policy that is normally limited to the insured’s premises only. It excludes the possibility of events occurring at other premises (suppliers of raw material to the insured or customers to whom the insured is supplying a product) which could have a negative impact on the insured’s business operation. However, a number of extensions are available, offering cover over and above the basic cover, and the business profile of a particular insured will determine which extensions are desirable. It

54 8 4

is not unusual to find that, after a quotation has been accepted, the closings will follow which include just about every available extension (whether or not it is applicable) and often expected at no extra cost. There could be a number of reasons for this, but generally it is as a result of misunderstandings concerning what is intended by the extensions and how to rate them. The following extensions are available following receipt of full underwriting information, and at an additional premium:

Suppliers extension: This extension covers loss suffered by the insured as a result of a break in the supply of goods sustained through damage caused at the supplier’s premises by an insured peril covered by the underlying policy. This protection is important to the manufacturers of products reliant upon the supply of raw material from suppliers. It is important to establish the percentage of dependency on a particular supplier as this has a bearing on the rate to be charged. Also required are the full names and addresses of all suppliers.

Customer’s extension: This extension covers loss suffered by the insured as a result of a peril covered by the underlying

Prevention of access: Access to an insured’s premises may be prevented as a result of damage to nearby or surrounding buildings or infrastructure even although there is no damage to the insured’s premises. Premium is charged depending on the indemnity period selected which, normally, can be anything up to 12 months, as well as the perceived risks within the vicinity of the insured’s premises.

Public utilities: Refers to property at electricity generating stations, sub-stations or transmission networks, gas works, water purification plants, etc. supplied by local authorities/municipalities. The interruption (due to an insured peril) of such supplies to the premises of the insured could result in loss. Cover can also be extended at an additional premium to include total or partial failure of supply to the premises subject to certain exclusions. There are other available extensions not mentioned above but, as indicated, not all are necessarily applicable to a particular case. But with a proper analysis and understanding of the client’s needs, it should not be difficult to determine which are required. Each extension should be individually underwritten and priced, but generally the rates are not exorbitant and advisors should endeavor to include the extensions when quoting – it was mentioned at the outset that often only the basic cover is arranged and it is imperative that the appropriate extensions are included to adequately protect the client from financial prejudice and the advisors against potential professional indemnity claims.

Gauteng | Alberton, Tel: 011 613 6161 ; Benoni, Tel: 011 421 1326 ; Bruma, Tel: 011 621 2700; Centurion, Tel: 012 661 1003 ; Crown Mines, Tel: 011 837 2382; East Rand Mall, Tel: 011 826 6446; Edenvale, Tel: 011 452 1863; Germiston, Tel: 011 454 0240; Gezina, Tel: 012 335 0400; Honeydew, Tel: 011 794 8964 ; Jhb Central, Tel: 011 493 9911; Krugersdorp, Tel: 011 660 2359; Menlyn, Tel: 012 348 5007 ; Midrand, Tel: 011 312 1133 / 1162 ; Montana, Tel: 012 548 1414; New Doornfontein, Tel: 011 402 1833/5 ; Pretoria West: 012 327 7065 ; Randburg, Tel: 011 792 3932 ; Rivonia, Tel: 011 234 3602 ; Roodepoort, Tel: 011 766-2588 / 2737 ; Sandton, Tel: 011 262 5704 Silverton, Tel: 012 803 7944/9903 ; Springs, Tel:011 811 3085; Stafford, Tel: 011 683 3398 ; Strijdom Park - Randburg, Tel: 011 791 4292 ; Vereeniging, Tel: 016 422 9777; Zambesi, Tel: 012 808 3720 ; North West | Potchefstroom, Tel: 018 294 5525 ; Rustenburg, Tel: 014 592 8101/8149; Mpumalanga | Middleburg, Tel: 013 243 2534; Nelspruit, Tel: 013 752 3832; Secunda, Tel: 017 638 1044/1413; Witbank, Tel: 013 692 5475. Kwazulu Natal | Ballito, Tel: 032 947 1844 ; Empangeni, Tel: 035 787 1627; Durban, Tel: 031 902 9534; Durban Central, Tel: 031 368 2108/9 ; Durban North, Tel: 031 579 5140 ; Kokstad, Tel: 039 727 3123 ; Ladysmith, Tel: 036 633 1114 ; Marburg, Tel: 039 682 3317; New Germany, Tel: 031 701 1192 ; New Doornfontein, Tel: 011 402 1833/5; Pietermaritzburg, Tel: 033 386 4408 / 9 ; Pinetown, Tel: 031 700 1474 / 1659 ; Free State | Bloemfontein, Tel: 051 432 7399 / 8409 ; Welkom, Tel: 057 357 1292/3 Limpopo| Tzaneen, Tel: 015 307 2262 ; Polokwane, Tel: 015 293 0982 Eastern Cape | Chiselhurst, Tel: 043 705 8400 ; East London, Tel: 043 705 8400 ; Port Elizabeth, Tel: 041 368 8550; Western Cape | Bellville, Tel: 021 949 0342 / 3 ; Blue Route, Tel: 021 701 1355 / 1374; George, Tel: 044 878 2861; Maitland, Tel: 021 511 6449 ; Montague Gardens, Tel: 021 552 7058 ; Parow, Tel: 021 930 3227; Somerset West, Tel: 021 850 0096.

Medical aid

claims trends

The costs of healthcare in South Africa are nothing to be sneezed at, and the trends in medical aid claims are useful in highlighting areas of concern, both in terms of the health of the nation, as well as the costs associated with healthcare. Christy van der Merwe

56 4 8

he inequalities prevalent in South Africa mean that, while there are high levels of diseases associated with poverty and malnutrition, there are also increasing numbers of lifestylerelated illnesses such as obesity and occupationalhealth-related illnesses and injuries. The 2014 PricewaterhouseCoopers (PwC) medical scheme survey, Drivers of change, says that medical schemes need to re-engineer their risk analyses to incorporate this rise in ‘silent pandemics’ relating to these lifestyle diseases.

incidence of medical claims across regions, with respiratory illness second in the Middle East and Africa. Cancer is second across all other regions. Although cancer hasn’t replaced cardiovascular disease as the leading condition yet, it has significantly increased in prevalence in Asia Pacific and Europe.

“It is the responsibility of the medical schemes to educate their members on increased risks relating to lifestyle choices, and to factor in the impact of these on their reserves,” says PwC.

Globally, the claim incidences for respiratory illness have increased since 2012, and gastrointestinal illness has decreased in all regions except Asia Pacific.

Hence the focus by many medical schemes on preventative healthcare, and rewards for positive lifestyle changes.

Top claims In it’s 2014 Global Medical Trends report, Towers Watson states that the types of medical conditions causing the highest prevalence of claims globally are more consistent than in the past. In most regions, cardiovascular disease and cancer top the list, although there are some notable differences by region. In the Middle East and Africa, respiratory conditions are common, gastrointestinal conditions in Asia Pacific and musculoskeletal conditions continue to predominate in Europe. Globally, cardiovascular disease causes the highest

Musculoskeletal/back conditions have increased in prevalence overall since 2012, driven primarily by increased claims in Europe and the Americas. Respondents in the Towers Watson survey rank it among the top three conditions in Canada, Spain and the UK. Although many insurers do not cover mental health conditions (particularly in Asia Pacific), claims in this category continue to grow. Stress, which has been identified by employers and employees as a significant workplace challenge, may be a factor driving increased mental health claims.

Impact on annual medical expenditure: Smoker/Non-smoker

Obesity level

Average annual medical expenditure

Smoker (40–50-year-olds)

Moderate

R 2 300

Non-smoker (40–50-year-olds)

Moderate

R 2 072

Non-smoker (40–50-year-olds)

Severe

R 4 400

Smoker (54–69-year-olds)

Not obese

R 6 200

Non-smoker (54–69-year-olds)

Not obese

R 5 167

Smoker (54–69-year-olds)

Moderate

R 6 600

Smoker (54–69-year-olds)

Severe

R15 800

Source: US National Institution of Health study September 2013



Managing costs When it comes to cost management, Towers Watson says that traditional methods of cost management (such as coinsurance) still dominate globally, although health promotion and well-being programmess are increasing in availability and usage. PwC highlights the main factors that keep medical scheme premiums higher than consumer price inflation: • Increases in medical innovation and technological advancements • Increased demand for coverage and services • Increased demand arising from increased supply of healthcare services • Changes in the risk profiles of medical scheme members • Fraudulent claims resulting in excessive cost to the system, and • Changes in risk profiles, which are driven largely by anti-selection. The US National Institution of Health conducted a study to estimate the associations between tobacco use, excessive alcohol consumption and obesity, and healthcare expenditure and chronic diseases. The study (results tabled on

previous page) included South Africans and was performed through a cross-sectional analysis of medical claims data for 70 000 South Africans from 2010. Fedhealth medical aid scheme responded to questions from RISKSA, sharing claims information to establish trends in the South African market. The table below includes details of the top 10 admission categories by hospital cost, with the average length of stay, and cost per admission data included. This gives an idea of the trends for the various conditions and the costs associated with them. The information is based on data from January to June 2014. Fedhealth also shared details of the top 10 highest claims received in 2014 by October, in the in-hospital setting. “We find that most of the high cost cases are as a result of a complication or infection which dramatically increases the hospital stay and treatment costs,” notes the scheme.

average. (Non-healthcare expenditure consists of things such as administration costs.) It is expected that going forward, medical schemes will continue to put more focus on preventative care and wellness programmes, particularly for those lifestyle diseases where early interventions can avoid diseases altogether thus lowering claims costs.

The R112.5 billion spent on healthcare expenditure by all South African medical schemes in the 2013/4 financial year, can be further broken down as follows: Total hospitals – 35.3 per cent, or R39.7 billion. Medical specialists – 24.5 per cent, or R27.5 billion.

“You will notice from the details column that many of the patients have comorbidities, most of which are lifestyle related or modifiable via lifestyle interventions (for example hypercholesterolaemia/hypertension/diabetes),” says Fedhealth, which is in line with the information presented by reports alluded to earlier.

Total medicines – 16 per cent, or R18 billion.

Hospital costs make up a significant portion of the healthcare costs to medical schemes, however, there are a number of other areas where significant claims impact schemes. The Council for Medical Schemes reports on how these costs to medical schemes are divided on

Dentists and dental specialists – 3.3 per cent, or R3.7 billion.

Total general practitioners (GPs) – 7 per cent, or R7.8 billion. Support and allied health professionals – 8.4 per cent, or R9.4 billion.

Total managed care arrangements – 1.5 per cent, or 1.68 billion. 

Top 10 Admission Categories by hospital cost Admission category 2014

Admissions / 1 000 Lives

Average length of stay

Hospital cost per life per month

2014

2013

2014

% Change

Cardiac Catheterisation/Angiogram

5.91

1.77

12.6

23.49

86%

Knee Arthroplasty

2.76

6.09

16.1

22.88

42%

Hip Arthroplasty

2.22

8.48

14.1

22.62

60%

Pneumonia

9.54

5.41

20.93

17.5

-16%

Caesarean delivery

7.55

2.88

17.74

15.79

-11%

Spinal fusion w/wo instrumentation

2.12

5.88

16.31

15.63

-4%

Mental Health admissions

8.92

10.38

12.52

13.87

11%

Arthroscopy w/wo minor procedures

6.67

0.8

13.17

12.58

-4%

Endoscopy – Urology

9.18

1.24

8.26

12.17

47%

Coronary Artery bypass procedures

0.59

12.42

8.92

12.17

36%

55.47

4.48

140.66

168.70

20%

Total of Top 10 admission categories

58 6 8

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Fedhealth's Top 10 highest claims (to October 2014) Admission category

Other bacterial diseases

Total hospital cost

R1 518 888

Length of stay

Age of patient

Details

Septicaemia following hemicolectomy, complicated by enterocolitis, Crohns disease, spinal cord injury, cardiac arrest and respiratory distress syndrome. Ventilation and total parenteral nutrition required. High cost prosthesis and high cost drugs Cancidas approved. Transferred to rehabilitation facility.

Ileostomy/jejunostomy/ colostomy procedures

R1 344 994

Septicaemia and respiratory distress syndrome. Thoracotomy, laparotomy jejunostomy and gastrostomy performed. Comorbidities: diabetes, hypertension and tachycardia. Ventilation via tracheostomy and total parenteral nutrition required. High theatre and specialised care cost. High cost drugs Targocid, Aredia, Vfend and Cancida approved. Discharged.

Throat disorders

R1 237 394

115

Biopsy and removal of lymph nodes done for retropharyngeal and parapharyngeal abscess. Complicated by tuberculosis of the lung and respiratory distress syndrome. Ventilation via tracheostomy required. High theatre costs. Transferred to rehabilitation facility.

Gastroscopy, peg and colostomy done for acute haemorrhagic gastritis and bowel fistula. Hip arthroplasty for fractured femur. Complicated by klebsiella pneumonia. Comorbidities: anaemia and hypertension. Total parenteral nutrition and bloodtransfusions required. High theatre, prosthesis and specialised care costs. High cost drugs Cancidas, Tygacil and Teicowin approved. Discharged.

Angiogram with insertion of stents, complicated by Hodgkins disease, illeostomy, open abdominal wound, sepsis and respiratory failure. Comorbidities: atherosclerotic cardiovascular disease and hypertension. Ventilation via tracheostomy and total parenteral nutrition required. High theatre, specialised care and prosthesis costs. High cost drugs Cancidas and Zyvoxid approved. Deceased.

Treatment of thigh fracture and laparotomy for distended abdomen. Complicated by adult respiratory distress syndrome, klebsiella pneumonia, congestive heart failure, acute renal failure and chronic obstructive pulmonary disease. Ventilation via tracheostomy, total parenteral nutrition and haemodialysis required. High theatre costs and high cost drugs Zyvoxid and Cancidas approved. Deceased.

Hip arthroplasty

Colostomy closure

Hemicolectomy

R1 231 651

R1 033 015

R1 020 167

Total gastrectomy

R897 148

Acute peritonitis followed by exploration of abdomen, removal of stomach and bowel to bowel fusion. Complicated by septicaemia and pneumonia. Ventilation via tracheostomy, total parenteral nutrition and blood transfusions required. High specialised care costs. High cost drugs Cancidas, Zyvoxid and Meronem approved. Discharged.

Coronary artery bypass procedures

R848 276

Sternotomy for coronary artery bypass. Complicated by chronic obstructive pulmonary disease. Comorbidity, diabetes mellitus. Ventilation required. High prosthesis costs. High cost drug, Tazocin approved. Discharged.

Admitted with dyspnoea. Angiogram and tricuspid valvuloplasty with ring insertion done. Complicated by cytomegaloviral pneumonitis and severe pulmonary insufficiency. Comorbidities: hypertension, hypercholesterolaemia and severe depression. High prosthesis costs. High cost drugs Meronem, Zyvoxid, Cymevene and Simdax approved. Deceased.

Traumatic subarachnoid haemorrhage as a result of an unspecified assault at home. Complicated by a pyothorax and acute renal failure. Comorbidity, diabetes mellitus. Ventilation via tracheostomy and dialysis required. High cost drugs Tazocin and Targocid approved.Â Deceased.

Cardiac valve procedures

Injury/trauma (medical stay)

R808 396

R771 420

60 8 327 Liberty

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The

longterm Dominic Uys

62 8 4

year

Major shifts in the industry from mounting regulatory pressure to tax reform have made for an eventful year in the life and disability space. RISKSA looks at the trends that affected the industry in 2014 and which will continue to be felt well into next year.

ver the past 12 months, the long-term sector saw changing tax legislation that made new products possible for a number of companies, and the impending Retail Distribution Review made for quite a bit of uncertainty and controversy. The Protection of Personal Information Act (POPI) is causing ripples throughout the industry as companies in every financial sector continue to attempt to attain compliance. In addition, the industry is seeing fiercer competition and increased confidence in the long-term insurance sector resulting from good quarterly results from most of the larger corporates. All in all, the year behind us has been an eventful one for life and disability cover. Changing legislation, new product offerings and economising existing procedures have been the main drivers behind evolving trends this year, and Nic Smit, product actuary at FMI comments that most of the things to look forward to next year are continuations of the trends that have already started.

Evolving legislation and market pressures On the legislative front, the developments surrounding the insurance laws amendment bill (ILAB) has been a major game changer, according to Johan Henning, partner and head of insurance at Webber Wentzel. April this year saw the proposed amendments to both long- and short-term legislation being scrapped. Treasury stated that the ILAB bill had not been passed on time. Henning warned, however, that this did not mean the regulatory changes were off the table. A few of the most vital changes have been incorporated into the Twin Peaks regulatory model. Among the most important of these changes, according to Henning, are alterations to the

63 5

power of the Registrar to issue undesirable business practice notices. The Registrar has already started proposing such notices, one example being the June 2014 proposal to declare the charging of fees in addition to premiums as undesirable. Aside from ILAB, Smit comments that the tax reform, which comes into effect in March of next year, has also been generating a fair amount of discussion amongst insurers, and this year has seen companies devoting a significant amount of time and energy to it. The changing tax laws have altered the way insurers need to quote on new business, according to Smit. “Cover will need to be limited to net salary. For salaried lives, this is a fairly simple problem, but for the self-employed or business owner, this becomes a bit more complicated. An insurer who has a method that allows someone to get more cover with them than other insurers will enjoy a competitive advantage,” he starts. He adds that insurers will also need to manage over-insurance on their existing policies. Some insurers have allowances in their policy wording to make adjustments to policies in light of changes in legislation or tax regulations. “If they don’t take this option, they will need to encourage their in-force books to amend their cover amounts where they are over-insured,” Smit says.

64 6 8

For those who are currently in claim, their pay-outs will no longer be taxed. A significant portion of claimants could now be receiving a monthly claim payment that is greater than their earnings before disability. Insurers are, therefore, going to have to manage these claimants carefully to ensure that they do not stay in claim longer than required. “It is going to be very interesting to see where all the players in the market land once all of the new regulations have finally been put in place,” Schalk Malan, executive director at Brightrock says. “One thing that was interesting in this year, was how the industry evolved in terms of the Treating Customers Fairly Act (TCF). The industry is definitely moving towards a much more formal implementation of the Act’s outcomes. We saw a lot more being done around adopting practices firmly embedded in legislation and being part of legislative outcomes. Most companies have put a lot of work into designing and redesigning their business to conform to TCF,” Malan says. “A lot of product providers have also focused on developing their agencies, specifically to protect themselves against potential RDR risks,” he adds. Ryan Chegwidden, head of finance, claims and product development at Altrisk adds

that the market has seen an increasing shift in distribution from independent brokers to the tied agents. “It was largely driven by remuneration and the fact that brokers have definitely started seeing more value in getting support within a larger organisation, rather than to fend for themselves. Competition for distribution has also become intense over the last year,” Chegwidden says. Malan agrees, adding that, at the same time, insurers have increased their focus on the direct distribution channels.

Product evolution The market has seen a number of new life cover products being made available. Early in the year FMI introduced its income benefit life cover product. The product was made possible by the changing tax legislation, which stipulates that income benefits on life cover will not be taxed, going forward. Recent years have seen increased focus on income protection, according to Smit, and 2014 has been no exception. “Wider cover is becoming more important, with critical illness cover products having started to compete to cover more and more critical and dread diseases,” Smit says. “We are starting to get increased pressure to

RYNO Killing himself with 30 a day.

quote on more obscure occupations that we currently decline, as well as more sub-standard health cases. Given the pressure on insurers to write business, we can expect them to start developing offers for these cases. This might be through a different underwriting approach or through redesigning products,” Smit continues. Finally, Chegwidden adds that the past year has also seen a shift in the way that insurers rate risks. “To take Altrisk as an example, in this year we introduced our Proactive Smoker product, which rewards members for quitting smoking. Similarly, we are seeing more and more insurers taking a closer look at their risks, and basing their assessments and products on more detailed information,” he says.

submit a claim under. Some of these criteria are an advantage to claimants, while others are not as beneficial as they might seem. We can continue to look forward to insurers tweaking their claim criteria,” he says. “From what I have seen, the pressure to write new business volumes has resulted in insurers relooking at the established way of doing things. You can expect there to be a couple of interesting announcements from insurers in order to gain some kind of competitive advantage. “It is quite difficult to predict what exactly will be done, but there will be something interesting offered in the near future,” Smit concludes.

Challenging old processes Chegwidden points out that the industry is starting to see an increased drive towards simplifying their products and a challenging of old processes. “The focus is on making products simpler and more cost effective. We expect to see an increase in this trend, and insurers will continue to tweak their products for efficiency. “Much like critical illness became a competition to have the longest list of conditions covered, income protection is becoming increasingly focused on the number of criteria you can

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Early detection means younger cancer patients

Andre Froneman, product specialist at Altrisk

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Specialist life insurer Altrisk says its insurance claims statistics show that cancer claims, particularly for breast cancer, are happening at increasingly younger ages. This could mean that women are heeding the call for early detection and diagnosis.

ltrisk has noted a distinct shift over the past five years, with an increase in early cancer claims, particularly for breast cancer. There are more claims for stage 1 and 2 cancers, and a decline in claims for more advanced stage 3 and 4 cancers. “The emphasis on pre-emptive screening and early diagnosis and treatment cannot be emphasised enough in the fight against breast cancer. Early detection and treatment of breast cancer are important factors in winning the battle and surviving with less extensive, invasive surgery – and with your finances intact,” says André Froneman, product specialist at Altrisk. The insurer reports that breast cancer and heart disease are the leading causes of critical illness and death claims among its female clients, and yet on both these fronts, women remain significantly underinsured. This is why it is essential that brokers ensure their clients have the right insurance cover in place to protect their financial security, should they contract a critical illness. And women should not neglect this type of insurance while they are young. “The reality is that you need to have cover in place when you are younger. This is the most productive time of your life, when you are most reliant on your income to meet financial obligations, take care of your family and secure a comfortable future,” adds Froneman. The good news is that early detection and diagnosis means that survival rates have gone up dramatically too. Almost two out of every three women with breast cancer now survive the disease beyond 20 years, compared to less than half in the 1990s. Research and early detection are at the heart of this progress. What many women don’t take into account is that even with an early stage cancer diagnosis, treatment and recovery can be a long and even debilitating process. During this time, you might not be able to work, and may perhaps even suffer side effects of treatment. “Besides having to cope with the emotional and psychological trauma of cancer, the side effects of treatment can have a dramatic impact on your normal day-to-day activities and your ability to work and earn an income,” explains Froneman. Advisers should ensure their clients understand the financial consequences of what could happen if they were to contract a serious illness, and have a plan in place should this occur, because for most people insurance is the only way to manage the risk cost effectively.

Altrisk claims stats The majority of the critical illness, life and disability claims are made by women between the ages of 41 and 55, says the insurer and shares further information on these: Of the total claims by women, 23 per cent are

for critical illness, 30 per cent are life claims and 22 per cent are disability claims, often as a result of suffering a disabling critical illness. Of all Altrisk’s 2013 claims by women, breast cancer accounts for 23 per cent and cardiac conditions account for 25 per cent. Both these illnesses share equal prominence in female healthcare circles, and heart disease is no longer the ambit of middle-aged men. The age band of women with the highest number of critical illness claims submitted is 31 to 50 years of age, the prime of one’s life and working career. The age band with the highest number of disability claims is 41 to 50 years of age.

RYNO Pays a packet for risk insurance as a smoker.

Of all the cancer claims by women, breast cancer dominates as the leading claims cause, where the highest number of claims is in the age band 41 to 50, followed by 51 to 60. Heart disease and strokes are increasingly vying for the leading cause of death and critical illness claims by women, with the largest percentage of affected women between the ages of 41 and 50. This closely maps heart disease statistics in men where the age group 41 to 50 also registering the highest percentage of claims for heart disease. In terms of female sums assured, the average sum assured on life is R780 000, and on critical illness it is much lower at R320 000. When one considers the real costs of medical treatment, rehabilitation, lost income and any necessary lifestyle changes, it soon becomes apparent that women are still woefully underinsured when it comes to dealing with a serious health or life threatening crisis, says Altrisk.

Cancer among South Africans According to the Cancer Association of South Africa (Cansa) the top five cancers among South African women are: breast cancer; cervical cancer; origin unknown (where it is not possible to determine where the cancer originated in the body); Kaposi sarcoma; and colorectal cancer. The lifetime risk for South African women to contract cancer is one in nine. Among South African men, the most common cancers are: prostate cancer; unknown origin; lung cancer; Kaposi sarcoma; and colorectal cancer. The lifetime risk for South African men to contract cancer is one in eight according to Cansa. Further research from Cansa shows that 90 per cent of cancers are caused by environmental and lifestyle factors such as smoking, diet and exercise. More than 100 000 South Africans are diagnosed with cancer every year, and the South African cancer survival rate is six out of ten. One in four South Africans is affected by cancer through diagnosis of family, friends or self.

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Choosing an

income protection provider?

Answer these questions first!

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assessment. These ‘fast track’ options make it easier for your client to claim for certain conditions and receive their pay-out quickly. Therefore, an insurer that offers criteria that allow quick claims with fewer requirements is an insurer worth considering. Finally, look at the insurer’s requirements around aggregation and proof of loss of income at claims stage. Different insurers have different rules that can drastically reduce your client’s benefit pay-out.

Nic Smit, product actuary at FMI

he disability cover market is growing, and your clients have more options than ever when it comes to choosing a provider for their income protection needs. But how do they decide? Start with these three questions:

Will my client’s claim get paid and how much will they receive?

For most clients, the most important part of their insurance policy is the pay-out they receive if they claim. This makes claim certainty the most important element of any income protection product – will your client get paid and how much? Most insurers have numerous claim criteria. However, quantity is not as important as quality – rather than counting the number of ways your client can claim, you need to consider how each claim criterion on offer works at claim stage. Occupational Disability is still the criterion under which most income protection claims are paid and is, therefore, the most important criterion. It is important to select an insurer with expertise and experience in disability claims assessment as temporary disability claims, in particular, can be more challenging than life claims. Research shows that 20 per cent of all temporary disability claims are for partial disabilities which are either assessed on a percentage disabled or a loss of income basis. Both assessment methods have advantages, so it is important to consider an insurer that allows your client to choose between the two methods, rather than be dictated to by the insurer. Some insurers allow claims for certain common temporary conditions (like fractures) without requiring a full occupational

Can they get cover that matches 100 per cent of their needs?

Income protection should not be one-sizefits-all. It is important that your client gets cover that is flexible enough to match their specific needs. As most individuals need their full income to survive, clients should be able to cover 100 per cent of their income until the day they would have retired. However, some insurers only allow cover of 75 per cent after the first two years of a disability, meaning that clients are left with the risk that, if they still cannot work after two years of disability, they will experience a shortfall in income. You should also consider waiting periods. Shorter waiting periods cover a greater portion of a claim, but longer waiting periods have a cheaper premium. A variety of waiting periods, as well as the option to select multiple waiting periods depending on client needs, will allow you to select the best cover for your client at the lowest premium.

Can my client change their cover at a later stage without further underwriting?

Income protection needs are likely to change over time (think a growing family or a changing business) and it is impossible to predict these changes beforehand. Consider what options are available to update your client’s cover over time, without requiring them to be medically underwritten again. The truth is that most individuals will experience a deterioration in health over time that will have an impact on the extent to which clients can update their cover.

SAVE THE RYNO Ryno needs to quit the killer. With a commitment to do so, Altrisk will give him a reduced premium from day one. Plus we’ll help him quit. If your clients smoke talk to them about Altrisk’s Proactive Smoker – it could save their life and their pocket. For more information speak to your Altrisk broker consultant or go to www.altrisk.co.za

We’re your type of risk insurer.

A word of warning around changing cover at a later stage - some options have restrictions that depend on loadings, exclusions, or previous claims. And these are often buried in the small print. For an income protection product to be effective, it must be able to fulfil the purpose of income protection – protecting your client’s future income with cover that is complete and flexible.

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

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316 million at high risk of

type 2 diabetes T

he International Diabetes Federation states that there are currently 382 million people living with diabetes worldwide, compared to the 30 million people diagnosed with the disease in 1985. By 2035, this is expected to increase to 592 million, which means one in 10 people will have the disease. And some 316 million people are currently at high risk of developing type 2 diabetes, with the number expected to increase to almost 500 million within a generation. Type 2 diabetes is mostly caused by unhealthy lifestyles and can thus be prevented or managed successfully to avoid complications. Unfortunately, ignorance prevails in most cases, therefore, this pandemic remains undiagnosed in many people. “Heart diseases and strokes are some of the main causes of death and disability among people with type 2 diabetes, and these two diseases remain in the top three claims events under the Momentum Myriad critical illness benefit,” explains Adela Osman, chief medical officer at Momentum. “People with diabetes have an increased risk of developing a number of serious health problems affecting various organs in the body along with a higher risk of developing infections, cardiovascular disease, blindness, pancreatic diseases, kidney failure, and lower limb amputation,” notes Osman. November 14 is World Diabetes Day and marks the birthday of Frederick Banting, who, along with Charles Best, discovered insulin in 1922; a life-saving treatment for people diagnosed with diabetes.

Prevention tops list A number of factors contribute to more people being diagnosed with diabetes, and the majority can be managed to minimise the occurrence of the disease. These factors include the rapid rate of urbanisation causing people, across the globe, to break with traditional lifestyles and diets and move to less healthy, more inactive lifestyles and unbalanced diets. This has led

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to, particularly in developing countries, a rapid increase in obesity which could result in diabetes. In fact, sedentary lifestyles increase the risk of diabetes by between 20 and 40 per cent. Osman adds that “a great number of researchers have confirmed that diabetes is closely related to body mass index (BMI) in excess of 30kg/m2 and a waist circumference in excess of 102 centimeters for men and 88 centimeters for women. In South Africa, recent studies have shown that six out of 10 women had waist circumferences greater than 88 centimetres which put them at risk of developing diabetes and other cardiovascular diseases. Actually, women that are diagnosed with diabetes have a 40 to 50 per cent greater risk of heart disease compared to men with diabetes”. Studies also highlight the fact that South Africans are developing comorbid diseases from a younger age with high blood pressure

and cholesterol starting to peak from as early as 25 years. The City of Cape Town issued a statement noting that diabetes continues to manifest as one of the most prevalent chronic lifestyle diseases and causes of death in Cape Town. The city has implemented a number of initiatives to encourage healthier lifestyles among residents. Osman emphasises that “a balanced diet is key because poor nutrition is a modifiable risk for diabetes. High carbohydrate diets are notorious for contributing to obesity which then leads to increased insulin resistance, resulting in type 2 diabetes. It is tragic to realise that almost 90 per cent of all diagnosed type 2 diabetes could be prevented by simply following a healthy lifestyle.” Osman explains that in 2002 the company launched Momentum Interactive along-side Myriad, its long-term insurance product, as a new approach to underwriting that rewards clients if they follow a healthy lifestyle based on factors such as BMI, cholesterol and blood pressure. “The rewards include guaranteed premium discounts for life. In order to secure these lifelong discounts, we encourage our policyholders to complete a three yearly online reassessment questionnaire whereby they provide us with additional information relating to their health and lifestyle,” she adds. This information is used to calculate a premium discount, based on a clients’ unique circumstances. From a claims perspective, as more health-conscious clients join Momentum Myriad, the risk pool becomes healthier, and the claims experience becomes more favourable. For clients, this means more affordable and sustainable premiums. “Healthy choices becoming easy choices could go a long way in preventing type 2 diabetes. The mere fact that type 2 diabetes can be prevented or managed successfully demonstrates that it is in our power to control certain conditions if we make informed decisions. The choice is yours,” concludes Osman.

The worst

catastro p From weather disasters to grievous aviation disasters, RISKSA has a look at the events of 2014 that shook the industry.

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o phes of 2014 Dominic Uys

he past year has witnessed major disasters, both natural and man-made. And while 2014 has been marked by noteworthy improvements in the profits for most of the major insurers and reinsurers globally, the effects of the catastrophes from the past 12 months are sure to be felt in the financial results of these same companies next year. Here are some of the disasters that rattled the insurers this year.

South Africa Gauteng once again fell victim to hail and flooding at the start of the year, with total losses from the season’s weather estimated to be in the range of R1.6 billion according to a report by Santam. The most noteworthy and unique event of this year, however, has to be the anomalous magnitude 5.3 quake that was felt throughout Gauteng and North West Province in early August.

Admittedly the earthquake was mild by geological standards. The US Geological Service assigned a green alert for economic losses and shaking related fatalities, indicating a low expectation of damage and casualties. That said, the quake damaged and destroyed around 400 homes, resulted in one death and was estimated in a press statement by Willis Re, to cost in the region of R140 million in claims.

Pakistan and India Monsoon rain in September brought with it massive flooding in parts of Pakistan and India. At least 648 lives were lost, and approximately 375 000 homes destroyed. The total cost of losses is still being calculated, but tentative estimates place economic losses in the Jammu and Kashmir regions at $16 billion. Insured losses are estimated around $150 million, according to Aon’s Global Catastrophe Recap. This is the fifth consecutive

year that Pakistan has suffered multi-billion dollar catastrophe losses. The monsoon has also been ranked as the single most costly catastrophe event of the year by Aon.

Mexico The strongest hurricane on recent record hit Mexico’s Baja peninsula in September, resulting in the loss of five lives and 135 injuries. Hurricane Odile came ashore near Cabo San Lucas, made landfall and resulted in major damage to thousands of structures. Aon’s catastrophe report has determined infrastructure losses to be around $596 million, and Mexico’s national commission of insurance and bonds reported preliminary insured losses of at least $522 million. The MultiCat Mexico 2012-1 catastrophe

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bond was established to provide protection to the Fund for Natural Disasters of Mexico, which was placed on Standard & Poore’s negative credit watch due to its exposure to the hurricane.

Prefecture near the city of Aki, Shikoku Island in August, with maximum sustained wind speeds of around 85 mph.

The bond will pay 50 per cent of principal if the hurricane had a minimum central pressure of between 920 millibars (mb) and 932 mb. While pay-out is likely, according to Willis Re’s latest insurance-linked securities update, investors are still awaiting post-event procedures for final confirmation.

From there the typhoon moved over Honshu, Cape Muroto Kochi and Shikoku Island. Over 700 flights were cancelled over the August 9 and 10 weekend, roads were disrupted and more than 3 200 houses flooded. Willis Re’s summary of cat events, published in August of this year, estimates insured losses for the event to be approximately $1.1 billion, closely mirroring the losses from Typhoon Roke.

China

USA and Canada

Tropical Storm Fung-Wong resulted in multiple landfalls in the country in September, killing three people and destroying 250 homes. Aon’s Global Catastrophe Recap places losses for this event at $155 million.

It was another record winter in North America and, according to a half-year industry report by Munich Re, the extreme cold weather has driven the biggest losses in this part of the world. Losses from blizzards were approximately $3.4 billion. The single most costly snowstorm occurred early in January over the eastern seaboard. Munich Re states that total losses came to $2.5 billion, of which $1.7 billion was insured.

Aon adds that severe thunderstorms were also reported in Gansu, Shanxi, and Inner Mongolia. Massive hail and damaging winds crippled the agricultural sector in these districts and losses of around $134 million resulted. Severe winter weather across the country caused an estimated $1 billion in loss and damaged around 100 000 structures.

Another blizzard at the end of January over the southern states brought metropolitan areas to a standstill, resulting in 13 deaths and around $250 million in damages.

Japan

Europe

Typhoon Halong was the first of its type to result in landfall in Japan in three years and has been likened to Typhoon Roke, which hit the region in September of 2011. The Category 1 typhoon made landfall over the southeast coast of Kochi

Persistent flooding in the regions of the United Kingdom, including Wraysbury, South Wales, Gloucester, Datchet and Hastings as a result of the winter storms between December 2013 and January 2014, lasted well into February.

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What has been hailed as the wettest winter in the known history of the UK, resulted in $1.1 billion in insured losses according to Willis Re’s summary of natural catastrophe events. This figure is, however, relatively low considering the widespread nature of the flood, since it was mainly rural areas that were affected. Also early in the year, Windstorms Anne and Christina raged through parts of France, Scandinavia and the UK. Three deaths were recorded and a combined total loss of around $500 million, according to Aon.

Malaysian Airlines Other disasters on this list have been itemised according to country, but one company has suffered severely enough in 2014 to warrant its own entry. Malaysian Airlines this year suffered two major losses that, some have speculated, may well sink the company. The combined effect of the disasters is, however, more far-reaching, and it is expected to raise insurance rates for the commercial airline industry across the board. Flight MH370 went missing on 8 March, taking the lives of 227 passengers and 12 crew members. Alliance paid out a total of $30 million. Flight MH17 was shot down over the Ukraine on 17 July, resulting in the deaths of 283 passengers and 15 crew members. The hull cover on the doomed plane was $97.3 million, according to a report by Aon.

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A UR AT RS TE

URBANISATION

What risks

may come

Some in-depth predictions have been made about the ‘next big thing’ regarding risk. Many of the findings have been quite surprising, and it seems that the industry may not be ready for what is coming. Dominic Uys

IVI

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E NT

T EC

CYB

ILIT

B LIA

y now it is no secret that the nature of risk is changing, and changing at an increasingly rapid pace. As technology advances and becomes progressively more complex, there is not only a rising number of risks due to accidental failures, but also due to criminal activity. These are, however, not the only drivers behind new and emerging risks and throughout the year a number of experts have commented on both the most likely threats to the industry, and the insurance industry’s preparedness to face them. Thomas Hürlimann, chief executive officer at Zurich’s global corporate business, this year noted that the majority of the new risks to the industry will hinge on three undeniable and interconnected trends of the modern world.

Three drivers of risk Firstly Hürlimann points out that globally, urbanisation continues to grow, with around 50 per cent of the world’s population now living in major cities. That number is growing and in 30 years from now it is estimated to increase to 70 or 80 per cent.

The second aspect is natural disasters. Weather-related natural disasters have steadily increased linked to factors like global warming, and floods, snowstorms, typhoons and hail have increased in intensity as well. This trend, laid over accelerated urbanisation, already points towards one problem for the industry. As the vast majority of cities are located close to major natural resources like rivers or oceans, the ever growing amount of wealth and assets in these cities is coming under threat. Finally, the growing interconnectivity of the modern world has made businesses across the globe interdependent in a way never seen before. “If a machine factory burns down in Africa, a factory in Europe or South America also grinds to a standstill,” Hürlimann notes. The key words in Hürlimann’s analysis are interconnectedness and complexity, which he points out will be the basis of the vast majority of the challenges insurers will face in the coming years. Various other observers, such as Willis Re have also made note of the importance that interconnected risks will play in the near

future, with the added dimension of the world’s growing reliance on digital communications.

Naming 26 possible threats Swiss Re this year also published a list of emerging threats in one of its Sigma studies. Instead of merely looking at drivers, the study called 26 future risks by name, rating the likelihood and larger impact of each as well. The study, New emerging risk insights, categorised threats as high, medium or low impact emerging risks and while some of these, like cyber liability and reputational damage, seem quite obvious, a few of the results are somewhat more surprising. One such example, classed as a medium impact risk, was the evolving plant pathogens that threaten rubber production. According to the report, South America has witnessed the emergence of a fungus to which rubber trees are specifically vulnerable. 

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Rubber production in the region has already suffered as a result and it is speculated that if this pathogen spreads to Asia, around 90 per cent of the globe’s rubber production will be in jeopardy. The affected insurance sectors are not merely limited to the short-term and motor segments, but also medical insurers may be affected. The importance of cloud computing security was also noted, and this is one prediction that was recently proven accurate. In September of this year, barely a month after the report, hackers accessed the personal pictures, information and messages of a number of Hollywood celebrities, models and sports stars, along with scores of regular people, and posted the information across the Internet. The one thing that the cybercrime victims had in common was that they all stored their information on Apple’s iCloud. While the company has stated that it would be working with investigators to find the culprits, legal battles are also bound to follow. While cloud computing has made data storage cheaper and more versatile, the report also notes that its risks are still largely unknown. Much more than the invasion of privacy, risks may, to a large extent, also include internal data loss for companies and partial business interruption. Once again, a somewhat surprising finding was the fact that the risks around e-cigarettes are also largely unexplored. While hailed as a healthier alternative to smoking, the report points out that there are still not enough published studies on how the water vapour used in these devices affects the human respiratory system. That said, it seems that some insurers have taken note of the report and have added exceptions around e-cigarettes in their policies. The health industry may also be affected by the increase in the use of aluminium in cookingware around the world, and especially in third-world countries. The long term effects of aluminium on the human body possibly include a long list of cancers and related illnesses. The collapse of oceanic ecosystems and even genetic testing also made Swiss Re’s list. In the end, David Cole, Swiss Re’s group chief risk officer, sums up the look into the future with these words: “The future is not a simple linear extrapolation of the past. Rather it is characterised by rapid and continuous change, thus looking back and extrapolating past experiences into the future is not sufficient to assess tomorrow’s exposure.”

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The notorious

time killer

Social media is infamous for sucking the productivity right out of the workplace and in some cases causing its fair share of reputational damage. It has, however, become an almost unavoidable part of your employees lives, so good social media policies are becoming paramount. Dominic Uys

mbracing the benefits of modern technology including computers, smart phones and tablets is a vital tactic for any business, and social media has proven itself to be an incredible business tool. However, without a good social media strategy, companies also expose themselves to a number of new risks.

ensure that their contracts of employment or Internet and email policy contain provisions that inform employees that they should not have an expectation of privacy in relation to their use of employer-provided resources, and that the employer has the necessary consent to intercept employees’ communications when using the employer’s work tools,” Wilson imparts.

It has been estimated that companies lose about seven times more productive hours due to their employees’ use of social media, than as a result of regular smoke breaks. Companies aren’t only exposed to internal problems, as demonstrated by Justine Sacco, former media PR exec who, with one racist tweet on her personal Twitter feed, dragged her company into the public spotlight in the worst possible way. For this reason, Shelley Wilson, partner at corporate law firm, Bowman Gilfillan says that companies need employment policies that clearly lay out what employees may and may not do regarding social media use, especially with the work tools provided to them. “Given the potential for abuse and confusion, the increasing use of technology in the workplace has necessitated that employers implement policies which clearly regulate behaviour,” Wilson comments. “One of the ways of ensuring that work tools are only used for work-related purposes is to include a clause in employees’ contracts informing them that they should not have an expectation of privacy, and that the employer has the right to monitor their use of the work tools provided to them, including accessing communications,” she adds.

The most effective way to manage employees’ use of social media websites is to make provisions in either their contracts of employment, or through a company-wide social media policy that regulates the use of social media sites during working hours, irrespective of whether or not they are using the company’s tools to do so. “In the knowledge that their employer may at any time monitor their usage of work tools and intercept electronic communications, employees may be less likely to conduct personal activities during working hours.”

RICA in perspective The Regulation of Interception of Communication Related Information Act of 2002 clearly states that an employer may not intentionally intercept an employee’s e-mail. Sections 5 and 6 of the Act, however, put forward some exceptions to this rule. Wilson notes that section 5 is the most important exception where the employer is concerned. It allows the interception of communication with the consent of the party to that communication. “For this reason, it is important that employers

One commonly used method of managing this during working hours is to block access to these platforms when using the company’s equipment. Steven Adams, associate at Bowman Gilfillan also weighs in, pointing out that outside of working hours, the more important question is in relation to the content that is posted by employees. “If the content of statements made is defamatory or has the potential to bring the employer’s name into disrepute, the employer would be within its rights to take disciplinary action against the employee. Ultimately, the employer would have to make an assessment on whether or not the content transgresses its code of conduct and warrants disciplinary action,” Adams concludes.

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Not if, but how

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Bitcoin experts welcome user alert Laura Owings

he National Treasury in September issued a user warning on the use of virtual currencies, such as bitcoin. Highlighting the increasing popularity of the digital technologies, the announcement drew attention to the risks associated with the relatively novel system. “While there are benefits associated with this new technology, it is difficult to assess those benefits against the risks of something so novel,

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innovative and technologically sophisticated,” said the alert. “Users of virtual currencies can, therefore, become susceptible to fraudulent or any other criminal behaviour as they may be less circumspect than usual when faced with the promise of high-return investment opportunities,” it said. Introduced in 2009, bitcoin remains an enigma

Treasury’s alert to consumers of the risks of virtual currencies is welcomed by bitcoin experts who say the permissive stance helps a growing industry become more secure.

both to general consumers and government regulators. Indeed, there has been no coordinated global approach to regulating virtual currencies and no country has given them legal status. The user alert, issued jointly by the National Treasury, Reserve Bank, Financial Intelligence Centre, South African Revenue Services and the Financial Services Board, is the first official stance to be released on bitcoin here. Some guidelines have been laid out abroad however, specifically in Europe. In Germany, for example, virtual currencies are recognised as a unit of account, which functions as private money or foreign currency but do not have a legal status, such as the euro. In Finland, virtual currencies are taxable, where capital gains tax apply when it is exchanged for another currency and also taxable when purchasing goods and services. In the US, there are reports that regulatory rules will be in place by January 2015 with a proposed licence, called BitLicence, for businesses that issue bitcoin, exchanges or transacts in virtual currency on behalf of clients. Although adoption in South Africa is lower than these countries, bitcoin is growing in popularity. Data from BitX, South Africa’s bitcoin exchange, shows that there has been an increase in usage since 2013, with a market of about 5 599 total bitcoins traded by the end of August 2014.

Particularly welcomed by BitX was the statement’s advice to consumers to properly vet the companies and investments where they do bitcoin business. BitX and its users have not noted any particular concerns about unscrupulous practices, according to Heyns. Indeed, Treasury tells RISKSA that it is not aware of any reported abuse or fraud cases linked directly to virtual currencies. It also notes that BitX requires that its users comply with the Financial Intelligence Centre Act (FICA), in addition to its own internal practices. “Although we recognise the potential benefits associated with the technology around lower transaction costs, processing speed and associated applications, there are also risks associated with it. It is therefore, incumbent upon regulators to evaluate whether virtual currencies need to be regulated and, if so, what the appropriate regulatory response should be,” Treasury says. In that way, the user alert should not pre-empt a particular regulatory response. Instead, it outlines a number of considerations that would inform regulation, including an appropriate balance of the cost of such regulation against the innovative potential of the new technology. Also, as use is still relatively small, regulations would have to bear that and potential growth in mind.

“Authorities are working to try and understand the growth in the use of the technology and associated applications, as a means to better understand the potential benefits and risks,” treasury says. Consumers too are examining bitcoin’s risks versus benefits. As the value of the currency at time of writing stands at R4 233, there is no telling what it will be worth next month. Indeed, Heyns says one of the problems with bitcoin is its volatility, but he expects this to level out in the future. “Over the next six to 12 months, we will see more applications that allow people to use bitcoin in a friendlier manner, driving adoption and helping price fluctuation become less of a problem,” he says. Such applications are also sparking a sea of change in the way people view bitcoin. Where Bitcoin was previously used for speculation, its integration with PayFast gives it a more tangible sense of being useful to buy and pay for real world things. “We believe the technology has a lot of opportunity to enable different kinds of financial services, so that’s a trend we hope to see growing,” says Heyns.

In July, the currency got its biggest boost when PayFast, a leading South African payment gateway, announced the addition of bitcoin as a payment method. The integration, in partnership with BitX, allows customers to use bitcoin to purchase from about 30,000 online sellers, with the sellers receiving South African rand in return. “In South Africa, we are seeing a steady growth of bitcoin users. There are a lot of people spending time and resources to develop tools to make bitcoin safer, more secure and more understandable,” says BitX’s Pieter Heyns. “The fact that the government released a statement giving clarity of the use of bitcoin was quite permissive, with caution, which definitely creates space for the further use of bitcoin,” he says.

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THE

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VAP Dominic Uys

Value added products (VAPs)have become standard in the vast majority of insurersâ&#x20AC;&#x2122; policies and the last decade and a half have seen the extra services offered on policies grow from just a handful of basics, to a plethora of services to suit the needs of most clients.

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ot all VAPs are created equal and many brokers and clients alike have gone through what can best be described as buyer’s remorse because of added services that seemed good on paper, but brought no value to the client.

Ronald Gall, director at Global Choices, begins by pointing out that brokers need to keep one thing in mind when looking for the right combination of VAPs for his client. “The broker needs to be cautious of the value adds that are not really linked to the primary insurance product. By this I mean that the VAPs in question should clearly be intended to manage or help with the insurable risks contained in the policy – motor cover that offers movie discounts as a VAP, for instance,” Gall says. “If you look at the fine that the Financial Services Board imposed on Discovery for adding shopping and other benefits to its policy, and thereby crossing the line into inducement, it should show you why the rest of the industry is now becoming a lot more cautious about the VAPs that we do endorse and link to a product. We want to stick to products that mitigate risk to the insured items. We, as an industry are also waiting for more clarity from the FSB on that,” he continues.

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When creating VAPs for an insurer, adding extra value to traditional service is more important than trying to invent something new and potentially, too far removed from the primary insurance product. So says Ryan Grill, sales director at One Loyalty, who adds that this realisation is paramount in a competitive environment.

Adding value to old VAPs “A decade ago, VAPs like roadside assistance or home assistance used to be ‘nice to have’. Today they have become a necessity, both in terms of competitiveness and risk exposure.

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Clients have come to expect these service offerings as standard, with direct insurers and even banks offering such benefits to give a complementary service to clients. Brokers are, of course, also under pressure to incorporate these essential services for their clients and insurers stand the risk of losing policy holders if they overlook or ignore these benefits. Not having these service offerings also increases insurable risk exposure, especially in the case of accident towing management which ultimately protects the insurers claim ratios”, says Grill. “A key point to be noted in being inventive is that although home assistance is not frequently used, it is a traditional benefit and perceived to be of some value. This particular benefit can also off-set an insurable risk claim, reducing administration in addition to giving policy holders peace-of-mind,” he says.

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“Where this service is specifically expanded to support both a combination of standard home assistance benefits and insurable risk cover (geyser and resultant damage claims), this would result in the client experiencing a comprehensive and seamless total household service,” Grill continues. Adding extra meaningful and focused value added benefits to traditional VAPs is paramount in a competitive environment,” Grill says. Grill also points out that insurers are eager to consider offering other VAP services as a means to strategically differentiate their business with Pothole Protect and Home and Convenience driver services being two examples. “The pothole cover, for example, can either aid the client in the recovery of their money should he not have insurance cover at all on their tyres and rims. Alternatively, where an insurer does provide this cover, their claims costs will be reduced,” Grill says. Similarly, Grill points out that the Home & Convenience Drive service combines many valuable benefits, including among others, protecting the client and passengers from driving drunk, avoiding a potential accident insurance claim, and providing a driver service for any other eventuality. “Other innovative and modern methods of providing greater value to clients whilst reducing insurers risk are to consider various risk management solutions. Examples of these are, weather condition notifications, property evaluation information or customised mobile applications,” he continues. Grill concludes that it is critical for insurers to analyse and assess the various value-added services and risk management solutions in order to strategically complement the company objectives.

kept in mind when it comes to VAPs and which side of the value-or-inducement divide they fall. “Just like the name says, a VAP should add value to the main product. The way we see it is that the VAP should be complimentary and enhance the main product. Due to this complimentary nature, it is important for the insurer and the VAP provider to work together when designing or implementing a product. On this note, there is an advisory role for the VAP provider to play as it is important to analyse historic utilisation patterns when deciding on a VAP,” Inglis starts Building on this, once a VAP is implemented, it is important to measure the on-going utilisation, according to Inglis, in order to make sure the VAP product stays relevant to the main insurance product. He adds that when initiating a VAP benefit, it is important to look at the long-term complimentary value of the VAP. “Don’t just implement a VAP to justify an increase and then fall foul of the inducement obstacles, because then you may need to change the VAP after only a short time. Ultimately the VAP provider also has the right to say no, should they be uncomfortable with the fit,” he cautions. Inglis states that one should also take into account what regulatory frameworks are needed to take into account when one creates a new product. “Regulatory frameworks play a very important part in defining VAPs in terms of creating the products and on-going servicing of these VAPs. As an example, we offer a Fines Protect product which helps the policyholder to get discounts and assistance on traffic fines. We had to look at a number of aspects,” Inglis continues.

Among these were defining the concepts of insurance as opposed to assistance products. “It was important for us to use the regulatory framework to define our offering. Due to the fact that we are assisting clients in getting discounts from the traffic departments our product was defined as an assistance product, and we don’t take the risk on paying out discounts,” he says. Terms and conditions for members also need to be scrutinised. “We have a strict compliance division who vets and signs off on our terms and conditions. Terms and conditions are important for us to clearly and in plain language explain the benefits to our members.” Lastly, Inglis states that correspondence and feedback, service level agreements and the state of the company’s service centre all play a vital role in the process. “We take note of the wider regulatory framework in terms of making sure all members receive the required documentation and marketing material. We also set up the appropriate channels for clients to contact us for assistance of if they have any issues that can be sorted out transparently. We also make sure we have agreements with all partners that set out the terms of service of our fines assistance. And finally, we need to make sure that we have the necessary technical setup to ensure we work within the regulatory frameworks,” he says. “In the end, it is all about adding value for the client and making sure that the insurer can maximise his appeal to new and existing clients. If the VAP doesn’t truly achieve that, then the insurer needs to rethink his choice,” Grill closes.

Walking the line While it is true that VAP service providers are not directly affected by the Financial Services Board’s (FSB), the regulator has expressed its concern over the fine line between adding value and inducement. Changing compliance requirements on insurers could also affect the whole market, from brokers to service providers. Rob Inglis, CEO of service provider, Road Protect, states that there are a few points to be

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10 years of O

FAIS

Laura Owings

internationally to set a bar for the level of professionalism expected in the financial services industry. “The biggest impact has been on professionalism, and that instils confidence amongst consumers and pride amongst those in the industry,” she says.

93 per cent,” she says. Furthermore, Da Silva says that FAIS has led to the disbarment of about 4 900 advisors. While many of those were because of not meeting fit and proper competency guidelines, many more were due to honesty and integrity issue.

“This 10 year journey hasn’t been without its challenges, but FAIS has become a successful piece of legislation,” says Caroline da Silva, deputy executive officer for FAIS at the FSB.

FAIS has laid the groundwork for license requirements, regulatory exams and a general code of conduct, fostering a more competitive market of financial advisors. Da Silva says the results of aspects like the exams speak for themselves.

“All this means that those who are left in the industry understand the rules of the game and the codes of conduct, further building customer confidence,” she says.

According to her, that success has not been limited to South Africa, but reached

“Today, 97 per cent of those required to write the exams do so, with a pass rate of

n September 30, 2004, the Financial Advisory and Intermediary Services (FAIS) Act came into effect. The legislation established a framework of financial service advisors, empowered consumers and set South Africa on a journey of tighter financial services regulation.

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Another major impact of the act was the appointment of the Ombud for Financial Services Providers. A body that receives complaints and helps consumers understand

management, practice management and business intelligence services to financial services providers, was launched at a critical time in 2004, enabling it to assist advisors to comply with the regulators’ criteria. Awareness on the part of financial advisors has also grown over the last decade, including the suggestion of some gaps in FAIS that could be improved upon in the future. For Middleton, one such gap involves how the regulation adapts to new areas that cause consumers harm. “If you look at what causes the most damage or losses to consumers, that would be investment schemes or scams that are largely in the unregulated space and fall between the cracks,” he says. Attention is also drawn to the one-size-fits-all nature of FAIS, an aspect acknowledged by both Middleton and Lightbody. “When the act was put forward, it was drafted with a one-size-fits-all approach to cover every eventuality that could be thought up,” Lightbody explains. “As time has passed, there has been a bigger realisation that that is not the most efficient.” In this way, the Treating Customers Fairly initiative is expected to bring about more customised legislation in terms of specific types of scenarios including different types of products and clients.

Both the advisor and the consumer have benefitted from the reforms laid out by FAIS in 2004. Ten years later, the Act symbolises the first step on a regulatory journey that continues today.

their needs and rights, it has benefited both financial advisors and consumers. “The ombudsman has enabled consumers to complain and get redress in an easy, cost effective manner, but it also allows for a balance between realistic and unrealistic expectations” says Rosemary Lightbody, senior policy advisor at ASISA, who served on the act’s advisory committee. “As the ombudsman does not always rule for the complainant, it has enabled those in the advisor field who are doing the right thing to keep from getting a bad name,” she says. In the 2012-2013 financial year, the ombudsman

reported 9 949 complaints, an increase of 13 per cent from the previous year. The amount of settled and determined cases also rose to a total R51 million. Experts suggest that increase is a result of growing customer awareness, due in part to the ombudsman’s accessibility and the media reports surrounding its rulings. “The number of complaints has steadily grown, but I wouldn’t say it’s because of greater inequalities or less appropriate advice. I’d say it’s because there are more consumers who are aware,” says Ian Middleton, managing director at Masthead. Masthead, which provides compliance, risk

Like TCF, the Retail Distribution Review and Twin Peaks are regulatory reforms on the horizon that show an ongoing commitment to protect customers and maintain a safe and secure financial environment. “There’s going to be more inclusive, streamlined supervision,” says Middleton of the future. “Regulators are going to be more invasive and questioning and potentially applying significantly heavier sanctions.” Lightbody concurs. “The FSB has said that it does intend to be more intrusive when it comes to supervision and enforcement,” she says. Having been involved with FAIS since its earliest days, Lightbody knows that the act was not put forward in 2004 in the shape that it is today. “It did not all fall into place 10 years ago. The advisory committee was very active and we were involved in a lot of developments under phase,” she explains. “It was an ongoing, iterative process and a very positive one.” For Middleton, there’s still road to cover before the industry is fully reformed. “The mere fact that we’re on this journey indicates that there’s still road to travel,” he says. “But we are closer today than we were 10 years ago, and I’m sure we’ll be even closer in 10 years’ time,” he says.

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Captive insurers, are you ready for SAM?

ith the Solvency Assesment Management (SAM) regime fast approaching, traditional insurers are applying dedicated focus on upgrading their systems and processes to ensure compliance.

implement the stringent SAM requirements. Magda Kendall, head of risk advisory and captive solutions at Aon South Africa comments that niche insurers need to be realistic when assessing their ability to comply with SAM requirements.

With little to no resources by way of manpower, niche insurers will typically rely on outsourced service providers to assist in implementation. However, this practice calls to question the ability of these niche insurers to adequately

She explains that the Financial Services Board (FSB) and the Reserve Bank, whilst considering all factors, including the size and complexity of the business, will ultimately hold board members accountable.

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six months after submission of the assessment to the FSB, is ‘probably not’. In addition the issue of ‘Board Notice 114 of 2014 – Proposed governance and risk management framework’ in September for implementation by 1 April 2015 will add to the effort required.

“An actuary’s knowledge and understanding C of the standard model and ensuring the data M quality is adequate – a concern of the FSB Y with short-term insurers, and the reason for the planned thematic review this year – should CM not be underestimated,” warns Kendall.

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“The ORSA is not a single document, nor a standard template, but rather the entirety of the process and procedures employed to identify, assess, monitor, manage and report risks and to determine the impact of your material risks on your capital requirements. An in-depth understanding of the Standard model to determine the Solvency Capital Requirement (SCR) is required together with the impact the risks in your insurance business have on this number,” says Kendall.

Pillar I and III The final Quantitative Impact Study (QIS), which was submitted in May 2014, along with the light parallel run, is in full swing with the comprehensive parallel run in 2015. The QIS forms the basis of the new reporting requirements in the form of Quantitative Reporting Template (QRTs) to the regulator. A key change under the SAM regime is that QRT’s must be completed by an actuary, whereas previously, short-term returns could be completed by an accountant only.

As a board member you should start asking CY yourself some of these questions: CMY • Do you understand what the drivers are to K determine SCR and Technical Provisions (TP) based on the QIS? • Do you know the difference between the standard model and simplification method contained in the QIS? • Do you have a risk rating methodology and risk register to evaluate the material risks and can you project the future impact of these risks on your SCR? • Have you developed and implemented your risk management policies? • How has your selection of assets affected the SCR? • Do you have a governance framework with control functions and resources to execute, monitor and report the results of ORSA? • Are the people that fulfil head of control functions qualified and experienced to provide assurance? • Have you embedded the results of the QIS3 to prepare for the SAM parallel runs? • Are you comfortable that you have the right resources to complete and submit the QRT’s? “If your answer is ‘no’ to some of these questions, it could mean that you might not be ready for implementation and the fast tracking of your activities is critical,” concludes Kendall.

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Kendall unpacks Pillar II by explaining that the most important outcome thereof is the ‘Own Risk and Solvency Assessment’ (ORSA) which will have to be submitted in 2015 as part of the comprehensive parallel run.

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2014/05/05

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POPI Survey results are in Melissa Anne Wentzel

Trustwave Holdings, a privately held information security company, recently released the findings of a survey of 113 South African IT professionals on their preparedness for the Protection of Personal Information Act (POPI). RISKSA takes a look at the results.

he act aims to provide all industry players with specific requirements on the processing of personal information and also to standardise compliance with privacy and data protection legislation. C-level executives, mid-level managers and IT specialists from various industries completed the survey, which focused on the processes companies should have in place to classify sensitive data, and the measures in place to prevent the loss, damage, and unauthorised access to that data. The data in question includes medical records, credit card data, and personally identifiable information (PII) like names, surnames, identification numbers, and medical histories. A significant 51 per cent of those surveyed indicated that they didn’t have processes in place to classify data correctly, and regarding the measures for the prevention of loss, damage, and unauthorised access to PII, 38 per cent said they had either technical or organisational measures in place, but not both, or they had neither.

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POPI requires all responsible parties to follow their eight listed conditions to ensure compliance with the act including: consent from any consumer for the processing of their information; a specific purpose for the collection of their information; the right of the consumer at any point to object and withdraw their consent; the existence of a specific request by the consumer to receive direct marketing; destruction of personal information where there is no specific purpose for retention; the right of the consumer to object, correct, access, and remove personal information held about them; the confidentiality and integrity of consumers’ PII, and a written agreement where third party administrators and other operators implement security measures to safeguard this information. The ‘confidentiality and integrity’ condition requires that companies notify the regulator and the customers in the event of a data security breach. A breach includes the loss, damage, and unauthorised access to PII, and a reassuring 67 per cent of respondents to the survey expressed confidence that they had not experienced a breach in the preceding 24 months where PII was affected.

What is less reassuring, however, is that according to the details of the findings of 691 breach investigations conducted by Trustwave in 2013, the average number of days from intrusion to detection is 87, which raises the possibility that South African companies may not even be aware a breach has occurred. A relatively small figure, 14 per cent, said they had suffered a data breach in the past 24 months, and 19 per cent were uncertain. “The most effective security strategy entails multiple layers beginning with a risk assessment,” says Leon van Aswegen, security consultant at Trustwave. The 38 per cent of those surveyed who felt confident their companies would be compliant with POPI within the next 12 months concludes that many South African companies are yet to make POPI compliance a top priority. Companies should consider a POPI compliance assessment tailored to meet their business’s requirements and define a strategy to comply with POPI condition 7, ‘security safeguards.

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Directors and officers

take cover Across the Europe, Middle East and Africa (EMEA) region, AIG is seeing company officials relying on specialised cover in an increasingly complex business and regulatory environment.

peaking at AIG’s Financial Lines Claims Conference in Johannesburg on 23 September, José Martinez, vice-president: financial lines major loss claims, EMEA, said that the company was experiencing an increase in claims related to directors’ and officers’ cover in business generally and financial institutions in particular. Across the EMEA region, AIG receives around 15 000 financial lines claims a year, and has around 20 000 open at any one time. “Legal liability is giving rise to more and more claims, probably because the whole business and regulatory environment is so complex,” says Mr Martinez. “AIG is championing mechanisms for alternative dispute resolution, like arbitration, to reduce costs and speed up the process for our clients. Our strategy is to be proactive and try to get claims settled early.” When it comes to directors’ and officers’ claims in commerce, Mr Martinez revealed that the number of claims was increasing by approximately 10 percent per annum. Some of that increase is driven by growth in the claims filed in respect for losses outside policyholders’ home jurisdictions—a side effect of globalisation and the drive by companies within developed areas to find new markets.

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There has also been an escalation in the number of bankruptcy claims related to allegations of mismanagement, perhaps a comment on the state of the global economy more than anything else. In Europe particularly, Mr Martinez says, growing shareholder activism and unprecedented regulatory scrutiny are contributing to growth in claims. More companies are suing their own officers, particularly with regard to excessive severance pay packages and general overpayments in the course of acquisitions and mergers. Industries especially affected include manufacturing, pharmaceutical, real estate, energy, technology and telecommunications. When it comes to financial institutions, a particular claims trigger has been misrepresentations regarding companies’ exposure to high-risk investments, such as sub-prime bonds. As in the commercial world, there has been a spike in companies suing their officers, and bankruptcy-related/bankfailure claims. “We’ve also noticed increased activity in the private equity/venture capital sector,” Mr Martinez comments. AIG’s data shows that financial institutions tend to settle with their clients before a claim is made, a by-product of

the realisation that complex products are more likely to be sold incorrectly than simple ones. Recent court decisions are placing a heavy onus on the institutions in this area. In the area of claims based on professional fidelity, AIG’s data shows that all types and sizes of companies are liable to suffer fraud, irrespective of industry. The company handles around 1 300 fidelity claims annually. Employee dishonesty remains the most important loss contributor, with growing numbers of senior managers implicated, but third-party fraud is on the rise. According to the 2013/4 Global Fraud Report, internal financial fraud/theft accounts for 27 percent of losses in sub-Saharan Africa and theft of physical assets for 47 percent. Vendor, supplier or procurement fraud is also an important contributor at 23 percent. Seventy-seven African companies have been affected by fraud, with the average percentage of revenue lost to peculation, equivalent to 2.4 percent of revenue. “In response, AIG has built up a team of 120 financial claims specialists across this region in order to help our clients negotiate the complexity successfully,” Mr Martinez concludes.

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SA employment tax incentive plan S M R E T ’S N A M Y A L IN

n an effort to alleviate the rising rate of unemployment among young South Africans, government has introduced an Employment Tax Incentive (ETI) – aimed at encouraging employers to introduce more young people into the workplace. A consistent and alarmingly high unemployment rate means our future workforce is not gaining the necessary skills or experience needed to keep driving the economy forward. But now, employers can help make a difference, and be rewarded for it. How does it work? INSETA CEO, Sandra Dunn, helps us put it in layman’s terms. According to a release from Statistics South Africa (National and provincial labour market: youth), youth unemployment rates are substantially higher than that of adults. The reports says that the scarcity of job opportunities

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for youth in the labour market is further reflected in absorption rates that are more than 20 per cent points lower than that of adults each year over the period 2008 – 2014. Young people without work are usually associated with a long list of social issues. The fact remains that when youth unemployment figures are low, more youngsters will be off the streets, injecting more money into the family household and learning new work and life skills along the way. Austria’s low unemployment rate (one of the lowest in financial crisis-stricken Europe) has gained significant interest. Even French Prime Minister, Jean-Marc Ayrault, has turned to Austria in search of resolution to soaring unemployment rates throughout Europe.

Youth unemployment is currently staggering at 25 per cent in 11 European Union (EU) states and 49 per cent or higher in Croatia, Spain and Greece, according to Eurostat. Youth unemployment is one of the biggest challenges currently faced by the EU. Many attribute Austria’s low unemployment rate to its so-called ‘apprenticeship guarantee’ a model which promises training for young persons who seeks to do trade apprenticeship, thanks to comprehensive support programmes from companies. Now, the South African Government has begun looking for solutions to youth unemployment by implementing ETI with effect from 1 January 2014. The policy promises to reduce the employers cost of hiring young people through

a cost-sharing mechanism, allowing companies to reduce the amount of pay-as-you-earn (PAYE) they pay without effecting the employee’s wages. The South African Revenue Services illustrate this by saying: “Employers who are registered for PAYE, and who employ a person (earning R2 000) for the full month of February 2014, will get R1 000 off their monthly PAYE liability, provided that the employee is a qualifying employee based on all the other remaining requirements.” Sandra Dunn, INSETA’s CEO says, “We would like all of the insurance sector employers; and in particular the SMEs to take advantage of the incentive – it’s the small and medium companies that are managing to create more new jobs.”

“One can try and understand the legislation in plain English, but with anything that requires an expert opinion, employers wishing to claim any rebates under the programme, must consult their accountants, auditors or a tax expert to ensure that they comply fully with the relevant legislation.”

Who qualifies? It is essential for a business to not only be registered with SARS for PAYE, but also to be in good standing in terms of the Tax Administration Act if they hope to qualify for ETI. Tax incentives will be calculated in accordance with formulae and equations as set out in the legislation. “Qualifying employers can only employ qualifying employees,” Dunn says.

Businesses located in any special economic zone or operating in designated industries have also been included as ‘qualifying employers’ where the age restrictions for qualifying employees do not apply. Nicole Paulsen, an associate at Cliffe Dekker Hofmeyr, one of the largest law firms in South Africa, explains the following exclusions: “An employer who is bound to a sectoral determination or a bargaining counsel agreement will not be eligible to receive the employment tax incentive if that employer does not remunerate that employee in accordance with the minimum wage. Where an employer is not bound by a sectoral determination, it is proposed that a minimum wage of R2 000 per month is applied. 

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“An employer will be disqualified from receiving the incentive where a finding is made by a competent court, the Commission for Conciliation, Mediation and Arbitration (CCMA) or a counsel or private agency that the employer ‘unfairly dismissed’ an exemployee in order to hire a new ‘qualifying employee’ and thereby take advantage of the tax benefit.

the incentive that they received for the previous twelve month period and will further be excluded from any future participation in the incentive.

Employers found guilty of an ‘unfair dismissal’ under these circumstances will incur an onerous penalty of 150 per cent of the value of

Which employees qualify?

“Lastly, the Minister of Finance may, after consultation with the Minister of Labour, prescribe any conditions by regulation that may be necessary in respect of granting the tax incentive,” Paulsen says.

Bear in mind the following criteria when

considering your employees for Employment Tax Incentives. ETI applies to employees who are South African citizens between the ages of 19 and 29 and receive a salary that is between the minimum wage of R6 000 for that specific sector. ‘Qualifying employees’ must be employed with the current employer (or associated institution) after 1 October 2013 and before 1 January 2017. Domestic workers and connected persons to the employer are excluded. Employees can be employed for part of the month – the incentive is then pro-rated.

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How does it work in practice? According to Dunn, the employer will not receive a cash pay-out. “The rebate amount is calculated based on SARS’s guidelines and deducted from the employer’s normal PAYE returns to SARS. The rebate reduces as the employee’s salary increases and is also less after the first 12 months,” she adds. There are three brackets for calculating the rebate: In the first 12 months the following applies: • Bracket No 1: employees earning less than R2 000 per month, the rebate is 50 per cent of the employee’s salary. • Bracket No 2: employees earning between R2 000 and R4 000 per month, the rebate is R1 000 per employee. • Bracket No 3: employees earning between R4 001 and R6 000 per month, the rebate is based on a formula. In the subsequent 12 months and beyond, the following will apply: • Bracket No 1: employees earning less than R2 000 per month, the rebate is 25 per cent of the employee’s salary. • Bracket No 2: employees earning between R2 000 and R4 000 per month, the rebate is R500 per employee. • Bracket No 3: employees earning between R4 001 and R6 000 per month, the rebate is based on a formula. Businesses can apply for a tax directive for qualifying employees by using the IRP3 form and then have the payroll administrator affect the tax rebates as a deduction in accordance with the formulae on a monthly basis, namely employee salary tax less the incentive (PAYE). If an employer (in the absence of an arrangement with SARS) fails to submit any tax returns or owes a tax debt to SARS on the last day of any month, then the employer will not qualify for the rebate. According to Paulsen, if in any month the incentive amount exceeds the PAYE due, the amount may be rolled over to the next month. She further explains there is, however, an excess limit of R6 000 per qualifying employee that may be rolled over and that a roll over may also be applied for future use during a period of tax debt or return submission. About 500 000 pupils leave school every year to enter the job market. However, only a small percentage manage to find employment. Other attempts by government to introduce youth subsidy programmes have been questionable. But the introduction of the Employment Tax Incentive can prove to be a most welcome solution to the increasing youth unemployment rate in South Africa.

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The

Toeing BetterBusinessBreakfast

e n i l the

Dominic Uys

The most recent pop-up conference hosted by RISKSA, the Better Business Breakfast: Keep it compliant, sponsored by IsoMetrix, once again failed to disappoint. The seminar, hosted at Constitution Hill in Johannesburg, focused on the intricacies of compliance with the regulations of the industry. From technology trends to environmental litigation, speakers at the event endeavoured to give delegates the widest possible view.

he RISKSA Better Business Breakfast seminars have not only presented the industry with cutting edge insights on better business practices, they have also gone one step further by setting the scene for these presentations in a most creative way. Readers will remember that the previous breakfast event was held at the Wits Medical School, a fitting setting for the day’s topic of medical aid schemes. Similarly, the old women’s correctional facility on Constitution Hill provided the perfect backdrop, given the theme of compliance and the repercussions of falling foul of industry regulations. Paul

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Marketos of IsoMetrics welcomed delegates and speakers.

Developing an integrated system Mark Victor, director at Deloitte’s risk advisory division, and Yolande Kruger, associate director at the division started the day’s presentations with a closer look at evolving trends and challenges in integrated governance risk compliance (IGRC), as well as adding value to the business model. “What we are talking about is integrated, standardised and streamlined GRC functions, providing strategic enablement to support an

organisation’s Business Model. This includes aligned frameworks, taxonomies, processes and reporting, as well as an integrated system providing efficient, effective and sustainable support to business operations and decisionmaking and appropriate assurance over the control environment,” Victor explained.

At execution stage, the company needs to evaluate the quality and integrity of the data and reconfigure procedures as required. In the final two stages, embed and improve, technology and business converge and the company takes control of the newly implemented system.

Victor also noted that business conditions are changing, with executives and directors being held to higher standards and levels of accountability. “With this, compliance costs have spiralled amidst the increasing volume and complexity of laws, regulations and rules.

The cost of non-compliance

Other factors such as more aggressive stakeholders, increased demand for transparency and more pervasive risks have all had a hand in changing the industry,” he said. Victor adds that there are also some specific pains that many companies share. In terms of compliance management, there is a desire to reduce complexity to improve effectiveness and lower cost. Many companies are also barely coping from a technology perspective, with systems primarily not being utilised to their full potential. Many companies are still using manually intensive processes to manage their compliance systems. Technology and compliance management systems can, however, offer companies some significant advantages. That said, Kruger points out that putting the data management system in place is not a single step process. At definition stage, the business needs to develop its own framework for handling compliance issues and analyse the causes and consequences for failing to meet compliance standards, develop a loss data collection and incident reporting process and develop a company-wide control framework. Technology and software should be scrutinised to ensure it meets company standards.

Lucinda Janse van Rensburg, managing director at Implex Legal Compliance Solutions, points out that businesses that do not comply with environmental compliance requirements will continue to face even more dire consequences, going forward. The judgement against the director of Blue Platinum Ventures earlier this year sent ripples through the industrial sectors in the country, and with good reason. The company director was found liable for the environmental noncompliance issues of the company and handed a suspended sentence, on condition that he and the company pay for and oversee the rehabilitation of the affected area. The case is significant because it is the first court case where the individual directors of a company have successfully been held personally liable for the compliance failings of the business. It is, however, not the only recent case that businesses need to sit up and take notice of. Golfview Mining was found guilty at the end of 2012 of illegally mining in a wetland, and the company was fined R1 million. In addition, the company is also held liable for the rehabilitation of the area, which may amount to as much as R50 million. In 2013, timber producer, York Timbers was also fined R180 000 and handed a confiscation order of around R480 000 for failure to incur the costs involved in obtaining an environmental authorisation before the commencement of a

listed activity. The company demonstrated a willful effort to avoid regulation and the company was prosecuted under the Prevention of Organised Crime Act. Nkomati Anthracite and Coal of Africa were also handed stiff fines last year. Janse van Rensburg notes that there are some lessons to take from these cases as to what companies can expect if they are found guilty of non-compliance. It appears that the fines imposed on these companies are suspended in most cases. This must, however, not create a false sense of security, according to Janse van Rensburg. The other punitive measures imposed on the companies are more catastrophic than mere fines. Rehabilitation costs exceed fines by far. Payments to affected parties are also likely to pinch the business. Both Golfview and Nkomati Anthracite paid out between R3 million and R4 million in damages. Along with this, suspension of activities and personal criminal liabilities are also more likely to arise. The final speaker of the day, Paul de Kock, director of Metrix Software Solutions, gave delegates a demonstration of his company’s software-based approach to compliance management. De Kock sums up the status quo by pointing out that accountability for an organisation’s compliance records is often left to the legal department or the newly appointed ‘compliance officer’. The management of compliance records, unfortunately, often falls outside of their control, and maintaining a view on compliance at an organisational scale is difficult, if not impossible. This is especially exacerbated by the lack of understanding and visibility of compliance requirements makes creating a compliance culture across an organisation almost impossible. Compliance, risk and audit functions are often also separate silos still operating in a labour-intensive environment with spreadsheets and hard copy files. The solution maybe to adopt a more transparent, dynamic and comprehensive approach to compliance using technology, according to de Kock. “Additional investment is needed to develop a knowledge base of compliance requirements and there needs to be an investment in technology infrastructure,” he concludes.

Sponsored by:

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It’s my

party and I’ll misbehave if I want to! Michelle Camps

on creating and promoting your brand throughout the year. You have pulled out all the stops in ensuring positive publicity of your organisation.

he year has finally come to an end, and it is year-end party madness. Company budgets are being squeezed for that last staff blowout. Invariably year-end functions are just another excuse for staff to behave badly, drink inordinate amounts of alcohol on the company tab and generally adopt their alter ego personalities. So the question is, is this acceptable behaviour? I can already hear the mixed sighs of, “don’t be such a party pooper,” from the usual suspects, to the other end of the spectrum of, “do we really have to attend yet another year-end staff party?”. But seriously speaking, the question is posed again whether this is acceptable behaviour, especially where clients are invited or if the event is hosted in a p ublic place. So, you have spent an enormous budget

You have even splurged further on mentoring your staff around the importance of living the brand through their personal behaviour. Yet, come year-end party time, and it appears that all is forgotten in the quest to have fun, at the company’s expense. What expense exactly? Purely monetary expense may be one thing, but what about at the cost of your brand and reputation? Drunk and disorderly behaviour, improper office liaisons playing out for all to see, not to mention the potential of drunk driving and the consequences that may follow with staff being arrested, or the cause of some fatal incident. The party pooper indeed! Of course, I am not saying stop the party, but party with caution. You are, after all, on company time or more importantly, you are still a representative of your organisation,

especially relevant if you hold a senior post and are expected to be a role model to your peers. You may argue that what you do after hours has nothing to do with the company, but if you are out in the ‘company name’ then it has everything to do with your company’s brand and reputation. Your clients are not your friends just because you’re now having a few glasses of wine with them at the company do. Company intellectual property remains just that, let alone board room discussions. It is amazing how much is divulged ‘in vino veritas’! So, behave appropriately, befitting of your brand and reputation, and wishing you all a jolly good time!

Michelle Camps is a marketing and communications specialist with a wealth of experience covering a broad spectrum of industries from financial services and healthcare to aviation and tourism. Michelle is an independent consultant assisting clients with marketing and communications strategy, brand management and business development. If you have questions for Michelle regarding advice for your business, please forward these c/o editor@risksa.co.za

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The future of

financial advice A UK perspective

Herman Sandrock, Glacier by Sanlam

ncreasing regulation within our industry has become the norm. Having worked in the industry in the UK for a number of years, I’ve witnessed some of the changes that have taken place – and their effects – first hand.

was that the primary RDR legacy would be the banning of commission and rebates, the more profound legacy seems to be that RDR fundamentally changed the advice model in the UK with many firms adopting a restricted model.

The UK adviser industry found itself at a crossroads in the run-up to the Retail Distribution Review (RDR) implementation. We look at some of these challenges below:

2. Clients With increased information and guidance at their disposal, clients have become more demanding. Many investors consult the Internet for a second opinion, which presents a healthy challenge for advisers.

1. New regulation Treating Customers Fairly (TCF) presented a challenge to the industry as it provided a false sense of comfort, with many firms believing it to be something they already had covered. In reality, firms were slow to adopt effective procedures and processes to ensure TCF is embedded in their culture. Properly documenting decisions remains a challenge as advisers tend to travel often. RDR was implemented in the UK at the end of 2012. Although our initial expectation

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3. Advisers Advisers regard themselves as fiercely independent, but research prior to RDR showed that 80 per cent of business placed was, on average, with the same five providers. Providing independent advice has become more onerous and expensive – often not valued by clients. 4. Fees RDR and TCF have resulted in a shift from

traditional event-based advice to a more ongoing adviser service. Advisers now agree on an annual adviser charge with clients annually.

What does the future hold? We believe that South Africa can learn from the UK experience. Let’s look at some of the possible trends we can expect: 1. Independence will become more onerous At the start of 2014, eight out of the top 10 adviser firms in the UK had already migrated to the restricted model, and it is expected that the rest of the UK adviser market will follow. The primary reason is that regulatory requirements for independent advice are simply too onerous and time-consuming for the average client – a process that is often not valued by clients. 2. Qualifications are vital Formal qualifications will increasingly become the differentiator with clients willing to pay more for better-qualified advisers. 3. Client segmentation is key It will become more challenging to profitably provide a fully independent service to mass market clients. Advisers will need to be clear on who their target market is and what type of service they provide. 4. Online is the future In the UK, half of investors are managing some of their investments themselves. Advisers need to ensure they retain some form of engagement with these clients.

5. Process matters as much as performance Even if performance has been excellent, it is vital that clients’ strategies match their risk profile and investment objectives. All decisions and discussions with the client need to be properly documented with any potential conflicts of interest disclosed and addressed.

The role of the adviser in the brave new world We believe that the industry has a bright future – but the role of the adviser will evolve in a world where constant change and adaptation is key to survival. There are five key areas that the astute adviser firms should cover: 1. Tax and product planning Tax-related complexity is increasing with governments looking at new ways to generate tax revenue. Advisers will continue to play a key role to defer and mitigate the impact of tax for clients. 2. Lifetime and retirement planning Globally, people have never been as wealthy as they are today. The Baby Boomer generation, entering retirement, presents an advice opportunity for qualified advisers as they have to convert their accumulated wealth into an income or transfer it to the next generation. 3. Asset preservation and growth Building bespoke client portfolios will only be viable for clients with larger investment portfolios. Advisers should instead focus on choosing the right investment manager and develop the right investment strategy that matches the client’s risk profile and investment objectives. 4. Looking after the next generation To put a robust plan in place to transfer wealth to the next generation can be challenging. An adviser who knows and understands his clients’ needs will be able to design a robust plan that meets their requirements in terms of family and trust planning. 5. Communicating Ongoing evaluation will pinpoint gaps where the client is potentially financially vulnerable. Ensuring that the client understands where he is on his financial journey will ensure that he does not take rash decision when times are tough. There are many opportunities available to qualified advisers as a result of regulatory and commercial trends. The successful adviser firms will be the ones that are prepared to critically review what they have been doing and adapt to position themselves for a successful future.

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ASIA

PACIFIC OVERVIEW

Norton Rose Fulbright recently published an overview of the regulatory framework for 20 countries in Asia Pacific. The report looks at the ten most common regulatory issues in each country, and identifies regulators and the extent to which foreign insurance companies may be permitted in the region. We will bring you all the data in subsequent editions of RISKSA. This month we look at Japan and Indonesia.

COUNTRIES

Japan

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Contributed by: Nishimura & Asahi

1. The regulator Under the Insurance Business Act (IBA) the Prime Minister of Japan has overarching authority as insurance regulator. Except for certain important powers such as granting and cancelling insurance business licences, most have been delegated to the Commissioner of the Financial Services Agency of the Japanese Government (FSA) and to the directors of the Local Finance Bureau and the Local Finance Branch Bureau of the Ministry of Finance (collectively LFB). Insurers and reinsurers must be licensed by the Prime Minister. There is a separate category of registration for entities that only carry on small amounts and short-term insurance business (SASTI).

5. Minimum capital

7. Group supervision

Insurance brokers (Nakadachi-nin) must be registered.

Licensed Insurance Companies: ¥1 billion capital.

Insurances agents must be registered and, for life insurance, every officer and employee of a corporate agent who individually acts as an agent must also be registered.

SASTI insurers: ¥10 million capital plus; ¥10 million (or more) deposit.

From the fiscal year ending March 2012 a group solvency margin requirement applies to the group (the holding company and its subsidiaries or the insurance company and its subsidiaries).

2. Subsidiary/Branch Japanese incorporated entities with a licence are Licensed Insurance Companies. Branches of foreign insurers and reinsurers may also be licensed and are known as Licensed Foreign Insurers. Every Licensed Foreign Insurer must deposit ¥200 million with the government office. Except in limited circumstances only Licensed Insurance Companies or Licensed Foreign Insurers may underwrite policies covering Japanese risks.

3. FDI restrictions None.

4. Control approvals Prior authorisation (ninka) from the FSA is required to: • become an ‘insurance holding company’ (a company (i) of which more than 50 per cent of the total asset consists of subsidiaries’ shares and (ii) which holds majority of voting rights in a Licensed Insurance Company). • acquire 20 per cent or more (or 15 per cent or more together with substantial influence on financial and business policy decisions) of the voting rights of a Licensed Insurance Company (Major shareholder threshold) – the ultimate controller as well as the direct controllers must apply. The acquisition of five per cent or more of the voting rights in an insurer must be notified.

Licensed Foreign Insurers: ¥200 million deposit.

8. Policyholder protection

Insurance brokers: ¥40 million (or more) deposited guarantee.

There are two policyholder protection corporations: Life Insurance Policyholders Protection Corporation of Japan and the Non-Life Insurance Policyholders Protection Corporation of Japan.

6. Risk-based capital The IBA provides for calculation of a solvency Total amount of margin ratio: solvency margin Solvency margin X 100 ration (%) = Total amount of risks x 1/2 Total amount of risk i calculated using different formulas for life and non-life, taking into account potential volatility or deviations in claims, interest rates, asset valuations, credit risk, business risks, minimum guarantee risk and catastrophe risks. A solvency margin of: 200 per cent or more = sound condition, no intervention by FSA Less than 200 per cent and no less than 100 per cent FSA will issue an ‘business improvement order’ Less than 100 per cent and no less than 0 per cent FSA will order measures to improve capability of paying claims, eg suspension of dividends to shareholders and/or policyholders, change of terms for new business, prohibition on directors’ bonuses. Less than 0 per cent FSA will order partial or total suspension of business.

They will protect up to 90 per cent of the policy reserves and may: • provide financial assistance for the transfer or payment of insurance contracts of a bankrupt insurer, • assume insurance contacts of a bankrupt insurer, • purchase rights to insurance claims of a bankrupt insurer. The corporations are funded by industry levies.

9. Portfolio transfers Yes as a comprehensive transfer. Insurance contracts can be transferred en bloc subjects to certain conditions and procedures including public notice, the absence of more than one-tenth (or one-fifth in the case of transfer of all insurance contracts) of the policyholders objecting and prior authorisation from the FSA.

10. Outsourcing Insurers may only in very limited circumstances (usually limited to insolvency) delegate discretionary powers with respect to their substantial business or administration of its assets with the FSA’s prior approval. Insurers may outsource ‘clerical works’ to a service provider without restriction. If the service provider is another insurer, the service provider  must obtain the FSA’s prior approval.

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Indonesia

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in Association with Norton Rose Fulbright Australia.

Contributed by: Susandarini & Partners in Association with Norton Rose Fulbright Australia.

1. The regulator The Financial Services Authority (locally the Otoritas Jasa Keuangan, ‘OJK’) who supervises all financial institutions.

2. Subsidiary/Branch Branches of foreign insurers are not permitted. Only an Indonesian incorporated company can apply for a licence to carry on business as an insurer.

3. FDI restrictions Yes. Foreign shareholders of any entity carrying on insurance activities are limited to 80 per cent at establishment.

4. Control approvals Any transfer of shares in an insurance company requires approval of OJK. All ‘key parties’ must pass the OJK’s ‘fit and proper’ test before being appointed or acquiring shares. Key parties mean members of the board of directors, board of commissioners, Sharia Supervisory Board and Member Representative Board as well as Controlling Shareholders, Experts and Expatriates. A Controlling Shareholder is a shareholder that holds 25 per cent or more, or less than 25 per cent, but has the ability to influence management and/or policy of the insurer.

5. Minimum capital Insurers: IDR 40bn /70bn /100bn Sharia insurer: IDR 50bn Reinsurer: IDR 100bn /150bn /200bn Sharia reinsurer: IDR 100bn

6. Risk-based capital RBC solvency margin ratio = net asset value (book value)/net asset value recalculated with possible adverse risks taken into account (risk-based capital). Specific risk factors are applied to asset values to reflect potential for asset default, currency mismatch of assets and liabilities, adverse claim experience and reinsurance default.

7. Group supervision No

8. Policyholder protection Each insurance company must form its own

protection fund as a means of ‘last resort’ to protect the interests of policyholders. The protection fund must constitute at least 20 per cent of annual premiums. The funds representing the protection fund must be deposited with a bank. The insurance law gives policyholders preferential rights in a liquidation procedure ahead of secured and unsecured creditors but behind preferred creditors (tax liabilities and employee compensation). OJK Regulation No.1 of 2013 gives a policyholder the right to report a complaint to the OJK with an indication of a dispute between an insurance company with a policyholder and/ or an alleged violation of the financial laws and regulations. Further, it also requires insurance companies to have annual programmes on customers and/or public education to promote financial (insurance) literacy.

9. Portfolio transfers Yes: first requires the consent of the OJK, then announcement in national newspapers. If customers do not object, consent is deemed. The transferor must have a procedure for

handling objections. The transferor must retain all rights and obligations under policies of customers who do not wish to transfer.

10. Outsourcing An insurer may not outsource ‘core’ functions, which include: risk underwriting, financial function and payment of claims. Additionally, an insurer must retain responsibility and at least a functional head for underwriting, financial management and insurance services. An insurer may outsource administrative functions, e.g., accounting, IT and back office functions.

Next month Malaysia and New Zealand will be profiled.

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news

Santam video guide helps manage risks at home Santam’s Home Explorer, an innovative and interactive video guide, shares some of South Africa’s top home risks and how to prevent them. It allows viewers to control the experience by navigating their way through the house, clicking on the interactive areas they’d like to explore. The YouTube video tours a house from a first-person perspective with a narrator and animated captions, sharing tips on how to manage everyday risks relating to each area in and around the property. This new tool forms part of the insurer’s ongoing ‘Be Safe Out There’ campaign which encourages South Africans to take proactive steps to reduce their risks. Donald Kau, head of corporate affairs at Santam, says that even the smallest changes in thinking can make us safer. “Through this interactive video guide, we highlight risk in the home and how to prevent them. By ticking off even a few of the risk checks highlighted in the video, you will be making your home a pleasant environment for you and your family.” The campaign will run across YouTube, Facebook and Twitter.

Standard Bank ranks in top twenty of greenest banks report Standard Bank Group, Africa’s largest bank by assets and earnings, has been ranked 19th in the Bloomberg Markets World’s Greenest Bank Report. Standard Bank is the only African bank ranked in the top twenty, achieving a total overall score of 72.5. The rest of the field is dominated by European-based banks. The bank also achieved a score of 76.8 for clean energy investments and a score of 62.3 for reducing Karin Ireton environmental impacts. Karin Ireton, head of sustainability management at Standard Bank said: “The Bloomberg ranking represents Standard Bank’s commitment to sustainability in every aspect of our business operations in South Africa and elsewhere. We are focused on reducing our overall impact on the environment, and financing and supporting energy-related projects that contribute to the upliftment of the communities in which we operate.”

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CLICK TO VIEW THE SANTAM HOME EXPLORER

Prestigious award for Discovery’s chief health actuary

M&F receives Top Employer Award Mutual and Federal received its fourth Top Employer Award for providing employees with excellent working conditions, nurturing and developing talent and continuously improving working conditions. Mutual and Federal started participating in the top employer survey in 2010 and has been receiving this accolade ever since. To qualify, many blue chip and multinational companies like Old Mutual, Coca-Cola, Unilever and SAP South Africa voluntarily participate in a human resource (HR) best practice research survey. Employee benefits, working conditions, staff training, career development, company culture and black economic empowerment are some of the practices measured. A top score earns participants the top employer award. “Mutual and Federal is proud of this recognition and will continue to provide the best services and good value to our current and potential employees,” says Johan van Lingen, head of HR delivery and acting HR executive.

The Actuarial Society of South Africa bestowed its most prestigious honour, the Murray Medal, on South African actuary Emile Stipp for his outstanding service to the Society and the actuarial profession. Emile Stipp Peter Temple, president of the Actuarial Society, presented Stipp with the solid silver medal at the gala dinner of the 2014 Actuarial Society Convention in Cape Town. Stipp, a healthcare actuary with more than 18 years of experience, is the Chief Health Actuary for the Discovery Group with overall responsibility for the Group’s health actuarial work in South Africa, the United Kingdom and China. This is only the 15th time that the medal has been awarded since it was instituted in 1972. Stipp is the 16th recipient, since there was a joint award in 1978.

Momentum Asset Management fund receives Fitch accolade Global ratings agency, Fitch Ratings, has assigned the Momentum Money Market Fund (managed by Momentum Asset Management, an AA+(zaf) National Fund Credit Rating (NFCR) and a V1(zaf) National Fund Volatility Rating (NFVR). This rating is in line with the highest money market fund rating in South Africa and the fund is managed by Momentum Asset Management. The Momentum Money Market Fund is managed by Conrad Wood and Richard Klotnick. Commenting on the ratings, Wood said: “It is meaningful for us to be rated highly by Fitch as they are one of the most prominent and respected rating agencies in the world. For us to achieve these ratings, our fund has had to meet exacting evaluation of asset credit quality, concentration and sensitivity to market risk.”

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Centriq ranks in Deloitte’s ‘Best Company to Work For’ survey Results of the 2014 Deloitte ‘Best Company to Work For’ survey were announced in October, and first-time participant Centriq Insurance, in the Insurance: Finance Services category, came 3rd overall. The company also achieved 10th place in the small company category, and has been awarded a Standard of Excellence Award – an award that is only given to those that achieve an overall mean score of 3.7 and above. “As one of the more credible surveys of its kind, I am delighted with Centriq’s ranking,” said Gareth Beaver, Centriq’s CEO. “Once we have received detailed feedback on the survey from Deloitte, we will continue to maintain our areas of strength whilst focusing on those that require improvement,” he concluded.

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O p

Cyclesure launches trip cancellation policy Specialist insurer, Cyclesure, has announced the launch of its new product, Trip Cancellation Policy. The policy, underwritten by Hollard and administered by Oojah Travel Protection, covers cycling enthusiasts against financial loss in the event that they are unable to participate in a cycling event that they have already paid for. “If you have the Cyclesure trip cancellation policy, you’re covered for unused travel, accommodation and the event entry fee. It covers you specifically for financial loss should you be unable to start or complete your cycling event,” Cyclesure said. The policy is triggered by: unforeseen illness or death involving the beneficiary, his travel companion or a close relative; if the beneficiary is made redundant by his employer; accidental damage; burglary; flood or fire at the policyholder’s home within two days of an event; terrorist attack or compulsory quarantine.

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T i d

•

P t

• •

VACANCY: HEAD OF BROKER DISTRIBUTION

(COMMERCIAL INSURANCE) OUTsurance is a formidable player in the short term insurance market. As a values-based organisation we take our reputation for awesome service and innovation very seriously and strive for excellence in all we do. Our commercial lines business has grown signiﬁcantly and we have a career opportunity second to none for a senior individual with a proven track record in managing a commercial broker distribution network with a strong focus on the Multimark commercial product. The Head of Broker Distribution will assist with the design, implementation and eventual management of a broker distribution model for OUTsurance. This will also entail: • Giving input into the software development requirements to ensure ease of quoting, administration and claims processing by the brokers we target. • Assisting with product development (MultiMark, Engineering, Corporate, Agriculture etc.) • Ensuring compliance of the commercial products with all the relevant regulatory requirements including FAIS, Binder Agreements and Remuneration policies. Please only apply for this awesome opportunity if you meet the following non-negotiable requirements: • Are FAIS ﬁt and proper compliant • Have a successful track record of setting up and managing a commercial broker distribution network

• Have extensive experience in broker development and portfolio management • Are competent in the commercial lines Multimark product • Operated as a key individual for the purposes of FAIS and completed all accreditation in this regard • Have an appropriate FAIS recognised qualiﬁcation At OUTsurance our leaders are: • Entrepreneurial and think outside the box • Excellent people managers and coaches • Strategic thinkers with a strong focus on improving both the top and bottom-line • Great at planning and executing operational plans • Analytical and comfortable using complex data to drive their operational decisions • Self-motivated and target driven • Highly disciplined but don’t take themselves too seriously

Are you the next Head of Broker Distribution for our Commercial insurance product? Please apply via our website

http://outsurance.pnet.co.za/

You always get something out. Car

Home

Business

Life

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news international

NORTH AMERICA Allied World sets sights on Canada

In an effort to expand its footprint on the North American continent, Switzerlandbased reinsurance and insurance company, Allied World, has opened new offices in Canada. To further increase its North

American operations, the firm is looking to add additional staff and products to each of its offices in the region. It appointed Gord Kerr as senior vice-president, chief agent and branch manager for the region. Kerr has spent the last four years as the chief executive and chief agent for Arch Insurance in Canada. Prior to this, he also spent 28 years with AIG in Canada.

US aviation insurers fuming over FAA’s slow drone response

The US aviation insurance industry was left fuming after Federal Aviation Administration (FAA) have postponed announcements over the use of drones, meaning underwriters are still unable to tap into what is widely expected to be a substantial market in years to come. The FAA was expected to announce their regulations regarding the use of drones and other unmanned aircraft by end of the first quarter in 2015. But announcements have been postponed for another year, leaving aviation insurers frustrated. The Association of Unmanned Vehicles System (AUVS) and 31 other industry groups told ajc.com, “We cannot afford any further delays. The technology is advancing faster than the regulations to govern it. The current regulatory void has left American entrepreneurs and others either sitting on the sidelines or operating in the absence of appropriate safety guidelines.”

EUROPE Zurich appoints Price and Murphy to head travel insurance product

Global insurer Zurich will launch new travel products to the consumer direct channel in the UK, Spain and South Africa later this year. Gary Price, appointed head of travel insurance for Europe, Middle East and Africa, and Gary Murphy, travel and health underwriting specialist, joins the insurer to lead the drive to develop this new travel market. The insurer said that there are future plans to join up with its other global offerings in the future. With a background in the travel insurance market, Price has previously worked at RBS Insurance, Direct Line and Allianz Cornhill. Murphy has been in the insurance industry for 20 years, joining Zurich from Tangiers Global and Ace Insurance. “The travel market is one where we can use our existing global capabilities, and the expertise of Chris and Gary to really provide products and services that our customers are asking for,” said Tim Holliday, Zurich’s managing director for personal lines, Zurich UK. “I‘m looking forward to working with all of Zurich’s EMEA countries to build our presence and deliver what our personal and business customers want from us,” said Price.

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Data Protection obstructs fight against insurance fraud

Insurance Europe, the European insurance and reinsurance federation said that the European Union (EU)’s Data Protection Regulation (currently in discussion by EU institutions) has the potential to obstruct the fight against insurance fraud. The rights to be forgotten and to withdraw consent would prohibit companies from processing people’s personal data. This

could make it impossible for insurers to identify potential insurance fraudsters. William Vidonja, Insurance Europe’s head of single market and social affairs commented, “The protection of people’s personal data is of the utmost importance. It is also necessary to ensure that rules do not prohibit insurers from carrying out an essential function in identifying criminals committing fraud.” Detected and undetected fraud is estimated to represent up to 10 per cent of all claims expenditure in Europe.

ASIA ING Group sells its Malaysian operation for US$1.73 billion

In what is Dutch financial services firm ING Group’s first deal in a nine-month drive to sell off Asian assets, Pan-Asian insurer AIA Group agreed to buy its Malaysian insurance operations for US$1.73 billion in cash. The sale of the Malaysian unit is expected to be followed soon by the divestment of ING’s Japan, South Korea, Hong Kong and Thailand unit, as the bailed-out Dutch financial firm offloads assets to repay €10 million (US$12.88 billion) in state aid received during the 2008 financial crisis. “It’s a good deal and they are paying up to buy a good quality business and to expand into a rapidly growing market,” said market analyst Arjan van Veen.

MIDDLE EAST Egypt impose new reinsurance regulations

The Egyptian Financial Supervisory Authority (EFSA) has said that new rules governing reinsurance will take effect from 1 January 2015, which means insurers will have to place business with a reinsurance companies which are on the approved list of the regulator. EFSA will issue a list of reinsurers with credit rating from one of four rating agencies approved by the Authority. If a reinsurer does not have a rating, its capital and shareholders’ equity should be at least US$60 million. The reinsurer should also be regulated in a jurisdiction whose regulations regarding solvency and technical reserves are similar to those of EFSA. Chairman Sherif Sami said that cession limits will be imposed on insurance companies. There will be a ceiling imposed on the business to be ceded to a single reinsurer and to reinsurers in a single country. He said that the solvency of the reinsurance companies is an important factor, as this would ensure their ability to meet contractual obligations to cedants.

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Glacier associate ct management.

events Compass annual Stars Function

Compass Insurance Company awarded their underwriters at their annual Stars Function on 24 October at the Hyatt Hotel in Rosebank, Johannesburg. “Compass recognises its underwriters for excellent performance on an annual basis,” managing director Paul Carragher said in his opening speech. The loss ratio award in the gross written premium less than R50 million went to Health and Accident while Thatch Risk Acceptances clinched the loss ratio award for gross written premium greater than R50 million. The combined ratio award in the gross written premium less than R50 million category went to Synergy Targeted Risk Solutions while Firedart Engineering Underwriting Managers won the combined ratio award for gross written premium greater than R50 million.

Wildlands’ Earth Night fundraiser

Turnberry product launch Neville De Lucia, new business development director at Dale Carnegie Training, led the presentation.

As part of their national roadshow, gap cover specialists, Turnberry, presented their new range of medical aid gap cover products at the Southern Sun Hotel in Cape Town during October. Their product brochure features a new look and feel and puts easy-to-read, relevant content at the broker’s fingertips. One of their new products, Extend-A-Care, which covers up to 500 per cent of the medical aid rate, caters to a diverse market. And with a monthly premium of R212, it’s also very affordable. What’s great is that all Turnberry products offer an added-value travel cover of up to R5 million, with the option to buy up.

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Wildlands Conservation Trust held their third annual Earth Night with sponsors Old Mutual South Africa at the Old Mutual Conference Centre at Kirstenbosch Gardens. Dressed to impress, friends of Wildlands and Old Mutual gathered to celebrate the success of their various projects and raise funds for the year ahead. Dr Andrew Venter, CEO of Wildlands Conservation Trust, opened the evening, sporting his proudly South African waistcoat and delivering a moving speech about his passion for our country, the dire state of our environment and the changes that need to happen fast. Karen Thomas, marketing executive at Old Mutual, told the crowd how proud the company is to be involved with Wildlands and actively involved in their Wild Series mountain bike challenges. Motivational speaker, mountaineer and expedition guide, Sibusiso Vilane (the first African to climb Mount Everest) also gave a enlightening speech, saying, “My inspiration was to do it for Africa.” The evening was marked by delicious food and great company. In the end, they managed to raise R394 000.

Norton Rose Fulbright annual insurance seminar

Norton Rose Fulbright hosted their annual insurance seminar in Johannesburg, Cape Town and Durban during October. The programme was filled with talks exploring industry developments in South Africa and revisiting case studies which reflect typical issues arising in the insurance sectors. Keynote speaker, James Bateson, the firm’s global head of insurance (based in London) spoke about international insurance trends and lessons learnt from Norton Rose Fulbright offices all around the world. Maria Philippides in Johannesburg, Kim Rew in Cape Town and Craig Woolley in Durban gave presentations on various aspects of fire insurance. Making construction project policies work in practice was discussed by Michael Hart in Johannesburg, Clinton Slogrove and Ane Potgieter in Durban, with the intricate web of cross liabilities being explained. Broker liability and the failure of investments to perform was deliberated by Tony Chappel in Johannesburg, Bonnie Steyn in Cape Town and Deniro Pillay in Durban.

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2014 ANNUAL OAK TREE FISHING CL ASSIC

Excellent haul for

Lion of Africa Insurance

ion of Africa Insurance was a participant for the second year running in the Oak Tree Fishing Classic. This annual event is held over five days in different countries in the Southern Africa region. This year’s event was held in Zambia, and the various teams drawn from the insurance and re-insurance fraternity in South Africa, and other African countries battled it out for the team honours. The fish of choice was the tiger fish, although a few barbel and other species were also caught. The largest fish of the competition was a barbel weighing a commendable 27 pounds and was caught by Tafadza (Taffy) Ziteya. Zambia is justifiably renowned for its tiger fishing experiences and is one of the world’s best tiger fishing destinations. It certainly didn’t disappoint the fishers in this event. With the best catches being made late in the day, as the sun edged towards the horizon, the anglers enjoyed probing the mysteries of the waters and landing the fish. Not only that, but the magnificent surroundings of lush bush filled with Zambian wildlife, meant that the competitors enjoyed a true African adventure. The Lion of Africa Insurance team, represented by Tafadza Ziteya and Warren Koch, managed to haul in 17.5 kg over the four tournament days and came out tops overall. The basis of the competition was highest accumulative weight per team, and this year’s efforts were well ahead of the winning 13.5 kgs caught

at last year’s tournament. The winner of the floating trophy for the worst fisherman of the Classic will remain anonymous! “Although I am more of a recreational fisher, I was very proud to have achieved this win and to keep the Lion of Africa Insurance flag flying high over our continent,” commented Ziteya. According to sponsors, the Lion of Africa Insurance team has earned themselves an automatic entry into next year’s event, by virtue of being winners. Zimbabwe has been earmarked as the host country for the 2015 event. The inaugural Annual Fishing Classic was hosted by Oak Tree Intermediaries, the niche reinsurance broking firm, in September 2012 at the beautiful Lake Jozini within the Royal Jozini Reserve in Swaziland. The second instalment of the Oak Tree Annual Fishing Classic took place in October 2013 in Henties Bay, Namibia. With the growth into Southern Africa a focus of many players in the shortterm insurance sector, it is fitting that such venues have been selected for the event. Besides the fishing, the event also served as a platform for the Lion of Africa Insurance team to interact with their peers from the industry and build solid business relationships. “Five days of competition, fun and camaraderie provide an unparalleled opportunity to network and interact with business associates,” notes Ziteya.

Taffy Ziteya displays the largest fish caught – a 27-pound barbel – which sadly didn’t count towards the competition.

About Lion of Africa Insurance Lion of Africa Insurance Company Limited is a South African non-life insurance company that was licensed by the Financial Services Board in terms of the Short-Term Insurance Act No 53 of 1998 on 23 August 1999. The company is the first insurance company in South Africa to achieve a Level 1 Broad Based Black Economic Empowerment rating in terms of the BBBEE Act of 2003 and is a wholly owned subsidiary

of The Lion of Africa Holdings Company (Proprietary) Limited, owned by Brimstone Investment Corporation Limited, a broad based black investment group listed on the JSE. The company’s short-term activities are concentrated primarily in the commercial property and casualty markets. It also operates in the personal lines, marine and engineering segments.

INSURANCE

For more info visit http://www.lionsure.com or find us on Facebook or Twitter. Lion of Africa Insurance Company Limited is an authorised financial services provider (FSP 17511) in terms of the Financial Advisors and Intermediaries Act No 37 of 2002.

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RIS K SA R e g at ta 201 4

Where the C a p ta i n s of I n d u s t ry m e e t Anton Pretorius

From the outset, COSA Media CEO and RISKSA editor-in-chief, Andy Mark’s vision for this event was never to be a cocktail cruise to Clifton. But a roaring southeaster gusting at 50 knots in some parts of the bay made the 2014 RISKSA Regatta somewhat more challenging. This annual event is the financial services industry’s networking event of the year. Without mentioning names, I personally know of three deals that went down during Friday night’s Captains’ Cocktail Party, leaving the company directors involved with very broad smiles indeed.

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The 100-year old Royal Cape Yacht Club, nestled in Cape Town’s picturesque Table Bay set the scene for the annual RISKSA Regatta on the weekend of 24-26 October – one of the most anticipated events on the financial services calendar. It formally kicked off on the Friday evening with the Captains’ Cocktail Party, where some of the biggest names in the insurance industry had a chance to rub shoulders with clients and yacht owners. Sporting black ties and cocktail dresses, guests were treated to a cocktail bar and – in true seafaring fashion – a Bunnahabhain whiskey

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tasting with SA’s own ‘Mister Whisky’, Pierre Meintjies, in his Scottish kilt. The cocktail party was generously sponsored by Windscreen Distributors, the sole importers of FUYAO automotive glass. Sixteen yachts were set to race on Saturday including teams and boats from Altech Netstar, Aon South Africa, Auto & General/ MUA, Camargue, Fulcrum Group, Hollard, Infiniti Insurance, Mutual & Federal, ONE Financial Services, PG Glass, and Zenith for the Accomplished – some with more than one yacht. Even RISKSA’s sister magazine, RISKAFRICA, got in on the action.

Saturday morning, however, brought some unfortunate news and Mark was about to have an even tougher day at the office. With wind conditions in the bay deteriorating overnight the prospect of the expected narrow weather window materialising by race start time disappeared completely.

A close Currie Cup final was televised on the big screen at the Royal Cape Yacht Club on Saturday. Locals were somewhat bemused when they realised they were surrounded by a large Lions supporter contingency and much friendly banter ensued, keeping the atmosphere festive!

The gusting 50-knot winds meant that racing would have to be postponed on grounds of safety. The crews, understandably disappointed, kept their spirits high and the VIP press boats, sponsored by TomTom and Customer Loyalty Consultants (CLC), were summoned from the V&A to keep crews occupied and entertained during the day.

The Awards Dinner guests would not go unrewarded and a prize was announced for the team with the overall best theme. Each company did sterling work on their table decorations but in the end it was PG Glass who came away the winner, having constructed their entire display with 100 per cent recycled glass recovered from their various job sites. Second place was jointly held by Fulcrum and Camargue, according to the judgesâ&#x20AC;&#x2122; final vote.

â&#x20AC;&#x153;The crowd was disappointed, for sure, but most of our out-of-town guests immediately chose to change their flight plans so that they would still be able to race on Sunday. To me, that shows the level of enthusiasm for this event,â&#x20AC;? Mark commented.

Oakhurst Insurance Company sponsored the dessert table with some tasty treats to accompany the vintage ice-cream caravan that distributed delicious vanilla soft-serve ice-cream,

which proved to be a big hit. The caravan itself was a brilliant CSI initiative where an NGO gave budding businessmen, Jade and Siphe, a unique entrepreneurial opportunity, along with sound business advice and guidance. Race day finally arrived on Sunday and in contrast to the previous morning, the race started in light wind. Sailors and teams experience sufficiently breezy conditions from the last turning mark to the end, making the race on the final stretch very interesting. All in all, competitors were treated to a beautiful day of sailing. By race-end, fifth place was claimed by Team Hollard, following close on the heels of Team Aon South Africa in fourth place. Third place was taken by Team Fulcrum, second place went to Auto & General/MUA, and for the second year running, defending champions, Camargue Underwriting Managers, claimed the FIA Regatta Floating Trophy in first place.

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RISKSA is firmly supportive of development sailing. The Royal Cape Development Sailing Academy is a benefactor of the Regatta, with thousands of rands being contributed to this worthy cause which will provide sailing courses for underprivileged teens. Daphne Jacobs, one of the volunteers at the RCYC and sailing instructor to the underprivileged kids has been volunteering for the past three years, and fell in love with race chairman, Harry Brehm’s, passion for helping the youth, regardless of where they come from. “You can really see the difference this makes in their lives,” she says, adding that it was sailing that saved her from a troublesome childhood. The RISKSA Regatta is held over the last weekend of October each year and is growing in popularity. Please watch your inboxes for news of an unexpected but massive boost to the RISKSA Regatta from next year. We can’t make

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any announcements yet, but even with our ‘dream-big-and-fully-expect-to-win’ attitude, we didn’t expect this.

was fantastic and the entire event was wellorganised. There was also a great competitive spirit out on the water.”

Read what some of the industry folk thought about the race day on Sunday during the 2014 RISKSA Regatta:

Anton Roux, CEO of Aon South Africa

James Shepherd, senior broker at Marsh Africa Sailing as a guest on the Hollard (Purple Pirates) boat “What a lovely day is was out on the water. Cape Town always offers a unique and interesting experience. The sunshine weather was brilliant and we even spotted some whales. The wind was non-existent and there were many dead spots out on the water. But if we had to sail out in Saturday’s wind, it would not have been as pleasant. The Hollard team

Sailing aboard Nitro (Team Aon) “It was absolutely awesome. After the hard winds of Saturday, Sunday’s race day was superb and it was Cape Town at its best. We went out on the water on Saturday and it was rough. We experienced winds of up to 35 knots and achieved speeds of up to 20.3 knots, which was unbelievable. It was challenging but very exciting too. For someone who’s not accustomed to sailing, it’s really all about team work and you need a team that can gel together. But with hardly any wind on race day, it was all about tactics and out-maneuvering one another. This kind of team work can be

applied to business too. Every member needs to know his or her responsibility when you’re out on the water.”

in a long time and the event was extremely well-organised. You’ll definitely see us again next year.”

Schalk van Rensburg, managing director at ONE Financial Services

Riaan Geldenhuys, chairman of FIA Western Cape

Sailing aboard the ONE Financial Team boat

Sailing aboard Auto & General/ MUA boat

“It was a long day out on the water, but it was great fun. We took a bit of a gamble with our tactics. It didn’t quite pay off, and we got stuck behind the rest of the fleet. But nonetheless, we kept spirits high on the boat, especially when we were coming into the yacht club and had to pack everything up. Everyone was laughing, working together and we did a great job. We’re still friends after a long day on the water and the crew really enjoyed it. We really had a wonderful time. I have to commend the camaraderie and spirit of the RISKSA Regatta. You get to chat with people you haven’t seen

“It was an honour and privilege for the Financial Intermediary Association of South Africa (FIA) to be involved with the RISKSA Regatta. On behalf of the FIA, I’d like to extend big congratulations to Andy and the rest of the RISKSA team for putting together such a fantastic event. It was excellent! Although we had a few dead spots out on the water, the racing was enjoyable nonetheless. Also, big congratulations to Camargue for winning the FIA/RISKSA Floating Trophy for the second year running. I have a skippers’ license and spend time on speedboats, but this was a totally different experience altogether, and I loved it.”

Winners for the second year running, Camargue celebrate in style

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classic cars Collecting

Luka Vracar

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Investment into classic automobiles has always been considered an alternative investment opportunity. However, renewed interest and new money has seen a significant growth in demand for classics, and triggered an increase in supplementary businesses, which help investor’s maximise their return. What makes a car a classic? And dare you drive it?

ne only needs to look at the money that is being spent on 1950s Mercedes Benzes and 1960s Ferraris at international auctions, such as the week-long classic car festival at Monterey in California and the Goodwood Revival in West Sussex, England, to get an idea of the market. This past August, Bonhams sold a 1962 Ferrari 250 GTO at Monterey for $38 115 000, an all-time record for a car sold at auction. The car is one of only 39 ever built and had to be rebuilt by the factory after it was crashed in 1962 in a racing accident that claimed the life of owner and driver, Olympic gold medallist in alpine skiing, Henri Oreiller. Complete sales from the five auctions at Monterey (Bonhams, RM, Gooding, Mecum, Russo and Steele, and Rick Cole) amounted to an eye-watering $427 395 903, according to sportscardigest.com. This is a huge 39 per cent increase on the sales from last year, with 41 more cars sold. The average sale was $540 324. “Unlike art in its purest form, which they themselves are anyway, they are also usable. They are social tools: you can join clubs, you can go on drives, you can share this art form with other people, and you can get as passionate about it as any other form of art that one cares to consider because classic cars have a history, and a family link, and as a consequence of that there is a lot that one can learn and find out about them. They are also obviously very technical, so if

one is technically inclined, there is also a lot of detail one can get into,” says Paolo Cavalieri, former Etana chairman. Cavalieri is involved with Pablo Clarke Racing, which sources investment vehicles for collectors around the world: “If you come and say that you want a Ferrari Dino, we will sit down with you and understand what colour, what kind of mileage, what budget you have, and we will find the car for you.”

What makes a car collectable? “The main factors are clearly the brand, the age, and the production number – so the number of units produced, and how it appears, whether it was restored or not. If we talk about brand and make first and foremost, it is clear that motorcar brands with a long history, and I would add to that a competition history, are the most sought after brands,” says Cavalieri. To give examples, when considering desirable brands perhaps one of the most well established is Ferrari. In addition to one of the most successful racing heritages, particularly in Formula 1, with drivers such as Juan Miguel Fangio, Niki Lauda, and Michael Schumacher, the prancing horse is on six cars of the ten most expensive cars ever sold at auction. Other marks that have rich competition histories include Lotus, in Formula 1, and Lancia, in world rally championships. “The number of cars produced is an equally

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“For example, there is a gentleman in Switzerland by the name of Marcel Massini, who is a Ferrari specialist, and you can phone him today and give him a chassis number and he will produce, in the space of 24 hours, the entire history of that Ferrari,” says Cavalieri. If the car you are interested in buying has a questionable history, or if it is a vehicle that requires more information regarding its history or ownership, it is the business of the certification specialists to go and find that information and provide a detailed report. This is particularly recommended for cars with racing histories, which often have accidents and modifications. For example, it is very important that your car is a matching numbers car. This means that it has the original engine, an original chassis, and an original gearbox and differential. Buyers will be looking for authenticity, and so should you.

important point as rarity commands a premium. So if more than 1 000 units, for example, have been produced, it is likely that the value of the model that you are looking at will drop. If less than 1 000 vehicles have been produced, or less than 500, or less than 100, and it is one of the famous brands, and is a pre-1970 model, it is highly likely that it will be a collector’s piece with strong upside value,” says Cavalieri.

more and more mark specialists are popping up around the world.

Cars in the 1960s had very small production numbers, only a few hundred, which is why they are so desirable today. Cavalieri indicates that Ferrari have stated that they are limiting their production to about 7 000 units per year, across four or five different models, so that they can preserve an element of exclusivity. This is the difference with modern cars; high-end models are produced in numbers too significant for them to be considered ‘classics’ in the future, and even though they are expensive when new, they depreciate significantly and are too readily available.

“This has become such an important business that manufacturers such as Ferrari, BMW, and Mercedes-Benz, not to mention Aston Martin and Jaguar too, have special departments in their organisations that are focused solely on their classic cars: keeping a record of the cars that they have produced and what they looked like when they left the factory, how they may have evolved since then (because authenticity is key) through to having a collection of spare parts, manufacturing new spare parts for old classic cars, including in some cases engines, which I think is crazy, but nevertheless,” says Cavalieri.

“So clearly supply and demand is a factor. The other reason the price of classic cars has gone up, generally, is that people are becoming more knowledgeable about these cars and seeing them as a genuine alternative investment. If you look at the auctions that took place over a week in California in August, people follow these auctions to see where the market is at. And these auctions happen regularly,” says Cavalieri.

To restore or not to restore usually depends on the car and the extent of the damage. However, it does create an interesting debate because, according to Cavalieri, cars with original patina that have not been restored and still remain in excellent condition command an even higher premium than a restored vehicle, because of their higher level of originality and authenticity.

Restoration The restoration of classic automobiles has become important business. Restoration specialists are not always associated in any formal manner to the original factory, and many have been around for decades. However, given that the necessary restoration of a classic car increases its overall value, and the increase in demand for classic vehicles,

These companies usually carry out research on the specific car they are tasked with restoring. They research the history of the vehicle, and its original production details. Then they restore the car to original specifications, or, at least, as close to original as possible.

Certification “When cars are trading for millions, you will understand that the importance of certification takes on a whole new meaning,” says Cavalieri. Alongside restoration specialists, the increase in classic car investments has given rise to companies around the world that are run by individuals whose sole business is to collect and store historical data on significant motorcars.

“Ferrari has a certification process which is not for the faint of heart from a price perspective. It will cost roughly R50 000 to certify a Ferrari – you pay the factory for this. What this means is that you submit to the factory all the details about the Ferrari, and they will research it and produce a file that confirms the car’s authenticity. When you sell it, the value of the car will be enhanced by that authenticity,” says Cavalieri.

Buying If a Ferrari worth tens of millions of dollars seems daunting, the results of the Monterey auctions indicated that the median transaction, which reflects low- to mid-figure car sales, was around $70 000 for the week. Even though this increased by 13 per cent from last year, the figure shows that investment-grade cars (which will appreciate in value) can indeed be found for the price of a 5 Series BMW sedan (which will depreciate). Also, the Monterey week is the world’s premium automotive auction event, where prices are expected to be high. Auctions can be found every month somewhere in the world with very rare and desirable cars, without the record-breaking price tags. As with any investment, it is important to do research into the product. Cavalieri recommends that the best way to learn about classic cars, and what might provide a good return, is to get involved in the car culture. He recommends attending motor shows, following auctions, learning about motorsport history, and using websites such as sportscardigest.com and sportscarmarket.com to keep in touch with what is going on with the market. “You should know the history of what you are buying as much as possible before you buy it. You should know of a qualified or reputable repairer that can assist you with the maintenance, if not the restoration, of your car. The second thing is to understand the condition of what you are buying because it is old and aged,” concludes Cavalieri.

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2013/10/15 10:00 AM

Luka Vracar

how to invest in whisky

Whisky is not just for drinking anymore. According to the Investment Grade Scotch index that is compiled by the UK-based Whisky Highland, the top 100 whiskies have appreciated by an average of 440 per cent since 2008. However, your average bottle of scotch will likely not prove to be a good investment. We find out which ones will.

here are a growing number of whisky collectors that are managing to turn their love for the spirit into cold cash. Collecting whisky has become so popular that Whisky Highland projects a 50 per cent increase in whisky at auction to 30 000 bottles this year, compared to the 20 211 sold in 2013. Warrick Mulder, who established bottleshop.co.za, which stocks investment grade whiskies, says that they regularly receive orders from collectors for rare or expensive bottles: “These types of collectors range from people that just collect and have collections of over 2000 bottles. That is the type of collector that just wants to have a huge collection, which ranges from R200 to R5 000 per bottle. There are also collectors who will only collect a certain brand, and they want every single kind of whisky under the brand, whether it be Macallan or Glenfiddich or Jack Daniels,” says Mulder The interest in investment grade whiskies is a result of escalating global demand, as well as the start of limited edition and special occasion bottling by distilleries in the 1990s. Those limited editions are now even harder to acquire in 2014 and are, therefore, even more desirable. Now that the whisky investment market has boomed, collectors are getting their hands on anything that has a story.

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“Whisky sales are increasing all over the world. Whisky is now a bigger seller in South Africa than brandy. South Africa has always had a huge brandy market, but the image of brandy has declined. As a result, about 18 months ago the category of whisky sales overtook the category of brandy sales,” says Pieter Meintjes, Distell’s ‘Mr Whisky’, and one of only two South African’s to be elected as a Master of the Quaich for his services to whisky. “There is a definite increase in premium whiskies. Although that market is relatively small, with the emergence of the black middle class, they are drinking a lot of whisky. Single malt sales out of Scotland only account for about seven per cent of total whisky sales, so 97 per cent are still blended Scotches. Within that blended category, premium is selling well. Distell ships 4.5 million cases of Scotch to South Africa a year. We are the fifth biggest importer of Scotch by volume and seventh by value, in the world,” adds Meintjes. They say that you should buy three bottles of everything: one to drink, one to sell, and one to swap. But when certain bottles cost up to £387 000, which is how much Sotheby’s sold a six-litre decanter of Macallan M earlier this year, to make it the most expensive bottle of whisky ever sold at auction, three bottles might be difficult to come by. The same is true for extremely rare bottles. However, if you wish

to ensure that a collection increases in value, buying rare, limited edition or expensive bottles is the way to do so. Like any collection, value is in the eye of the beholder. Not all whiskies will appreciate. Whisky, once bottled, does not get better with age like wine. A 21 year old single malt will still be a 21 year old single malt if you open it ten years after your purchase. However, supply creates demand, and because demand for whisky is soaring, with some smart choices and background knowledge you can maximise your collection’s potential. While certain bottles do increase in value at a significant pace, these are the exceptions to the rule and a bottle should never be considered as a short-term investment.

What to buy? “In terms of investment grade whisky, there are two things you need to focus on. Firstly, look at the closed distilleries such as Port Ellen, Rosebank, Littlemill, and Karuizawa. I would say those are the top distilleries to focus on in terms of a potentially good investment. The reason they have become collectable, is that there was whisky laying down in casks since they closed down, which is now being bottled. So these whiskies are 20 to 35 years old, and there is never going to be any whisky from these distilleries again, so the values are skyrocketing,” says Mulder.

Older and discontinued bottlings can become collectable, even if they were not considered so when they were originally released. Distilleries sometimes choose to remodel and remarket their whiskies, perhaps to fit a current trend, and their original products become sought-after as they are rarer, or already have loyal fans who would love to get their hands on a bottle of the old stuff, such as the famous Ardbeg Black Label 10 year, or Glenlivet bottles from the 1980s. An example of this kind of remodelling can be seen as major distilleries, notably Macallen, have begun to remove the age of the whisky

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from the label. “They have done away with that because they do not have enough stock, and they have rebranded it. So now you don’t get a ‘Macallan 18 year’ you get a Macallan Amber, Macallan Ruby, Macallan Gold. So the age statement whiskies have become collectable, and, unfortunately for purists, a lot of other brands will probably be going down this same road,” explains Mulder. In addition to closed distilleries and discontinued products, highly collectable whisky is especially made up of limited edition, anniversary, commemorative, and annual releases. These are desirable because they are limited to begin with, and collectors know that there are only a certain number available, and as time goes on these bottles will become even rarer. These collectable whiskies include anything that is individually numbered and part of a limited run, especially if it is less than 2 000 units. An example is the now iconic Macallan Private Eye, which was released in 1996 for about £35 in commemoration of the 35th anniversary of a British magazine, Private Eye. The bottles sold upwards of £1 500 last year and continue to trade hands among collectors. “Occasionally, a distiller will put a vintage on an aged whisky. For instance, they may make a 1989 21-year-old whisky, and that adds value to the whisky.” says Meintjes.

What is it worth? Before you can invest and expect a good return, you need to know what you are buying. You need to know the history of the brand and the distillery. The biggest mistake people make is to assume that all whiskies will increase in value. Furthermore, it is almost impossible to gauge the appreciation of a bottle of whisky, unless it is extremely expensive to begin with. In that case, you can be sure that its price will significantly increase. “If you look at the Glenfiddich 50-year-old, in 2012 it was selling at R160 000. That same bottle in 2013 was selling for R299 000. That is almost double the cost. It was the correct bottle to buy. It depends on the distillery, when it was bottled, and how aged the whisky is,” says Mulder. In this case the 50-year-old filled all the right criteria. But whiskies of this age are highly unusual. Highland Park recently released a 50-year-old, and only 275 bottles will be produced. With its high age, the extremely low number of units, and ornate, hand-made bottle design, it almost guarantees a good return on its £10 500 price tag. However, you do not need a huge budget to start collecting. The Glenfiddich Snow

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Phoenix is a good example of an average price bottle that became a collectable, even though it was not released in typically limited numbers; 60 000 bottles were made available. Still, demand for it remains high. “In 2010, Makro brought out the Glenfiddich Snow Phoenix. The whisky resulted from a disaster at the distillery where snow fell on the casks – you cannot have liquid on casks. Still, Glenfiddich decided to bottle the casks that they managed to save. Those bottles were retailing for R680 at Makro at the end of 2010. If you had bought a few hundred bottles then, you would have a few million’s worth now, as they are now selling at R7 500 to R10 000 a bottle,” explains Mulder. Like all investments, there are no guarantees, and sometimes even a bottle that might seem like a sure thing could depreciate. The Royal Wedding limited edition whisky which Macallan released when the Duke and Duchess of Cambridge married is an example of a limited edition bottle that lost value. The price of the bottle rose from £150 in 2011 to £1 650 in 2013. However, after Macallan announced that they are removing the age statements from their bottles, the price depreciated to around £900. Furthermore, some whiskies, no matter how limited in availability, are simply not that great to drink and their value will remain low, so insider knowledge is essential. While a popular and excellent whisky (and this author’s favourite), new bottles of Lagavulin 16-year single malt are not considered as great as the ones bottled in the 1980s. Interestingly, the Lagavulin 12-year old is more expensive than its older sibling. Why? Because it is rarer.

“Set a budget and choose a distillery, or what you are going to focus on. Buy correctly. Don’t just buy a Glenfiddich 12-year-old and think you are going to make any money on it, because those types of products do not appreciate,” says Mulder. While it is a good idea to invest in rare or limited edition whiskies from the iconic distilleries, it is equally important to learn about whisky in general, speak to experts, drink a lot of whisky and be wary of trends. Some distilleries that are popular today may not be so in a year, so it is advised that passion for the drink comes first. In that case, you never lose.

Poles Apart Andy Mark

Zanzibar, commonly known as the Spice Islands, can be found off the East African coast. Pristine beaches dusted in white sand, fringed by swaying palm trees and surrounded by the warm Indian Ocean; this exotic cluster of islands is a dream destination for those in search of a little bit of culture and a lot of paradise. RISKSA looks at two luxury Zanzibari resorts respectively established by two Polish entrepreneurs.

n opposite sides of this idyllic island lie two luxury boutique resorts, each the realisation of two very different Polish entrepreneurs’ investments on the island after each visited the archipelago and fell in love with the tropical paradise. On the east coast, the aptly named White Sand Luxury Villas and Spa, is a slice of serenity nestled along a crystal clear Indian Ocean. On the west coast, where the sun bids adieu, is Zanzi Resort, one of the most

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private resorts on the island and the very picture of romance and warmth with secluded private beaches and a personal concierge. A rich history spanning spice routes, slave trades, and sultans; Zanzibar’s cultural centre is the famous Stone Town in the island’s capital, Zanzibar City, a UNESCO World Heritage Site. A tour of the town will satiate your wanderlust with sites like Beit Al Ajaib (House of Wonders), Tippu Tip’s House, Maruhubi Palace and other ruins of former Islamic dynasties.

Zanzi Resort

Review

Marek Bukala is an adventurous soul who has swum with crocodiles and sharks in the Australian rivers. A romantic, he visited Zanzibar 12 years ago and the island stole his heart. Inspired by his wife, he set out to create a resort centred on love and privacy: the perfect honeymoon retreat.

A warm, intimate atmosphere is created by the rich palette of earthy hues and African artworks adorning the villa walls. Eclectic textile prints and artisanal furniture inherent of the African and Arabic architectural influences decorate the resort. Winner of both the 2013 Traveller’s Choice Award and the 2014 TripAdvisor Excellence Award, Zanzi Resort’s friendly, engaging staff cater to your every whim and ensure guests are treated as royalty.

He designed everything himself, from the villas to the furniture, basing everything on the prior six years he spent living in and out of hotels. The building took three years to complete and includes drinking water straight from the taps (somewhat unique when travelling in Africa), innovative Styrofoam ceiling insulation and specially designed bricks to keep the villas cool in the summer months. Zanzi Resort has been open for business for the past two years and nearly all the staff are locals. It is the essence of romance and privacy; ideal for honeymooners, couples, and celebrities.

Villas There are only seven lavishly equipped villas on the resort, each completely secluded on a six hectare area and each serviced by a personal concierge. Every villa is secured by a privacy pebble and has a bedroom with a beautiful king-size canopy bed and an ensuite bathroom, a spacious living area, and panoramic views of the sea. Outside there is a private pool complete with swimming machine to create resistance, a romantic private gazebo draped in a flowing canopy, and just down a little path, guests will discover their own secluded patch of the Indian Ocean where skinny dipping is discreetly encouraged.

Cuisine Guests may choose to have breakfast, lunch, and dinner in their private villa, on their secluded beach, or at the beautiful Zanzi Resort restaurant, seamlessly integrated into the surrounding lush vegetation. Deo Job Nyika is the restaurant’s 24 year-old bisque chef. Before coming to Zanzi as a sous chef, he was mentored at Kendwa Rocks Hotel

by a Finnish chef who nurtured his passion for cooking with lessons and books. He is now the head chef at Zanzi Resort, mentoring some of the most ambitious, creative culinary talents on the island who will arouse even the most refined palettes with an exciting menu of impeccable seafood, fresh vegetables picked from the resort’s very own ecological plantation, and the famous Zanzibar spices. Nyika oversees the expert crafting and artful arrangement of every meal which is complemented by a large selection of imported wines.

Activities - Specially created medieval gym with rope and timber equipment - Beach volleyball and badmington - Thai massage/yoga retreat - Library - Private cooking lessons with a master chef - Sea kayaking - Snorkelling/Scuba diving - Biking - Kitesurfing - Cultural tours and excursions to Stone Town, Prison Island, and Kizimkazi, to swim with the dolphins.

Services - Daily room service and turndown service - 24/7 concierge service - Free Wi-Fi

Location/Travel Zanzi Resort is 15 kilometres from Stone Town – nestled on the cliffs of Kama.

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Zanzibar White Sand Luxury Villas and Spa Andre Niznik, software entrepreneur and avid kitesurfer, discovered Paje while on a kite surfing holiday there. Andre quickly recognised a gap in the market for an upmarket boutique family resort. Niznik had been looking for a family investment, for business and recreation and brought in daughter Natalia to assist with developing the resort. The project was initiated four years ago when the father and daughter team bought an entire Casuarina wood plantation and enlisted the expertise of renowned East African architect, Neil Rocher, to create a building that would adapt to the environment. Rocher designed the whole resort in the sand, to blend in with the natural beauty of the

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setting and accommodated existing palm trees by simply building around them. Andreâ&#x20AC;&#x2122;s life partner, Katarzyna Kuzminska, drew on the same organic palette indoors for a natural interior feel without compromising on high-end luxury and style. The resort is furnished in top-quality Casuarina and Mango wood, with handcrafted king-size beds that require six men to move, and unique wooden, three-layer rooftops. All balustrades are hand-sanded and polished and the resort houses a carpentry workshop, more a factory really, that employs and upskills the local community. The factory provides much more than just the furniture for the resort. Utilising the services of a top craftsman from Poland who has painstakingly trained local craftsmen, the factory is now ready to take on external business. Zanzibarâ&#x20AC;&#x2122;s White Sand Luxury Villas and Spa officially opened in June this year and they cater to active families keen to enjoy the myriad activities the island offers.

Review Spacious and serene, the Zanzibar White Sand experience is one of utter peace and uncompromising luxury and style. An absolute aesthetic wonder but combined with exotic activities; this is a trip worthy of a slot on the bucket list.

Villas There are 11 lavish sea-facing villas on the resort: five beachfront one-bedroom villas, five family two-bedroom villas, and one presidential five-bedroom villa; each surrounded by tropical gardens and carefullygrown vegetation providing guests with absolute intimacy. Each luxury villa is on an extensive plot that spans up to 1 660 square meters and is made up of two units connected by a recreational garden with private plunge pool, private decking and 200 metres of beach front for the first line of villas.

The villa is split into a stunning, high-ceiling day area with a dining section and lounge, and a resting area where guests will find their bedroom, dressing closet, bathroom with rain shower as well as an outdoor bathtub. Outside guests can enjoy panoramic views of the ocean and surrounds on the rooftop terrace or spend the warm evenings stargazing from the hanging bed.

Cuisine Zanzibar White Sand guests can treat themselves to fine dining at the resort’s stylish restaurant overlooking the main pool and vertical garden. The magnetic culinary infusion of Asian and Indian influences from Thai chef, Somjit Kunkhunthod, and Indian chef, Dayasagar, will stun and inspire with delicious Indian Ocean seafood and aromatic spices, attracting diners far beyond the resort gates. Guests may choose to relax with their sundowners at the bar, the pool, or on the rooftop lounge as they witness the breath-taking African sunset.

Activities Paje is one of the top kitesurfing spots in the world which is why Zanzibar White Sand Luxury Villas and Spa opened their own high-end kitesurf club: Zanzibar Kite Paradise – one of the resort’s main attractions. Located on the resort border, it is accessible yet unobtrusive to guests. Other activities include: - Snorkelling in the coral reef - Fishing - Swimming in open waters with dolphins - Stand-up paddling - Blo-karting - Kayaking - The famous Spice Tour - Visits to Stone Town - Island-hopping in a traditional boat - A Spa, nestled in the natural landscape,

with a: tropical seating area with waterfall – a steam room, sauna, and couple’s treatment room.

Services - In-room check-in and check-out - Twice-a-day room service and turndown service - 24/7 Concierge service - Butler service - Free Wi-Fi

Location/Travel Zanzibar White Sand Luxury Villas and Spa is located on Paje Beach, a one hour drive from Stone Town/Airport, located on the east coast of Zanzibar

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Zanzibar Facts Travel - Abeid Amani Karume International Airport (ZNZ) is the main airport on the island, though many tourists fly into Dar es Salaam (DAR) and take a ferry to the island. - Return ticket from Johannesburg (JNB) to Abeid Amani Karume International Airport (ZNZ) one-way will cost about USD 700. - JNB to DAR USD 600. - Return Paris Charles De Gaulle (CDG) to ZNZ USD 1 300. - CDG to DAR USD 1 000. - London Heathrow Airport (LHR) to ZNZ USD 1 200. - LHR to DAR USD 900.

the rock band Queen was born in Stone Town, Zanzibar. - Average length of stay – honeymooners: 5-7 nights, younger travellers: 10-14 nights.

Health and safety - Routine vaccinations include vaccines for hepatitis A and B, and typhoid - Yellow fever vaccination 10 days before entry if you plan to stay for a lengthy period. - Locals report that malaria is not a concern however preventative measures are still advised. - Beware falling coconuts. - Unless otherwise stated, local water is not safe to drink. - At the time of going to print Zanzibar was unaffected by the Ebola outbreak on the west coast of Africa and the DRC.

Getting around - 11+ daily 25-minute flights from Dar es Salaam, Tanzania (DAR) to Zanzibar, Tanzania (ZNZ). - Taxi from DAR to ferry docks USD 20. - Ferry from Dar es Salaam to Zanzibar USD 35. Economy (lower deck) / USD 40, First class (Upper deck). - Charter flight from DAR to ZNZ USD 80+. - Roads: Zanzibar has 1 600 kilometres of roads of which 85 per cent are either completely or partially covered with tarmac. The remainder are gravel roads – annually rehabilitated to make them passable throughout the year.

Weather - Best time to visit is the cool dry season June to October. - Rain season from November to May. - Temperature: Low: 20°C High 33°C. - Water temperature: Low 25°C High 29°C.

General - - - -

Time Zone GMT +3. Currency: Tanzanian shilling (TZS). Official languages: Kiswahili and English. Population according to a census in 2012 1.3 million. - Freddie Mercury (born Farrokh Bulsara) of

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Plan a trip Two luxury resorts on opposite sides of the Spice Islands, each offering a unique perspective of paradise, how does one choose? Why not indulge your indecisiveness, and spend a week at each. Experience the igniting of your passion sunset-dining and skinny-dipping at Zanzi; then invigorate the senses with an adrenaline-filled kitesurf when you rise with the sun at White Sand.

The two Polish entrepreneurs may well be polar opposites in personality and hospitality ideals, but they share an ethos of philanthropy that has impacted not only the local people they’ve employed but also the wider Zanzibari community. Niznik’s carpentry workshop and Bukala’s school, where the locals learn English, reveal a mutual understanding that when it comes to investing in Africa; the financial reward is great but seeing the impact you make in people’s lives is priceless.

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P Carel Nolte has been a passionate member of the South African insurance industry since 2000. His column aims to educate, cause a smile, instill pride and stimulate debate. He welcomes contrary views and debate and can be reached via carel@comms.co.za.

Kuier with Carel

End-of-year parties have changed over the years. Thankfully. Gone are the days of debauched drunken groping and driving home drunk.

hilst much alcohol is often still consumed, the industry is far more responsible in the how we drink and how we get home after functions. And companies have moved away from over-indulging in food and drink and added special touches to make events have a bigger impact. Take the Allianz function held at the now standard, and superb, venue – Katzy’s (basically a spit away from the Allianz balcony above!). Organised by the evergorgeous Olivia (and as MD Delphine said – she is still not looking for another job!) the event opened with an oyster and champagne bar and ended with major dance moves. For anyone who still doubts the transformation in our industry (we have a way to go, but great strides are being made) just pop into any of the Allianz events and you will be blown away. This party is a must for networking: brokers from Seamus Casserly to Guy Scott were cutting deals – the latter having just returned from a trip to supervise the building of his holiday home and returning with a few new mandates – including two wine farms. Nothing like slapping two birds with one grape Mr Scott. Mark Haken, sporting his George Clooney beard, was holding court and Sasria’s Tau, with his usual bevy of super sexy, super fashionably dressed, super fun colleagues in

tow, was his usual effervescent self. However, I think he was still recovering from his sterling performance at the Border Institute dinner as he, for once, was not the last to leave! Many companies these days combine their end-of-year having fun parties with a doing good angle. Whether it is joining forces with Habitat for Humanity and building a house as part of the Christmas lunch or taking food parcels and doing activities with orphans, the insurance industry shows it can party and make a real difference in people’s lives. And then we have, obviously, our industry institute end-of-year functions. The Border Institute, small by comparison with the bigger metros, is always a highlight. With changing venues and entertainment – this year the brilliant Centre stage impersonation of a suave Italian had the audience in stitches – the IIB attracts nearly 200 people. It is such a good event that Global Choices joined this year, sponsored prizes, arranged lifts via their service providers who didn ’t want to drive and stayed up until the wee hours of the morning. The Insurance Institute of Gauteng’s function has now increased to over 2 000 people – a tremendous feat. And with such organisation, it is no surprise that the IIG’s Marguerite got on a plane for Oz to enjoy some well-deserved chill time – straight after the function! She may have, of course, also wanted to leave the country after witnessing

the incoming as well as outgoing presidents dancing to Mango Groove…. For many years these dinners were the same old same old – however, now they are dynamic, networking, fun opportunities filled with special moments and a highlight for many of us. It has been a privilege and joy to write this column during 2014. A big year for me personally as I left the corporate insurance world and started doing more entrepreneurial investments within our great industry.

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In addition, my mother died. I mention these two events because they are not extraordinary – all of us go through career changes, suffer great personal losses and yet, despite (because of!) those, coupled with the support, camaraderie, passion, can-do-attitude and desire to improve the world held amongst so many of us insurance folk, we all continue to move forward. I wish you a most blessed, outrageously brilliant end-of-year with your family and friends and suggest we all include a new year’s wish for our industry – let insurance continue to be the bedrock of our economy and make the world a better place. And that brings our little kuiers to an end. Be well.

We say farewell to Carel’s column but readers can look forward to something just as spicy from our next issue.

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