RISKSA January 2015 by COSA Media

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

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Feature writers Anton Pretorius Christy van der Merwe Dominic Uys Luka Vracar Sarah Bassett

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CONTENTS JANUARY 2015

Nine captains of the industry share their outlook on 2015

28 |

SHORT TERM

28 / Insurance, lights, camera, action! 36 / The rules of engagement 44 / Getting ready for a full year

48 |

MEDICAL

48 / The year ahead for medical aid schemes

52 |

LONG TERM

52 / The year of change

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Institutes and Associations – as strong as their membership

58 | MANAGING RISK

72 |

CAREER

112 |

LIFESTYLE

58 / Great achievements: require great risk management

72 / Industry lessons from the regulators

112 / Sports, camera, action! Action camera buyers guide

64 / A country called Africa: hospitality, tourism and the risks of perception

74 / Formulating responses to RDR

116 / Tangerine scream: Ford Focus ST

76 / The buzz on BEE in financial services

118 / Broker’s wife

68 / Holiday season: a time of tourism, hospitality and… insurance claims

94 / News

WARNIN G

102 / Events

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Dearreader

n this overly connected era where our days seem to get filled with more ‘stuff’ and everyone has more access to us, it is paradoxically harder to stay on top of what is really important. There isn’t a minute that goes by it seems, without somebody trying to contact us or tell (sell?) us something. We’d like to help.

Our 2015 goal for you, dear reader, is to sift through the clutter, bringing you only the most helpful bits of trade specific information, making it easy for you to stay on top of your game. In a world where drowning in a sea of irrelevant information is a real possibility, RISKSA is coming to the rescue with a brand new digital daily, featuring a mix of aggregated and all-original content, fresh off (our) industry-specific presses. A quick scan taking just a couple of minutes each day and you’ll be done. We’ll deliver this new daily in a carefully crafted format, especially designed to take no time at all to read. Think of the new RISKSA daily as your cheat-sheet to success. Need even more depth to your low-down? The risksa.com news site is updated daily with relevant, well-written news and for those of you (like me) who are addicted to the wonderfully tactile world of print, your multiple award-winning print version of RISKSA will always be available for you to page through before it graces your boardrooms, bedrooms and coffee tables around the country. Also new for 2015, we’re adding to our mix of best-of-breed journalism regular RISKSA TV updates, for those who would prefer to see all the insider skinny up close and personal, instead of only reading about it. And there you have it. Our 2015 focus is to provide our audience with the very best content delivered any way you choose to receive it. From stunning digital versions for tablets and smartphones (both Android and Apple) to web, web TV and even face to face at one of our many events during the year, the RISKSA production team is ready to make your business life simpler and faster by becoming the only trade publication resource you really need. I look forward to hearing your feedback – mail me on editor@comms.co.za.

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na ,2 edic anc ake pr le can help aâ&#x20AC;&#x2122;s top insur year ahead m to ib n e ic s h a r s t f h as po uth A ies in etter t now b ing as much some of So d opportunit k e w SA ar an om . At RISK rch and prep ain insight fr challenges s one for all e g u a h t o e res nce to ay on rosper the cha hey had to s ay it be a p d a h m We hat t re is w try. He Christy van der Merwe 10 8 4

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UTH AFRICA

M D

YNE A RAHAM B

he infrastructure development across the continent and the discovery of oil and gas in Mozambique and East Africa offer significant opportunities for insurance providers. Further opportunity lies in the ability for the industry to innovate, create new products and add value to customers in South Africa’s emerging middle class. The expansion by corporate business into subSaharan Africa represents a chance for insurers to support their client’s growth plans into this region by providing innovative cover and risk expertise. Challenges come in the form of low rates, which mean insurers must be more selective about the quality of the risks written, highlighting the importance of accurate underwriting and correct risk management processes. The technical skills shortage in specialist areas like engineering, risk management and underwriting needs a collective focus and effort to attract, train and nurture graduates and young talent in these areas. What are your top tips for success this year? • Differentiate. Whether it is on products, skills or distribution, if insurers aren’t doing something different and uniquely meeting customer needs, another provider will be. • Invest in skills development. Even if all the skills required today are on board, the industry at large needs more technical skills. • Segment the market, understand it and target those which are profitable and offer good opportunities for growth. • Avoid providing commodity insurance solutions.

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Y INSUR

R I C CE O GEN

E O

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MC DU TOIT

ON OSSIP

he year ahead presents unique challenges and opportunities for the insurance industry. Innovation and behaviour-linked insurance models will be key drivers of growth and competitiveness in the sector. The application of behavioural economics coupled with telematics technology is set to continue to disrupt the insurance space. Behaviour-linked insurance models enable insurers to better understand the evolving nature of risks that are increasingly based on behavioural factors while technology remains a key enabler. Societies are increasingly expecting companies to fulfil a socially progressive core purpose to create shared value. The short-term insurance industry in particular has a material role to play in society to contribute meaningfully to individuals’ lives. One of the biggest challenges is South Africa’s alarming road accident death rate, which has a severe impact on the economy and the short-term insurance industry. Telematics has the potential to enable insurers to track and measure driving behaviour, and has the ability to reverse the road accident death rate trend by providing individuals with tools to improve their driving behaviour, and rewarding better driving with meaningful incentives.

e believe the success of the business is that we strike win-win deals with our partners and our underwriting management agencies.

In 2015, we will still be embarking on our strategy of growth; we have to – we are a relatively small insurer, and we need to keep on growing at double digits. Obviously it will be progressively tougher to grow at those kinds of rates, but despite that, we have a number of new ventures up our sleeve. And certainly in the next financial year, we will be growing with at least another five product ranges, in order to satisfy our strategy in growing our business. The fact that natural disasters have been on the increase, is something of concern, although as a niche insurer it doesn’t normally affect us as badly as it does the general insurers. However, certain of our lines (for example the agricultural line business) have been severely affected by, for instance, the recent earthquake in Gauteng. So we certainly need to keep our eye on the ball and make sure that we have the necessary catastrophe covers.

Using telematics, insurers can also help clients in innovative ways, for example by being able to detect when they have been involved in an accident and provide immediate assistance. We expect to see enhanced innovative telematics solutions continue to disrupt the short-term insurance industry allowing insurers to better assess risk and provide more meaningful benefits and cover to clients.

Tap here to view a video of Du Toit discussing the company, and challenges and opportunities in 2015.

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L LINES

NS HOLLAR DI

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WI L

LEM SMITH

he philosopher Alan Watts said it better than anyone here at Hollard could. When he said, â&#x20AC;&#x153;The only way to make sense out of change is to plunge into it, move with it, and join the danceâ&#x20AC;? he neatly captured our advice to all players in the insurance industry for 2015. Because not joining the dance will put you at risk of becoming irrelevant. In response to increasingly unpredictable weather patterns, insurers will continue exploring better risk management processes (such as early weather warning systems), while simultaneously understanding exactly how to flex claims handling capabilities to deal with periods of extremely high demand. Better risk management will be the buzz phrase in corporate and commercial sectors, with tough economic times providing real impetus for this trend. Technology will continue to both enable and demand change among all industry players. In motor insurance, commoditisation of telematics devices, production of electric cars (BMWâ&#x20AC;&#x2122;s first fully electric car will be available mid-2015) and the emergence of technologies such as Advanced Emergency Breaking (already standard in the UK), will all demand innovative responses from intermediaries, insurers and suppliers alike. Technological advances will also spur growth in digital distribution models. Of course, 2015 will also see changes as we all react to the Retail Distribution Review (RDR). Changes in business models across the industry and high levels of intermediary consolidation will see the dance floor change dramatically in the year ahead.

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NK INSURANC

To view a video of Tyikwe discussing the company, and challenges and opportunities in 2015

UMI TYIKWE

and Bank Insurance has a short-term and a life insurance division and was granted its license from the Financial Services Board in April 2014. The rollout of the business plan in a sustainable manner was top priority. The Land Bank decided that partnering with companies that complement what Land Bank offers would be the best way forward. The major challenge for any state-owned entity (SOE) is its rationale to exist when the private sector is present in the market. Land Bank Insurance exists to address the challenge of private sector shortcomings. South Africa has an emerging agricultural market that continues to be underserviced, and rural communities that do not have access to financial products, especially agricultural. Given the role that agriculture is going to play in the South African economy, in terms of being a provider of unskilled jobs, there is a need for a state-owned entity to offer solutions. Providing new insight and introducing more science into crop insurance is a major opportunity. As an SOE we are in a unique position, and have at hand various agricultural players that are owned by the state, in particular the agricultural research council, which has a lot of data that can provide us with the scientific basis to underwrite and manage agricultural risks. We have also got the South African Weather Service, which has got an extensive history of climatic data that we can use. I am excited to bring these partnerships, with the public and private sector to realisation in 2015. Land Bank Insurance is essentially being built from scratch, so I am excited to recruit and employ young people who are enthusiastic about insurance, who never thought they would work in agriculture. I want to make agricultural insurance sexy, so itâ&#x20AC;&#x2122;s going to be fun working in this space.

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he South African economy performed poorly in 2014. Economic growth is still mediocre, with unfavourable future forecasts. This will have a serious impact on the industry as it inevitably means that consumers have less disposable income to spend on insurance. The slowing and stagnant economy is having another indirect effect on our industry as the incidents of crime and fraud increase during a period of slow economic growth. As the police crime statistics of 2014 show, the country experienced heightened criminal activity, especially in the business crimes sector. This translates into more claims and, ultimately, higher premiums for our customers. From a macroeconomic point of view, things are still looking dire for the industry. Unemployment is still high leading to increased criminal activity while consumer confidence has been further undermined by the recent downgrades by rating agencies. For us as a company, customer service will be important in acquiring and retaining customers. Customers need sound advice when purchasing insurance due to limited disposable income. In order to meet our customers halfway, we will keep premium increases at a moderate level. The best way to keep premium increases to a minimum largely depends on reducing our cost base. It is, therefore, important that we create efficiencies in business to counter slow growth. 2014 has also seen the insurance industry coming into the sights of industry regulators. The need to embed regulations has never been higher and as a company we understand the importance of

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implementing common sense regulations that will improve the sustainability and image of our industry. An example of this is the work we are doing to implement a plain language guideline for all our business units so as to truly â&#x20AC;&#x2DC;treat customers fairlyâ&#x20AC;&#x2122; by communicating to them in clear, understandable and effective language rather than convoluted business jargon. Lastly, we have seen great progress on the technological side of things during 2014, and we expect this trend to accelerate next year. We have seen technological developments in terms of driving, consumer behaviour, fraud management, enhancing customer experience and claims processing. All of these innovations are increasing the efficiency of our operations and industry. All of these trends point to 2015 being a challenging year as complexity and economic stagnation continue to take their toll. Mutual and Federal is ready to meet these challenges head on and to thrive.

ST IN

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his year will undoubtedly be one of regulatory compliance and adjustment for the industry, and these elements will certainly impact greatly on my personal focus. We’ll have our hands full with the introduction of RDR (which effectively re-engineers the entire insurance landscape), together with the implementation of SAM, the continued roll-out of TCF and at the same time, the regulators move to the twin peaks model. Despite the very obvious challenges that this presents, there are a number of opportunities that will also arise, especially from Oakhurst’s perspective, which has both full administrative, as well as binder supporting capabilities. Oakhurst is well placed to service brokers’ personal lines portfolios where the cost of administration has become prohibitive to their business models, and are actively seeking to accommodate brokers and UMAs that are keen to explore new partnership opportunities, or are contemplating new ventures. Forming long-term partnerships with like-minded individuals and companies, our philosophy of embracing change and being open to new and unique product concepts in both the personal lines and small commercial markets, as also our advanced use of technology, should hold us in good stead during these turbulent times. It is quite probable that increased compliance costs combined with reduced earning potential will result in smaller brokerages consolidating or having to fundamentally restructure their businesses. What we’ve seen from our operation in the Australian market is that personal lines car and household business is primarily provided by direct insurers with brokers

writing this as an auxiliary line to their main areas of focus, which are normally in the commercial, high-networth or specialist fields. During this period of change and consolidation, our objective is for Oakhurst to be proficient in providing our partners with feasible solutions, both in the current changing landscape, and into the new era that will no doubt unfold over the next couple of years. Being a telematics-focused motor insurer, we’ll obviously also continue to innovate and strive to maintain our lead in the application and use of technology, which, in this fast changing environment, is manifest by ongoing challenges and opportunities. We also believe that over the next couple of years we will see increased use of telematics from both an insurer and OEM perspective, and telematics ultimately becoming the norm rather than the exception. We’re also seeing a large shift in the availability and use of ‘big data’ which we’ll continue to embrace. Being consciously aware of the costs and complexities involved in all the aforesaid, we are motivated to contain these and continually strive to find ways to reduce waste and improve our processes in order to facilitate our ability to provide cost effective end products to our partners. All in all, 2015 is set to be a challenging, and in many ways, watershed year. My tip for success is to keep your eye focused on the end outcome and not to become overwhelmed by the rate and extent of all the current change. At the end of the day, our hope is that the client will prevail as the ultimate winner, with fair pricing, great service, enhanced products and efficient processes being the order of the day.

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G CEO OF SA

IN GO

IAN KIRK

n an interview with RISKSA, while still at the helm of Santam, CEO Ian Kirk acknowledged that the South African economy is going through a tough time, and the industry is under pressure. “But in tough times, there are opportunities that do not arise when the wind is at your back. It is important to deal with the threats and exposures, but that is also when you can really move the business forward.” The regulation issue creates a lot of anxiety for insurers, and intermediaries, added Kirk. “We have a responsibility to sustain the intermediated model. We need to get through this phase – because it is a phase – we have seen it coming, we are not quite sure how it’s going to land in South Africa and how it’s going to be adapted, and that is our responsibility - to work with our partners and to get the right answer.” Remaining upbeat, Kirk maintained that it is a great thing in South Africa that the Financial Services Board (FSB) is open to honest conversation. “They understand the issues, there are different things to balance – they have got to sustain the intermediated model, they have to put the customer in the middle as well – and they understand that. I feel positive about it.” On another note, Kirk cautioned that the risks on the ground need to be fully researched and understood. It’s an area where he feels the industry could improve by adequately reflecting risks in the ratings, and also improving mitigation actions. By way of example, Kirk mentioned a workshop on sprinkler systems that he recently attended. “It’s not something that I deal with every day, but I think

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it’s an area where we could be doing things better. We could have higher standards. We could insist on more as insurers, there are too many cracks that appear – the fire loss statistics are frightening and I think that we could have done better.” Kirk also highlighted that transformation and technical skills of the managerial pool are areas that also require more focus. “Yes, we have achieved a lot and it’s a wonderful thing when I walk through this organisation and I see how different it is now to what it was then. “And when I go to the IIG dinner and I walk around the tables and I see the demographics are completely different – we can be proud of that, but I still think we could have done a better job.” Kirk affirmed that general insurance is the DNA of capitalism. “We are right there, making claim payments every day that put people back on their feet. That is our job, and people recognise the value.”

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t Zurich, we believe that it is our broker model that makes our offering so valuable. Our ethos of investing time and resources in delivering what matters to customers, when it most matters to them, is directly in line with the expectations of the evolving global customer base. People don’t live ‘off-the-shelf’ lives; hence, it makes sense that they want more from the insurance that protects their businesses, their homes or their assets than an ‘off-the-shelf’ product. It is, therefore, critical to provide customers with tailored solutions backed by in-depth research, market insights and global best practices, and the flexibility to change with customer needs over time is also key. After all, it is only through informed expert consultation that consumers become customers, and purchases become relationships. From the customer perspective, speed and efficiency are the criteria on which they measure a company. One of the most common complaints about insurance claims concerns the time it takes to settle a claim. To add to frustrations, this occurs even when the amount claimed is relatively small. It is also important to make it easier for intermediaries to work with an insurance company.

Elements that also affect the risk landscape include environmental liability, industrialisation, urbanisation, and increased life expectancy, the impact of social media on risk mitigation and the frequency of catastrophic events, terrorism, and wars. One of the largest challenges to social and economic development in Africa is the massive infrastructure deficit. Insurance companies need to invest in market and sector specialism so that they provide products and solutions that can be tailored to address the requirements of the infrastructure build out in Africa, ensuring that project implementations are facilitated and that development is enabled. In this way the insurance industry can move from being the unacknowledged infrastructure development enabler to a sector recognised for its contribution.

Technological advances and data also continue to pose challenges and subsequent opportunities, and for financial services professionals, convenience, ease of use, technological capabilities and a mind-boggling array of apps will be pivotal in realising sales and efficiency targets, cutting overheads and enhancing brokercustomer engagements. The changing risk landscape requires researching and understanding these emerging and interconnected risks and tailoring products and services that will provide protection for our customers.

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INSTITUTES & ASSOCIATIONS as strong as their membership

Being a valuable member of a professional association can be a great way to enhance your career. Particularly in the insurance industry in South Africa, which is currently undergoing significant regulatory changes, it is one way to stay up to date with changes and have your say where possible to influence regulation.

Christy van der Merwe

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hrough conferences and social events, South Africa’s insurance institutes and associations allow professionals to enhance their networks. Education also plays a significant role, and involvement here allows members to ensure they keep up with continuous professional development (CPD) requirements, and constantly learn new things to give them the edge in business. Gerhard van Staden, president of the Insurance Institute of the Free State (IIFS) highlights the value of belonging to an institute, emphasising that “it allows for interaction with insurance companies, loss adjusters and co-members, which is critical to stay on top of your game.” Justin Naylor, president of the Insurance Institute of Gauteng (IIG) highlights that the industry belongs to everyone who plays a role in it, and the more people get involved, the more they contribute together to making it better. Insurance Institute of South Africa (IISA) CEO, David Harpur, tells RISKSA that 2014 was a positive year for the Institute, and more good work and success is expected in 2015. In tough economic times, the education and relationships enhanced through association become even more valuable. Financial Planning Institute (FPI) CEO, Godfrey Nti, explains that FPI members benefit from CPD initiatives that provide access to tools and programmes to stay up to date with information and resources relevant to the industry. The FPI has also engaged in strategic partnerships with companies to offer discounts for products and services that help members build their brand. These range from subscriptions to professional indemnity insurance. The FPI also has Memorandum of Understanding’s (MoU’s) with the Fiduciary Institute of South Africa (FISA) and the South African Institute of Tax Professionals (SAIT), which add value to members who belong to more than one professional body.

The biggest challenge The industry as a whole is grappling with new legislation and regulation, and at present, the Retail Distribution Review (RDR) is a major cause for concern as it directly impacts people’s livelihood. Justus van Pletzen, FIA CEO, reiterates that the RDR, published 7 November 2014 and earmarked for public response by 2 March 2015, will present the biggest challenge for its members, regardless of the financial discipline they practice. “The FIA’s challenge is to ensure that the RDR allows for a remuneration model that adequately and fairly compensates our members – South Africa’s risk and financial intermediaries – for the value that they add to their clients and thereby enables them to run sustainable and profitable practices. We share the wider industry challenge of promoting the value of good financial advice to consumers whenever the opportunity presents,” Van Pletzen emphasises. The FIA has been interacting with National Treasury, the Financial Services Board, the Council for Medical Schemes, the Competition Commission and the Minister of Health to ensure that they fight in the corner of intermediaries at the highest level.

Nti highlights that in addition to the RDR, the FPI is particularly concerned about the delays in implementation of the Tax Amendment bill and the retirement reform policy. “These delays have created great uncertainty for the industry, at large.”

Continuing the good work As well as numerous RDR discussions, the FIA was also pleased to receive a response from the Minister of Health to its repeated requests for a review of the fees paid to medical schemes brokers. Though it must be noted that the

quantum of this increase was disappointing, adds the FIA. It has been a very busy year for the FIA, and the association also added a business interruption calculator to its suite of financial advice tools (FInApp); unveiled the FIA Knowledge Centre; and launched its FIA-affiliated Compliance partners solution. Similarly at the FPI, the organisation continues to enhance recognition of the Certified Financial Planner (CFP) professional designation and collaborate with industry partners. The FPI also concluded a number of Memorandum of Understanding’s (MoU’s) with key industry players such as the Financial Services Board (FSB) and Road Accident Fund (RAF).

Five minutes

with the

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The MoU with the FSB aims to promote and maintain a sound financial planning environment in South Africa, and collaborate on a range of consumer financial literacy projects during the year to drive awareness around the importance of financial planning and the value of CFP professionals. Nti explains that the MoU with the RAF provides financial education to RAF claimants to protect them from being financially exploited. The collaboration provides claimants access to financial literacy tools through the FPI MYMONEY123 programme, with a view to empower them in making sound financial decisions. The agreement also enabled FPI and the RAF to explore collaborative opportunities on financial education and advocacy platforms, nationally. “This year, we signed FPI Corporate Partner agreements with Old Mutual Corporate and Sanlam. The partnership is aimed at raising the competency levels of the companies’ financial planners and financial advisors. Through various up-skilling initiatives, these financial planners and advisors now have access to a learning pathway towards the CFP certification. The partnership will ensure the highest quality financial planning advice for the business’ clients,” adds Nti. The FPI’s 26th annual convention attracted 1 000 delegates and exhibitors in 2014, and the Financial Planning Week (FPW) initiative provided free financial planning education sessions to over 2200 people across South Africa, empowering them in better managing their finances, says Nti, highlighting the valuable work of the Institute. Although RISKSA can’t see into the future, 2015 is likely to hold numerous challenges and bring in significant opportunities. There is no doubt that through membership and alliance with the various industry association and institutes, intermediaries will be well prepared to face whatever may come their way.

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Drakensberg Insurance Institute President: Susan Joynson What was your highlight of 2014? The DII was revived in 2013 after being dormant since 2004, and we have successfully rebuilt our brand to be a respected institute in Pietermaritzburg and the surrounding area. This was evident in our successful gala dinner where 196 people attended. The evening was the highlight of our year bringing together members in celebration of what the DII has achieved in a short time span. We were honoured to have IISA CEO David Harpur address our members at this function. What are the biggest challenges and opportunities going into 2015? The Retail Distribution Review (RDR) and the challenges this will bring to the industry is definitely top of the list. Those that embrace RDR will see this for the opportunity it presents to embed the professionalism of the industry and the value proposition of the intermediary. We are proud to be a part of an industry, which exists to underpin growth in our economy through the transference of risk. We are passionate about our industry and the role our members fulfill in society. We will continue to support our members in expanding their knowledge and professionalism for the benefit of the industry.

The Financial Intermediaries Association of Southern Africa (FIA) CEO: Justus van Pletzen What are the biggest opportunities for your members in 2015? The value of good financial advice is underplayed and not fully appreciated by our clients, so there are huge opportunities for our members to inform consumers about the service they offer. We also need to interact with regulators to ensure that they understand and appreciate the role that intermediaries play when it comes to consumer education and support. By focusing on the value of advice that they offer, intermediaries will be more successful in negotiating upfront fees with consumers. The FIA’s number one objective is to ensure fair and sustainable remuneration structures for our members, South Africa’s risk and financial advisers, and in so doing demonstrate the value of advice. Why should people join the FIA? An association is as strong as its member base. The FIA relies on members for input, views and strategies and welcomes member participation. Members then belong to an organisation that speaks to the regulators and other associations with a unified voice, and through their

participation in FIA structures they can influence what is said. We represent small, medium and large organisations across all financial services disciplines, including employee benefits, financial planning (risk and investment), healthcare and short term insurance. The FIA ensures that its members receive regular communication on regulation and compliance to ensure that they position their practices appropriately. I am convinced that our members have embraced professionalism and that ‘financial advice’ is a profession that should be recognised and respected by regulators and clients alike.

importance of financial planning, and businesses and consumers seeing the value delivered by CFP professionals. Our members are expertly placed to support the growing demands of both business and consumers. They have the opportunity to demonstrate the value of a competent financial planner and further entrench themselves within the financial planning industry. Another great opportunity for our members is the option to become an FPI brand ambassador by giving their time, talent and skill to help build the profession. They will have the opportunity to grow the recognition of the CFP designation, through education and awareness. These initiatives could range from speaking at community meetings or conferences, to media interviews, to leading a member recruitment effort and consumer outreach programmes.

The Financial Planning Institute (FPI) CEO: Godfrey Nti

What is the association’s main concern going into 2015? The financial wellbeing of South Africans remains a concern and our number one focus is education and access to professional financial planning for all. As such, together with our CFP professionals, we will continue with our consumer outreach programmes, which create awareness around the importance of financial planning, and demonstrate how the process can help one achieve financial independence. Our corporate partnerships and industry collaborations will continue to play a vital role in supporting education around financial planning and access to CFP professionals and we plan to expand these relationships in 2015, offering greater value to the industry and consumers. 

The consumer outreach programmes include pro bono initiatives such as Financial Planning Week (FPW) and FPI MYMONEY123, which offer consumers access to professional financial advice on budgeting, debt management, and savings and investments.

What are the biggest opportunities for your members in the year ahead? The greatest opportunity comes from South Africans increasingly recognising the

The Insurance Institute of the Eastern Cape President: Matt Kethro

The Insurance Institute of the Cape of Good Hope President: Brent Lyall

The Insurance Institute of Gauteng President: Justin Naylor

What was your highlight of 2014? Our council members went all out to make our annual dinner this year a roaring success. IISA CEO, David Harpur, was our guest speaker again this year, bringing news of the continued successes of the IISA. The theme was the Great Gatsby, and the weather was much better than the previous yearâ&#x20AC;&#x2122;s event.

What was your highlight of 2014? The amount of money we generated for charity through throwing events and having fun within our industry was incredible. The functions are getting bigger and better, and the result is that we are able to achieve bigger donations for our charities. As an institute, we are always looking for ways to offer more to our members and to change with the times. In 2015, we would like to add a few new social events to the calendar and keep our members informed on the new legislative and regulatory changes through seminars.

What was your highlight of 2014? I have two highlights. Firstly, what we achieved by raising the bar with networking events such as the inaugural dinner, the midwinter rave, night golf and the annual dinner. And secondly, we are also really proud of the IIG class of 2015 and what we have achieved in education. We look forward to continuing these good things and wowing our members with some new and better things.

What are the biggest opportunities for members in 2015? Doing more with less is the order of the day, particularly with decreasing numbers in our organisations. Finding the time to network and learn at the social and educational events is more and more important as we find it increasingly difficult to meet outside of these events at lunches or dinners as we did in the past.

What are the biggest opportunities for members in 2015? Our home â&#x20AC;&#x201C; Africa, and all its potential is the biggest opportunity that all our members should be embracing.

What are the biggest challenges facing members in 2015? It is a challenging time for the short-term industry with underwriting margins still under pressure, changes in legislation and many significant corporate changes and a South African economy and political situation that remains challenging. It is at times like these the people and relationships really matter, so the IIG looks forward to facilitating even more networking and relationship building and sharing experiences through our educational initiatives. In challenging times, we see incredible opportunities.

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The Insurance Institute of South Africa (IISA) CEO: David Harpur

Insurance Institute of the Free State President: Gerhard van Staden

The Insurance Institute of the Border President: Michelle Amm

What was your highlight of 2014? There has been significant growth in numbers of students choosing insurance as a career, and emphasis from the FSB on professionalism in the industry appears to be attracting more students to this field. The IISA has also made progress on the recurriculation of various UNISA insurance courses for the new Higher Certificate in Insurance that will be launched, and this is likely to be ready for 2016. This will combine subjects in order to have fewer subjects, which in turn simplifies study materials and exams. This is in addition to the annual work of updating study materials to ensure that they remain relevant.

What was your highlight of 2014? Our events definitely stand out as the highlight. Our President’s Lunch featured guest speaker Allan Heyl, former member of the infamous bank-robbing Stander Gang. The room was dead silent when he spoke, and everyone was glued to his every word. It was truly inspirational, emotional and motivational.

What was your highlight of 2014? 2014 was a superb year for us! We took on a ‘new look’ with our new logo and our own constitution, which was voted in at our AGM earlier this year. We connected with other institutes and attended the education summit arranged by the IIG. Valuable information sharing took place, and we are hoping this will become an annual event.

We also held six great breakfast forums, and will continue with those in 2015. We focused on topical issues such as cyber risk and compliance and regulation. But, of course, the biggest single event that stands out is the Insurance Conference, and we had record numbers and great representation from all corners of the industry throughout the world. What is the association’s main concern going into 2015? Education remains the focus, and the IISA will continue to support the local institutes as they also move to become more focused on educational endeavours. It has been encouraging to see the revitalisation of some of the local institutes, and the excellent work that is being done. I encourage people to continue to try and find as many topical subjects that enhance people’s knowledge on all levels and take our industry forward. There have also been major improvements on the CPD front, and soon an online platform will be launched, allowing members access to talks, lectures and breakfast forums where CPD points could be earned. This is becoming increasingly important as members in remote areas are thus allowed great access, as well as members living overseas who wish to maintain their qualification.

We also had a fundraising evening, presented in the form of the TV show Noot vir Noot. We called it ‘Nood vir Brood’. We had a live band and 12 different teams competing for the champions’ title. We raised an amazing amount of money to buy bread, which we donated to various local institutions in need. We also supplied bread and soup to children in need through donations from Sasko, which donated a loaf for every loaf of bread that we bought. One of our educational events was a visit to a local panel beater. They gave us a brief lecture and walked us through the entire panel shop. It was very interesting to experience the insurance industry from their perspective. They also gave some volunteers the opportunity to do some panel beating work themselves. It was great fun and very insightful! What are the biggest opportunities for your members in 2015? I believe that education and training should be on top of the list. The insurance industry is changing at a rapid pace due to technology and regulations, and we need to be flexible and adapt to these changes in order to survive. The IIFS will provide structure and guidance for our members in order to keep up with these challenges. I firmly believe that if we anticipate and plan for changes we will create our own future.

We certainly stepped it up this year on the education front by offering our members training and presentations of a high standard also enabling us to secure CPD points for our professional members. What is the biggest concern going into 2015? New blood! While our membership figures are good, we have very little interest from our existing members in joining the council. In 2015 we will be on the hunt for ‘new blood’ – people who are eager to learn and bring fresh ideas to the table and help us ensure the survival of our council and take our Institute to new heights. In 2015 we look forward to strengthening our ties with other institutes and associations and working in collaboration with them to the benefit of our members to ensuring that the IIB is recognised as a role player in the industry.

Another highlight for the year is sure to be the 2015 Insurance Conference, and the theme for the year is ‘Risky Business – the Insurance Solution’.

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Insurance, lights, camera, action! Luka Vracar

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A film production is an exercise in logistics; better yet, a circus. Moving around a cast and crew of 200 people from one location to the next, setting up the various platforms, from makeup and hair, catering and equipment, things can and will go wrong. Add to that the threats of crime, neglect and temperamental weather, insurance cover is essential. RISKSA takes a look at the complexities of life on a film set.

ilm production in South Africa is booming. In the past year alone, Cape Town Film Studios turned down 32 major projects because it has been completely booked. We have seen several high-profile and big budget movies come out of the country recently, most notably Neill Blomkamp’s District 9, which became a critical and commercial hit in 2009, earning $211 million off of a $30 million budget. It was filmed in Soweto, as is Blomkamp’s upcoming flick, Chappie. Additionally, the high-budget, international productions filmed in South Africa in recent years include Blood, Dredd, Diamond, Safe House, Invictus, and the Emmy-winning series, Black Sails, which was recently renewed for a third season. All in all, the film industry contributes around R3.5 billion to South Africa’s economy, according to the National Film and Video Foundation. Denise Hattingh, owner of KEU Underwriting Managers, which specialises in entertainment, event and film insurance, says that the intensive and logistically complex nature of a film production often does not prioritise insurance as high as it should. Still, film production risk is

a vast grey area that requires comprehensive solutions and foresight that only comes with experience.

Risk management What is the exposure of risk if you take a group of celebrities, throw them in the bush, give them tasks to perform, and film them using R20 million worth of equipment? What if a fire occurred nearby? This is what happened during the recent filming of I Am A Celebrity, Get Me Out Of Here, an international reality concept insured by KEU. The example highlights how important risk management is when dealing with complex and costly situations. “When we do risk management, we go to the locations prior to the start of filming to assess what the greatest concerns are. While the production company thinks about the production and focuses on things like how the film looks, and how the cast and crew are performing, we look purely at the risks involved and what are the things that we can do to make life easier and prevent losses from happening,” says Hattingh. 

It is up to the broker to ensure that the insured understands the policy conditions. After the risk management assessment, the insured needs to be informed about the specific risks or the changes required by the insurer in order to adhere to conditions, which are often bespoke. However, due to the vast number of productions and risks, a complete risk assessment is not always possible. KEU, for example, would then highlight major risk. Brokers will also have to communicate about specific risks they might be concerned about. “Film changes from one production to another, so you cannot always have one rule apply to all. Risk management then highlights and specifies what we want them to do in specific circumstances. It is a service we offer free of charge to the

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client. We send somebody out there, we pick up that cost, and together with our risk management report, which both the client and the broker receive, we do the proper underwriting up front,” says Hattingh.

On set The risks on the set of a production are varied and sometimes completely unpredictable. They can range from something as small as a fender bender at a location, to something as significant as a set burning down. This is covered by film producer’s indemnity (FPI), and offers cover for nominated key cast and crew; the loss or damage of film or digital media, sets, wardrobe or equipment; third party damage; personal accident, and a range of other elements needed by film producers.

“We have seen a lot of major claims; a lot of personal accident claims, especially when they are building the set. We have had a man electrocuted on set. We have had a man drown on set. There is a lot of activity during a production, and claims that have to be finalised. So there is always an interaction with the insured during a production,” says Hattingh. “In the past 24 months our major risks came from fires. We had the Big Brother house that burned down. We had two fires out in Muldersdrift, and two different productions were affected by it. There was also the fire in Nelspruit. Fire was not a concern for us in the past. Damages to goods, theft of props or wardrobe, and third party property damage were always a bigger concern,” says Hattingh.

While fires may be expected as a result of set construction or electrical damage, the recent instances that have led to fires becoming a major risk are varied. They are also location specific – if a production is filming in the winter months in the Highveld, it is dry and the winds are strong; fires will spread quickly. This is what happened to a KEU insured production, after an incident of arson on a neighbouring farm.

However, it is subjective. If an individual suffers from diabetes, for example, it is possible to buy back some of that cover,” explains Hattingh. Equipment, including hired-in equipment, is covered by equipment all risk insurance. The insured has the choice: they either keep the equipment of the hirer (the owner) or they take out insurance under their own control. Hattingh indicates that most producers prefer to insure it under their own control because they know the conditions of the policy, and they can control it better.

“Regarding the two in Muldersdrift, the one started because a crewmember flicked out a cigarette without putting it out properly. The second one started because the crew were burning one section of the set (because they wanted a burnt out look) and did not put it out properly. Due diligence was definitely the issue,” says Hattingh. When underwriting an international production with a very extensive budget, the cast can become a very great hazard, says Hattingh. This is because if cast members are not able to perform, the production needs to be cancelled or postponed until that cast member is available. In this case, nominated key cast and crew cover, which covers only the allocated individuals, incurs the costs. “Under nominated key cast and crew, the biggest condition that we have is non-

appearance due to illness, which will be excluded unless the person has had an approved medical. And, if a person that is so important to the production has to go to a doctor, they can only go to a doctor that we have prescribed.

“Under equipment all risk you do not only deal with the equipment hirers, big companies like Panavision, but also with individuals who own their own pieces of equipment, and one of the big conditions that we have on our policy is that all equipment is tested prior to filming. So you are not allowed to roll any camera unless it has been tested and is in working condition. But that is a standard condition across the market,” says Hattingh.

The new digital form of filming means that there are now very specialised people that need to control the photography that has been captured. The issue is that training courses for these skills have only recently been introduced. “That is always a big concern for us, you always have to use people that are qualified and understand what they are doing, and with new technology that changes so drastically, it is not always possible to have a tick against someone’s name to ensure that they have the relevant course, because next month new technology has been transferred,” says Hattingh.

Behind the scenes The film productions indemnity will cover a lot of eventualities, but at the same time it is specific about what it covers and what it does not. Only a certain number of people are covered under nominated key persons, but what happens if an actor who only has to shoot five to six days over the course of the film disappears or gets ill? Even though their name may not be attached to the production, those days need to be reshot, incurring additional costs. What happens if the production budget is not available, perhaps the biggest risk during the overall  production of a film?

There when it matters Your insured Production Company can focus squarely on their production, safe in the knowledge that KEU’s products have been developed over many years of focusing exclusively on their needs. We cover nominated key cast and crew, negative film, digital media and faulty processing, props, sets and wardrobes, hired-in equipment, third party property damage and extra expenses. But we don’t stop there. We also cover business property and the company’s office contents, public and employer’s liability, money and motor vehicles and personal accident for all cast and crew. KEU, your partner in short-term insurance for entertainment and events.

KEU Underwriting Managers CC products are underwritten by Centriq Insurance Company Ltd. We partner with registered short-term insurance brokers to ensure your risk is covered. Tel: 0861 00 0090 Fax: 0861 00 0030 email: info@keu.co.za www.keu.co.za Authorised FSP: KEU 5076 Authorised FSP: CENTRIQ 3417

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“Our responsibility is to complete and deliver the film,” says Paul Raleigh, head of Hollard Film Guarantors. “Our job is to ensure the film is delivered to the distributors, sales agent, or investors based on the script and within the budget. The money must be in place, because we cannot guarantee completion if the money is not in place.”

face. While these elements cannot be insured by traditional insurance, they can be mitigated from the start. Film production does not begin when the cameras start rolling; preproduction often takes the same amount of time as filming. Location scouts, set construction, film testing, training, and all manner of preparation can take place up to a year in advance of principal photography, and that is when insurance starts.

“A lot of the budget problems are cash flow issues. The money is always late. It just seems that it takes much longer to close the money than it is to deal with the logistics of the production. “One of the things we can do is bridge all those financial commitments. Many films get into trouble as a result of cash flow, because you might set up this whole machine and find that you are delayed by two weeks, and that can cost you R1 million. Now you are already in the hole, and you have not even started shooting,” explains Raleigh. The guarantor will provide the finishing funds to make sure the film is delivered and will also ensure that the necessary insurance that is required for the film to be completed, such as essential elements insurance, which may call for certain locations to be used or for certain cast members to be attached, is in place. Anything that is outside the control of the film producer or is not covered by traditional FPI and equipment all risk will fall to the film guarantor. “A simple thing that we do is go in with the expectation that the schedule is not attainable,

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that the film cannot be made in 30 days, that it will realistically take 40 days. Those are the risks we try to mitigate before we even start,” says Raleigh. “You can insure against the weather on a commercial because it is a one-day event. But you cannot insure on a feature film. So we need to know that there is flexibility in the schedule: if it is raining can we go do interiors? In which case how, have you contracted your actors? The actors have only been contracted for the call that they are used for, the lead actors have to be contracted for the duration of the production so that we know we have flexibility if the schedule changes,” adds Raleigh.

Wrap Films face several major claims. For Raleigh, the trick is to know when a problem or a potential loss is going to happen before it does. Falling behind schedule and under-budgeting are two major problems that film producers

Furthermore, brokers need to be aware that, because of the unpredictability and logistic complexity of film production, claims will happen and early communication is important: “The job of the broker is to ensure that all of the producer’s plans and all the relative information about the production is submitted timeously. “Additionally, producers must not leave the claims for the end. We are very strict on this. If something happened, it must be reported immediately. It resolves a lot of issues and ends up costing less in the long run,” says Hattingh. “Brokers need to have a good grasp of what producers are up to. Do not try and underwrite out of the office. If you are interested in this market, you have to get to a film set and see what you are dealing with. Understand the terminology you are dealing with because that is going to make a big impact on understanding the risk. Be passionate about it, there is a lot of paperwork and a lot of last minute stuff that is submitted to the broker. It is very intensive,” concludes Hattingh.

Take cover Insurers and brokers alike are best advised to gird their loins for a growing onslaught arising from legal liabilities. An increased awareness of consumer rights, together with a legal fraternity keen to capitalise on every single opportunity, is a potential recipe for disaster.

By Austin Mpandawana legal advisor: Renasa Insurance Company

iability insurance has long been a thorn in the flesh of the insurance industry abroad (in the USA, Canada and Europe). Asbestosis is a well-known example. The problems associated with this highly specialised area of insurance are now likely to bite those in the South African industry as well.

very costly for those who are now taking on these risks. It is, therefore, prudent that insurers have a team of qualified personnel able to respond to their clients growing needs for such cover in a way that will not place the insurer directly above a ticking time bomb.

South Africa is one of the worldâ&#x20AC;&#x2122;s emerging economies, and with this growth comes exposure to some risks that were, previously, only experienced in foreign markets.

My experience at claim stage is that, as far as liability goes, some brokers are not currently as well versed with the finer details of this type of cover as they need to be in order to adequately advise both existing and prospective clients.

For example, disposal of waste is problematic, and opportunists have begun seeking ways to put waste, such as fly ash from power plants, to use. However, the longer term effects of using products made from such waste is a grey area for which answers will only be revealed in the future. As with asbestosis, it may ultimately prove

Given that there is an increasing number of small to medium business enterprises seeking cover for such potential liabilities, more and more brokers potentially face this shortcoming. It is imperative that brokers develop more in-depth knowledge as well as seek advice from the relevant insurance specialists before selling liability products.

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It is also my view that competition, which is helping to keep liability premiums depressed, is not serving the industry well. Appropriate rates must be charged in order to accommodate claims, and limits of indemnity may well need to be increased because the potential losses that could arise from these risks could be greater than currently anticipated. Knowing what rates to apply for the unique circumstances facing each and every client boils down to the specific expertise of those writing these risks. As we live in an imperfect world where the risk of liability is very real, I would suggest that both insurers and brokers now need to carefully review what liability cover may be required and to ensure that insured clients take cover for legal liabilities at appropriate levels.

PROFILE

forges sturdy growth Short-term niche insurer GENRIC Insurance Company is steadily building its family of products and underwriting management agencies, offering brokers and their clients a holistic, one-stop insurance house, backed by a formidable team and a solid balance sheet.

GENRIC Insurance Company has been busy. It is fast becoming a force to be reckoned with in the niche short-term insurance market.

Building GENRIC’s strength

Since it set out two years ago to grow within the short-term insurance sector, it has launched numerous new products and underwriting management agencies (UMAs), and built a sturdy balance sheet through the acquisition of strategic stakes in some of its UMA and broker partners.

Recently the company initiated its strategy to acquire strategic stakes in some of its UMAs, marking the next phase of expansion for the insurance company.

It has embarked on a landmark coinsurance partnership for the agricultural industry with parastatal Land Bank Insurance Company. And its turnover has increased by 40 per cent per annum for two consecutive years.

It bought all the shares in the following UMAs: Polygon Underwriting Agency; Sirago Underwriting Managers; Quantum Liability Underwriting Managers; and Lynx Transit Underwriting Managers.

But for GENRIC, this is just the beginning of even greater things, according to chief executive officer MC du Toit.

GENRIC also holds a stake in its new UMAs: aviation specialist Planesure Underwriting Managers; fuel and motor retail specialist Petrosure; healthcare insurance specialist Wesmart; and micro insurance specialist Sekusile Underwriting Managers.

“GENRIC is becoming a substantial insurance player in the South African short-term insurance market,” he says. “We are making great strides towards strengthening our balance sheet and actively building quality products and services for the niche markets. For us, the business of insurance is not just something we understand and do well, we live and breathe it.” GENRIC offers a palette of niche insurance products to brokers and their clients, as well as directly, backed by a healthy balance sheet and A-rated reinsurers.

Tap here to view a video of Du Toit discussing the company, and challenges and opportunities in 2015.

“We are building our strength to become a preferred insurance brand,” du Toit says. “Bringing these UMAs closer to us means that we are even more closely aligned in ethos and practice to benefit our clients.” Pivotal to the company’s distinguishing ethos of bringing top-class niche expertise to the market is the individuals behind the company, its partners and its products. In the past year, GENRIC has made a number of strategic alliances with, and appointments of veterans within their specific sectors to support the company’s product expansion.

Filling the healthcare gaps GENRIC also expanded its offering in the healthcare space with the launch of UMA Wesmart Financial and Administration Solutions, bringing a suite of much-needed, affordable and proven healthcare insurance solutions to the market. Wesmart is a juristic representative of GENRIC, administering the Docsure short-term health insurance product range, which is tailored to the needs of corporate employers, individual and families. GENRIC bought a strategic stake in the UMA. Wesmart is

spearheaded by Martin Rimmer, CEO of the UMA. He has almost 20 years’ experience in the healthcare industry, and is highly commended within the industry and by the GENRIC team. “The benefits of having an institution like GENRIC backing you as an UMA are huge,” Rimmer notes. “Policyholders know that they are dealing with a company that has a solid balance sheet, and GENRIC has a reputation for understanding the niche risks well.”

Martin Rimmer, chief executive, Wesmart

Mpumi Tyikwe with MC du Toit.

Land Bank coinsurance marriage One of the more recent alliances is with agriculture specialist Land Bank Insurance Company. GENRIC entered into a co-insurance partnership with the parastatal to bring insurance and risk management solutions designed purely around the needs and wants of the agricultural sector. This marriage is significant for both established and emerging farmers because GENRIC and Land Bank are both financially strong enterprises, offering unparalleled skills within their ranks that have been developed from within the agricultural space.

Land Bank picked GENRIC as strategic partner specifically because of the company’s niche skills in agricultural insurance within its UMA African Rand Underwriting Managers. “GENRIC is a niche player with highly specialised skills in the agricultural sector,” Land Bank Insurance Company managing director, Mpumi Tyikwe, says. “We align on views and strategy. Land Bank is not merely looking for scale, but for the right partner for the long haul. And we have found it with GENRIC.” The product that was born from this marriage is AgriAsset – Insuring A Good Year Every Year. It is set to bring accessible insurance to developmental farmers and their communities, an area where insurance penetration is still minimal. With AgriAsset, great emphasis will be placed on training and development to increase acceptance of the product offering. The insurance policy offers insurance, not only to farmers, but also to ancillary service providers that support the agricultural industry. These include seed providers, fertiliser producers, equipment suppliers, and more, catering for the entire chain within agriculture, upstream all the way down, but excluding retail.

Truly South African Another major coup for GENRIC this past year has been the partnership with Petrosure Underwriting Managers, a new black-owned UMA engineered by fuel and motor retail insurance veterans, Irene Fortuin, managing director, and Jabu Nkomo, executive director. Collectively the duo has more than 55 years of experience in the financial services sector, with more than a decade of this spent in the fuel and motor retail sector. Nkomo notes that he and Fortuin have strong relationships in fuel guarantees, Petrosure’s differentiation in an already-niche market. “A better match for GENRIC we could not have found,” says GENRIC’s Cornel Schoeman, chief commercial Officer. “Irene and Jabu are very profesprofessional and highly regarded in their sector. They operate like a well-oiled machine and are completely in this to

provide sound products, create real value and build strong business partnerships.” GENRIC took a strategic stake in Petrosure, which is in keeping with the insurance company’s strategy to closely align its family of UMAs and strengthen its balancesheet. Because Petrosure is a black-owned UMA, GENRIC adheres to the spirit of the Liquid Fuels Charter and shows the company’s commitment to build a truly South African company. “GENRIC is a truly South African company,” says Fortuin. “It understands the market totally, and truly believes and invests in the South African future that we believe in.”

Keeping the family close GENRIC Insurance Company had a vision of homing its whole family of underwriting management agencies under one roof, a move that would ease doing business with the niche short-term insurer who offers a holistic dashboard of innovative risk management solutions for specialised risks. Therefore, one year ago GENRIC moved to Midrand Office Park from its initial home in Randburg. The UMAs, each within their own spaces, scattered across Gauteng, moved in at the beautiful new premises shortly after that. Now GENRIC has its UMAs with their teams in the same building, alongside the insurance company’s own team.

“Our brokers and clients have the convenience of instant access to our entire portfolio of offering, with each offering’s accompanying expert,” explains GENRIC’s Cornel Schoeman. “Having the GENRIC UMAs under one roof is true to our philosophy of having a closely-knit family, and of being a one-stop solution for our clients.”

and sound administrative and compliance support. We immediately recognised that Candice and Gen have a lot of credibility and extensive experience in their industry to launch this new broker.” GENRIC was the perfect partner to set up Arco360, says Hobday. “Not only could we open the doors to our business within one month, fast bringing this idea to fruition, but also the compliance standards I’ve witnessed in this process with GENRIC are outstanding,” she notes. Arco360 offers innovative, tailor-made equestrian insurance products, underwritten by GENRIC, that are well administrated and managed, but delivered with a sympathetic approach. “Our feeling is that equestrian medical insurance should operate in much the same way as regular, human medical insurance, since horse owners typically treat their animals like a son or daughter,” says Hobday.

Equestrian legends join GENRIC GENRIC also assisted in creating specialist equestrian broker, Arco 360, the brainchild of Gen McNeill, CEO, and Candice Hobday, chief commercial officer, both legends in their own right within the equestrian milieu.

She explains: “You need someone on the other side of your claim that operates super efficiently and within the regulatory framework to safeguard your investment, but you also need them to be sympathetic, to understand that we’re dealing with a dear, dear family member here.”

GENRIC’s first introduction to McNeill and Hobday came barely one month before the broker opened its doors for business. Over the span of four weeks, GENRIC assisted in setting up Arco360, in which GENRIC also holds a stake.

Candice Hobday and Filina

“This is a prime example of what GENRIC is good at,” says Cornel Schoeman, chief commercial officer at GENRIC. “As a niche short-term insurance company, we are in the business of incubating new products and getting them to market quickly, but with solid foundations

Gen McNeill and MOT Saint John and Mossandi Legacy

Walk the talk GENRIC Insurance Company takes its role in society seriously. The GENRIC management team and employees had been set on contributing as a company to make positive changes within their community and South Africa at large. And so the GENRIC Youth Foundation Trust came into being in the past year. “We are walking the talk,” says du Toit. “As an organisation, GENRIC has always been of the mindset to assist in the devel-

opment of the youth of South Africa. This is where we believe we can make a difference and can intervene in shaping a positive future for our country.” The foundation owns 20 per cent of GENRIC’s shares. It is a registered trust, and its mandate is focused on the development and education of youth, rather than mere support. “We found that there are many charities that already offer the support,” du Toit says. “So we really want to get down to

the nitty gritty of developing the youth.” In this regard, the foundation has already defined a number of projects that are in the planning and scoping phases. One such project that is currently in draft phase is assisting five beneficiaries from previously disadvantaged communities between the ages of 12 and 16 in their education and development. The foundation plans to pay

Jamie Illing, managing director, Planesure

Jabu Nkomo, executive director, Petrosure

Becoming the preferred brand GENRIC created a few in-house products in typical GENRIC style of innovation, with some of the products the first of their kind in the South African market. The unique Dealer Assist policy is a good example of this. It insures motor dealerships against actions brought by customers under the Consumer Protection Act. GENRIC underwrites the policy through its UMA, Quantum Liability Underwriters.

Irene Fortuin, managing director, Petrosure

GENRIC also expanded on its rental guarantee policy by offering great-value insurance to landlords of residential and commercial properties, be it a single property or a group of properties. “GENRIC is going from strength to strength to become the preferred niche insurance brand in South Africa,” says du Toit. “We’re serious about our business. We continue to fine tune what we have and expand into what the market needs and what makes financial sense.” He concluded: “Now we have the balance sheet to back up our growth aspirations, to become a critical one-stop shop for brokers and their clients, but also a place where we know our brokers and their clients by their names and by their very precise risk needs.”

Cornel Schoeman, chief commercial officer, GENRIC

for the pupils’ education and all that it entails, such as uniforms, school fees and the like, and bring the children into the GENRIC offices for vocational exposure. “We see big gaps in capacities by youth in the transition from Matric to university,” du Toit says. “So, we want to enable the kids to be better informed of what happens in the workplace, and what different options and disciplines exist.” During their visits to the GENRIC office for training and education, the young adults would

be exposed to all the different departments within the company, exposing them to the varying careers that exist, such as legal, compliance, sales, accounting, actuarial and more. Du Toit says the trust has projects planned also for the development and education of smaller children. “Watch this space for some exciting upcoming projects the GENRIC Youth Foundation Trust is planning,” he concludes.

www.genric.co.za

E M P A O L WL E Y R

N U R T U R E

T R U S T

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Above MC du

Avoiding

financial losses from hail and storm damage

Following the devastating impact of the Gauteng hailstorms for short-term insurers in both 2012 and 2013, the industry has been on high alert to try and mitigate potentially similar impacts, which cost the industry billions of rands.

PS short-term insurance executive director, Nazeer Hoosen, explains that brokers should maintain close contact with their clients and ensure that they are aware of preventative measures that they can take to protect their valuable assets from these devastating events, which are characteristic in many parts of South Africa in the summer months.

are susceptible to lightning, especially the Gauteng and Highveld regions, to consider various preventative measures to ensure they protect their homes and the contents within their homes against damage. “Sometimes it is a good idea to have lightning conductors installed on the property, especially for thatch roof homeowners, as the risk of lightning causing a fire in such a structure is quite high.”

“Damage from these storms can often lead to very expensive repairs and, without adequate insurance cover, this can place consumers at serious risk of financial loss,” Hoosen notes.

Brokers with clients living in these areas should also maintain contact with their clients, and be sure that they are aware of the fine print and what their insurance policy will cover after damage caused by heavy storms and lightning. “Electric gates, garage door motors and appliances like TV sets and PC’s can easily be damaged following a direct lightning strike. Therefore, homeowners must ensure that their insurance policy includes cover for this type of damage in the event of lightning.”

Highlighting the extent of damages as received through a recent PPS short-term insurance claim, Hoosen explains that a client’s cost to re-paint and repair their Pretoria home following hail damage totaled R185 000. “The hail hit the walls of the house so hard that the paint was chipped off and also resulted in about 50 windows being broken. Following a full investigation, it was found that this was not as a result of negligence or poor paintwork, which clearly shows the magnitude of damage a hail storm can cause to a house,” Hoosen says.

Hoosen further adds that advisors should make sure that their clients check that the water flow around the house is flowing in the right direction towards proper drainage, to ensure that no water could flow into the house in the event of heavy rainfall.

Hoosen says that intermediaries should advise their homeowner clients who live in areas that

“All drains and gutters should be unblocked in order for rainwater to run away from the house.

Homeowners should conduct special inspections on the gutters and drains, especially after the winter months when debris is more prone to build up in roof gutters and drainage systems.” Hoosen says that consumers can also implement various preventative measures to mitigate the damage that heavy storms can cause to their vehicles. “Consumers need to be attentive for any warnings issued by the South African Weather Service of severe storms or hail. Should a warning be issued, vehicle owners should take the necessary precautions to park their car in a safe place that is sheltered against hail.” Brokers can alert their clients to the fact that they could get weather alerts by following the South African Weather Service on Twitter, and many insurers are also sending warnings via this social media platform to warn of extreme weather events that could have short-term insurance implications. Hoosen notes that while preventative measures can assist to mitigate or minimise damage as a result of storms or hail, it is vital that brokers make sure that their clients check the wording in their insurance policies to ensure that they have the necessary cover for these types of claims following extreme weather, Hoosen concludes.

The rules of

engagement Melissa Wentzel

36 8 4

There have been a number of concerns raised in the hospitality industry in South Africa over the past year, ranging from the administrative headache of changing legislation, to the threat the Ebola outbreak in East Africa poses to the 2014/2015 summer season. RISKSA takes a look at what could be the biggest threat to hospitality for risk managers in 2015: the guest.

recent survey of the smartphone usage habits of 5 000 desktop Internet users in South Africa revealed that 92 per cent of Internet users own smartphones, and 82 per cent of those owners use their smartphones to access the Internet. Of the activities South Africans perform on their smartphones, accessing social media is the third most used activity, after instant messaging and email. These findings, coupled with the new Consumer Protection Act (CPA), means today’s guest, both local and international, is more mobile, more present online, and more aware of their rights as a consumer. Skift, an online marketing platform for the global travel industry, is currently running an interview series, The Future of the Guest Experience, which looks to CEO’s of international names in hospitality, like Marriott, Starwood, and Wyndham Worldwide, for insights into the evolving expectations and demands of hotel guests. Stephen Holmes, CEO of Wyndham Worldwide, says that one of the major causes of the current shift in guest expectations and demands is the advent of ubiquitous technology and data that’s available to all consumers. According to the last research study released by World Wide Worx and Fuseware, South African Social Media Landscape 2014, Facebook is currently the largest social network with more than 9,4 million active users, and Twitter has more than doubled its users in the past year, from 2.4 to 5.5 million, in 12 months. More relevant to the hospitality industry has been the rise of American-based website, TripAdvisor, that provides a free service to travellers to post their reviews and experiences. An early adopter of user-generated content, TripAdvisor has more than 75 million user reviews and opinions, and has become the go-to platform for any potential guest prior to planning a trip. “If a consumer is going to a certain market and knows there’s a bunch of different hotels then they want to be told what they’ll like and they don’t want to hear it from the hotel. They want to hear it from a third-party site…like TripAdvisor,” says Holmes. “There’s a growing ecosystem of online rating and review platforms geared specifically toward the hospitality industry which, if mismanaged

or ignored, can be potentially disastrous,” says Brett Powell, MD of Intertel, a forensic investigation and technical intelligence company that provides an online reputation management service. The by-product of this evolving social media landscape is the advent of a new breed of guest – empowered, expectant, and wielding CPA citations. “Social media has revolutionised how an entire generation expects to communicate and interact,” says Powell. However, social media has also exposed the hospitality industry as an easy target for negative, and quite often defamatory feedback, and the potential for reputation ruin. “Reputation and brand management is vitally important. All you need is one guest to have a bad experience, and that can have a huge impact on the hotel going forward,” says Brian Muller, director of Factory and Industrial.

“The main thing we’ve experienced over time, because of our involvement with the accommodation industry, is that B&B and guesthouse owners are subjected to frequent intimidation,” says Lana Mizen, head of hospitality at Zurich. “We were finding that every time something doesn’t go right, whether it’s a liability claim or if a guest is involved, then the person threatens to publish on social media.” Zurich has recognised the demand for public risk management within the tourism sector, and have added containment cover as an extension to its liability clause within their hospitality policies in October last year. This extension covers the costs of PR or crisis consultant fees and essentially minimises any negative publicity subsequent to a crisis situation. “Nowadays, issues can accelerate from dissatisfaction to crisis at the speed of light,



CASE STUDY

BnB Sure/Zurich containment cover “A guest made her way up a grass embankment at an establishment and did not follow the pathway provided. She slipped and fell and sustained injuries. After a thorough investigation, it was clear that there was no negligence or wrongdoing on the part of our client. The client had clearly marked the accessible pathway to use to ensure the safety of all guests. This was just an unfortunate accident due to the guest making a wrong choice. However, the guest was unhappy with the outcome and demanded that she be compensated for the injuries and threatened to turn to social media if the matter was not resolved to her liking. The client then faced possible damage to their brand. This was a perfect opportunity to make use of containment cover.”

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CASE STUDY

and with the click of a button, while the window of opportunity for interdicting an escalating problem is diminishing rapidly,” says Powell. Ascent Underwriting Managers have a product extension called Goodwill Protection that covers the costs of mitigation in the wake of a threat to brand or reputation. “We have had the extension for a little over two and a half years now and we see it becoming more and more necessary in this age of unverified digital information,” says Paul Halley, managing director of Ascent. The extension covers the approved costs of launching counter-active multimedia campaigns, promotional campaigns, or in more extreme cases, the costs of formally approaching Google, Facebook, or TripAdvisor through the necessary legal channels to have certain comments removed. “The concern and the risk with multimedia is that it’s not conventional journalism, so there’s nobody who’s editing or verifying the details. I think at best the filters on most of these platforms would be around bad language or issues around racism. “But there’s no verification of the integrity or the accuracy of the statement. So fundamentally anybody can go and write anything and influence the perceptions of anyone who reads it, and it could be based on no facts at all,” adds Halley.

Meet expectations Products like containment cover and goodwill protection, while absolutely necessary, should still only be a risk manager’s last port of call. “First of all, make sure that there is good expectation management within the organisation and that the brand promise is being fulfilled while equally being aware of potential issues in real time,” advises Halley.

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“For example, if a complaint is lodged, handling it sensitively and correctly at the time would obviate any need for a guest to put their poor experience online.” “Guest expectations are fundamental to reputation management and should be managed from the outset – before the first contact if possible,” says Powell. “After-the-fact reputation management is not really reputation management at all. It is damage control, and it’s severely limited in the digital age.” A brand’s promise needs to be supported all the way through an organisation, otherwise the reputation risks damage as opposed to being enhanced. “By far the easiest way to avoid negative reviews is by not promising something that cannot be delivered, and by making every effort to deliver what has been promised, on time and within budget,” adds Powell.

Have a plan

BnB Sure/Zurich containment cover “A guest at an establishment had goods stolen from his room. He was insured elsewhere, so we initially rejected the claim. He then had a shortfall and some items were not covered. As a result, he turned to TripAdvisor to complain and only removed the post after payments were made. This is a prime example where not only is the insured’s reputation at stake but also the insurer’s. Often, in these particular cases, the establishment is underinsured, or a specific incident is not covered, placing the insurer in a comprising position. Yes, due process was followed, but at the same time the brand itself has the potential to be tarnished.”

Halley, Powell, Muller and Mizen are unanimous in their agreement that a comprehensive social media content strategy is essential to reputation or public risk management for not only the insured, but insurers as well. According to Intertel, reputation management involves actively monitoring, constantly assessing, and positively influencing the reputation of a business (or a brand) or person. So essentially it covers reputation building, reputation monitoring, and reputation recovery. “I think the best thing to do is have a cohesive media and multimedia marketing strategy where they are ensuring that they are present on these platforms, that they are monitoring these platforms, and that they are capable of

responding positively or negatively to comments posted on these platforms,” says Halley. “Leveraging current and emerging technologies to create a strong online presence with recognisable branding will not only encourage public participation and engagement, but will facilitate positive commentary, improve service delivery, and inform product development,”  says Powell.

coming and seeing us” says van Paasschen. “Frankly, not to sound contrite about it, it’s forcing the hotel industry to do a better job at customer service. It’s forcing us to get a better game. We probably should have always had a better game, but it’s forcing us to have a better one,” said Holmes.

Seize the opportunity “The shift that everybody is seeing from a PCbased search engine transaction view of the world to a mobile-based dialogue, app-based way of relating to brands, fundamentally opens up new possibilities for how we can have direct conversations with individual guests, how we can anticipate their needs,” said Starwood CEO, Frits van Paasschen, in his interview with Skift.

“It’s very high risk but at the same time it’s also a very handy tool, to tell guests about up and coming discounts or any packaged deals that they can take advantage of and also to keep the establishment at the top of the potential guest's mind,” says Mizen. “What social media and the availability of information does from my point of view is; the more you know about my hotels and what you can do there, the better chance we have of you

CASE STUDY

Ascent - goodwill protection cover “Guests had suffered a traumatic experience at one of the country’s leading lodges. There was no physical injury to either of the guests or threat of injury, but they had lost their possessions as a result of a random act of God. It had a particularly emotive connection to them as they were out in the country celebrating an important anniversary and a renewal of their vows. As a result of this act of God, this couldn’t take place. This inconvenience together with the loss of the guests’ property resulted in them seeking compensation from the insured well beyond what they were entitled to by law. Dissatisfied with that, they proceeded to defame the lodge on a number of specific platforms around hospitality and around these lodges. Due to the prominence of

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this lodge and its reliance on international tourists they needed to respond. We assisted with the cost of the attorneys who defended the client against the guest, and on a legal basis, got the guests to not partake in any further defamatory statements and equally approached the platforms and, through the necessary channels, had the defamatory comments withdrawn or deleted. In addition to that, it is believed there were conciliatory gestures made on behalf of the lodge directly to the guests as an offer of good faith at their discretion. So the costs of the attorney interdicting the guest from spreading any further defamatory comments on the public domain, and obtaining the removal of the earlier defamatory statements, were funded by the goodwill protection costs extension.”

Powell emphasises the importance of recruiting guests as ‘brand evangelists’ by encouraging the digital word of mouth – tapping into the collective opinion and experience of patrons. He also reassures that genuine negative reviews need not be damaging at all. “If they’re genuine, if they’re honest, and if they’re few and far between, then they’re arguably an opportunity not only to showcase how wonderful your business is at resolving customer complaints, but vital for improvements to be made to prevent a recurrence,” he says. “I think it’s made it a much livelier conversation …we get guest feedback not just through our survey, but through dozens of social media insights. That feedback is…much richer in its depth because it is very much alive. It’s feedback that often might be given by somebody while they’re still in the hotel,” said Marriott International CEO, Arne Sorensen. “There should be no doubt that an online content strategy is not only beneficial to a business but is imperative if your enterprise relies in any way on online traffic for marketing, sales, bookings, referrals, etc.” says Powell. “Google your name or your business name and see what information is out there. How much of that information did you author and is the information really what you want potential guests and the public in general to encounter when they search you? If yes, you’re on track. If not, then you need an online content strategy.” “Generating unique, quality online content on a regular basis not only enables a business to keep search results fresh (and positive) but is the most effective way of diluting the effects of negative publicity – much like a drop of cyanide in the ocean,” he adds. “If you go to our website or our Facebook group, we publish a lot of information on it. For example, information about fires, about fire safety, guides to good thatching, the risks of Ebola to South Africa, etc. and we keep it updated,” reports Muller. Powell has this last piece of advice: “Don’t let a guest checkout without having elicited their views about your establishment and your service. Invite them (incentivise them if need be) to express to you how they really felt about your business. Give them the opportunity to speak their mind and you will be given the opportunity to make things right before they go.”

Run Cancer n w o T a t t u O

Friday 30 January 2015

Johannesburg Register at

www.daredevilrun.com

Are you

br ve enough

to go the distance? 11

Getting ready for a

full

year Dominic Uys

44 8 4

The last year has been a tumultuous one for the reinsurance sector. While there were extensive catastrophe losses, the quarterly results for most of the major players in the industry seemed positive, for the most part.

nternationally, the reinsurance market was put under pressure by the resurgence of catastrophe bonds and insurance-linked securities (ILS) and the African markets saw an increase in competition as traditional reinsurers started looking for new territories to sell their products. Major emerging risks such as cyber liability and new health risks, as predicted by many market analysts, have also begun to make themselves known with increasing regularity. Indeed the past year has taught the insurance and reinsurance community to expect just about anything. As the new year gets into full swing, RISKSA sits down with a few experts in the reinsurance world to get a taste of what lies ahead. Iain Macindoe, CEO of Willis Re South Africa, starts by pointing out that the major hail losses of 2012 and 2013, coupled with deterioration in the motor market, have impacted the reinsurance community in 2013 and 2014.

The year behind us “There is a dichotomy in terms of South Africa versus the rest of the world. If you look at the reinsurance market from a global perspective, there is an abundance of capital, the loss ratios are low and reinsurance is highly competitive. In the South African context, it is slightly different. As a result of an increased frequency in natural catastrophe losses over the last few years, as well as a deterioration in the motor results last year, South Africa’s reinsurance results are generally in a negative position,” says Macindoe. “However, we are seeing a huge demand for South African business from major international reinsurers who are keen to be part of the well documented potential ‘African Renaissance’. As noted, the companies that have been operating here have suffered

some significant losses and so the loss ratios are under pressure, however the abundance of overseas capital available is keeping the market on an even keel.” “South Africa is definitely the engine room for Africa, yet at the same time it is probably the country with the lowest GDP growth currently on the continent. There are major political and economic challenges for South Africa which could potentially inhibit future GDP growth and as a result of this large corporates in South Africa are investing north into the rest of Africa to enhance their own business growth. Given this approach, this would provide collateral improvement to South Africa as a result of these entities being listed on our local stock exchange,” he continues. “The soft reinsurance market conditions continue on the local and international markets. What is already known is that excess capacity from professional reinsurers and ILS’s continues to fuel the reinsurance market and, as expected, drive down prices,” MD of Hannover re Africa, Randolph Moses adds. He points out that for various reasons this is a not a healthy situation for reinsurers and clients alike. “All buyers of reinsurance have access to the same capacity irrespective of rating or profitability. This means that insurers that are disciplined throughout the underwriting cycle are disadvantaged as their competitors have access to the same reinsurance capacity irrespective of results. This in turn leads to competition on the insurance front,” Moses continues. Rates on the reinsurance and insurance front are driven, amongst other factors, by losses. It is well documented that the benign hurricane had very minimal impact on the reinsurance rates in the US, Europe and the rest of the catastrophe peak zones in the world. This means that international reinsurance prices have come down for cat covers. The floods and hail storms in Europe over the last two years also did not push up rates. “Closer to home, there has been renewed interest in the African continent from other international reinsurance companies that are looking to diversify their writings all over the world. There are a few challenges in doing business in some countries on our continent. Great strides have been made in some countries in settling balances, improved data quality and skills to name a few areas. Regulation is also not having an impact on how we do business locally, but there are also legislative changes in other countries on our continent. In some countries ‘domestication’ of reinsurance is the order of the day. 

However, great opportunity exists in most subSaharan countries, and this is not just limited to infrastructure spend (CAR business) but also agriculture, motor, increased middle class, etc. Growth prospects for Africa remain positive, and the region’s GDP growth is projected to rise to slightly above 5 per cent in 2015-16 as well as in 2017. There are concerns around the impact of events such as the Ebola epidemic, which is not only a tragedy in terms of loss of life, but will have a major impact on the economies, exports, tourism, etc. of the countries affected, resulting in dire negative consequences for many of them,” he says. “On the backdrop of the above comments we expect January 2015 to be largely stable as pricing is starting to reach the bottom of the technical limits that reinsurers can continue to underwrite,” Moses concludes.

Looking towards the coming year “As a result of the current demise of South Africa’s GDP growth, there will be limited opportunity for growth by reinsurers in a conventional sense. Therefore, reinsurers will be eager to protect their current market share and with the infiltration of new foreign entrants into South Africa, 2015 will be a competitive reinsurance year, and a strong buyers’ market. We’ve already started to see very

competitive behaviour on some of our 2015 risk and catastrophe excess of loss renewals,“ Macindoe says. On the motor proportional side, the market remains under the same extreme pressure, and Macindoe states that ceding commissions will be under pressure for those portfolios that have consistently produced unacceptable high loss ratios. “We are certainly also seeing opportunities in areas like cyber, terrorism and personal accident. Given the nature of the market over the last two years, aggregate excess of loss structures are coming more and more into vogue. In addition, cedants will be looking more critically at their reinstatement conditions to ensure that they have the requisite lateral protection. This will be most prevalent in the natural disaster space where large hail losses have become more frequent, and while we do not know what to expect from the weather, the last thing that any company wants is to run out of adequate reinsurance protection against hail losses,” he says. “Finally, given all of the recent risk and regulatory changes in the financial services industry, this will create additional product opportunities for niche and specialist reinsurers into 2015,” he continues. “What is the outlook for 2015?” says Munich Re of Africa CEO, Junior Ngulube. “Disciplined managing through the current cycle is the only solution for the sustainability of the (re) insurance industry. Future growth prospects do exist in the premium risks and premium products space – off the beaten track – whilst core business terms are difficult to maintain and continue to be susceptible to cycle swings. Another important factor is the alignment of interest between insurers and reinsurers – low retention levels in combination with high capacities will not incentivise risk carriers to implement market corrections in the core business space,” “The challenges will be reporting within the SAM framework, especially in the absence of line of business segment data and for those companies who do not have agile IT systems for SAM preparedness – data transparency and analysis capabilities will make the difference and determine success,” he continues. “Regulation pressures continue to exist and those who embrace it at an early stage and prepare accordingly will see the benefits going forward. Expansion into the rest of the African continent will work for the less hurried. It will require the development of local talent, understanding of local cultures and specialised product knowledge in the context of the strong local cultures,” Ngulube concludes.

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The year ahead for

MEDICAL

AID SCHEMES Christy van der Merwe

The Medical aid industry in South Africa faced a number of challenges in 2014, and 2015 looks to be another year where innovative thinking and hard work will be required to keep apace. RISKSA gets insight from two medical scheme principal officers on what we can expect in the year ahead.

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osts have been a hot topic. The majority of medical aid member contribution increases for 2015 were above the inflation rate set by the consumer price index (CPI), however this was no great surprise as healthcare inflation was again higher than CPI-linked inflation, as it has been for almost a decade. “Very few employees receive salary increases matching the increases experienced in medical aid. This means that people are now being forced to consider downgrading options, or if that is not possible, resigning from the scheme altogether,” says Robert Wilson from Dave Wilson and Associates Financial Services, highlighting the key issue for advisors.

One of the greatest challenges for schemes remains the ability to get people on-board at a young age, adds Jordan. “We know that medical aid schemes cannot fund big cost members without the pool of contributions from their younger, healthier members. And significantly, the older profile member is increasing.

Dr Bobby Ramasia, Bonitas’ principal executive officer, does not expect major changes to the status quo in the country’s healthcare industry during 2015. His view is substantiated by statistics identified in the Council for Medical Scheme’s (CMS) annual reports, which have remained largely unchanged over the past few years.

An analysis by PricewaterhouseCoopers, Drivers of change, has found that life expectancy is on an upward trend, and that South Africans are living longer. The increase in life expectancy in the South African population has begun to reflect in the medical schemes’ pensioner ratios as well,” he states.

“There has been minimal growth in medical membership, healthcare cost inflation has stubbornly remained at approximately four per cent higher than the CPI and the leading contributors to total healthcare spend remain hospitalisation at 35 per cent, specialists at 24 per cent, medicine 16 per cent and doctors seven per cent, according to the latest CMS annual report.”

Burden of disease The major health risk factors are prime causes of conditions such as diabetes, cancers, hypertension, heart diseases and strokes. The prevalence of these diseases has been on the rise, and the incidence rate is becoming greater in the older population,” adds Jordan.

“For these trends to change there must be fundamental changes within the healthcare legislative framework, and there is no reason to believe this will take place in the short term,” he says.

“Mandatory cover could definitely have helped to ensure a constant flow of young members to stabilise the risk pools. Escalating costs are, however, aggravating the problem and making private healthcare increasingly more and more unaffordable.

Consolidation and slow member growth

Clearly affordability is a key concern for many young people and so the cycle perpetuates. A more flexible regulatory environment would make it easier for schemes to address this problem and encourage and really drive a change in member behaviour,” Jordan says.

Peter Jordan, principal officer of Fedhealth says the question of sustainability for medical schemes in South Africa remains a legitimate concern for schemes in 2015, particularly considering 65 medical schemes closed their doors in the last 10 years. “The balance of open schemes are basically just competing for better risk pools to remain sustainable,” Jordan adds. He explains that risk equalisation could have helped a lot in this regard and would have enabled schemes to compete on efficiency, but, unfortunately, this is not the case. Sustainability of schemes is dependent on the quality of the

partnership between the scheme, its providers and its members, and herein lies the challenge. “Everyone needs to work together in an environment which encourages the arrangement and administration of cost effective healthcare and at the same time promote more responsible claiming and behavioural patterns from members,” Jordan notes.

“Continued cause for concern is what the industry refers to as the ‘increasing burden of disease’ in the country. Simplistically, the burden of disease measures the gap between the current health status of the population versus the ideal health status of the population,” explains Ramasia in agreement. “In South Africa, the burden of disease is exacerbated by issues such as HIV and TB

The Treasury is significantly behind the plan for public health reform modelled in the 2011 Green Paper and there is no mention of the NHI in the Treasury’s budget plans,” he says.

Competition Commission inquiry The Competition Commission’s inquiry into the private healthcare is another factor which is likely to have an influence on the industry. The commission will specifically look into the increases in prices in private healthcare and determine cost drivers, notes Ramasia. The deadline for submissions was 31 October 2014 and at this stage it is premature to speculate on the Commission’s finding but it can recommend the creation or amendment of policies, legislation or regulations. “Whatever the outcome, Bonitas remains convinced that the right formula for making medical schemes more affordable, is that healthcare providers must work with the patient, and the patient’s medical scheme to improve healthcare outcomes and make contributions more affordable,” he concludes. as well as the increasing challenge of noncommunicable or so called ‘lifestyle’ diseases. Socio-economic factors are certainly playing a role in the former while an aging population and poor lifestyle choices are driving the increased prevalence of conditions such as diabetes, cardiovascular diseases, hypertension and certain cancers,” Ramasia says.

Public sector issues Dr Ramasia cites the challenges faced in the public health sector as an additional concern going into 2015. “Government plans to introduce a national health insurance (NHI) system in South Africa by the year 2025. Although a number of pilot projects are underway, prerequisites for the successful implementation of an NHI system are adequate medical healthcare personnel and public healthcare facilities that are on a par with those in the private healthcare sector.” “South Africa continues to face a severe shortage of doctors and nursing staff estimated at 38 000, while all indications are that public health facilities are in disarray,” Ramasia explains. He further adds that it is significant that since the Department of Health published its Green Paper in 2011, the public debate about how to finance the NHI has all but ceased. “The Treasury was to have published a discussion paper in April 2012 but despite a number of assurances, that has not happened.

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Preventative care is key The majority of medical schemes raise concerns that they are being crippled by high claiming ratios, predominantly driven by lifestyle diseases. “If healthier behaviour could be better rewarded and incentivised by medical schemes directly as part of their benefit structure, this pattern may be reversed. Instead of focusing on the bad risk, we need to focus on the good risk and get to the root of the problem. If there was a way to directly incentivise positive behaviour and penalise negative behaviour we may be able to turn the tide,” says Jordan. “The future of medical care must lie in preventative wellness treatment rather than just funding curative procedures,” he reiterates. There is no doubt that members can make a difference and alleviate pressure on the system by starting to think about how they can cut medical costs by reducing stress, eating wisely and exercising. It’s all about taking responsibility for one’s own health. Corporates need to take responsibility for their employees’ wellbeing and encourage a healthy lifestyle as well. “The reality, however, is that until all schemes are in a position to meaningfully promote and directly reward people for being healthy, there will be only limited behavioural change and schemes will continue to battle to attract a younger, healthier risk profile,” concludes Jordan.

Angiography for the masses

Dominic Uys

ate last year, Tygerberg Hospital’s division of cardiology unit unveiled its new and ground-breaking radial angiography service at the hospital. This could make a significant impact on the current bottleneck in the number of patients awaiting the procedure. The cardiology division’s latest addition has been hailed as the first of its kind on the African continent and is already making great strides in catching up to the backlog of patients in South Africa that require this procedure, as well as reducing costs to medical schemes. “The new facility will allow us to perform coronary angiographies and interventions such as stent placement, significantly quicker and ultimately cheaper than we could before. At present, the standard way to perform an angiography is to access the major arteries of the body through the groin of the patient. This presents a number of downsides. Firstly, the patient needs to be admitted to hospital overnight to recover from the procedure. Secondly, we are often unable to use this technique on patients that are deemed too frail,” explains consulting cardiologist at Tygerberg Hospital, Dr Hellmuth Weich. “In contrast, during radial angiography we go in through the smaller veins in the patient’s arm.

It is a procedure that requires more specialised training on the part of the cardiologist, but it is considerably less invasive and the patient does not need to be admitted to the hospital ward for recovery. From that perspective it will clear up a lot of the bottlenecks that we have in the Western Cape at the moment, and the cost for the patient or the healthcare funder will be significantly reduced,” Weich continues. The state-of-the art facility operates under the directive of the not-for-profit foundation Sunheart and the division of cardiology, department of medicine, Stellenbosch University and Tygerberg Hospital. The multi-million rand investment was made by key private and public partners, of which medical technology provider, Medtronic, is the principle. “In South Africa, more than 50 000 patients annually require advanced cardiac care such as coronary angiography. Yet, many don’t have access to these procedures and are, therefore, denied potentially life-saving treatments including coronary stents. The first dedicated radial suite at the division of cardiology will see a significant increase in the number of patients we are able to treat,” says Professor Anton Doubell, head of the Cardiology Division and director of Sunheart.

Doubell described the procedure as a ‘business class coronary intervention’, referring to the cost reduction. The facility will additionally be used to provide training for cardiologists throughout the country in the radial angiography technique. An additional funded training fellowship and the renovation of the lecture room, resulting in an ultra-modern lecture facility, has also boosted the teaching and training activities at the unit. The recent expansions to the division of cardiology also includes a new screening facility for the diagnosis and study of rheumatic heart disease in children. “We are busy conducting a study of 2 000 children in the region in order to gather information on, and diagnose, rheumatic heart diseases. The truth is that there exists very little data on the condition in South Africa, and we are hoping to find out more on the prevalence of the condition. It is a condition that mostly develops in children, and it is often either misdiagnosed or not caught at all. The only information of this kind that we have at present, dates back from the 1970s, and so far we are finding very different results from that, due in part, to the fact that we are using much more advanced and sensitive equipment,” says consulting cardiologist Dr Philip Herbst.

PROFILE

ITâ&#x20AC;&#x2122;S BUSINESS AS USUAL FOR MUA MUA Insurance Acceptances, the specialist underwriter focused on the high net worth (HNW) personal lines market, has entered into an agreement with Telesure Investment Holdings to underwrite on behalf of Auto & General Insurance Company, one of Telesureâ&#x20AC;&#x2122;s licensed insurance companies. Anton Pretorius

She says that despite the initial concerns, the move has really shown the real value that lies in having strong partnerships in place. “Our brokers have trusted our decision and have given us their full support. With this new partnership, I feel that we’ve proven a lot of the critics wrong. It’s been nothing short of exceptional for us,” she adds. “The shift has exceeded all my expectations and we’re immensely pleased with our new partnership.” Fourie says that because most of MUA’s dealings are with high net worth clients, the company has a somewhat different service approach towards brokers and clients. “We really pride ourselves in looking after our clients and Telesure understands this. They have been extremely accommodating and the partnership has been fantastic. They already feel like part of the family,” she adds. MUA MD Christelle Fourie

UA is still a wholly-owned subsidiary of Lireas Holdings. Fourie says that, initially, the announcement that the company was changing risk carriers was met with some caution from brokers. “Not many brokers do business with Auto & General, as the company has not been known for operating in the traditional broker space and has generally been perceived as a direct player in the industry,” Fourie says.

The company believes that relationships play a critical role and that only through fostering strong relationships with brokers and policyholders, are they able to grow into the leading high net worth specialist underwriter in the personal lines market.

Changes to motor claims service model MUA has had a positive experience by teaming up with Telesure. They’ve already started seeing tangible results from the partnership, including introducing changes to MUA’s new motor claims service model.

“Changing our client service model on the motoring side included going from an external to an internal solution. While brokers and policyholders had to get used to us using our own panel of experts and motor assessors, things have proven to be better than before and everyone seems quite pleased with the result,” Fourie says. She explains that the main reason MUA changed risk carriers was that they required a partner who could help manage the company’s claims costs. “In terms of profitability and rate increases, our goal is to try and reduce any costs being passed on to the policyholder. Auto & General is remarkably good at managing their motor plan costs and is able to offer us solutions for managing claims costs,” she says. Everything in their motor claim model is managed tightly. From the minute the vehicle is involved in an accident; to the tow truck operator; how the damage is being assessed to how the client will eventually be reinstated. That’s been the difference in lowering our average costs and ultimately, it has had a positive effect on our loss ratio and bottom line, which is wonderful.” While there have been a few changes with MUA’s motor claims service model, they’re not about to change their name or move into the Auto & General offices anytime soon. “The changes made sense from a business point of view. At the end of the day, the brokers are still dealing with the same people. “MUA is still an independently-owned underwriting manager. We have a full mandate to settle claims and we handle any broker relations. Even though we now underwrite for Auto & General, the interaction is still with  MUA” she says.

PROFILE

Staying savvy and sustainable Creating a sustainable business model has been an essential focus for MUA. Having benefited from Telesure’s highly advanced technological systems, economies of scale relating to its procurement process and its innovative underwriting techniques; MUA has been able to ensure that it maintains a book of business that is profitable. “Brokers will continue to do business with underwriters who are innovative and stay up to date with current trends in the digital space. We’ve had our app for the past year and a half, and it’s been doing really well for us. We are constantly looking to innovate. Developing tools and solutions from a technological perspective is the only way forward,” Fourie explains. For MUA, the focus is not solely around the concept of simply developing an app, but more on creating greater accessibility and efficiencies for the policy and claims administration. “The more you can automate and innovate around technology, the easier it becomes and the more business we’re able to write,” she says. In reducing their loss ratio, MUA is in a better position to focus on improving its value proposition and service to brokers and clients. One of the main driving factors in ensuring this sustainability is the ability to manage the cost of repairs and procurement. This is done by and large through the bulk buying power of the risk carrier. They’ve been able to mitigate the cost for repairs, especially with the continual price increases for parts as a result of inflation and exchange rates. The partnership with Telesure has also allowed MUA to focus on the development of innovative products that it hopes to launch to market in the near future. MUA believes that, in developing these products, they will be able to not only provide a better value proposition to their existing client base, but also potentially explore previously untapped market segments.

Plans in the pipeline According to Fourie, 2015 is all about improving MUA’s underwriting profitability. “We’re focused on both consolidation, as well as to make sure that we have the best business on our books for insurers and reinsurers. We’re also focused on innovation and product development,” she says. She continues, “Writing a healthy book of business is always important to us. Next year is about profitable growth. We’ll continue to focus on the high net worth clients more than anything.” Fourie says it’s still business as usual at MUA. Throughout the partnership,

MUA has retained its independence and says it will continue to offer the same standard of service levels it has provided over the past 26 years. “Brokers have been dealing with us since 1989. Not much has changed, except for a new risk carrier that is exceptionally accommodating, supportive and respectful of our business strategy and our partnerships. We could not be happier with our new risk carrier,” Fourie comments. What can brokers and policyholders look forward to in 2015? “We plan on launching

a new product at the beginning of the year [February 2015] that’s largely aimed at the young professional. This will be aimed more at the ‘financially successful’ younger professional. There is definitely potential in that space and we are looking to grab the opportunity with both hands.” “Our relationships with our brokers, some who have been with MUA since the beginning, have proved invaluable and contributed to the success of the brand in the marketplace. The change in risk carriers has been no exception to this, and they’ve been fully supportive throughout the entire process.”

New faces With over 30 years’ experience within the short-term insurance sector, Lindsay Robertson will head up MUA Insurance Acceptances as the new regional manager for Gauteng. Robertson started her career at Guardian National in 1984, and then moved on to 28 years with Mutual and Federal and Commercial Union, as the company’s head of schemes. “We look to employ the best people we can possibly afford. We’re very pleased with Lindsay’s appointment. She is a very experienced individual with a strong background in technical underwriting, rates and pricing. We know we have the right person up in Johannesburg – just when you need them the most,” Fourie comments.

relationships with national and independent brokers within the Gauteng region, I believe that I can add tremendous value to the role.” What’s more, MUA has expanded their national footprint with offices now in Johannesburg, Durban and Cape Town. “We now have regional offices in all the major centres and an administration centre in Cape Town. The Durban and Johannesburg offices implement front and back office procedures and deal with broker relations and client services. All the administration is done in our Cape offices. Watching us grow steadily over the years has been a great experience for us,” Fourie concludes.

Robertson has completed her Certificate of Proficiency (COP) and is an associate of the Insurance Institute of South Africa (AIISA). She completed a Management Advancement Programme (MAP) with the Wits Business School and a Senior Management Programme at the University of Stellenbosch. Robertson is also Financial Advisory and Intermediary Services (FIAS) compliant. “I am excited about joining the MUA team and I look forward to building onto and forging new relationships with the Gauteng broker network for the business,” says Robertson. “With a solid network of

About MUA Insurance Acceptances MUA Insurance Acceptances is a leading insurance underwriter of personal lines insurance for the Executive motor, classic car and home market with policies catering for the specific insurance needs of high valued vehicles and high net worth individuals. MUA is a subsidiary of Lireas Holdings (Pty) Ltd and underwrites on behalf of Auto & General Insurance Company Ltd, a member/subsidiary of the Telesure Investment Holdings Group. For more information please visit: www.mua.co.za.

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)

change The year of Dominic Uys

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ndustry announcements last year included the long-awaited Retail Distribution Review (RDR), which was finally made available for comment by the Financial Services Board (FSB) in November. While the proposed regulation changes have largely been accepted as positive, the response from the industry has still been mixed, as Anthony Smith, head of the KPMG Financial Services Regulatory Centre of Excellence pointed out to RISKSA.

The new year promises to bring some interesting changes and shifts in the longterm insurance space. RISKSA speaks to the industry insiders to find out what 2015 holds for providers of life and disability cover

In particular, Smith noted that the cost of the systems and processes that advisors and insurers will need to put in place would cause increased pressure in the current tough market conditions. In addition, the suggested caps on insurance binder fees payable to multi-tied intermediaries have also caused some rumblings thus far. But come March, the industry will finally have its finished RDR document and with it, more clarity on where it is heading. Twenty fourteen also saw amendments to the current tax legislation being passed. While most of these are aimed at retirement, the life and disability segments were also able to draw some benefits from the changes, and last year saw a number of new products that would take advantage of the new legislation. Nicholas van der Nest, director of risk product innovation at Liberty says that there are, however, a few things to keep in mind in this regard. â&#x20AC;&#x153;Indeed some competitors have launched benefits that pay a monthly income in light of the pending change in legislation, which basically removes the tax deduction for the insurance premiums for income protection policies and exempts the consequent insurance benefits as a result. The legislative changes are, however, only planned to take effect on 1 March of this year, which means that the new products are still being administered on the current tax regime. As such, benefits will be taxed as income should the policyholder claim before March 2015,â&#x20AC;? he notes. The changes in the regulatory and legislative environment have however been anticipated for quite some time, and the industry has, for

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bad news for consumers, although some insurers have various other avenues available to mitigate the impact of both,” van der Nest concludes.

Focus points for 2015 I think we should keep in mind that the RDR is an on-going process. I believe that in South Africa we are going about it in the right way, and there are a lot of positive things developing already,” Schalk Malan, executive director at BrightRock starts.

final regulations before embarking on these changes. “The proposed tax changes are likely to have a significant impact on the industry once implemented in March. At its most basic we are likely to see a reduction in the overall levels of income protection purchased,” he continues. The likely results of this, according to van der Nest are:

the most part, not been caught by surprise by most of the amendments. Van der Nest took us through some of the coming changes and their expected effects.

Regulating 2015 and beyond In addition to the tax legislation, the second main regulatory change relates to health insurance products, according to van der Nest. “Initial drafts suggested that it would no longer be possible to offer medical type products through life insurance companies. In particular, it was proposed that both medical gap cover and hospital cash products would no longer be available through insurers.

• With claim payments no longer being taxable, policyholders would require lower levels of cover than they currently need, all other things being equal; and • The removal of tax deductions for income protection premiums is likely to reduce the number of customers who purchase the benefit (the tax incentive is removed). This is particularly true in the self-employed market, currently making up more than 10 per cent of the industry. “In addition to the changes in new business practices required, insurers would also need to consider how they will treat existing policyholders.

Subsequently this view had changed, and it was envisaged that there may be an opportunity for insurers to play a larger role in the provision of these two products going forward,” he says.

In particular, there is some concern that the incentive associated with benefit levels which exceed current income will lead to significant behaviour changes on the part of policyholders and hence increases in both claims incidence rates and the average length of time for which claims will be paid. The additional administration associated with the changes is also likely to increase costs for insurers,” van der Nest adds.

The revised commission proposal, which states that these two products would be subject to medical aid commission structures implies that the products may be more suitable to an online or call centre sales channel. Van der Nest points out that no insurers have launched any changes to their products and are likely to await

The change in tax treatment for income protection policies could negatively impact the current protection gap significantly. “Depending on how insurers address these changes, claims costs could rise significantly, potentially leading to changes in premium rates or benefits provided. Both of these ultimately represent

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“Looking into 2015 I think that the pressures around whether people are saving enough and the issues around retirement will very much remain the same as 2014. Also, the new solutions and changes that have been mentioned in the industry, such as the possibility of raising the retirement age; all of these will have an impact on the insurer as well, because if clients now take out disability cover, for instance, you will once again have to ask the question of whether he is adequately covered according to the new concept of retirement.” “On the distribution front, we believe that there will be an increased focus on direct models. As agencies continue to undergo major changes and shifts to comply with legislation, we foresee that an interesting market will start to develop. We could start seeing a bigger focus on whether companies will develop either their direct distribution strategy, or their intermediary model. And that will definitely make for some interesting dynamics,” Malan continues. Malan also states that technology and big data in the industry will see growing interest. “More and more life offices have started looking at their systems and their internal risks and how their systems need to improve in order to mitigate those. Also, they will need to start looking at how they can increase the speed at which data is processed and transmitted. In addition, we also need to start looking at ways to make this technology simpler for both the advisor and the clients. Speaking to that, there will also be increased demand for life offices to make their products simpler and which give better value for money for the client in general,” he says. “Overall I think this year will bring some challenges, as well as some positive developments, and it should be interesting to see how companies will evolve to meet the changing needs,” Malan concludes.

7 M&CSAATCHI ABEL/11438/E

Cash plans

in the crosshairs Dominic Uys

The Association for Savings and Investment South Africaâ&#x20AC;&#x2122;s (ASISA) latest claims fraud statistics have shown a decrease in the number of fraudulent and dishonest death, funeral, disability, health and hospital claims. The values of these claims have, however, increased, and the report indicates that hospital cash plans have been hit particularly hard in 2013.

SISAâ&#x20AC;&#x2122;s 2013 claims fraud statistics have shown a gradual decline in fraudulent and dishonest claims, in part due to initiatives in the long-term industry, aimed at decreasing the opportunities to scam insurers and schemes, according to Peter Dempsey, deputy CEO of ASISA. Twenty thirteen saw a total of around 4 690

110 56 8

detected fraudulent and dishonest death, funeral, disability, health, hospital, and retrenchment claims, compared to the 5 466 cases recorded in 2012. The value of these claims, however, increased substantially from R669.9 million in 2012 to R794.5 million in 2013. The value of fraudulent claims against death and funeral policies was

“In this instance the syndicates that the report speaks of, aren’t the typical criminal groups that the industry used to see much more of in the past. We are more referring to collaborative efforts between all the market participants, from doctors and administrative staff, down to the policyholders themselves,” Dempsey says. Misrepresentation and material non-disclosure resulted in 949 claims against hospital cash plans being rejected to a value of R7.5 million. Fraudulent documentation was detected in 18 claims worth R156 442. “The reality is that it is very difficult for individual members to defraud their hospital cash plan without help from doctors and hospital staff. Through sharing of information and working closer with medical aid schemes, insurers are identifying syndicates consisting of doctors and hospital staff and are increasingly clamping down on such claims.” That said, Dempsey notes that hospital cash plans themselves, present some easy opportunities for these groups to exploit. “This is an area in the claims statistics where we can genuinely say that there been an increase, and the reason is that these types of products are really so simple to perpetuate fraud against. The policyholder just needs to show that he was hospitalised. The proof for this comes in the form of a hospital account, which may be three weeks to a month old already. In many respects, it is like a short-term policy. If a policyholder claims and says that his insured bicycle was taken from the front lawn, for instance, there is very little one can do to prove otherwise,” he says.

substantially higher from the previous year, at R524.6 million compared to R310.8 million. Dempsey however points out that the more worrying trend here was the spike in numbers that hospital cash plans have witnessed. “I think the increase in claims value is a bit of an aberration. More importantly, we find that there are certain hotspots that pop up every so often. Death and funeral policies have always attracted the most cases of fraud but last year hospital cash plans equalled their numbers for the first time,” says Dempsey.

Built-in vulnerability ASISA’s members detected a total of 2 019 dishonest and fraudulent hospital cash plan claims to a value of R16.8 million, of which 1 052 were cases of fraud perpetrated by syndicates to a value of R9.2 million. By comparison, in 2012 there were only 14 cases involving syndicates.

One of the methods that Dempsey says the industry has been seeing a lot more of, is what he terms ‘motel beds’. In these kinds of scams the policyholder is checked into the hospital in the late afternoon, spending the night and leaving shortly after having breakfast the following day. The claimants often do this for a number of consecutive days, leaving in the morning for work and returning after five. The policyholder then submits the claim two months later. “Most of the time these claimants are also on a medical aid, which pays for their hospital stay, while they receive a nice daily amount from the hospital cash plan. The industry has been working a lot closer with the Board of Healthcare Funders to fight this kind of exploitation, and over the course of the last year we’ve initiated a much closer working relationship between the medical aid schemes and our industry. The more trends we can identify and share amongst each other, the more this will, hopefully, lead to more cases being caught, and fraudsters being discouraged,” Dempsey says.

Evolving fraud detection “In terms of death and funeral claims I would also say that the reduction of cases also signifies an actual decrease in fraud, as opposed to an increase in fraud instances that go undetected. On this front, the industry has definitely benefited from a progression of initiatives over the last decade or so. The industry’s ability to run computer-based algorithms is improving all the time, and the data enables one to follow up on suspicious claims more effectively. This culmination is certainly making it more difficult for fraud to be perpetuated, but there will always be people who will take chances,” Dempsey imparts. The majority of disability claims in 2013 were rejected due to misrepresentation and material non-disclosure rather than fraud. A total of 447 claims worth R251 million were found to be dishonest while only six fraudulent claims worth R1.2 million were detected. Retrenchment benefits also saw a spike in numbers. According to Dempsey, this market segment recorded very few dishonest or fraudulent retrenchment benefit claims in the past. In 2012, for example, only 6 cases were recorded, while 2013 saw 125 retrenchment benefit claims worth just over R1 million rejected due to misrepresentation, material nondisclosure and fraud. Dempsey adds, however, that the majority of claims submitted to life companies are legitimate and therefore honoured. The beneficiaries of individual policyholders who had death and disability cover in place received benefit payments worth R26.7 billion from the life insurance industry in 2013. “Life companies paid 98.9 per cent of all claims made against fully underwritten life policies in 2013. Only 1.1 per cent of death benefit claims were declined.” Dempsey ends on a positive note, pointing out that the majority of irregular death and funeral claims detected in 2013 involved dishonesty through misrepresentation and material non-disclosure rather than the criminal intent of fraud. In total 1 504 claims worth R478 million were found to have involved either misrepresentation or material non-disclosure. Looking forward, Dempsey tells RISKSA that ASISA’s next reports will already start coming out in January, with the collective investment schemes statistics for 2014. “It will be reporting on all the inflows and outflows, number of funds registered and de-registered, and growth in the industry. Later in February we will also be releasing the life insurance statistics for 2014,” he concludes.

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Janine Joubert, executive head of business risk at Vodacom

Great achievements require great

risk management RISKSA chatted to Institute of Risk Management South Africa (IRMSA) Risk Manager of the Year winner, Janine Joubert, on what sets her team apart, the role of risk management as a business enabler and the future of insurance in a changing risk environment. Sarah Bassett

58 8 4

What do you believe sets the Vodacom risk management team apart? We don’t do risk management sitting in an office, we’re in the trenches future-proofing the business and I think that is the key thing that sets us apart. We are constantly looking to come up with innovative solutions for how something can be done, rather than trying to prevent it from being done. For Vodacom to be successful in the highly competitive and dynamic telecommunications market, we need to constantly innovate and launch more products and services, adding greater value to customers. This requires taking risks. Managing these risks needs to be central to driving the business – it has to be an enabler, not an inhibitor to business growth. How did you come to risk management as a career? I consider myself blessed to have found my niche and passion in risk management fairly early in my career. I enjoyed early exposure

to financial reporting, which provided the foundation for understanding effective risk reporting. Subsequently my career evolved into the information technology space which provided the foundation for understanding effective risk mitigation for new technology. This led to exposure to the field of fraud and forensics which in turn provided visibility to legal and regulatory compliance directives and fraud risk assessments. I learned the importance of implementing proactive controls for risk mitigation. I then moved into innovation projects where I developed risk management frameworks and succeeded in embedding risk management practices within a high technology innovation environment. What do you love most about your work and the risk management discipline? The telecommunication industry in particular is demanding, fast-changing and innovative. You need to be flexible to deal with the daily challenges. I have a terrifically supportive team, and I thoroughly enjoy being leader to this team and driving risk management in the

business. People think of innovation and risk management as two opposing poles, but they’re not. Great achievements require great risk management. If you look at the great innovators of the world, you’ll see they’re actually great risk managers. There’s huge power that come from considering risk and knowing that you are equipped to deal with any challenge. That is the beauty of risk management. Why do you think you won Risk Manager of the Year? Nobody could have been more surprised than me. The calibre of the other nominees is in itself an example of how risk management has grown in stature in recent years. But I think perhaps my passion for pioneering innovative risk solutions helped us scoop the award. Innovation and risk are not often mentioned together, but there are many innovative solutions that we can deliver.



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But there are still huge opportunities for data growth and smartphone penetration. The key for sustainable growth is to outpace our competitors. Data is capital expensive, so we need continued significant capex investments. Effective management of these strategic risks forms an important component of Vodacom’s strategy in order to pursue opportunities with greater confidence. Do you think insurance is becoming more or less relevant in the changing risk landscape? Multiple unpredictable risks now threaten the sustainability of organisations. In this context, where protecting physical assets seems less important than protecting the business model and strategy, insurance can seem less relevant.

At Vodacom we’ve demonstrated this with several innovations in our approach. One example being the development of an innovation and risk methodology based on best practices from various disciplines. We look at 31 areas of risk management, and the framework can be categorised according to the risk profile of the innovation project. What does this award mean to you and how do you plan to use this achievement in the coming year? I am absolutely delighted to have received this award, and I would like to thank IRMSA for their choice and trust in me. I will certainly do my utmost to validate their trust. IRMSA has been doing great work to promote risk management as a discipline and a science and as a member of IRMSA, I will be involved in the organisation and its activities. I am passionate about giving back, and I’d like to share the knowledge gained from guidelines of best practice. What strikes you most about how the nature of risk has changed over the course of your career?

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It is unbelievable how much volatility, complexity, technology and unknown risk we are seeing now. More than ever before and it’s just going to continue to accelerate. A few years back, we had an established approach to risk management which has not kept pace with the speed of evolving risk. Analysing risks twice a year doesn’t keep up with the speed of the business and the number of risks. The only way to effectively counter these risks is by building flexible organisations and ensuring that risk management is embedded within the first line of defence to ensure more informed risk decision-making and create a whole culture of risk management where we need to be increasingly more proactive and focused on adding value to the business rather than just focusing on risk prevention. Ultimately, risk management needs to add value to the costumer. For the telecoms industry in Africa, what do you see as the critical risk areas challenging growth on the continent? There are increasing regulatory and competitive pressures in Africa, particularly within telecommunications, and continued pressure to diversify and grow operations.

For insurance to remain relevant, effective strategies are required to support the business models of organisations. In particular, effective responses to information, cyber, supply chain and reputational risks are needed. Insurance brokers should play the role of strategic advisers to businesses, helping business respond effectively to critical strategic risk. Therefore, I think the insurance industry is still absolutely relevant. We will see huge innovation coming out of this area with an increasingly central role for risk management in the sector. What would you like to see change or improve in the risk management space in South Africa and Africa more broadly? The fundamental question that risk practitioners are asked is: how do you actually help me to grow my business? It can be challenging to communicate the value of risk management, especially if a business sees compliance aspects as a preventer of business rather than enabling the pursuit of opportunities. We need innovative ways to effectively promote the value of good risk management and better manage stakeholder expectations. Only then will we succeed in embedding an effective risk management culture within the organisation. Trust between stakeholders and risk management is paramount in implementing innovative risk management models.

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9 2014/11/21 1:54 PM

Africa: A country called

hospitality, tourism and the risks of perception Sarah Bassett

The tourism industry across Africa constitutes an important pillar in the realisation of the continent’s economic potential. Revenues from tourism represent more than double the total received in donor aid, according to the African Development Bank Africa Tourism Monitor. But 2014 has been a tough year for the industry, and it seems possible that 2015 may follow suit.

or 2014, the greatest risk and obstacle for tourism numbers across the continent has been the ongoing West African Ebola outbreak and the perception challenge it highlights. “The ongoing misperception that Africa is one homogenous country instead of 55 recognised and individual states with vastly different conditions is a perception that needs to be corrected for the sake of tourism to Southern and East Africa,” says David Pratt, specialist head of Hospitality and Tourism within Hollard Broker Markets. “African tourism was severely impacted by the global recession that started around 2008. In 2013, we started seeing signs of a recovery, with the number of tourists increasing by over five per cent, or three million, over 2012,” Pratt continues. This increase created a positive anticipation that 2014 would be the year for a return to normality for the tourism industry. The World Tourism Organisation had forecast up to a six per cent growth in the number of travellers, and the early signs were impressive. Many tour operators and booking agents experienced record sales in the early part of 2014. Unfortunately, a recent survey of more than 500 safari operators by Safaribookings.com found that they had experienced overall reductions of 20 to 70 per cent when compared to 2013. The primary reason given for the sharp decline was ‘fear of contracting Ebola’.

Tourists’ misconceptions of Africa “Despite the fact that the countries affected by Ebola – namely Sierra Leone, Liberia and Guinea – are closer to Europe than to Eastern and Southern African, there are geographical misconceptions of tourism regions by potential tourists. The view of Africa as one homogenous country will ensure that the number of tourists will remain low, even to countries not infected by Ebola, until the disease is contained or public perception changes,” Pratt notes. East Africa has been particularly impacted by tourists’ Ebola concerns, despite being more than 5 000 kilometres from the outbreak region. During August, the World Health Organisation (WHO) issued a warning regarding Kenya having a high ‘possibility’ of experiencing an outbreak, due to it being a major travel hub. However, to date, that

country has not experienced a single incident. “It is praiseworthy as well as noteworthy that international airports are highly vigilant in steps taken to prevent any spread across borders,” he adds.

Ebola football disappointment Morocco was scheduled to host the African Cup of Nations Football tournament in January. Due to Ebola concerns linked to the large influx of supporters from West Africa and the difficulty in controlling such numbers, Morocco cancelled the tournament. Although it is likely that another country will host the tournament, this decision will have an impact on the Moroccan tourism industry because many in the tourism industry have taken advance payments for bookings. They have also assumed greater levels of debt in improving the services offered by hotels and lodges. The employment expectations of locals have also been dealt a blow. The Cup of Nations event would have expected an opportunity of employment for at least the period of the competition and possibly even permanently, as sports tourists may elect to re-visit the country at a later date. But those individuals are now unlikely to earn an income from tourism, which is a further impact of Ebola on individuals as well as on the Moroccan economy as a whole.

Ebola and insurance “Ebola has affected the travel insurance side of the business. With the recent outbreak in parts of West Africa, the cancellation of trips has become a huge issue, resulting in additional insurance claims,” says Lana Mizen, head of hospitality at Zurich South Africa. “In fact, 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 United States where cases have been reported). In these instances, cancellation and medical benefits would only apply as long as the policy was purchased prior to an official warning from the government regulation (WHO) body. Of course, its stands to reason that establishments in these countries would benefit from hospitality insurance that covers loss of revenue for when guests have to cancel their respective trips,” she continues. “Insurance companies do provide an element of protection with respect to contagious disease being the cause of business interruption.

However, this is generally limited to disease occurring within a specific radius to the affected business, lodge or hotel. It is highly likely that, should Ebola not be contained in the West African region and spreads further, reinsurers might consider either specifically excluding Ebola, or entirely remove the contagious disease clause. Treaties are being renewed for the 2015 calendar year, and there is little doubt that this specific extension will come under scrutiny,” says Pratt.

The impact of terrorism While Ebola has had an impact on the number of tourists cancelling or postponing scheduled trips to Africa as a whole, the impact of terrorism has been more localised to those countries directly affected, says Pratt. “Nigeria, for example, has seen a decline in the number of visitors following the kidnapping of schoolgirls and that government’s perceived inability to adequately deal with that challenge.” “The country which has been hardest hit is Kenya following the bombings in Nairobi and terrorist attacks along the Kenyan coast. Although this has had an impact within the local economy, most tourists primarily visit Kenya for safaris. Those visitors who may have planned to visit Mombasa for the beach portion of their holiday are now switching to Zanzibar, the beautiful archipelago of islands off the coast of mainland Tanzania,” he continues. 

“Fortunately, there have been no direct attacks on African hotels. However, the Taj Mahal hotel in Mumbai, India, was severely impacted by a terrorist attack during 2008. To put matters into context, this does not mean that a single incident in India makes that country any less safe to visit than ever before. Equally, terrorism attacks in Africa merely demonstrate that there is no destination that can offer a guarantee of personal safety – and insurance needs to be carefully assessed in new and insightful ways.” “In response, insurance does provide various products. For instance, Hollard Hospitality and Tourism provides war and terrorism cover, as well as kidnap and ransom, and we have partnerships and representatives throughout the African continent. From an insurance point of view, it is extremely important to have sources for local risks, as well as legislation and circumstances specific to each country,” says Pratt.

Although our colleagues in Africa originally experienced interest in war and terrorism as well as kidnap and ransom cover, demand for this cover appears to have reduced. This seems to be due to the Somali Pirates issue being largely addressed by a greater military presence in the region, including South African forces. There has also been a reduction in the number of kidnappings from oil bases in Nigeria. For the present moment, this seems to suggest that the threat of terrorism within African countries is not viewed as an immediate priority by either hotel owners or the African insurance industry. “However, all specialist underwriters and experts within Hollard Broker Markets who cover all categories of insurance, including hospitality and tourism, encourage brokers to keep alert to changes which can happen in a flash. We believe our intermediary network, particularly those who guide clients in the ‘movement dependent’ tourism and hospitality arena, are faced with the challenge of keeping totally abreast of changes which can happen overnight,” Pratt notes.

South Africa and the constraints of power For South Africa, the announcement of a further round of load shedding, a further delay on the construction of the long-awaited Medupi Power Station along with the reality of parastatal power producer Eskom’s financial afflictions has left analysts suggesting that power insecurity is likely to hamper the country’s progress for another five years. With serious implications across every industry, the tourism industry is left with considerable risks too. These constraints can present a number of challenges for bed and breakfast and guesthouse owners in particular, both Halley and Mizen agree, where large hotel chains are more likely to be able to afford generators to counter the challenge. “The hospitality industry cannot survive without electricity. Ultimately, no guest is going to be comfortable without electricity and water. The ability of operators

to provide key services such as cooked meals, cold drinks, Wi-Fi and hot water is totally compromised,” notes Halley. “It also means that the potential for injuries is also greater – guests falling down stairs in the dark and so on,” adds Mizen. “It could result in reputational damage – disgruntled guests who will turn to social media to complain. In addition, equipment and maintenance cover will be essential as a fluctuating electricity supply could result in equipment breaking or failing (power surges are also often covered in the property section of a hospitality policy),” she continues.

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“Security and fire alarms may not function without electricity and cover is subject to these systems working and being able to function. This puts assets under greater risk and could mean that in some cases losses are not covered,” notes Halley. According to Mandy Barrett of insurance brokerage and risk advisory Aon South Africa, this is where the help of a good broker can be critical. “A professional broker can add tremendous value in the advice process and guide you towards a thorough understanding of the terms and conditions of your cover, making sure that you are not compromised or prejudiced by unreasonable limitations on the cover. A broker would always point out terms in a policy that applies onerous or unreasonable limitations,” says Barrett, suggesting that policyholders check these limitations carefully and consult with a broker if they find they would not be covered should alarms fail as a result of power failure. For smaller establishments, all of these impacts can create knocks simply too great to sustain, with serious consequences for these businesses. “Certain mitigation measures can be taken, fitment of solar geysers, for instance, but this only goes so far. Unless the entire operation is taken off the grid, these businesses remain in trouble,” Halley warns. Solar geysers and systems to provide lighting for stairwells and exits is a good place to start, he suggests.

On a positive note – flight routes Halley raises the state of South Africa’s national carrier, South African Airways (SAA) as a further cause for concern. “SAA is critical to the tourism sector in South Africa and Africa more broadly. Seventy per cent of South Africa’s visitors are from the African continent, so the ability to service these routes is critical to maintaining tourism numbers.” On this front, there is good news, with the recent announcement that from December of 2014, SAA was increasing the frequency of its African destination flights by 17 per cent. Effective 1 December SAA increased frequencies between Johannesburg and Maputo by 19 per cent – from 17 to 21 weekly frequencies, flights between Johannesburg and Harare increased from 18 to 19 every week (5 per cent), between Johannesburg and Kinshasa from 6 to 7 a week (6 per cent) and Johannesburg and Mauritius from 9 to 10 weekly frequencies (9 per cent). “The strengthening of these routes comes in the wake of positive load factors and increased traffic between the countries,” comments SAA acting chief executive officer, Nico Bezuidenhout.

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Holiday season a time of tourism, hospitality andâ&#x20AC;Ś insurance claims Sarah Bassett

For South Africaâ&#x20AC;&#x2122;s top tourism destinations, the summer brings bustle and business thick and fast. This is the time for feast in the hospitality industry, but it is also a time of heightened risk. RISKSA chats to insurance specialists to find out more about the annual seasonal claims spikes and what establishments and service providers can do to ensure theyâ&#x20AC;&#x2122;ve got all the bases covered for a prosperous season.

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cross the country, the seasonal challenges and risks differ substantially, observes Paul Halley, managing director of Ascent Underwriting Managers. In the Western Cape, the summer season brings strong winds which can cause damage to property and unprotected items.

Tourists often do make something of a target of themselves, he notes. “There is an annual seasonal increase in crime and tourists are often soft targets, carrying high-value goods of use to criminals. We do see an increase in crime towards December holidays particularly. In the industry, we have standing joke that the criminals also want Christmas presents.”

For in-land provinces and part of the East Coast, the summer season brings lightning, thunderstorm or rainstorm-related claims. The increasing frequency and severity of hailstorms across the country in the last few seasons has also had serious consequences for risk and weather-related claim trends.

“For hotels and guest house establishments, this year particularly, we have also seen an increase specifically in employee-influenced criminal activities and we’ve also seen an increase on small, petty-level crime at guest houses and bed and breakfasts which are a little more vulnerable than many hotels and we’ve seen an increase in theft of guests’ effects from guests staying at guest houses and B&Bs,” he continues.

In addition to these weather concerns, the summer season is the busy season, and this brings another set of heightened risks. By simple odds, with more people, there is more opportunity for things to wrong. “Hotels are busier, there are more guests and perhaps more and new staff; more servicing requirements. People’s minds are tired, both staff and guests, and guests are in holiday mode. Those from low-crime countries may be less security conscious and alert than they should be, and criminals certainly take advantage of this. They may be less switched on to the risks around them than they would be in familiar surroundings or in their home country,” says Halley. And busy, stressed staff and hotel operators are sometimes also not as conscious as they should be of what is going on around them, rendering both soft targets to criminals.

There has also been a noted increase in walk-in crime where there is theft of portable items such as an iPad, camera or credit card machine. But it’s not all opportunism. At the recent Southern Africa Tourism Services Association Conference, the Chairman of the Tourism Business Council of South Africa (TBCSA) remarked that police had uncovered a suspicious gang handing out complimentary ‘Welcome to South Africa’ key rings at various entry points to the country such as airports and stations which have a tracking chip in them which allows the criminal to target a specific guest and track them to their location in a very sophisticated way and then hold them up and  rob them.

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daily basis. “It’s a busy time of year with many priorities, but you need to make people aware and regenerate an awareness at the right time for the additional increase in potential crime exposure, so that it is again brought to top of mind and staff have it drilled into them at every level of the operation.” It’s about a risk culture, he says, but more than that, it’s about seeing it as an extension of the customer-centric nature that hospitality operators should have in their overall culture, with guest satisfaction and experience front and centre to the business. “Your guests’ safety and security is a critical component of this. You can’t service a guest and fulfil your service objectives to your guests if you aren’t taking their security seriously,” says Halley.

Insurance strategies “Often owners think that personal insurance is enough. However, this type of insurance does not include liability or business interruption cover,” warns Lana Mizen, head of hospitality, Zurich SA. “A guest could be injured or an event such as a storm or flood could prevent guests from arriving at an establishment, ultimately resulting in a loss of revenue.”

UNDER

CONSTRUC

Risk response Where specific, seasonal weather patterns are expected such as high winds and storms, guest house and hotel operators need to inspect their premises and ensure that any required maintenance has been done. “If it wasn’t seen to during the quieter time, it should be done now. Owners and operators need to ensure that roofs are in correct condition, that gutters are cleared and in good condition, that any waterproofing that may need attention is attended to and that any storm water drains

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in the vicinity, for example, are cleared and checked by the municipality to avoid potential flash flooding,” Halley recommends. “If you’re inland and expecting a lot of lightning, ensure that any lightning protection devices that are installed on your premises have been serviced and remain operational.” He suggests that tourism and hospitality businesses run awareness campaigns with risk managements, security staff and broader staff in general to create awareness of what to look out for and what should be checked on a

Of course, it’s not only guests that could suffer injury, she adds. Owners themselves could get injured or fall ill, leaving no one to run the business. “Bilking (leaving without paying) is also a common occurrence, negatively affecting profit margins. It is also advised that the policy extends to equipment as well, including maintenance cover. Guests who aren’t able to use the air-conditioning or washing machines may not return again and could potentially say negative things about the establishment, resulting in reputational damage and loss of business.” In addition to these concerns, with the rising use of social media and online review platforms such as TripAdvisor, public risk management is essential, says Mizen. “This is why policies with containment cover are a nonnegotiable. Zurich offers this as an extension to its liability clause within hospitality policies at no extra cost. This comprises public relations or crisis consultant fees and ensures that crisis situations are dealt with in a timeous manner and that negative publicity is minimised.” For brokers, reminding and warning clients of these risks and the responses required, as well as the critical insurance and risk transfer options and products available, can be an invaluable value offering at this busy and potentially hugely rewarding time of year.

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ou and your firm could unwittingly become involved in crime if a customer you are dealing with uses your business to launder money acquired through a criminal activity, like drug dealing, or if the intention is to use your financial processes to provide funding for terrorists. There is a reason that Financial Services Providers (FSPs) have been classified as accountable institutions in terms of the Financial Intelligence Centre Act, Act No. 38 of 2001 as amended (The FIC Act). In terms of the FIC Act, FSPs have a legal obligation to submit reports to the Financial Intelligence Centre (FIC) so that, together, we can limit the opportunities for criminals to succeed in their criminal activities. Here are the legal obligations that apply to all FSPs that fall within the ambit of the FIC Act: 1. The duty to establish and verify the identity of your clients. 2. The duty to keep records. 3. Report to the FIC. These reports include: • Cash threshold reports – FSPs are required to report any cash transaction above R24 999.99 to the FIC (section 28 of the FIC Act). Cash includes coin and paper money, and travellers’ cheques. This applies to both cash received by your firm and cash that you pay out to your client. You must report aggregates of smaller amounts

which total R24 999.99 when combined, where it appears to you that the transactions involving those smaller amounts are linked in a way that suggests that they should be considered fractions of one transaction. You can allow for a period of up to 24 hours between the different payments. There are also instances where more than one accountable institution and/or reporting institution will be required to report information relating to the same transaction in terms of section 28 of the FIC Act. • Suspicious and unusual transaction reports – The FIC Act requires that any person, who carries on a business, is in charge of a business, manages a business, or is employed by a business, must report suspicious or unusual transactions to the FIC (Section 29). This reporting obligation applies to FSPs too. • Terrorist property reports – Section 28A requires that accountable institutions file a report with the FIC if the accountable institution knows that it possesses or controls property linked to terrorism or to entities that are sanctioned in terms of the provisions of the Protection of Constitutional Democracy against Terrorism and Related Activities Act, 2004. The knowledge about the origin and ownership of the property in question is based on fact and should be acquired with reference to an objective set of circumstances or facts (as opposed to a suspicion that is formed subjectively).

4. Formulate and implement internal rules. 5. Train your employees on the FIC Act and your internal rules. 6. Appoint a person (compliance officer) – to ensure that your business complies with the relevant provisions of the FIC Act. 7. Register with the FIC via the FICs website.

When does an FSP fall within the ambit of the FIC Act? A person who carries on the business of an FSP that requires registration under the Financial Advisory and Intermediary Services Act, No. 37 of 2002 (the FAIS Act) is an accountable institution. Advisory and intermediary services in respect of short-term insurance and medical schemes business are, however, excluded from this requirement.

Find out more on the FIC’s website – www.fic.gov.za – or call 0860 222 200 if you have a query.

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Industry lessons Neesa Moodley

Each year, the ombuds and regulators release their annual reports, highlighting trends in complaints over the last year. This is an ideal opportunity for the financial services industry to identify weaknesses and set in place processes to ensure that they get it right the next time around.

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oth the Pension Funds Adjudicator (PFA), Muvhango Lukhaimane, and the Financial Advisory and Intermediary Services (FAIS) Ombudsman, Noluntu Bam, released their annual reports for 2013/2014 towards the end of last year. Here’s what each regulator had to say.

Pension Funds Adjudicator As in previous years, Lukhaimane expressed concern over the high number of complaints related to death and withdrawal benefits. In particular, she highlighted problems in the security industry related to employers failing to pay pension fund contributions on time as well as the failure of some pension funds in maintaining accurate and up-to-date accounting records. “The number of instances where death benefit allocations have been set aside…is also of concern,” she says. Under the Pension Funds Act, the trustees of a pension fund have a duty to carry out investigations and find out who the financial dependants of the deceased were before making a final death benefit payment. However, Lukhaimane says there is an “overreliance on uncorroborated affidavits to establish legal relationships and factual dependency is of great concern. Most allocations have been set aside for lack of proper investigation.” During the period under review, the office of the PFA received 5 405 new complaints, up 4.7 per cent from the previous year. A total of 6 763 complaints were resolved during the year, including a backlog of complaints from the previous year.

CASE STUDY Delay and allocation of death benefit The complainant, TC Khadi, had not received a death benefit from Univen Provident Fund administered by Sanlam Life after the death of her husband, SM Mukoma in July 2010. The nominated beneficiaries on record were his wife, TE Mukoma, daughters RMF Mukoma and R Mukoma as well as his brother F Mukoma. The board of trustees initially allocated the death benefit to the nominated beneficiaries as well as three other daughters and the deceased’s parents while TC Khadi did not receive any benefit at all. A decision was later made to allocate 10 per cent of the benefit to TC Khadi, which she rejected. Her complaint to the PFA stated that she was living with the deceased at the time of his death and had three minor

children who were financially dependent on him. Lukhaimane then found that the board of trustees had based their decision on TE Mukoma’s marital status and a submission of her financial commitments. “Even if no marriage existed between the deceased and the complainant, it suffices if she shows that she was financially dependent on the deceased,” she says. Lukhaimane also found that the board of trustees had failed to consider the financial circumstances of the beneficiaries or the fact that TE Mukoma was the sole heir of the deceased’s estate while the Mukoma children were also the beneficiaries of a group life cover policy. She ordered the fund and administrator to set aside the initial allocation of the death benefit and to re-exercise their discretion.

CASE STUDY Funeral loan cannot be recovered from death benefit Employer, Two Ten Chemicals, complained to the PFA that the Chemical Industries National Provident Fund had not repaid the company for loans of R5 000 each granted to the families of T Ngobeni, N Bambeni and J Ngobeni. The company management had been under the impression that any funeral loans could be recovered from the death benefits payable by the provident fund. Lukhaimane dismissed the complaint, saying it was clear that death benefits do not form part of a deceased estate and that employers are not permitted to deduct from a retirement fund’s death benefits, the outstanding balances of funeral loans granted to family members of deceased employees. “Funeral loans are debts of the deceased estates and should be recovered from the deceased estates,” she says.

FAIS Ombud Bam’s office celebrated the milestone of its tenth anniversary this year. A large proportion of complaints received over the last ten years related to savings and investments and more specifically to fees. Complaints included: • Issues with undisclosed commission costs. • Trail fees. These are fees paid to financial advisers on the understanding that they will consult with clients annually to advise clients on the performance of their investments. However, a number of consumers were unaware of these fees and had never seen the adviser in question after being sold the investment.

• Termination costs that are levied when consumers try to exit a compulsory savings product due to a change in their financial circumstances. • Penalties when consumers requested a reduced premium. • Financial advisers not fully informing consumers about the financial implications of replacing one product with another. • Fraudulent documentation, where consumers are signed up for policies they did not intend to purchase. • Property syndication complaints are quite common, and there has been an increase in hedge fund complaints. • Lack of clarity around disability, dread disease and critical illness cover. In relation to short-term insurance, complainants said they were not informed of material terms such as the excesses applicable on their policies. For example, they were sold policies on the basis of cheap or lower premiums but were not informed that this would mean an increased or higher excess payable at claims stage.

CASE STUDY Excesses not disclosed clearly In January 2011, the complainant took out commercial short-term insurance cover for his trucks. He later lodged two claims with the insurer for damages to the trucks in March 2011 and May 2011. However, the complainant was surprised when he found at claims stage that he had to pay an additional excess of R15 000 per claim because the trucks were being driven by foreigners. The FAIS Ombud highlighted the insurer’s duty to disclose all monetary excesses clearly to the client and the matter was settled when the insurer refunded the complainant R30 000.

CASE STUDY Inappropriate advice In this case, the complainant’s financial adviser advised him to invest R1 035 179 of his pension benefit in a life annuity. While the complainant’s funds were being transferred, he requested a lump sum withdrawal in addition to the money being transferred to the life annuity. However, his adviser failed to inform him that he would pay income tax on the lump sum withdrawal and he was taxed to the tune of R64 350. The adviser made a settlement offer of R64 350 which was accepted by the complainant.

RDR

Formulating responses to

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Christy van der Merwe

South Africa’s insurance industry has largely welcomed the release of the Retail Distribution Review (RDR) discussion document, which was released by the Financial Services Board (FSB) on 7 November. Now begins the serious scrutiny of the long-awaited document and the formulation of responses required by March 2015.

ixed reactions are anticipated from the market, Anthony Smith, head of the KPMG Financial Services Regulatory Centre of Excellence

tells RISKSA.

Smith and Lyndall Hobson, financial services insurance manager at KPMG explain that knowledge gained from the UK RDR model showed that after a year of implementation, financial advisors managed to change their business models to adapt. A survey done in UK indicated that 88 per cent of customers were satisfied with changes made to remuneration models. “We are confident that there will be a similar reaction in South Africa. However, the cost outlay for advisors and insurers in terms of systems and processes has not come at an opportune time,” say Smith and Hobson. Indeed, the costs of compliance to the myriad new financial services regulation in South Africa, particularly in the current tough market conditions, are a major concern for intermediaries. The current public comment period is the opportune time for intermediaries to have a say in shaping the regulation, which will in turn shape the way business is done going forward. Smith and Hobson note that for certain players that have established compliance departments and resources which are able to understand the implications of such regulation to their business models, the comment period is sufficient. However, for the smaller industry players who are currently facing a host of regulatory changes, RDR may not receive sufficient attention.

Distribution channels “There are some early signs of unhappiness from various sectors with regards to the proposed caps on insurance binder fees payable to multi-tied intermediaries (binder holders) per binder activity,” says Justus van

Pletzen, CEO of the Financial Intermediaries Association of Southern Africa (FIA). He adds that these issues will be tackled as the FIA responds to the 50-plus proposals in the RDR discussion document. The FIA reiterates that a precursory viewing of the document suggests that the FSB has been mindful of the requirement for differentiated fee structures on products that are marketed to low-income consumers. It is also clear that the FSB will level the playing field between adviser and product supplier in ensuring fair outcomes for consumers. The RDR executive summary notes: “Key structural changes include placing greater responsibility on product providers for ensuring the delivery of fair customer outcomes through their chosen distribution channels…” “As RDR places more responsibility on the product suppliers to ensure delivery of fair customer outcomes, we expect that product suppliers will need to consider their current distribution channels and whether these remain appropriate. We expect that there will be more of a focus on the quality of distribution channels used,” explain Smith and Hobson. There are numerous proposals contained in the RDR aimed at capping intermediary remuneration. The FIA notes that the RDR proposes far-reaching reforms to the regulatory framework for distributing retail financial products to local consumers, and are aimed at addressing poor customer outcomes in the current system. The experts at KPMG note that the environment may become challenging for the smaller players as their remuneration structures may be less lucrative as a result of commission scales being regulated. “Intermediaries with limited diversification in their current portfolios may be affected more than others.”

Product suppliers “We may see a reinvention of products and a

potential decrease in the appetite to sell lowerend products that are not lucrative in terms of earnings,” note Smith and Hobson. They add that this will result in product suppliers being more innovative in product design. Due to proposed changes in remuneration to intermediaries, products may be structured differently to encourage intermediaries to sell the products. Overall, the market has anticipated many of the changes put forward in the RDR discussion document. Only on further investigation and practical application will one be able to see whether there are any unexpected challenges, say Smith and Hobson. The FIA adds that despite the numerous delays in publication of the document, the organisation is cognisant of the complexities the regulator has had to deal with in ensuring that the discussion paper considers all possible scenarios in the financial advice space. The Financial Planning Institute (FPI) in particular welcomed the references to financial planning, as contained in the paper. “We have been engaging with FSB and National Treasury over a few years to work on the concept of regulatory recognition for the profession and the concept of financial planning, and are very excited about this opportunity to further engage on this topic,” says Gerhardt Meyer, FPI board member and FPI advocacy committee chairperson. “One will only be able to truly evaluate any unintended consequences once the proposals emanating from the RDR become effective. Unintended consequences may not impact the market as a whole, but may rather impact specific products working through specific distribution channels. These consequences may only be realised once entities consider the impact of RDR on their individual business models,” conclude Smith and Hobson.

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BEE The buzz on

Neesa Moodley

in financial services 76 8 4

hen the code was launched, it was hailed as a roadmap for the financial services industry with clear instructions on how to build on existing achievements in black economic empowerment (BEE). When the code was launched, the transitional period for the financial services sector to comply was extended to April 2015. Leila Moonda, chief executive of the BEE Institute, says the last compliance report from the Financial Sector Charter Council was released in 2008.

The Financial Sector Code for Black Economic Empowerment (BEE) was officially launched in July last year but how far has the financial services industry actually progressed? RISKSA took a closer look.

“The Council is currently compiling a report for 2013 and this is due to be released within the next six weeks. Once that report has been released, we will be in a better position to confirm the current BEE status of the industry,” she says. Repeated attempts to contact the Financial Sector Charter Council directly were unsuccessful.

Financial Sector Code scorecard Financial services giant, Sanlam, is confident that it is already fully compliant with the current Financial Sector Code. The company’s BBBEE (broad-based black economic empowerment) status is currently level two as determined in terms of the Financial Sector Code scorecard. The scorecard includes nine weighted components: equity ownership, management control, employment equity, skills development, preferential procurement, enterprise development, empowerment financing, access to financial services and socio-economic development. Group chief executive, Johan van Zyl, says while Sanlam has shown improvement across all measures of the BEE scorecard, the company has performed “exceptionally well in the areas of ownership, enterprise development and empowerment financing”, scoring full points in these areas. Sanlam’s total BEE ownership was 33.59 per cent as at 31 December 2013, including the Ubuntu-Botho transaction and the impact of mandated investments. “The past year also marked the first year that the group applied the access to financial services measure and our performance in the ‘access to financial services’ element indicates that we are well established in the lower end of the market,” he says. Ubuntu-Botho, led by entrepreneur Patrice Motsepe initially acquired 226 million Sanlam shares at the beginning of 2004. The transaction was funded through R1.1 billion debt and a capital investment of R200 million from Ubuntu-Botho. Over the following ten years, the Sanlam

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dividends were sufficient to repay all of the debt, cover costs, pay a once-off cumulative dividend of R50 million to shareholders and invest R110 million in Ubuntu-Botho Investments Holdings, a targeted investment company jointly owned by Sanlam and UB. Beneficiaries of the Ubuntu-Botho consortium include: • Trade union Sadtu’s investment arm, Sihold; • Trade union Nehawu’s investment arm, Niholdings; • Ubuntu-Botho Churches Support Trust; • Ubuntu-Botho Young Persons Development Trust; • Women’s entity Abafazi-Basadi Ubuntu-Botho Investments Company; • Ubuntu-Botho Women’s Upliftment Trust; • 200 Sanlam black management staff; • Metswale.

Final revisions underway Van Zyl confirmed to RISKSA that the Association for Savings and Investment South Africa (ASISA) is currently responsible for negotiating the revisions to the current Financial Sector Code on behalf of the industry. “The industry has not had sight of the final revised codes yet. These will be finalised after a negotiation process has been completed by ASISA with the relevant government and financial services industry bodies,” he says. He adds that in general, the BEE targets are expected to be more stringent while the weightings and penalties are expected to be more punitive. Speaking at the launch of the Financial Sector Code last year, minister of trade and industry, Rob Davies, said that the target for direct ownership had been amended to allow financial services companies to achieve either a 15 per cent direct BEE ownership or 10 per cent direct ownership with five per cent in the way of equity equivalents. Another amendment is the inclusion of a regular two-year review to ensure that BEE achievements are not diluted over time. Two new elements introduced in the code are ‘empowerment financing’ and ‘access to financial services’. The code applies to all companies or businesses operating in the following fields: 1. Banking 2. Long-term insurance 3. Short-term insurance 4. Reinsurance 5. The management of retirement, pension and collective investment scheme assets 6. Management of formal collective investment schemes 7. Financial services intermediaries and brokers 8. Underwriting management agents

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9. Management of investments on behalf of the public, including but not limited to, private equity, members of any exchange licensed to trade equities or financial instruments in South Africa and entities listed as part of the financial index of a licensed exchange.

BEE in banking Kershini Govender, the divisional executive for transformation, strategy and alignment at Nedbank, says the bank has achieved a level two BBBEE status over the past five years and this status was confirmed by external auditors, Sizwe Ntsaluba Gobodo last year. “At a broader level, transformation is a journey for Nedbank and we acknowledge that while we have made progress over the past 10 years, there is much more work that remains to be done. For example, going forward we have to improve in procuring services from black-owned and black-womenowned small businesses and to appoint more black people in our senior management structures,” she says. Some of Nedbank’s BEE achievements to date include: • Expenditure of R1.5 billion on skills development for black employees since 2004. • An Eyethu BEE deal in 2005, which has seen a pay-out of R747 million in dividends with a net value of R6.7 billion to more than 500 000 beneficiaries. • Expenditure of approximately R644 million towards socio-economic developments since 2004. • The Imbizo Business Acumen programme which is an initiative jointly facilitated by Nedbank, Old Mutual, Wiphold and Mutual and Federal, as a contribution to the National Development Plan of boosting entrepreneurship. The training programme forms part of the larger Imbizo Financial Inclusion strategy being implemented in 17 sites, which are mostly rural communities around South Africa.

Reinsurers coming to the BEE party Reinsurers practicing in South Africa also fall under the Financial Sector Code and a number have already put BEE measures in place. Willis South Africa is a full subsidiary of the Willis Group and BEE shareholder, the Amabubesi Group holds 26 per cent of the South African arm of the Willis Group. Aon South Africa is a level four contributor to BBBEE while Swiss Re is a founding partner of the Swiss South African Co-operation Initiative (SSACI), which is a public-private partnership that helps unemployed youth in South Africa gain work experience via training projects. At all levels of the financial services industry, companies can be seen making changes that will improve their BEE standing and see them comply with the Financial Sector Code. The long-awaited industry compliance report from the Financial Sector Charter Council will no doubt provide a bird’s eye view of actual overall progress in the financial services industry.

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A New Yearâ&#x20AC;&#x2122;s business resolution

for brokers... Cement your client relationship by managing expectations at claims stage.

nstead of stepping back when an assessor or adjuster is assigned, a broker would benefit by personally managing the expectations and entire claims experience of clients, because the way clients experience that process influences the likelihood that they will remain loyal to you and respect your choices.

Willie Jansen van Rensburg, head of claims, Hollard General & Specialist Liabilities, within Hollard Broker Markets

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â&#x20AC;&#x153;A mistake brokers often make is to take a step back once a loss adjuster or assessor is appointed by insurers but this is a perfect time to cement your relationship and demonstrate your competitive edge against other intermediaries and direct insurers,â&#x20AC;? says Willie Jansen van Rensburg, head of claims at Hollard

General and Specialist Liabilities within Hollard Broker Markets. “At this stressful time there is nothing a client needs more than uninterrupted, highly personal and controlling service from someone he or she knows and trusts; someone with whom a personal relationship already exists and who understands the company and its people.” Jansen van Rensburg explains that the challenge to brokers varies in difficulty, depending on the type and complexity of a claim. “Many parties can be involved, in addition to your client, such as a third party, one or more insurers, loss adjuster, other brokers, public adjuster, attorney, advocate and experts. These parties may all, from time to time, create premature expectations for your client about whether the policy will respond or not and what will be paid out and when.” So how can a broker manage and orchestrate these unpredictable possibilities and risks to his client’s peace of mind? It is more than likely that your client’s future loyalty will depend on your actions during this crucial process.

Lay the foundation Do proactive groundwork before that critical claim: • Take the General Code of Conduct seriously and implement it in your business, set out in the FAIS Act (37 of 2002). Although it does not deal specifically with a broker’s duties at claim stage, it sets the tone.

• Ensure a proper overall mandate (preferably in writing) is in place with your client, clearly outlining the broker’s responsibilities at all stages, including when a claim is made. • Make it your business to know your client and their business inside and out. Make sure their policies adequately cover all its risks. If you have any doubt, Hollard encourages you to meet with us to clarify what is, and is not, covered. • Conduct a regular Uninsured and Uninsurable Risks exercise with your client for each policy. • Ensure your internal systems (IT and otherwise) have the capacity to deliver current cover details to your claims team at any time. • Give your client a contact list including names and numbers for every type of claim.

Claims leadership How to manage your client’s expectations during that critical claims process: • Be actively involved in claims meetings between the adjuster and your client. This provides your client with direct assistance and support and keeps you up to date throughout the process. Ensure the main points of those meetings, such as outstanding information and timelines, are written down and circulated. • Provide your client with concise, regular feedback about the claim’s status. • Do not confirm a particular loss will, or will not be, covered until you receive written confirmation from the insurer.

• If a contentious issue arises or, if a claim is repudiated, ask the insurer to provide written and detailed facts via the loss adjuster. This should enable you to understand the situation clearly and give informed advice to your client regarding the next step, such as: make representations; refer to the Ombudsman for Short-Term Insurance; take legal action; reasons to accept the insurer’s decision; and other options. • If a public adjuster is involved, a clear understanding of the relevant duties and responsibilities of the broker and public adjuster should be agreed upfront, in writing, to avoid future disputes. • Ask the loss adjuster/insurer to notify you when the Agreement of Loss is drawn up so you can personally break the good news to your client.Current payment methods prevent you from having the pleasure of delivering the cheque in person, but I still remember a few old school brokers who used to insist on doing so. • Another proactive idea is to ask the insurer to add your name to the entities/people listed on the Agreement of Loss to be released and discharged from any further claims linked to that incident. There is an increasing trend of claims against brokers for alleged professional negligence, and this could be a protection. In conclusion, one of the biggest causes of losing existing clients is a claim going south. That’s why I believe the above will assist you in managing your client’s expectations which will result in a closer relationship and protect your revenue.

81 5

The commerciality of

direct insurance PART 1

Fifteen years ago many people in the industry doubted the viability of a direct insurance model in personal lines. Today, with the benefit of hindsight, we know it is not only viable, but it has proven to be the most significant catalyst for change in our industry, with the possible exception of regulation.

Peter Todd director, Repair Solutions

s we see the likes of Outsurance and Telesure focus more aggressively on the direct commercial model, the question has to be asked as to whether this segment too will see a significant shift from broker to direct. The next 12 months will see a number of new players enter this space, yet once again it is not uncommon to hear industry veterans dismiss this trend as somewhat of a non-starter. After all, commercial insurance is too complicated to sell direct…or is it?

How do the financials stack up? Whilst it might surprise some to know that Outsurance’s commercial business generated premiums of R746 millions for the year ended June 2013, it will shock most to know that they achieved a loss ratio of only 47 per cent on this business. Compare this to the leading traditional insurer, Santam, at 61 per cent. Even though the Outsurance volumes are still relatively small there is enough volume to suggest that the broker market needs to pay attention.

Segmenting the market There is undoubtedly a segment of the market that lends itself to a direct commercial model –

the small ‘mom and pop’ shop that is, in many respects, a lot simpler to underwrite than some personal lines portfolios. Therefore, it is no surprise that Outsurance pitches its marketing at the butcher, the baker and the candlestick maker – in fact they are creating segments within the segment and utilising their expertise in modelling personal lines rating to similarly rate these homogeneous risks. From the buyer perspective, the process is fairly simple, and because these target segments have fairly static risks, their service needs are not very onerous. In fact, it is here where the direct model is able to differentiate on price. The broker models, on the other hand, tend to differentiate on relationships and, as such, the need to provide continuous service adds cost. In an economic downturn, clearly the price differentiator is proving compelling.

How do the pricing models stack up? Direct insurers benefit from the fact that they have established their brands and, therefore, the marginal cost of acquisition through advertising is relatively small when compared to the acquisition costs of traditional insurers. The

latter spend some money on advertising, but they are also spending money on managing the relationships with their brokers and then of course they are paying full commission on top of this. From a servicing perspective, there is perhaps some similarity between the models as the direct insurers utilise agents to inspect the risk and engage with the client, while the traditional insurers rely on the broker to fulfil this function. However, the direct agent is arguably less qualified than the broker and, therefore, costs less than the commission and fees paid to brokers. This is especially true when one considers that the agent in the direct model does not attempt to maintain an ongoing relationship with the client and is there primarily to assist in gathering underwriting information. As such, it is not an ongoing cost for the direct insurer. So what about the larger commercial risk – will they too go direct? Look out next month for my synopsis of the likelihood of the direct model making inroads into the large commercial space.

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10/06/2014 12:14:37 PM

AIG launches

property performance series Christy van der Merwe

AIG South Africa launched the company’s global Property Performance Series product at broker events in Sandton, Durban and Cape Town, and looks forward to uptake of this product, which has been designed to strengthen the clients’ business continuity cover.

he Property Performance Series is an easy-to-navigate all risk property damage and business interruption policy designed for medium to large businesses (sums insured range from $50 million to $750 million) in a wide range of industry sectors, including the commercial property industry, airports, healthcare, retail and real estate, and telecoms for example. Jenny Watkins, global property executive for AIG Africa, explains that the product is being rolled out globally and uses global product wording, which is standard, although locally adapted for regulatory specifics. “It is a very forward thinking product. We listened to what the clients need, and they want wide cover,” reiterates Watkins. Clients, particularly multinational companies, benefit from a global wording which provides consistent cover supported by local claims and loss prevention support. A key difference is that AIG is writing 100 per cent of the risk, and this is of great benefit to the client, adds Nick Barber, claims manager at AIG global property for the Europe, Middle East and Africa region.

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“It helps with claims, as decisions can be made quickly and allows clients to maintain business continuity.” The enhanced global wording incorporates AIG’s ‘Claims Promise’, which assists businesses with cash flow after a loss, and provides access to specialist engineering support. After a loss, the policy will advance 50 per cent of the agreed property damage and extra expense estimate to pay for repairs and replacements of damaged property to help businesses when cash flow is critical. Property performance has a number of extensions built into the form including contractual penalties, crisis management, cyber, environmental clean-up, equipment break down and upgrade to green following a loss – all designed to strengthen the clients business continuity cover. The property performance product also cuts back on common conditions and warranties with blanket limit basis and no average clauses or coinsurance penalties reported to related values all designed to ensure a smoother claims process. This means that upfront risk selection

is of paramount importance for AIG, and Watkins explains that AIG needs to adequately assess the risk, and understand sufficient detail behind it, including how the business operates, business interruption information, and restoration requirements when applicable. AIG’s engineering helps to minimise loss potential from client’s businesses, providing benchmarks against industry standards to measure risk quality and give recommendations on improving contingency and catastrophe planning. Barber further explains that in case of a business interruption loss, AIG will calculate the claim on both a gross profit or a gross earnings basis and will pay whichever is the greater of the two. With this product, AIG has stripped away a lot of the traditional product wording and introduces global standards and product wording. The global organisation has been through numerous changes recently, and with this product, AIG South Africa aims to provide new risk solutions to a broad range of property exposures, and through its broker partners attract new business.

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Hunting skills to extinction Dominic Uys

Poaching and headhunting of skilled employees has become an inescapable part of the labour sector, and the insurance business is no different. One recent study, however, notes that the skills pool is in dire need of a cessation of hostilities if it is to replenish its ranks.

here needs to be an accord between CEOs in short-term insurance to adopt a non-poaching philosophy when it comes to industry skills. This was one of the findings of the recently released INSETA Status of Skills in the Insurance Industry report, which notes that most employees are no longer loyal to their employers, and readily change jobs to improve their situation in the short term. The survey, which was conducted through 22 face-to-face interviews with human resources directors from leading industry brokers and insurers, as well as 70 telephonic interviews with medium-sized companies, is the second in INSETA’s series of industry reports. The survey found that headhunting within the industry has a significant impact on the core issue of skills development within the industry. With traditional training grounds, such as multiline insurers that gave previous generations apprenticeship opportunity, having largely disappeared, respondents felt that companies have an increased responsibility to implement rigorous succession planning and train up skills within its ranks.

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The cost of internal company skills training however remains both expensive and timeconsuming, exacerbated by the fact that trained candidates are once again at increased risk of being poached by competitors. Respondents have, therefore, called for greater cooperation between employers and INSETA, IISA, FSB and other representative bodies to develop a pro-training, anti-poaching accord. While these organisations do interact effectively, the perception within the industry is that they operate largely in isolation. “By forcing trainees to lock in more firmly with an employer, this will ensure that companies receive a reasonable return on the time and funds they invest in training and fast-tracking suitable candidates,” the report states. Headhunting also impacts company morale, according to the survey respondents. The report states that it results in remuneration that is often out of line with other employees in similar categories, leading to dissatisfaction within the company.

Approaches to in-house training The survey includes a number of possible approaches to skills training within the company. “Rapid learning is key to an organisation’s success. In a knowledgebased economy, people’s ability to absorb and process new information, and adapt quickly to new realities are critical to the continued success of an organisation. This creates a need for an innovative approach to training both teams and individuals,” it imparts. Among the strategies are: e-learning programmes – a proven way to develop skills such as leadership, time management, communications, teamwork and client care; tracking learners’ progress, since many learners and interns move through training or acquire qualifications, with no clear record of how the process has advanced their career or added value to their organisation; and the efficient use of limited training resources.

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new

Exploring a

frontier Dominic Uys

The country of Myanmar (formerly Burma) has opened its doors to foreign insurers for the first time since 1952. The once isolated country has spent the last two years reforming its economy, and is now ready for a hungry international market to conquer new ground.

n the past year many of the major players in both the insurance and reinsurance market have acknowledged that the industry needs to look towards the developing economies if it is to achieve any growth in the future. The burgeoning economies of countries like, Cambodia; Cuba and Vietnam have all recently begun to appear on the radar as fields for future growth. The one economy that has generated the most excitement recently has however, been Myanmar which, with the introduction of a number of proposal Bills aimed at economic reform, has opened itself up to foreign investment for the first time in over 60 years. A report done by Mckinsey & Company in June of 2013 noted that Myanmar requires an investment injection amounting to around $650 billion by 2030 in order to support the countryâ&#x20AC;&#x2122;s growth potential. Around $320 million of this would need to go towards infrastructure alone. The potential for Myanmar in that case, is a GDP of about $200 billion in 2030. Also, the report estimates that the potential for economic growth could reach approximately 8 per cent year-on-year. Since the announcement of the 30 amendments enabling the countryâ&#x20AC;&#x2122;s economic reform, the influx of foreign investment has already been substantial. Investment into Myanmar from the start of 2014 reached the $50 billion mark by the end

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“The new office will help us build on such links. Importantly, Willis will now be in a position to help Myanmar’s insurance industry to access the very latest risk management innovations and to develop best practice,” Khaing Zar Aung, Willis’ chief representative officer in the country, said at the time.

of October, and 29 companies based in 11 countries entered into the country last year.

Insuring an ex-monopoly The insurance sector has to date been monopolised by the state-owned Myanma Insurance Company, which was founded in 1952. Starting this year, the 14 international insurance companies that have opened representative offices are able to conduct business as independent entities. Sompo Japan Insurance, Mitsui Sumitomo Insurance Co, Tokio Marine & Nichido Fire Insurance Co, Taiyo Life Insurance Co, Poema Insurance, American International Assurance Co, the Great Eastern Life Assurance Co, Prudential Holdings, ACE INA International Holdings, Pana Harrison (Asia) Pte, Manulife Financial Life Insurance and Willis Co are all currently active in the Myanmar. Under the new legislation, these private companies will be able to offer nine of the 48 officially recognised categories of life and general insurance. These include life policies for athletes and victims of snake bites, general insurance against fire damage to property and comprehensive vehicle insurance. One important requirement however, is that insurers will need to show at least $6.2 million in capital before they are allowed to offer longterm insurance, and $41.5 million for general insurance, effectively only qualifying the industry heavy hitters to compete.

Economic reform in action Following the start of Myanmar’s political reform in 2012, the country’s newly formed cabinet set about encouraging foreign corporates to invest in the nation for the first time since it attained independence in 1948. In the past two years Myanmar has enticed 37 international companies in various economic sectors to invest and establish a presence in the country. The amendments include policy reforms of anti-corruption laws, currency exchange rates, foreign investment laws and taxation.

A major component of the opening economic borders is the establishment of special economic zones, where the Myanmar Government envisions the majority of foreign companies to set up operations. One of the biggest of these is the Thilawa Special Economic Zone, a $150 million development at Thilawa port, south of the city of Yangon. It is expected to be fully operational in 2015. Two international firms have been contracted to develop the country’s mobile infrastructure. Norway-based Telenor and Ooredoo from Qatar have each been granted 15-year licences, and a target has been set to reach 80 per cent of the country’s 60 million-strong population by the end of 2015. The national power grid is similarly expanding, and the government is in the process of adjudicating bids from international power producers vying for the 30 available contracts. Finally, foreign banks and insurers would also be allowed to enter the country as wholly independent entities. Several foreign banks already have representative offices, including Malaysia-based CIMB Bank, Singapore’s DBS Bank and Japan’s Sumitomo Mitsui Banking Co, while some of the largest players in the insurance market have established offices in Yangon, including ACE, MetLife and Prudential.

Strategy of a new entrant In March of 2014, Willis Re opened its representative office in Yangon. The groundwork for this office had already been laid through interaction with Myanma Insurance, with Willis having placed reinsurance for the state owned entity’s major risks in the past.

Aung tells RISKSA that the demand for specialised insurance cover for the unique risks faced by the different industries has become evident. “Willis is working closely with Myanmar insurance to introduce new products to the market, and to assist clients by drawing on the expertise of our global network of specialists,” she adds. Aung points out that one particular challenge that the company still needs to address is to nurture local talent to fill the growing insurance industry. “This is especially important for commercial insurance as it requires both brokers and insurers to understand each client’s unique risk exposure. Luckily there is a large pool of local graduates ready to enter the emerging financial services sector and therein lies an opportunity. Those companies that are willing to invest time and effort to train new staff will be better prepared to meet the growing demands of their clients.” “Our strategy in Myanmar is to grow our business by matching the requirements of our current and prospective clients with our expertise in risk management and insurance. We have already shown our commitment to the market by establishing our representative office, and now we are building our brand reputation by inspiring confidence in our clients through service excellence. We are providing a one-stop risk management solution by accessing the full capabilities and expertise of the Willis group,” Aung concludes. However, much remains to be done in this year and, while major strides have been made by the fledgling government, the economic sector still awaits clarity on crucial issues. While already showing a promising 6.5 per cent economic growth rate, the country is still some way away from reaching its $650 billion investment target, and political uncertainty remains a concern. The next 12 months will tell whether Myanmar truly is Asia’s next emerging tiger economy.

89 5

ASIA

PACIFIC OVERVIEW

COUNTRIES

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 Malaysia and New Zealand.

Malaysia 1. The regulator Bank Negara Malaysia (BNM) regulates entities which carry on insurance business, insurance broking, adjusting and financial advisory. Insurers are licensed by the Minister of Finance on the recommendation of the BNM. Brokers and financial advisers must be approved by BNM, and adjusters must be registered with BNM.

2. Subsidiary/Branch Branches are not permitted. Insurers (other than professional reinsurers) must be public companies; adjusters must be incorporated whereas BNM may specify the form of establishment of reinsurers, brokers and financial advisors. There is currently a freeze on the issuance of new insurance licences by BNM, although BNM may be open to consider applications on a case by case basis. Prior consultation with BNM is encouraged.

3. FDI restrictions 70 per cent limit on foreign equity ownership. >70 per cent considered on a case by case basis for players who can facilitate consolidation and rationalisation of the industry.

4. Control approvals Prior written approval of the BNM or the Minister of Finance (as the case may be) is required for a person to: â&#x20AC;˘ initially acquire an aggregate share interest of >5 per cent in a licensed insurer; â&#x20AC;˘ subsequently hold an aggregate share interest in a licensed insurer equal to or exceeding each multiple of 5 per cent, or the

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Contributed by: Zaid Ibrahim & Co

trigger for a mandatory general offer (i.e. 33 per cent); • hold more than 50 per cent interest in share in a licensed insurer; • have ‘control’ over a licensed insurer, regardless of shareholding level; or • dispose of shares resulting in shareholding below 50 per cent or a change in ‘control’. In addition, a company holding >50 per cent interest in shares in a licensed insurer must be approved by BNM as a ‘financial holding company’. For an approved insurance broker or financial adviser, ≥5 per cent shareholding requires notification to BNM and any change of control requires prior written approval of BNM.

5. Minimum capital Minimum paid-up share capital: • insurer: RM 100 million • local reinsurer (life): RM 50 million • local reinsurer (non-life): RM 100 millionminimum surplus assets over liabilities: • licensed foreign reinsurer: RM 20 million

6. Risk-based capital Yes, the risk-based capital framework applies to all insurers, including reinsurers, licensed under the Financial Services Act 2013, for business generated within and (subject to limited exceptions) outside Malaysia. The framework was implemented with effect from 1 January 2009. CAR = (total capital available÷total capital required) x 100 per cent Total capital available (TCA) is the aggregate of Tier 1 capital (such as issued and paid-up ordinary shares) and Tier 2 capital (such as cumulative irredeemable preference shares)

less deductions from capital (such as goodwill, deferred tax asset and investment in subsidiaries). The total amount of Tier 2 capital must not exceed the amount of Tier 1 capital.

Benefits Protection System (TIPS) which protects specific benefits under life and general insurance, subject to specific limits for different classes of coverage.

Total capital required (TCR) is the aggregate of capital charges for each insurance fund and assets in the shareholders fund/working fund. Capital charges are fixed for credit risk, market risk, insurance liability risk and operational risk or surrender value capital charges.

9. Portfolio transfer

BNM has set a supervisory target capital level of 130 per cent. Each insurer must set its own individual target capital level to reflect its own risk profile. The individual target capital level must be higher than the supervisory target capital level.

7. Group supervision Yes. Under the Financial Services Act 2013, BNM is empowered to exercise oversight over financial groups for the purposes of promoting the safety and soundness of a licensed insurer. In general, the prudential requirements applicable to licensed insurers also apply to financial holding companies, and BNM may specify standards on prudential matters to a subsidiary of a financial holding company if it is of the opinion that the activities of such subsidiary may pose risks to the licensed insurer or its financial group. BNM also has the power to issue directions to a financial holding company, its subsidiary or the director, CEO or senior officer of such financial holding company or such subsidiary.

8. Policyholder protection The Malaysia Deposit Insurance Corporation (MDIC) administers the Takaful and Insurance

Yes, by scheme approved by the BNM and confirmed by the court. Court approval has the effect of vesting all transferor’s right and title in the assets transferred by the scheme on the transferee and making the transferee fully responsible for the liabilities transferred by the scheme without further actions or consents required.

10. Outsourcing ‘Core activities’ consist of activities constituting insurance business (ie, receiving proposals for insurance, negotiating on proposals for insurance on behalf of an insurer, issuing of policies, collection or receipt of premiums or settlement or recovery of claims on policies), board and senior management oversight, investment management, internal audit and compliance functions, risk management, strategic planning and decision making and financial analysis. Certain types of core activities are permitted to be outsourced except to the extent permitted and subject to the requirements set out in the relevant BNM guidelines. The prior approval of BNM is required for the outsourcing of some of these core activities (eg, premium collection, administration of claims, investment management to fund managers and internal audit to group internal audit). An insurer is required to notify BNM of any material outsourcing arrangement.



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New Zealand

1. The regulator Reserve Bank of New Zealand (RBNZ), which gains its authority under the Insurance (Prudential Supervision) Act 2010. Any entity that assumes liabilities to New Zealand policyholders under a contract of insurance is an insurer and requires a licence from, and is regulated by the RBNZ. The provision of insurance broking services and other insurance intermediation services is regulated, although no authorisation is required under New Zealand legislation. The provision of advice or other services in relation to insurance products is regulated, and the provider may need to be registered and/or authorised.

2. Subsidiary/Branch Insurers: • An insurer may be a local entity or a

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branch of a foreign insurer • the directors and other relevant officers must be ‘fit and proper’ • an insurer must hold a current financial strength rating from an approved rating agency. Brokers, financial advisers and insurance agents – may be a local entity, branch of a foreign broker or individuals.

3. FDI restrictions Yes – consent of the Minister of the Crown is required for acquisition of rights or interests of 25 per cent or more of an entity worth more than NZD100 million.

4. Control approvals Consent of the RBNZ must be obtained for any change of control: control means ≥ 50 per cent of the company’s voting rights.

Contributed by: Mayne Wetherell

5. Minimum capital Actual Solvency Capital (ASC): • Life insurer – ASC of NZD5 million • General insurer – ASC of NZD3 million ($1 million for captives)

6. Risk-based capital Solvency margin is the excess of actual solvency capital (ASC) over minimum solvency capital (MSC), expressed as a dollar amount. ASC is the total of capital fewer deductions from capital. MSC = Total Solvency Requirement (TSR) less, in the case of life insurance, the aggregate of policy liabilities and other liabilities. TSR = sum of capital charges for certain key business metrics including: insurance risk, catastrophe and asset risks (including credit, equity and property risk, foreign currency and

interest rate risk, asset concentration risk and reinsurance recovery risk). Policy liabilities are valued on a best estimate basis, and other liabilities are valued under NZ GAAP. Any likely breach over the next three years must be reported.

7. Group supervision Yes – for subsidiaries of NZ insurers. Insurer subsidiaries must be consolidated and the solvency standards applied to the consolidated group. Non-insurance subsidiaries are treated as related party equity investments, subordinated loans or other obligations.

8. Policyholder protection Life insurers must maintain and keep distinct and separate from other assets, one or more statutory funds into which all

amounts received by the insurer in respect of the business of that fund must be credited. Investments made are assets of the fund. There is no protection fund for non-life policyholders. On liquidation of an insurer, (other than from a life insurer’s statutory fund) there is no priority for policyholders, and the court has the power to reduce the value of contracts of insurance.

10. Outsourcing There is no express restriction on outsourcing. However insurers must have a risk management policy and, depending on the nature and scope of the activity to be outsourced, such outsourcing may need to be disclosed by way of a modification to the risk management policy. In addition, the insurer must ensure that at all times it meets the conditions for entitlement to hold its licence.

9. Portfolio transfer Yes. The RBNZ may, on application, approve a transfer of all or part of an insurer’s NZ business to another insurer that meets the licensing requirements. The RBNZ must have regard to the policyholders’ interests and may request an actuarial report. The transfer takes effect as a novation of each policy. On insolvency, a liquidator or administrator may apply to the High Court for approval of a scheme of transfer of insurance business.

Next month we profile Papua New Guinea and Singapore.

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news

Norton Rose Fulbright Representatives – (left to right) Sibusiso Gule (chairman) and Riza Moosa (head of banking and finance) holding trophies awarded to the firm on the night: Law Firm of the Year, Overall Professional Services Firm of the Year and a Lifetime Achievement Award for Excellence in Labour Law for Gule.

Norton-Rose Fulbright cleans up at SAPSA Awards Norton-Rose Fulbright South Africa continues to rack up the accolades as the company was named Best Law Firm and Professional Services Firm of the Year at the inaugural South African Professional Services Award (SAPSA) hosted at Emperor’s Palace in Johannesburg during October. Norton-Rose Fulbright’s global chairman, Sbu Gule, was also awarded with the Lifetime Achievement Award for Excellence in Employment and Labour Law at the

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event’s award ceremony, which was hosted at Emperor’s Palace in Johannesburg. Gule, global and South African chairman of Norton Rose Fulbright, focuses on employment and labour law and immigration. He’s been involved in several landmark cases and has gained experience in litigation in the Magistrate’s Court and High Court as well as in commercial matters. He has also acted as a judge in the Labour Court and has sat as an assessor in the High Court. “We are proud

to have won this award,” said global chief executive Peter Martyr. “The quality and scale of the professional services sector in South Africa is significant and is a key factor to our global strategy in both the development and potential of the region. “The entire practice contributed to this, and we’re very pleased with our achievement and grateful to Sbu for his commitment and contribution to the global practice and to our efforts in South Africa”.

Mutual and Federal to raise fraud awareness On special invitation from Mutual and Federal, the South African Insurance Crime Bureau (SAICB)’s Hugo van Zyl will be hosting fraud awareness sessions with the insurer’s brokers and staff. Topics to be tackled include current industry trends and vital tips to apply to proactively detect fraud. “The aim of this week was to highlight the seriousness and evergrowing problem of economic crimes in South Africa and our industry in particular. Fraud Week was first organised 12 years ago by the Association of Certified Fraud Examiners, the world’s largest anti-fraud organisation in an effort to proactively fight fraud and help businesses safeguard their assets. The campaign was designed to raise the level of awareness and encourage our brokers and employees to be vigilant and report any suspicious and fraudulent activities,” said Gary Slater head of forensics at Mutual and Federal. “The SAICB is the only entity mandated by the short-term insurance industry to enable collaboration and facilitation in addressing organised crime and fraud prevention on behalf of the industry. And we encourage all our member companies to embrace International Fraud Awareness Week in this manner,” added Hugo.

Financial planners growing in recognition A growing acknowledgement for the Certified Financial Planners (CFP) from industry and businesses in 2014 has prompted the FPI to laud the collaborative efforts with its CFP professionals and industry partners. These developments in 2014 also spurred greater awareness and understanding of the importance of financial planning for consumers. FPI CEO, Godfrey Nti, explains that this trend was evidenced in the Financial Planning Standards Board (FPSB) Comparator Research survey, which was conducted across 92 financial services firms in 12 territories, including South Africa. The survey sought to explore perceptions on financial planning within the industry and better understand the industry’s views on the value of the CFP certification. Some of the key findings from the South Africa survey were that 80 per cent of firms believe that CFP professionals generate higher revenue, with 60 per cent reporting that their business revenue actually increased as a result of employing CFP professionals. Furthermore, 80 per cent of firms reported that employing CFP professionals lowers compliance and legal risks compared to financial planners or advisers without these credentials. The survey revealed that 80 per cent of firms viewed CFP accreditation as favourable when employing financial planners or financial advisors; 75 per cent of firms plan to grow the number of CFP professionals by hiring new advisors or in supporting existing advisors in attaining CFP certification. Sixty per cent of companies surveyed expect an increase in the number of people seeking professional financial planning advice in the short term. “The CFP designation is an investment in oneself. The biggest benefit is that the designation allows our members to rightfully claim that they are better educated, have achieved the highest level of competency and are in higher demand than the majority of representatives in the industry,” concluded Nti.

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Minister of Health appoints new regulatory council The Minister of Health, Dr Aaron Motsoaledi, has appointed a new council to govern the Council for Medical Schemes (CMS), regulator of the medical schemes industry. The CMS supervises a massive and very important industry. There are about 83 medical schemes in South Africa with around 8 776 279 beneficiaries. These schemes have a total annual contribution flow of about R129.8 billion. The council determines overall policy, but day to day decisions and management of staff are the responsibility of the registrar and the general managers. Professor Yosuf Veriava has been re-appointed as chairperson of council.

Johan van der Walt, a chartered accountant and former executive manager and Board member of SA Tourism with board, audit and risk committee and executive management experience; Moremi Nkosi, who holds a Master’s Degree in public health and is currently working at the national department of health as a technical specialist on national health insurance policy; Dr Matlodi Steven Mabela, holds a PhD in economics and is currently the operations and corporate strategy executive of the Institute for Corporate and Social Development SA and was involved in establishing the Gauteng Economic Development Agency.

He is a retired professor of medicine at the University of Witwatersrand in Johannesburg. Council members who have been reappointed are: Dr Loyiso Mpuntsha, a medical doctor and chief executive officer of the South African National Blood Service (SANBS). Lunah Nevhutalu, an INSEAD MBA graduate with more than five years financial markets’ experience as well as Professor Bonke Clayton Dumisa, an academic and attorney. Newlyappointed members of council are: Maboye Mosidi, a senior professional nurse who holds several nursing and nursing management qualifications.

Adv. Harshila Khoosal Kooverjie, is a practicing advocate and member of the Pretoria Society of Advocates who works extensively in the fields of tax, labour, intellectual property, commercial law and alternative dispute resolution.

She is the general secretary of the South African Democratic Nurses Union (SADNU);

Prof Sadhasivan Perumal holds a doctorate of commerce and lectures at the University of KwaZulu-Natal School of business management with extensive lecturing and publishing experience who has served on numerous boards and committees. Daniel Lehutjo, acting chief executive officer and registrar of the CMS, said “We welcome the appointment of the new council. We

Ten ton trucks covered with Auto & General business insurance Broadening the options in the heavy commercial vehicle arena, Auto & General business insurance has extended its motor vehicle insurance offering to include heavy commercial vehicles up to 10 tons. Clients can now cover their trucks as part of their combined business insurance policy, says the company. “Customers can choose to insure their 10 ton truck with a motor-only policy or with a motor and business all risk policy. The latter covers the tools and equipment kept inside the commercial vehicle. There are three cover options available – comprehensive, third party, fire and theft and third party only,” says Mornè Stoltz, general manager of Auto & General business insurance. The Auto & General business insurance 10 ton truck cover comes equipped with windscreen cover, towing and storage to the closest repairer, medical costs up to R5 000, wreckage removal and claims preparation costs of up to R50 000. Customers can choose to add car hire for a light delivery vehicle of up to 1.3 tons and cover for the commercial vehicle’s sound system.

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look forward to the insight and expertise from the new council as they help direct the regulator in achieving its vision of striving to be a fair custodian of equitable access to medical schemes in order to support the improvement of universal access to healthcare. We take this opportunity to congratulate those appointed and wish them well in their tenure.” Members of the council represent a variety of skills and backgrounds, and include experts in law, finance, actuarial sciences, economics, medical sciences, corporate governance and consumer affairs. Council members are appointed on a part-time basis for a period of up to three years.

Infiniti Insurance opens guarantees division After having recently launched its new general, environmental and specialist liability division – RisQ, Infiniti Insurance has also announced the opening of its new Infiniti Guarantees division. The new venture for the insurer will provide construction guarantees, and industry veteran, Clive Sparks will be leading the new division. “Clive comes with a wealth of experience and knowledge. He worked in the banking industry for 19 years before diversifying into insurance in 2002. His progress in this sector saw him successfully launch and head up the guarantee divisions of two major insurance companies,” says Infiniti. “His approach of fair treatment and high principles, coupled with innovative, yet conservative underwriting and tailor made products has been, and will continue to be, a winning combination for successfully meeting his high caliber clients’ needs,” continues the company. The introduction of the Infiniti Guarantees division complements Infiniti Insurance’s growing and diverse product offering, which includes Infiniti Aviation; Infiniti Legal Sense; Infiniti Re, broker and specialist underwriting divisions; and the recently launched general, environmental and specialist liability division RisQ.

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newappointments

Fulcrum Group Following 20 years of service to the insurance market as CEO of the South African Insurance Association (SAIA), Barry Scott has Barry Scott joined the Fulcrum Group as of December 2014. Scott will work closely with Fulcrum CEO Vaughan Jones as head of projects and integration. Says Jones: “Our business has gone through a period of sustained and exciting growth. With the many opportunities facing us, coupled with our belief that Fulcrum is best placed to assist intermediaries with all their financial needs during a time of considerable change in the insurance landscape, adding a team member like Barry – with his experience and desire to make a difference – is a real win for us.”

Centriq

Thabo Moodie

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Thabo Moodie joined Centriq’s Alternative Risk Finance division in the position of account executive recently. Moodie is currently busy completing his MBA at the University

of the Free State – the same institution where he obtained his B.Com Hons in Accounting in 2008. He completed his TOPP Articles with ABSA where he held various top positions before he subsequently joined the IQ Business Group as Principal Consultant, Finance and Risk. Moodie was with Barclays Africa CIB before he decided to join leading company, Centriq.

Sanlam Sanlam has announced the appointment of Clement Burns Booth as independent nonexecutive director to the Sanlam board of directors with Clement Burns Booth effect from 1 January 2015. Booth, who is based in London, has vast executive and board experience in the financial services industry locally and abroad. He currently serves as a member of the Board of Management of Allianz SE, responsible for global insurance lines (corporate and specialty insurance), reinsurance and Anglo markets (UK, Ireland and Australia) and will take up the Sanlam position upon his retirement from this position at year-end. “I am honoured to take up membership of the board of directors of Sanlam and I hope my knowledge and experience will contribute to

guiding the company’s continued growth and stature as a diversified multinational financial services company,” Booth said.

The Sanlam Group The Sanlam Group has announced the appointment of Hubert Brody, as its new chief executive of group strategy and projects, Hubert Brody with effect from January 2015. Brody is the former chief executive officer of Imperial Holdings. “Brody, a chartered accountant, is credited with taking over Imperial during one of its most challenging periods and directing the group’s expansion in Europe and into the rest of Africa. During his tenure as CEO from 2007 to 2014, he presided over a significant increase in the Imperial Holdings share price and built a solid reputation for implementation and delivery,” Sanlam said in a statement.

Santam

Lizé Lambrechts

The Sanlam group announced that Sanlam Personal Finance chief executive, Lizé Lambrechts, will take over as Santam chief executive from current CEO Ian Kirk,

effective 1 January 2015. Lambrechts successfully led the group’s biggest business through extensive regulatory changes and challenging market conditions over the past 12 years at the helm of SPF, to become one of the leading retail financial services groups in South Africa. An actuary, Lambrechts also holds a B.Sc Honours (cum laude) in Applied Mathematics from the University of Stellenbosch.

MUA With over 30 years’ experience within the short term insurance sector, Lindsay Robertson will be heading up MUA Lindsay Robertson Insurance Acceptances as its new regional manager for Gauteng. Having started her insurance career with Guardian National in 1984, Robertson moved on to spend 28 years with Mutual & Federal and Commercial Union, as the company’s head of group schemes. She has completed her Certificate of Proficiency (COP) and an Associate of the Insurance Institute of South Africa (AIISA). She completed Management Advancement Programme (MAP) with the Wits Business School and a Senior Management Programme at the University of Stellenbosch. Robertson is also Financial Advisory and Intermediary Services (FAIS) compliant.

Appointments by the Financial Planning Institute (FPI)

FPI Riana Badenhorst Appointed as: member services administrator Badenhorst is responsible for providing exceptional service to all FPI members, and ensuring that all members are provided with up to date information on all matters regarding membership. Her role also involves providing members with support relating to Continuous Professional Development (CPD) points, education and professional standards. Name: Lelané Bezuidenhout, CFP® Appointed as: certification manager

Bezuidenhout mandate is to manage the operational side of the certification department and to ensure the effective implementation of the certification processes and standards. She works closely with her team of administrators ensuring the smooth running and fulfilment functions of membership applications, CPD retrievals, and ensures that an effective and fair Professional Competency Exam (PCE) is delivered. Wende Davids Appointed as: customer experience officer Davids’ role is to facilitate and implement processes to help FPI understand, analyse and create a positive customer experience, taking customer relationship, loyalty and value management, as well as plain language principles into account. She is responsible for managing the customer experience wherever it sits in the business. This role involves studying the company and its business processes from a consumer perspective and implementing the changes according to consumer and stakeholder needs. Sherma Malan, MBA Promoted to: senior certification manager Malan heads up the certification department and is responsible for promoting and implementing best practice standard and ensures that the certification function is delivered within those standards. Her strategic oversight involves fulfilling the role of building and maintaining stakeholder relationships with South African Qualifications Authority (SAQA), Quality Council for Trades and Occupations (QCTO), education providers, continuous professional development providers and examination panel members. Sibongile Mdluli Appointed as: business analyst Mdluli is responsible for providing system

maintenance services for business applications and evaluating the required business functions, processes and procedures to identify areas in need of improvement. Her role involves dealing with suppliers to strategise, design and integrate computer-based solutions to meet the business needs of clients and stakeholders. Angeline Mveng Appointed as: examination body clerk Mveng’s role is primarily to assist with the general administration of the examination body department. She is also responsible for updating examination documents, moderating all parcels captured, printing and re-printing examination documents. Additionally, she assists in checking attendance registers and answer sheets for each regulatory examination written. Kirsten Stevens Appointed as: events assistant Stevens is responsible for assisting the events co-ordinators, in the FPI Centre for Continuous Professional Development, with event planning, implementing and evaluating. Her duties involve assisting with setting up venues, registrations and logistics at all events. Over and above this, she assists with compiling and communicating reports to committee members and speakers based on the feedback forms filled out by delegates. Jevin Tod Appointed as: marketing manager Tod is responsible for developing, establishing and maintaining marketing strategies to meet FPI’s strategic objectives, as well as the effective management of the marketing, branding, advertising, events and conventions, and promotional activities of the organisation.

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news international

USA Lloyd’s to launch new cyber risk code for 2015 With the introduction of a new set of cyber risk codes and the benefit of a re-run cyber-scenario data-collection exercise, Lloyd’s has big plans for its cyber segment as of 1 January 2015. Lloyd’s performance management director, Tom Bolt, said companies must look to inspire innovation in the fast-growing cyber class of business and warned that that exposure and accumulation must be properly managed. Bolt lauded cyber classes as an area where the Lloyd’s market was showing real strength and innovation.

has launched a new programme that will give US hosts up to US$1 million in liability cover in case of guests sustaining serious injury within the host’s property. While a US$1 million host guarantee already exists, this product will protect both host and guest. The new policy aims to help improve expressed concerns of the safety of hosting short-term guests and is ‘actively working on ways to expand it internationally’.

Airbnb expands liability product

Obama admin caught out over healthcare numbers

Airbnb, a website for people to rent out lodging,

Republican investigators have accused the

Obama administration of intentionally trying to botch numbers in order to make the health rollout seem more successful than it actually was. This was after the government reform committee revealed that the number of people that have signed up for healthcare under the Affordable Care Act (ACA) has been overestimated by 400 000. “The mistake we made is unacceptable,” said health and human services secretary, Sylvia Burwell on Twitter. Spokesman for the Obama administration, Aaron Albright, said, “Those consumers have separate dental coverage in addition to a medical plan, and were doublecounted by mistake.”

AUSTRALIA Allianz gets northern territory at ‘a good price’

Local analysts and commentators said that the northern territory of Australia got ‘a good price’ for the sale of Territory Insurance Office (TIO) to Allianz Australia. The sale price of A$236 million for the insurance arm, plus the A$48 million picked up from the sale of the banking arm to People’s Choice, represented about 10 times annual earnings.

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EUROPE Major interest for insurance units of Turkey’s Halkbank According to Reuters, more than a dozen major European insurance groups have shown a significant interest in the acquisition of Halk Hayat Emeklilik and Halk Sigorta, the pension and insurance units of Turkish Halkbank. These insurance groups include Ageas, Aviva, Zurich, Japan’s Meiji Yasuda, Nippon Life and Sompo Japan Insurance. Malaysia’s Khazanah and USlisted Ace Group have also expressed interest. In the first half of 2014, Halk Sigorta generated a total volume of gross written premiums of €103 million), while Halk Emeklilik reported €33 million. Swiss Re CEO says its all about ‘covering the gaps’ Reinsurers should worry less about excess capital and more about covering the gaps. This was according to Swiss Re CEO Michel Liès who delivered the keynote speech at the recent

AM Best Conference for reinsurers. Liès pulled back from the reinsurance sector’s earlier line that ‘new capital’ was ‘hot money’ that would disappear at the first sign of trouble. He said that “it remains to be seen” what would happen if either yields improved elsewhere or if there were a major catastrophic event, but he did not predict that the new capital would go away. Claims growth rates set to rise Swiss Re’s Global Economic and Re/Insurance Outlook predict that the rate of claims growth is expected to rise in coming years. The claims growth is expected to increase across all geographies, with Canada and Germany historically high correlations of claims growth to wage and CPI inflation, according to Swiss Re’s Roman Lechner. The UK and France have historically shown low growth of claims in relation to GDP. In the life sector, profits for

life assurers had been improving, with an outperformance in the UK being based on life assurers in the UK generally having a higher percentage of their assets in equities. Ingosstrakh ratings removed from CreditWatch list Standard & Poor removed the ratings of Russian insurer Ingosstrakh Insurance Company from the CreditWatch list (ratings under revision), where S&P had placed them with negative implications. The outlook is negative. In the report, S&P noted that the negative rating outlook reflects Russia’s sovereign outlook, as well as the incertitude regarding Ingosstrakh’s ability to improve its operating performance, liquidity and capital adequacy in the difficult economic environment and the current market conditions in Russia.

ASIA Mixed reports for BJP in insurance battle

Indian opposition Congress Party encouraged the BJP-led coalition on the chance of the Insurance Bill being passed. The Chandan Mitra-led Indian select committee that was mandated to review the proposed Insurance Bill before submission to the Rajya Sabha (Upper House) during the winter session of parliament is reported to have asked for a two-week postponement of the deadline by which it has to submit its report. The committee was originally meant to submit its report by the first Friday after the commencement of the Winter Session of parliament, which was 24 November 2014. A two-week postponement put the deadline back to 12 December.

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events Cold as ice Mutual and Federal’s executive committee team hands over a cheque of R50 000 to the J9 Foundation – headed up by MND (Motor Neuron Disease)diagnosed Springbok legend, Joost van der Westhuizen. The team completed the Ice Bucket Challenge on 19 November 2014. From L to R: Mark Weston, Michelé Schliesser, Jaco van der Sandt, Raimund Snyders and Nangula Kauluma.

Centriq Tour partners with IISA to help fund frail care facility The Centriq Tour de Conference, held in July this year has generated R14 500 in donations for a charity sponsored by the organisations participating in the event. This past September Centriq, in collaboration with the Insurance Institute of South Africa (IISA), the South African Insurance Association (SAIA), and the Financial Intermediaries Association of South Africa (FIA), handed a cheque for funds raised during the 2014 Insurance Conference at Sun City, to the Logwood Village. The tour’s contribution was just a part of the overall R110 000 donation to Logwood Village, raised by delegates and companies attending and supporting the conference. The facility, dedicated to providing care and facilities to adults with intellectual disabilities, was chosen by IISA as their nominated charity for 2014 and 2015. The Centriq Tour de Conference was the brainchild of Gareth Beaver, Centriq’s CEO, whose mission has always been to do things ‘greener’, as well as to aid the conference in reducing its carbon footprint.

Hollard hosts specialist liability session The Hollard Specialist Liability team hosted a valuable information sharing session on the intricacies of liability cover at the Music Room at Hollard’s Villa Arcadia in Parktown, Johannesburg during November last year. The company invited a few recognised experts to provide their insights. Kicking off the session was Hollard’s head of liability, Warwick Goldie, who opened with the fact that director and officer (D&O) liability cover has become an absolute necessity in today’s business environment.

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“No company can afford to be without D&O liability cover in this day and age,” he reiterated. Also present were Lee Astfalck of Livingstone Crichton attorneys and Lisa Swaine of Webber Wentzel, who spoke on D&O risks and professional indemnity respectively. Astfalck echoed Warwick’s sentiment by stating, “There has been increasing scrutiny on directors and their activities over recent years.” Finally, Terry Ward of Crawford and Company provided a loss adjustor’s point of view on how to manage claims effectively.

ADVERTORIAL

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IICoGH annual Gala Dinner awards the industry’s finest Dominic Uys & Sarah Bassett

he Insurance Institute of the Cape of Good Hope (IICoGH) welcomed 500 of the industry’s finest to its annual Gala Dinner at the beautiful waterfront venue, The Lookout, in Granger Bay, Cape Town in November.

Master of ceremonies for the evening, comedian Kagiso Mokgadi, welcomed guests and notable VIPs including Insurance Institute of Gauteng president Justin Naylor, CEO of IISA David Harpur, and former IIKZN president Lynda Brown. IICoGH president, Brent Lyall, reminded guests to be proud of the role insurance plays in keeping the country flourishing, and urged those already established to prioritise and share their secrets with younger entrants and inspire a new generation of professionals. The IICoGH also took the time to honour exceptional professionals in the industry. Long Service Awards were handed to Andrew Miles from Lion of Africa Insurance, Gary Luyt from PSG, the FIA’s Johan

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Heymans, Kenny Davids of Santam Insurance, Zurich Financial Services Agent Larry Marcus, MUA Insurance Acceptances Leslene Swart, Mark Strybis from One and Bernadette Bruce from G van Cuyck Insurance Consultants. During the course of the evening the award for Most Active Council Member was also given to Sandra Snowball of Fulcrum. Three breathtaking original paintings from artist Chaz Williams were auctioned for charity, raising a combined total of R187 500. Event sponsors included Santam (which also kept guests ‘covered’ when it rained with handy yellow umbrellas!), Sasria, AIG, Absa, Infiniti, Barclays, Zurich, Global Choices, Hollard, Mutual and Federal and, of course, RISKSA as the official media sponsors. Congratulations to the whole IICoGH team on another spectacular Gala Dinner.

The nightâ&#x20AC;&#x2122;s winners: longstanding service winners honoured at the IICoGH Gala Dinner

Sandra Snowball receives the Most Active Council award from IICoGH president, Brent Lyall.

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IIG Dinner honours the industry

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Dominic Uys

IIG President, Justin Naylor, with the recent graduates of the Class of 2014 educational programme.

n November, the Insurance Institute of Gauteng (IIG) hosted their 74th Annual Dinner at the Sandton Convention Centre in Johannesburg in proudly South African style. Accommodating around 1700 guests, the IIG states that this year’s Dinner was the biggest gathering for the institute so far. Proceedings were kicked off by singer, Ed Jordan, who played master of ceremonies for the evening, and notable guests included former IIG president, Bob Cox, who recently celebrated his 90th birthday. In his speech, IIG president, Justin Naylor, thanked his employer, Hollard, as well as the industry for their support and light-heartedly

showed photo slideshows to sum up the activities for the year, the IIG Council, as well as the ‘Class of 2014’ educational programme. Certificates to honour those with 40+ years of service to the industry were handed out, deputy president Zuriel Naiker presented the loyalty toast and Mango Groove’s Claire Johnston lead attendees in singing the National Anthem. African face-painting, fine bead-work, painted vehicle tyres and cleverly branded shacks complimented the fun-filled South African theme of the evening. The IIG reports that it used approximately 85 per cent townshipbased businesses for décor and buskers.

The table décor, made up of fresh fruit and vegetables, was donated to Oasis Haven, Frederic Place Old Age Home and Ry-MaIn-Quadriplegic Centre after the event. The evening was closed out by Mango Groove, who had everyone on the dance floor and singing along with the band’s iconic songs. The event sponsors and co-sponsors included ACE, African Reinsurance Corporation, AIG, Allianz, Aon, Cardinal, Genasys, Global Choices, Hollard, InsureGroup, Lireas, Marsh, Mutual and Federal, One, PG Glass, Santam, Sasria, SHA, Swiss Re, Tracker and Zurich.

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IIKZN president, Nicolette Clements and the IIKZN council of 2014.

IIKZN Gala Dinner

celebrates past present and future

he Insurance Institute of KwaZulu Natal (IIKZN) hosted its prestigious IIKZN Gala Dinner 2014 at Sibaya Casino’s Imbizo Conference Centre under the theme, ‘Yesterday, Today and Tomorrow’. The evening’s main sponsors, Santam, Renew-It and Hollard were each dedicated to one of the three entertainment slots. The evening’s unforgettable performances were all from young, up and coming performers, including Marianthe Panas(14) and Rheece Van Schalkwyk(13), and the Survivors dance group. Award recipients for the event included Bonita Schoeman from Aon Newcastle, who was presented with the award for Most Meritorious Programme in Short-Term Insurance, Kuvan Kistan from H.W. Brokers

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Dominic Uys

who received the award for Most Meritorious Programme in Advanced Insurance, and Keith Bester from Scottfin who was awarded Candidate of the Year. “Whatever we do today, both collectively and individually, it is with the aim to be the heritage of a future to be proud of,” IIKZN president, Nicolette Clements told RISKSA. “There is no other industry that comes together in unison to celebrate achievements. To the youth, the up and coming new generation of brokers and insurers, let the camaraderie in this room motivate you and make you feel proud to belong within this amazing industry of insurance,” concluded Karusha Naicker of PG Glass in her toast to the delegates.

Janine Joubert, executive head of business risk for Vodacom was named IRMSA Risk Manager of the Year.

Nicolene Gerritsen , IRMSA Up and Coming Risk Mana ger of the Year.

IRMSA reflects on the year Dominic Uys

he Institute of Risk Management South Africa’s (IRMSA) Annual Gala Dinner and Awards Ceremony at Gallagher Estate in Midrand in November hosted around 300 industry professionals in the insurance and governance risk management sectors. Entertainer, Harry Sideropoulos welcomed guests under the theme of the Gala, ‘Behind The Mask: Revealing the Excellence of Risk’. In her opening speech, IRMSA president, Sheralee Morland, thanked the IRMSA executive committee for its dedication to the profession and added that the Institute would be producing its first risk report in next year. “We are nearing the end of an incredible year. A year that served up risk events that have challenged, horrified and caused significant financial harm for risk officers at

global financial institutions. Tonight we are gathered to acknowledge the achievements of some of our colleagues who have stood out above the crowd, and initiatives that have made an extraordinary contribution in the risk space,” Morland said. “I am so pleased to end this year and declare the party officially started, safely in the know that IRMSA is responding to this world of risk and that it is an institute that has become well-placed in its timely provision of an offering that allows members to be abreast of developments, best practices and response strategies,” she added. Risk Manager of the Year and Up and Coming Risk Manager of the Year awards were handed to Janine Joubert, executive head of business risk for Vodacom, and risk specialist at Sasol, Nicolene Gerritsen,

respectively. Runners up in these categories were Reshma Ramkumar, chief risk officer for Impala Platinum and Renelle Garzouzie of Nedbank. Awards for various industry initiatives were also presented to: Vodacom, in the category of communication and technology; Aurecon, in consulting services; AngloGold Ashanti, in energy, utilities and mining; Nedbank, in financial services; the Department of Arts and Culture, in government and public services; and Transnet Freight Rail, in transportation and logistics. Governance risk and compliance software provider, BarnOwl, was the main sponsor for the event. Other sponsors included American International Group, Cura Software Solutions, Isometrix Software, Participate and Marsh.

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Camera,

aCtion! Action camera buyers guide Anton Pretorius

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It’s one thing to entertain dinner guests with tales of adrenaline-fuelled adventures or trans-African expeditions. It’s a whole other story providing visual proof. In today’s modern age of action cameras, anyone with a passion for the outdoors (mountaineers, cyclists, bungee-jumpers or 4x4-enthusiasts) can be their own cameraman, especially when you’re dangling from the edge of a cliff with hardly a hand to spare. What’s more, some action-cameras can even be applied as effective business tools.

ike all things electronic, video cameras (or action sports cameras) have become smaller, lighter and more affordable. Today, you can purchase a reasonablypriced, user-friendly video camera that can mount unobtrusively onto your vehicle or safety helmet and record high-definition video, sound and still images with the mere flick of a dial. With the demand for first-person adventure footage rising, the market for action cameras has grown significantly. Several new players have followed in the footsteps of industry leader GoPro, but each new player offers something

GoPro Hero 3 (Black Edition)

new in the way of high-definition visuals and footage features. With the power of social media, you can now easily share your off-road adventures with the rest of the world. Some action cameras even feature apps that allow you to record remotely via a WI-FI function. During our recent Cape to Dar es Salaam Expedition with sister magazine, Land Rover AFRICA, we got familiar with a host of different action cameras and were duly surprised by how the market has evolved. We managed to narrow down the top offerings based on features, performance and price.

rating:

PricE:

r5 800 (RRP)

GoPro, the undisputed leader in action cameras, has gone from a bootstrapped R&D product born in Nick Woodman’s garage to a US$ 2.5 billion company. Nick saw potential for the product when he identified the problem of capturing action sports like surfing, snowboarding and skateboarding up close. Recently, GoPro shares have dropped by 16 percent after reports linked the device to injuries sustained by Formula One star Michael Schumacher’s ski accident last year. While the action camera giant has had some fierce competition for several years already, this situation, albeit unfortunate, has certainly levelled the playing field in the market. However, GoPro’s Hero 3 Black Edition continues the tradition of delivering crisp, full highdefinition video quality, advanced image processing and sturdy ergonomics that has made them the world’s best-selling camera company. The Hero 3 Black Edition is 20 percent smaller and lighter than its predecessor, delivering improved image quality and a host of new features. The SuperView function captures a wide angle perspective, while Auto Low Light mode intelligently adjusts frame rate for low-light conditions. Coupled with a 30 percent longer battery life, four-times faster WI-FI, a sharper lens and compatibility with all GoPro mounts and accessories, the Hero 3 Black definitely lives up to the standards of the rest of the GoPro stable. Editor’s vErdict: “The GoPro Hero 3 delivered some fantastic footage during our Cape to Dar Expedition in July. Whether it was on a pole, filming scenes from a moving vehicle, mounting it onto the vehicle and traversing some rough terrain or filming underwater in Lake Malawi, the GoPro Hero was stable and delivered exceptional footage quality. It’s hard to fault the Hero 3, but perhaps a small live view screen at the back would come in handy to make sure of your angles.” 

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Garmin VIRB Elite

rating:

PricE:

r4 800 (RRP)

Cansonic UDV-888 The Garmin VIRB Elite proved to be a true dark horse on our expedition. Renowned for making some pretty good GPS’s, we never expected Garmin to produce such a tough and functional action camera. Not only is it visually attractive, the functionality of the VIRB is first-class. Made to withstand any adventure, the VIRB Elite will go anywhere and deliver highdefinition quality footage. Without any additional housing, the VIRB can survive water submersion for up to 30 minutes. It records 1080p wide-angle video and 16 mega-pixel still shots without interrupting video recording. It features a 1.4-inch colour display and will record three hours of full 1080p (45 minutes more than GoPro’s 2.25-hour 720p offering). While it might be slightly pricier, it does offer more bang for your buck with built-in WI-FI and GPS tracking. Its rugged outer layer is designed to survive bumps, drops and hits in the air. Editor’s vErdict: “The Garmin VIRB Elite really impressed our expedition team with it quality footage, stability and host of built-in features. With the GoPro’s reputation, the Hero 3 was always going to be our first choice going into this expedition. But after seeing what the VIRB was capable of, it soon became our primary camera, especially for those long drives in the vehicle. It was exceptionally stable, and the quality of the footage was likened to watching a 3D movie. It even spent some time underwater in the mighty Zambezi River when our boat flipped in the rapids during a river rafting trip. But it captured even that footage perfectly and came out unscathed. The only drawback would be the lack of proper mounts. While it has adjustable arm mounts, it is held down with a sticky mount.”

rating:

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r4 000 (RRP)

While the Cansonic UltraDV-888 action camera is being classified as a highly versatile piece of video recording tech, it’s not exactly knocking the GoPro off its throne atop the actioncam kingdom. However, it remains a pretty decent unit with functional features and a reasonable price tag. Even with a 1.5-inch LCD screen at the back, the tiny UltraDV measures only 58 mm high. In most situations, you’ll be using the water-resistant casing, unless you remove the GPS unit from its home above the lens protrusion and connect the suction cup adaptor Cansonic to the camera. This allows the Cansonic to be mounted onto a windshield or any other piece of glass. The GPS unit adds location and speed data (accelerometer) to video record on the road, essentially working like a dashboard cam. Insurers would love this information, and when you’re a broker on the road, logging your travels has just been made easier. Resolution is also pretty good, recording 1 080p on a 140 degree A+ lens, although not as crisp and high-definition as the VIRB and Hero3. While it lacks somewhat in terms of design, user-friendliness and durability, the whole UDV-888 set-up is less than the cost of an average GoPro, minus accessories. Editor’s vErdict: “The Cansonic didn’t impress us in terms of resolution and wasn’t all that user-friendly. While this camera is not about to make GoPro worry about their bottom line, it’s more than capable of holding its own. I feel it’s more useful being permanently installed in a car than mounting it on your head for a bungee. But that’s hardly a negative. It’s actually pleasant having a camera that provides full control, keeping an eye on roadblocks and other drivers, especially when it doesn’t cost an arm and a leg.”

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AEE MagiCam S70

rating:

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r4 995 (RRP)

Polaroid XS100

rating:

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r2 000 (RRP)

Here’s another camera that plays in the GoPro space. Similarly designed, the AEE MagiCam S70 is a fierce rival, and is equipped with several features that some of the older GoPros don’t possess. The AEE MagiCam S70 is a mountable action camera, capable of shooting quality high definition video. It comes complete with an underwater housing that allows it to be immersed in water down to a depth of 100 m. Its built-in WI-FI allows the S70 to connect to a WI-FI enabled smartphone or tablet, for use with the AEE app or WI-FI remote. The AEE MagiCam S70 special edition action camera with waterproof housing captures Full HD video at up to 1080p at 60 frames per second and can shoot up to 16 megapixel JPEG still photos. It also features a slow-motion mode that captures HD 720p video at 120 frames per second. Built-in Wi-Fi allows the camera to be controlled from an Android or iOS mobile device and footage can even be edited remotely. Editor’s vErdict: “The MagiCam S70 is very comparable with the GoPro for nearly a grand less. The shooting resolution is very similar to the Hero 3, and while the GoPro’s imaging is a bit more washed-out, it is slightly sharper. The S70 is well saturated, but struggles slightly with the glare of the lights. The S70 has a great retro-style with a sturdy mount (it definitely looks the part), but is also very bulky and heavy. One can definitely feel its weight when mounted onto your helmet and can make you feel slightly top-heavy. But for the price, the MagiCam S70 puts up a pretty good fight.”

Polaroid’s ‘high-impact and shock-proof’ XS100 ticks most of the boxes in terms of what you require from an action-cam. Size matters and the smaller, the better. Don’t be fooled by its long shape, the XS100 is lightweight (weighing in at 136 g) making it very portable and easy to handle. What is great about the XS100 is that it does not need any outer shell (like the GoPro or MagiCam), it’s already made rugged enough. It records a full resolution video and a smaller file suitable for immediate sharing, it is waterproof down to 10 m and shoots video in 720p, 960p, and full HD 1080p and 16 mega-pixel stills. A variety of rotatable mounts are included which allows you to capture footage from any awkward angle. The XS100 lacks somewhat in image quality compared to the other players on the market. We found the images to be less crisp and clean compared to Hero3 and VIRB (and even the MagiCam). The XS100 features built-in accelerometer that automatically adjusts the lens to capture proper footage, and a battery life rating of three-hours which is pretty good. However, unlike most of the other action-cams, the XS100 does not include any Wi-Fi functionality for connecting to smartphones or tablets. Editor’s vErdict: “With a relatively reasonable price tag, the XS100 is a solid choice if you’re looking for a tough action camera. However, it’s somewhat outdated. With no Wi-Fi functionality or live view LCD screen, one will ask the question if it isn’t worth paying that extra couple of rands more? It takes a while to get the feel for the buttons and functions, and if you want to change things on the fly, you’ll need to bring a laptop to adjust.”

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Ford Tangerine Scream

Focus

The original Ford Focus, and specifically the sporty ST170 launched in 2002, set a certain performance standard. RISKSA recently had the opportunity to drive the current Focus ST…

Luka Vracar

angerine Scream. The colour Ford released specifically for the third generation ST, much like they did with the Electric Orange for the second generation, is not just loud, it is a roaring cacophony. We were sceptical of the eyesearing brightness, and even more so when we parked it outside the office on a grey Cape Town morning.

model. They claim a 0-100 km/h time of 6.5 seconds and a top speed of the usual 250 km/h, which we have no doubt the yellow wonder can do. While it may be the most powerful ST to date, the secret is how the car performs on the roads, specifically the bendy bits.

In this incarnation, Ford has opted for their Eco-Boost technology. They have downsized the engine from 2.5 litres to 2.0 litres, but rest assured, the turbocharger remains. Together, the powerplant is more dynamic than ever, producing 184kW and 360Nm of torque, making the ST top in the segment – the current 2.0 litre Golf GTI produces only 163kW. That is a lot of torque, another feature across all recent Fords, and it is torque that pushes you back into your seat, and it is torque that you want. With the downgrade of displacement, the Eco-Boost engine also significantly decreases fuel consumption and harmful emissions by up to 20 per cent.

The ST needs a loud colour, because it is a loud car. It roars to life in seconds, and you hear that rowdy engine note fill the cabin through some clever sound induction by Ford, who have installed a sound symposer which feeds the noise from the engine bay into the cabin. Even though it is a cylinder down on its predecessor and the note is not as throaty, the ST must still be one of the best sounding hatchbacks on the market.

Ford says that the numbers are a 10 per cent increase in performance over the previous

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Drive

Acceleration is surprising, and it feels much faster than its 0-100 km/h time indicates. Soon you realise how smooth the car is, switching between gears effortlessly with what seems to be endless torque from low down on the rev range. But the mid range is where the car shines as bright as its paintjob. Between

3000 and 5000 RPM the power pushes you back into the seats, before topping out at 5500. But more power is just a shift away. When you hit the turns, the ST’s allindependent suspension provides absolute confidence. You never feel like the front might go off; Ford’s new electronic Sport Steering System is quick and responsive and you would not lament the absence of the fifth cylinder as the wheel twitches in your hands under acceleration. Put your foot down hard on the throttle, and you can expect torque-steer in such a powerful front-wheel drive car, but it certainly put a smile on our face. Ford’s electronic torquevectoring system might not be as effective in controlling the torque-steer as a traditional slip-differential would, but you get used to it quickly. The power goes to the road well, and the ESP only kicks in if you really want it to. As you would expect in a hatchback, hot or not, when you slow down it is comfortable. Perhaps then, only the engine note reminds you that you are in a sporty Ford. We found this model had a lot more balance between sportiness and comfort than the previous ST.

Power: 184kW Torque: 360Nm 0-100km: 6.5 seconds ToP SPeed: 250km/h

Styling When the first Focus came out its styling set a trend for all hatchbacks. Particularly the rear lights mounted on the pillars of the car and the diamond-shaped headlights, both of which became common on the roads amongst the Fordâ&#x20AC;&#x2122;s counterparts. The second generation Focus offered much of the same, except it was more aggressive, more angular and muscular. The new Focus continues in the vein of its predecessor. You know what you are getting when you see it: something of a hooligan. It is not pretty, and perhaps it might not age as well as the first-generation model, but it is certainly a hot hatch to rival the, admittedly, more refined Golf GTI. There are two trim levels available. While there is no difference in performance, the higher spec ST3 is R44 000 more expensive than the standard ST1 option, but for that money you get very comfortable: body-hugging leather Recaro seats, climate control, bi-xenon headlights as well as day-time running lights, and keyless entry.

Verdict We had a blast in the ST. Much like the Eco-Sport

crossover we drove recently, the ST manages to keep us entertained from the set off. Owing to its energetic mid range and superb levels of adhesion on the tarmac, it is easier to drive and more fun than some of the three-quarter of a million sport coupes during the daily commute. And with the five-door configuration and

smaller engine, it is more practical too. The Focus ST is a great car of exceptional value. The bang for your buck is about as loud as the Tangerine Scream itself. Pictures courtesy Ford Media Centre.

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Broker’s

wife

CMY

Dear luvelies

t’s been such a long time since we have been able to share a sneaky word or two! I must say that it is great to be back working with the lovely team at RiskSA. Since we last spoke, Riccardo (such an Italian stallion) and Michael (the very important managing director) have gotten married – not to each other of course (although, when it took Michael nearly 5 years to propose to his bride Michelle, I did begin to wonder). Rumours of me having gone to ground after being under the surgeon’s knife are, of course, hugely exaggerated. For a start, with near perfect looks such as mine, surgery is not a necessity. And, having a little laser peel done hardly qualifies as ‘surgery’. If you don’t believe me, just ask the receptionist at Dr Botox from the Melrose Aesthetics Clinic. In chatting to her, she may also share with you how the two-forone special worked for the MD of a certain medical aid fund, who is a monthly visitor.

P S S S T ... 118 8 4

My absence was, in fact, as a result of Jonathan Dixon from the FSB. A delicious, sweet boy, but it wasn’t his gym-fit body that kept me busy but rather his directives and missives and RDRs, KIs and goodness-knows what else. My darling husband was so busy that he insisted I come to work at the brokerage. Have you ever… me Working?! Well, thankfully, that has now come to an end. He signed many of the inhabitants in Steyn City so he has a new admin team and I get to be back doing what I do best – attending functions by his side, meeting all of you and sharing some of your fabulous stories. Over the next year or so I promise to keep you informed about fashion, who is doing what to whom (in the boardroom of course, not the bedroom – mind you, for some, that is the same thing) and generally ensuring that we don’t forget the spice that makes up the interesting insurance industry in South Africa. To kick off the year, a few tips for the ladies in the industry: wearing white, tight-fighting dresses to black-tie functions are generally

not a good idea. And, after the excesses of the festive season, it really, really is not a good idea. You can, however, encourage your men to wear tight numbers (red, purple, yellow – it doesn’t matter) when they run (well, one or two run, most just walk and have fun) at the annual DAREdevil Run on 30 January. In fact, the tighter, the better as I like to check out what talent lies beneath. Size, of course, doesn’t matter, but it always helps to know whether you are working with a gherkin or a cucumber in the salad, as it were.

For the men, a tip on size as well. At the end of January my husband (and most of his brandy-drinking, Sarel van der Merwe wannabe buddies) will be driving their cars at the Zwartkops Racetrack. And, as any clever woman knows, a man’s car is often in direct proportion to his abilities. Here’s to the start of what is sure to be an interesting year ahead! Have a lovely month and see you at the industry functions. Please come say hello.

The Broker’s wife is a fictional (we think) account of the social happenings in our industry.

INSU INSU

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