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contents JUNE 2014


Engaging the continent With African markets increasingly considered the land of opportunity, business expansion is moving in from every corner, with South Africa no exception.


Accessing Africa Expansion into Africa is at the heart of many South African companies’ growth strategies, and the continent is bursting with opportunity.

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short term

28 / Driving key in HCV 34 / Zooming in on drivers 38 / Hazards of the waiting game 46 / Mental in a rental 52 /The name’s Bond, cat Bond



56 |



56 / Funding care when medical aid falls short

58 |

long term


58 / Fixed property vs unit trusts 64 / Holy smoke – the impact of e-cigarettes on life insurance 70 / The benefit of income 76 / Premium patterns – help your client make the right choice

78 | managing risk


78 / It's your mess... 82 / Top 10 insurance risks for marine cargo 84 / Salvaging shipwrecks in the 21st century

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132 |



138 |



90 / ILAB lives on

132 / Coining it

138 / Airport navigation

94 / CFOs face increased liability risk

136 / The Range Rover Evoque Pure

142 / High alert – Health precautions for first-time African travellers

104 / Old medium, new technique 110 / The perfect toast 108 / Boost business with Facebook 112 / News 120 / Events 124 / PSG Konsult Conference 2014

Renasa’s highly personal service is underpinned by advanced claims and underwriting technology. We give our brokers state of the art tools that provide a sustainable competitive advantage without interfering with 8

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their existing processes and systems, or compromising their independence. Want the best of both worlds? Contact Renasa today on 0860-RENASA or visit 9

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Dearreader The elections have come and gone. Our politicians have made the usual promises and the electorate has had their say. Again. It is with interest that I have been reading press reports on the shenanigans going on deep inside the DA. For a change, it is Madame Zille who is crying foul and accusing our press of misquoting and taking statements out of context. If there was ever any doubt that there are still newspapers that are free and fair operating in this country, then the ability of those newspapers to piss off both the ANC and the DA in equal part must mean they continue to exhibit exquisite balance in their reporting. One might be forgiven for thinking our continent is a basket case, what with the mass kidnapping of schoolgirls in Nigeria, bombing of innocent civilians in Kenya and, of course, corruption on a grand scale nearly everywhere else. It was inspiring to stand in the queue on voting day and listen to the good-natured banter between all races, certainly at the polling station I voted at, and I was left with an overriding sense that if left to our own devices, the ordinary men and women of this land have a real will to fix things, and would do a better job of healing ourselves than the politicians tasked with our nation’s future. It is certainly not all doom and gloom. In conversations with readers and partners aligned to our sister publications, Land Rover AFRICA and RISKAFRICA, there is definite optimism and excitement for our future. In fact, in a little over a month, I leave on an epic trip through sub-Saharan Africa with my Land Rover AFRICA crew. Travelling with MasterChef judge Reuben Riffel and a film crew, we’ll be highlighting the positive impact tourism is having on the region; and I’ll be collaborating on a unique cookbook with Reuben and local chefs between Cape Town and Dar es Salaam, which I’m particularly excited about. In this issue of RISKSA, we take a gander at our continent, particularly with a view to the logistics of doing business here, moving goods, investing and the importance of supply chain integrity. It’s high time that we realise that we too stand on African soil and our industry is well poised to make a significant impact on Africa’s future. Enjoy the read.



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between business practices and relationship building, and nepotism and corruption can be vague and make for extremely difficult scenarios. “Corruption will return to bite you in the butt sooner or later. You are digging your own grave if you submit to it. We do not advocate corrupt business practices,” says Runge. Foreigners are often viewed as walking cash machines, and will be targeted for bribes. One should be prepared to deal with this. For all the risks and opportunities on the continent, Runge highlights that there are also a fair number of fallacies doing the rounds. One must remain alert and aware while travelling in Africa, and avoid potentially dangerous situations. “The impression that locals are wandering around with sticks, shooting at bodyguards and waiting to kidnap businessmen is greatly exaggerated. There have been instances where a company has scaled down operations for economic reasons, but blamed this on safety reasons, which is unwarranted,” adds Runge. Of course, visitors should play it safe, and make the most of expat services on offer, for example Medivac and International SOS, which have proven very successful. This also highlights the importance of conducting health impact assessments, particularly if employees will be working on remote sites. If working in an area where meningitis is a threat, there should be a corporate policy in place so that everyone knows how to deal with it. One mine operator in the copperbelt has made it mandatory for workers to have a breathalyser test before they start work – no matter what time of day their shift starts. Nobody is allowed on site without passing the breathalyser test. These are the kinds of problems that one may not plan for but can seriously affect operations.

Hotspots The activity in Africa is linked to resources, and while there is still a lot of focus on raw materials, the need for energy has added a new dimension to the exploration on the continent. South Africa does not possess a wealth of oil and gas expertise, which is why other nationalities are ahead of the game in this regard. South African companies would do well to provide secondary supplies, equipment and services. The Tete province in Mozambique is teeming with activity as coal prospecting, mine development, transport and export takes hold. The Changara area in the Zambezi Valley is also seeing more action. The Beira railway line needs about $200 million for short-term upgrades; at the moment the capacity is about four million tons a year, but this needs to be increased to transport about 20 million tons of coal a year.

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There has also been significant natural gas finds in northern Mozambique, which extend along the Tanzanian coastline. There has been some discussion about a natural gas plant on the border of the two countries, which could be beneficial; however, the Tanzanian Government has indicated that it would prefer a plant of its own. The Kenyan coast and the coast of Madagascar are also experiencing an increase in prospectors looking for natural gas. Development of these resources will require investment into natural gas infrastructure. The Mtwara gas pipeline is another project on the radar, which will transport gas to Dar es Salaam, where it will be used for power generation rather than being exported. The gas finds in Mozambique mean that the northern city of Pemba has seen a lot of recent growth. Property companies have started selling industrial land as this could be where a gas plant will be located. There is a dire need for basic services in the region such as accommodation and catering. Botswana is also seeing its share of the action with continued development of the Mmamabula coal complex by Jindal Africa. There is prospecting for natural gas and coalbed methane but the issue of how to get these resources out of the landlocked country has long been debated. The Namibian port at Walvis Bay has already allocated space for the export of Botswana coal, but the railway from Botswana through to Walvis Bay is yet to be constructed. The other option is to construct a railway east; however, crossing borders through South Africa, Swaziland and Mozambique has proven problematic. Angola’s oil and gas industry continues to thrive, while inland, in Zambia, the copperbelt is the backbone of the economies and copper accounts for over 64 per cent of Zambia’s exports, which are mainly destined for China and South Africa. In January 2013, the Zambia Environmental Management Agency (ZEMA) approved 27 mining and exploration licences, showing that there is no likely slowdown anticipated. Construction of a $1.1 billion railway line in Zambia’s copper belt, from Solwezi to Kalumbila, a joint venture between North West Rail and JSE-listed logistics company Grindrod, will start in 2014. Cameroon and Equatorial Guinea are seeing increased prospecting for iron ore, while in Sierra Leone, the Tonkolili iron ore mine is exporting some 15 million tons of iron ore a year along a 270-kilometre railway line to Pepel port. Grindrod is supplying the locomotives. 

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continent the

Sarah Bassett

With African markets increasingly considered the land of opportunity, business expansion is moving in from every corner, with South Africa no exception. The message on the lips of every adviser is, as many have learnt the hard way, Africa is not one homogenous country and businesses ignore the dynamics of individual markets at their peril. RISKSA takes a closer look at market trends and where the branding and marketing opportunities lie.


eople are not statistics, emphasises Joseph Kamiri, head of marketing and distribution at UAP Insurance, Kenya, suggesting that many of the large South African players moving into East Africa are missing certain dynamics of the region’s markets. “Within five years, we will see these companies either restructure or exit the market entirely.” While this may not be true of every expanding South African business, it is certainly something that many global businesses have struggled with in the past. A recent example was that of an advertising campaign in Africa from Indian mobile phone company, Bharti Airtel, which fell flat. Though the business is active in 17 African countries, the advert used images of the savanna, actors from South Africa and coins when many Africans use only paper money, limiting the advert’s appeal in many parts of the continent. “This is where multinational companies go wrong. They have their global brand positioning and they want to cut and paste,” says Bharat Thakrar, head of Nairobi-based African marketing services agency Scangroup. “They

think everybody looks the same; but merely having black models is no longer enough. It’s like putting a Thai, a Chinese and an Indian in the same Asian ad. People recognise themselves,” he adds. According to Terry Behan, CEO of experience branding consultants VWV’s EMEA division and author of Connect with the Continent, the gap between how the African market is represented in the global press and the realities on the ground is vast. “The level of misinformation and hype touted at conferences, and both local and global news is considerable. The result is that your average investor, entrepreneur and brand builder are left somewhat confused when trying to comprehend the opportunities and challenges presented across the key markets on the continent.”

Middle-class mania The World Bank, along with some of the most respected global consulting firms, have estimated Africa’s middle class to be in the region of 300 million people. This is a considerable figure considering that the USA has a total population of 311 million, notes

Behan, suggesting the statistic is misleading. “When estimating the size of the middle class in sub-Saharan Africa, economists have used the lowest possible relative measure; a $2-a-day criteria. By comparison, in France or Germany if you earn less than $40 a day, you are beneath the poverty line.” However, says Behan, the rise of the middle class across the continent is significant and should not be undervalued. “More sober commentators put middle-class numbers at 120 million, based on an income of between $15 and $20 a day.”

Take advantage of the trends “In the developed world, we tend to create vanilla brands that skim across market segments and groupings. Africa is different. Broadly generic campaigns have been shown to be less effective than tailor-made ones. Businesses need to understand the different market segments, appreciate the differences and create regional campaigns in context using local language and local models. When


you consider, for example, that Nigeria has 510 living languages and 250 distinct ethnic groups, the enormity of the task is clear, but experience shows that the result is always worth the effort,” says Sean McCoy, director of strategic branding consult antsy Harwood Kirsten Leigh McCoy (HKLM).

“The impact of these ventures on brand equity and shareholder value is considerable and new financial reporting guidelines recommend that corporations value and report on their intangible assets, meaning that you can expect branded social causes to start appearing as line items on balance sheets the world over.”

“It is an environment that favours the bold; an environment that requires a pioneering approach and a willingness to do things differently. It is a territory that requires some new brand thinking,” he continues.

Edutainment, category development and product education

Brand a social cause There are no shortage of problems to be solved in key African markets, presenting opportunities for proactive brands to step in to provide basic services, gaining widespread visibility and a positive brand association. In South Africa, Outsurance already provides pointsmen and women to direct traffic at busy intersections. In Nigeria, Sterling Bank hires street sweepers to keep high-traffic intersections neat and tidy. “Branded social causes may be a very legitimate way for brands to formally partner with local, regional and national government to address social challenges and, in some cases, make the daily lives of citizens that much easier. It can also have a positive commercial impact on the brands themselves,” says Behan.

The Nollywood powerhouse that is Nigeria’s booming film industry represents a powerful opportunity for branding and communication across the continent. Broadcasting to over a dozen African countries, in 2013, Nollywood produced over 1 000 movies, double that of Hollywood. The largest Nollywood markets are Ghana, South Africa, DRC, Zambia, Kenya and Nigeria. “One of the challenges faced by many growing industry categories across the continent is that the consumer is unaware they exist, or simply doesn’t understand the value of the services and products on offer,” notes Behan. “For the short- and long-term insurance sector, now expanding into the middle income and mass market sectors, the problem is that many families don’t understand the importance of protecting their assets, livelihoods and future

earning potential and therefore don’t insure. Having the industry body fund consumer education using Nollywood could go a long way to growing market awareness and driving new business,” he suggests.

The age of opportunity The power of edutainment is a valuable tool in accessing the youth market. Populations in Africa fit largely into the sub-20 age bracket. According to the CIA World Factbook, in Nigeria and Angola, 44 per cent of the population are under the age of 15; in Ghana, 39 per cent. Similar statistics play out across all the significant consumer markets on the continent. African countries also make up 45 of the 50 countries with the highest birth rates. Not only does this mean that African consumer markets will continue to swell significantly in the coming decades, but that the current youth market holds significant power. In 2011, Access Bank in Nigeria entered into a strategic partnership with Nickelodeon, a global family entertainment brand, in the launch of a new retail banking product, the Early Savers Account, targeted at children in Nigeria. The partnership leverages Nickelodeon’s world-famous animated preschool heroine and cartoon character, Dora

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the Explorer, to encourage financial responsibility from an early age. “The campaign, the first financial literacy campaign in Nigeria, has been enormously successful, growing the market as well the Access Bank brand. The show is broadcast to 2.8 million households across the continent,” explains Behan. “The case study serves as a lesson to others in the importance and relevance of ‘edutainment’ for with younger audiences, buying Access Bank valuable real estate in the hearts and minds of millions of young Nigerian customers.” While not geared for children specifically, Santam Namibia is also tapping into the power of television to grow its market, last year launching a 32-week series presented by Santam Namibia CEO, Franco Feris, teaching the basic concepts of insurance.

Christianity as commodity Both McCoy and Behan confirm that the biggest brands on the continent are not always

listed companies. Perhaps the most powerful brands of all are the preachers behind the continent’s Christian congregations. “Preachers on the continent have a stronger and more passionate following than even the biggest European football teams,” says Behan. “They promote peace and love and preach financial prosperity and commute in private jets, commanding the respect of millions in Africa, Europe and North America.” Most powerful is Pastor Chris Oyakhilome, founder of Christ Embassy, with operations in Nigeria, South Africa, United States, United Kingdom and Canada. With 1.2 million followers on Twitter, Pastor Chris runs television stations, hotels, fast-food chains and a publishing company. Just one of its magazines sells two million copies a month. Behan suggests that it would make sense for financial houses to target congregations through the larger churches, with a percentage of the profit going back to the church to be

invested into grassroots development. “In the same way that football clubs like Manchester United and Liverpool build their brands and balance sheets through the endorsement of products, services and related activities, it makes sense that the most powerful and charismatic brands on the continent do the same,” he suggests. Taking the time to delve into the market nuances and design innovative branding strategies in response is key to the success of businesses across the continent and, notes McCoy, no companies are better placed to do this than home-grown African brands. “In the telecommunications industry, for example, countries are developing their own brands that are leaving their international competitors behind, such as Nigerian Glo, which was also awarded a licence in Ghana. They may not have huge budgets but they are much more tactical in their branding activities and that’s paying dividends.”

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IN HCV Dominic Uys

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Southern Africa has witnessed a steady increase in projects that require cover for special and oversized cargo in transit from port to end destination. A softening marine insurance market may however be making the underwriter’s task more difficult.


teffen Siljeur, marine underwriting and business development manager at Mutual & Federal, explains that a new development in the industry has been the notable increase in renewable power generation projects. “There have been more solar- and wind- powered projects that have been taking place in South Africa, the components for which are mostly being shipped in from abroad since they cannot be sourced locally,” Siljeur starts. “The rest of Africa is also developing more renewable projects but from our perspective, the biggest drive seems to be locally. The only real challenge has been to make sure that the various projects are correctly underwritten and what we at Mutual and Federal have done is to co-ordinate the various components for these projects in-house, from an insurance perspective. Our marine cover for the components coming in from China or Europe, ties in with our engineering department, and we have done a lot to become a one-stop provider for these kinds of projects in terms of cover,” he says. CEO of Tradesure, David Leclezio, also notes that the demand for new mining projects has been on the increase, and a significant number of the abnormal loads that the company has underwritten are related to new plant equipment and mining infrastructure entering the country. “There is not necessarily a lot of this mining activity happening in South Africa, but we have seen a lot of mining machinery being shipped to places like Zambia and


Mozambique. One of the abnormal load specialists that we work with, Transcor, reports that they have been transporting around 450 to 500 abnormal loads per month and they get about 25 times more than that, in enquiries,” he says.

Softening in the market While one cannot complain about an increase in business in one’s sector, one weighty problem has developed from an underwriting standpoint. Petra Fordyce, head of marine at Zurich Insurance, tells RISKSA that the marine

insurance industry currently finds itself in a soft market cycle, putting the underwriting process under strain. “Especially with project cargo, your underwriting needs to be sensible and you need the right level ofexpertise. We are unfortunately seeing less and less that the underwriting for these projects is being done wisely. There are a lot of juniors and inexperienced players entering the marine insurance market and we are generally seeing a lack of appropriate expertise,” she starts.

According to Fordyce, abnormal loads are predominantly linked to substantial projects, and issues arising from their transport inevitably have a knock-on effect into the project costs and liability side. “So to get that cargo from point A to point B in a satisfactory condition is absolutely vital. With the economic pressure being what it is at the moment, we see that many clients are looking to save money wherever they can. It predictably leads that many companies will go with the cheapest insurers and policies, instead of the most sensible ones,” she says.

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from the bank that’s been around for more than 150 years. We can provide you with the right cover for your business needs. Our customised solutions cover the various risk exposures faced by transport business. Various optional extensions may be added such as risk of downtime, credit shortfall and loss of deposit following an accident or theft. Call us on 0860 999 334. Let’s talk business. Standard Bank Insurance Brokers (Pty) Ltd is an authorised financial services provider (FSP224). A member of the Standard Bank Group. Moving Forward is a trademark of The Standard Bank of South Africa Limited. Standard network rates apply. Products are underwritten by Standard Insurance Limited. SBSA 171002-12/13

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Moving Forward


Fordyce attributes the influx of capacity in the market to the fact that marine insurance has always been viewed as the sector with the most profitable lines. “There are a lot of companies entering this sector in order to diversify from the less profitable lines, like the motor portfolios that have been experiencing a lot of difficulty lately. The barriers for entry into the sector are percieved to be low, and it has resulted in increased pressure on our rates,” she says. Fordyce says that on Zurich’s side, the company does not compromise on pricing for these policies. “One cannot compromise on sensible premiums and cover but as a large company, we have the benefit of being able to offer better value-adds and global support, so we are still able to make a good case with clients on why they should be covered by us.” The effect of this softening in this market is a major source of frustration to other players as well and Leclezio points out that it has impaired the ability to accurately underwrite cover for the overland transporters as well. “The biggest challenge here is quoting and insuring correctly and there is a major problem that creeps in when clients (transporters) are making an enquiry. They can give you the weight and dimensions of the cargo but they generally don’t know the value of the cargo until the last minute. These clients now need

insurance but they don’t know how much cover they need,” he says. “In the case of intermediaries, we’ve found that they often do not take the time to gather all the information that they need for a proper valuation. Part of the problem is that a transporter and an underwriter can’t hold out on a quote until a client provides all the required information, because the competition in the market is such, that this client can simply take his business to someone who offers a looser approach to underwriting the risk and a lower price,” he says. Another industry insider comments that the short lead times regarding cargo information has meant that some transport companies do not have enough time to acquire the proper permissions. “We have seen more than a few abnormal loads being transported without licences because they simply didn’t have enough time,” he says.

Educating the industry “We have covered our share of abnormal loads going to the major coal-fired power stations under construction. We have also seen the increase in abnormal cargo intended for mining projects in sub-Saharan Africa. The modes of transport have obviously changed very little over the years but project cargo and the necessary skills to manage their risks have certainly become more complex,” says Andrew Walker, AIG’s marine loss control manager for Africa and the Middle East. 

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“We have found that every single aspect of the transport needs to be scrutinised, from the lashings and transport used, to the port where the cargo is offloaded. It has happened before that the project cargo could not fit through the exit gate of the harbour,” he continues. Walker states that, along with that, risk management has started taking on an increasing role. “Obviously getting these project loads to their destination intact and on time is becoming more and more important. Getting the route planned and mapped out is a huge part of managing this risk and some of the biggest challenges for us have been when one

of these loads gets stuck under a bridge or similarly we have cargo shifting because of uneven road surfaces,” he starts. Walker also points out that correct route planning in South Africa has its own complexities. “A road may look fine on paper but we need to make sure that there are no road works planned on that route and that all the traffic arrangements are in place. Even then, there could sometimes be unexpected surprises and last minute route changes that once again increase the risk to the cargo,” he says. Walker adds that the need for detailed information regarding the project cargo is paramount to managing risk in this respect. “AIG now provides presentations aimed at intermediaries, clarifying exactly what the value-adds are that clients can benefit from, how our cover works and what kind of information we need to accurately underwrite that risk,” Walker concludes.


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Zooming in on

drivers The most recent annual road accident report, released by the South African Department of Transport, revealed that the rate of serious accidents on South African roads is costing the economy around R307 billion per year. More than theft and hijacking, unsafe driving and rising accident rates, are posing an increasing risk to the commercial transport industry. With this, driver behaviour is coming under closer scrutiny. Dominic Uys

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he remote monitoring of driver behaviour in the commercial transport industry is not a new phenomenon. Vehicle tracking services have offered not only a means of recovering stolen property, but also to identify trends within one’s own fleet. In this field there are a number of service providers that offer tracking solutions and the number of applications have grown exponentially. Sid Beeton, divisional manager for transport at ONE Insurance, tells RISKSA more about the tracking solutions that form part of the company’s services. “We have a joint venture with Autotrak, and our clients’ cover includes the cost of unit tracking and recovery. It is a web-based system and you can track your vehicles, looking at parameters like speed, number of stops or the like. We also use a company called Guardcor in KwaZulu-Natal, and they offer bureau services, giving on-thespot reports when they see speeding,” he says. “The trend is very much to monitor your vehicles more closely and satellite tracking has, to a large extent, closed the gap that fleet managers used to have in terms of maintaining communication with their drivers. Most companies have also started taking advantage of the increased visibility of their vehicles to analyse things like fuel usage and speeding,” he continues. The question that comes to mind, however, is whether there may be such a thing as watching too closely. Beeton states that another of the services that ONE has started recommending to their clients, is the DriveCam system, which has not only proven itself as a useful tool in improving driver safety, but also takes the scrutiny of driver behaviour to a whole new level.

Getting into the cab Service provider for the DriveCam system in South Africa, Drive Report, describes its services as utilising data from video and caller reports to create a focused risk profile of a driver, enabling fleet operators to establish an accountable and structured solution to driver management. Louis Swart, managing director of Drive Report, explains that the around 83 per cent of vehicle incidents have been proven to be caused by driver error. A statistic which is just as applicable within South Africa as it is on the international stage. “There are of course so many telematics companies that track the vehicle and what is being done to the vehicle, but we can’t always see the real dictator of risk (the driver) at work. We are, on the other hand, focused exclusively on the driver area, and I believe that the industry’s shift to behaviour management has





installs a video event recorder in the vehicle behind the rear view mirror. The recorder includes two lenses facing the front as well as the interior of the vehicle. In the event of an accident, the camera retains the visual information from a few seconds before and a few seconds after the incident, and sends this information to the DriveCam review center for analysis.

assisted us greatly in generating new business,” Swart says. “And the fact that we have proven our product to actually be able to affect real behaviour change, has definitely helped the acceptance of DriveCam in the insurance industry. We have seen insurers change from underwriting losses to underwriting profits within a period of 12 months,” he continues.

Swart explains that the video feeds from the truck cabs can be accessed online by the fleet manager at any time to see how their drivers

To break it down, Swart explains that the company

are doing and monitor driver behaviour. “It is a mammoth task to analyse almost all the footage from every camera that we have on the road but we are connected to an international team of reviewers who analyse the video data for us. Our people then look for signs of fatigue, whether the driver has taken on any unauthorised passengers, or whether it

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is even the authorised driver who is operating the vehicle. We have actually caught some drivers giving driving lessons to unlicensed operators. If there is a problem we can let the fleet manager know immediately. From the data that we gather, we can identify training points that we can later use to educate the fleet,” Swart says. With incidents, sudden stops and other erratic driving now being monitored, Swart adds that another key component of driving behaviour change, is to also let the driver know that they are being monitored. “The driver has the ability to activate the red flag system on the camera himself if he needs to alert a fleet manager. When the unit records and sends information, it also indicates to the driver that this is happening. The driver can then activate the cam to give his version of events, if that is necessary,” he continues.

Behaviour change witnessed According to Swart, improvements in fleet behaviour take place relatively quickly. “We issue regular reports to our clients and we immediately address trends we notice arising within a fleet. The fact that drivers are alerted when we record data has also helped them to see when they are making mistakes. I need to add at this point that our network allows for

recognition of good driving behaviour when we register sudden stops or incidents, and it becomes clear that the driver was actually able to successfully avoid serious accidents. In some of our clients, we have seen the first positive changes within 60 to 90 days,” he says. “Safer driving is one thing, but there is the fact that overall fuel efficiency tends to improve as well. We can’t do much for the client in preventing problems like fuel theft, but efficient driving does make a marked difference,” he adds. “What we can do is provide both fleet managers and underwriters with a driver safety rating that each driver earns for positive behaviour. It can go a long way towards driving down a fleet owner’s insurance premium when he uses certain drivers for specific jobs,” Swart concludes. There is, however, one point that Beeton raises. He states that there has to be buyin from the driver’s side for the system to produce results. “One has to keep in mind that the cab of the truck is, for all intents and purposes, the driver’s office, and a lot of negative sentiment can evolve from the feeling of being constantly watched while at work,” Beeton concludes. The results are undeniable, according to Beeton and it seems to be very much the direction in which this industry will grow.

“We can’t do much for the client in preventing problems like fuel theft, but efficient driving does make a marked difference.” 37

While insurers and brokers work to ensure that claims are processed swiftly, suppliers are not always so quick off the mark. RISKSA takes a look at who carries the risk when suppliers take their time in fixing damage that leaves a property or asset vulnerable; and what your clients need to know to protect themselves in such circumstances.

Hazards of the

waiting game Sarah Bassett

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n a recent freak act of wind, the back windscreen of my car was blown out. On discovering the break, I immediately called my broker and lodged the claim. Receipt of the claim was confirmed not long after. And then the waiting began. The terms of the policy tied me to using a specific glass fitment service provider. It took 72 hours, numerous phone calls and one non-starter repair attempt in which the fitters arrived with the wrong windscreen, before my car had a rear windscreen again. During this time, my car’s security was significantly compromised, made worse by the fact that I park on the open street at night, in a neighbourhood famed for car theft. Horrified by the terrible service and frustrated at being tied to a poorly performing service provider, I complained so bitterly my broker paid for my taxi fare to and from work for three days so that I could keep the car garaged at work by night. What I didn’t actually realise – and what neither my broker nor insurer ever mentioned – was that had I not been able to do this, it is unlikely that further damages or theft resulting from the delay would have been covered by the insurer. In instances of supplier or service provider delay, who is responsible for the increased risk? And how should you advise clients to mitigate this risk?

Whose risk is it anyway? In theory, in such a case, should further damage occur, the insured would simply make a second claim and would be liable for a second excess, suggests Brenda Kasselman, manager for personal non-motor at Mutual & Federal. “However, we don’t expect the insured to leave a house or asset unsecured. The client is expected to take all reasonable measures to secure that property, thus it is important that brokers advise their clients to have repairs done as soon as possible,” she cautions. “Further loss will be covered if the terms and conditions of the policy are still met, despite the additional risk created by the initial incident. The difficulty is that the damage may result in the policy terms and conditions being breached,” explains Michael Chronis, director at Norton Rose Fulbright. “Take for example where a window of a car is broken. If the policy requires that the car be locked before there is liability and this is no longer possible, any theft from the motor vehicle will not be covered.” Similarly, if a house is broken into and a security gate broken, if it is a term of the policy that the insured is to have a security gate in

place, if there is no security gate the policy will not be required to respond. “The customer has a responsibility to make certain that the asset is protected and secured at all times while it is in their possession even though it has been damaged, up until it is collected by the selected service provider. The fact that the customer has reported the loss and a service provider has been selected does not relieve them of their duties and responsibilities in securing the asset until the service provider has collected it,” confirms Zakes Sondiyazi, motor manager at the South African Insurance Association (SAIA). “It is a condition that the insured must always act as if not insured and must take every step expected from a reasonable person to mitigate further loss in the event of an initial loss,” adds Sammy Koma, SAIA property manager. “It is also a condition that the insured must take necessary steps to minimise the loss; for example, by boarding the premises or hiring a watchman to guard the damaged property, so long as the mitigating steps are not too onerous. Insurers will reimburse the insured all the reasonable expenses incurred.”

Making the client aware “In most cases, the customer is made aware of the importance of securing the asset until the selected service provider has collected it for repair/replacement,” says Kasselman. “In some instances, this information is provided at sales stage but a customer might have forgotten the details at claim stage,” she continues. Here is where the advice of a thorough broker is crucial. Though the insurance wording highlights that the onus is on the insured to take reasonable precautions for the asset, brokers can offer enormous assistance by ensuring their clients understand the extent of their responsibility in safeguarding assets at this stage – and in clarifying what is considered reasonable. For example, according to Chronis, parking a car which has a broken window on the street in a crime-prone area would be considered reckless and therefore a policy would not respond should it be stolen. Given that taking a car off the street for multiple nights while waiting on an insurer-stipulated service provider may require considerable cost and inconvenience to a client, it is worth the broker making this explicitly clear. It may not seem an obvious reasonable expectation to many clients if street parking is listed in their policy. In my own case, this was never once mentioned by my broker or insurer. Had I not had easy access to a garage at work, it would not have occurred to me that while I


waited for my insurer’s preferred supplier to answer the phone and return my exasperated messages, my car was not actually insured.

Rights and options Along with emphasising a client’s responsibilities, making the options clear is valuable and could go a long way to easing clients’ frustrations. Feeling I was getting nowhere with the preferred supplier, I phoned around and found a different service provider willing and able to fit my windscreen immediately, but my broker suggested that this would not be covered in the terms of the policy, given that it stipulated a service provider. Kasselman suggests, however, that if the client is worried about an asset such as a car or house being damaged while

awaiting repair, Mutual & Federal would advise them to get their own supplier to fix the asset and claim afterwards.

supplier. This can be tricky because the insurer might be paying less simply because of discounts received from bulk buying.”

“If the client does not use a Mutual & Federal supplier, we would compare the amount they were billed and pay if it was in line with a quote from our suppliers.”

“Where the insurer has made it a term of the policy to use a specific service provider which is unable to provide their services immediately, or within a reasonable time, and an alternate service provider would be able to do so, then it is Norton Rose Fulbright’s suggestion that the insured puts the insurer to terms, saying, ‘as a result of your insistence that I use a specific service provider I am being placed at additional risk/inconvenience. You must either allow me to use my service provider or accept the additional risk/inconvenience’,” suggests Chronis, adding that it is best to negotiate a solution with the insurer.

Commenting on motor claims specifically, Sondiyazi notes that each claim is treated on its merits. “For example, in a case where the windscreen needs to be re placed urgently, the customer is allowed to go ahead and do the emergency repairs or replacements to minimise further damages to the property and then submit the invoice to the insurance company.” The insured should ensure that they are not part of the problem, making certain that they are available when suppliers are able to make the repairs. From a property perspective, “Some insurers may reimburse the insured for expenses incurred to fix the loss and avoid further damage even if an unapproved supplier is used, so long as the insured can prove that there would have been further losses if the action was not undertaken,” Koma confirms. “However, the amount paid to minimise this should not be much higher than what the insurer would have paid to their preferred

Speak up “In short, different insurers will look at individual claims on its merits after consideration of the above conditions, be they written or as it would be expected from any reasonable person. But, for the purposes of this exercise, we can assume that consequential loss following a claim is not covered,” says Koma. In instances where clients are not warned of this by their insurer or broker, or where their assessment of reasonable is different to that of the insurer, losses could be significant and clients could be left deeply dissatisfied in the service provided all round.

Zenith For The Accomplished (Pty) Ltd, partnered by The Hollard Insurance Company Limited, manage and design insurance products for an elect market of financially accomplished individuals. Our products are augmented by their distribution through an elect broker network who presents after sales advice to policy holders, based on the content of a comprehensive inventory and risk appraisal obtained from independent industry leaders. | Tel: +27 21 872 7065 | Fax: +27 21 872 7168 191 Main Road Paarl 7646 | PO Box 3505 Paarl 7620 Registration Nr: 2006/032693/07 Zenith For The Accomplished (Pty) Ltd is a licensed Financial Services Provider, Underwritten by The Hollard Insurance Co. Ltd, an authorised Financial Services Provider. FSB Number: 36469

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Insure Group Managers Holdings Limited is an authorised financial services provider (FSP 2882). Its main operating company, Insure Group Managers Limited is an authorised FAIS representative of FSP 2882 and a registered credit provider (NCRCP 131).



turnaround Smart systems enhance sectional title schemes Christy van der Merwe

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When it comes to technological transformation in the insurance industry, it has been ‘the big disrupter’, which has manifested itself in two ways: firstly through proliferation of direct distribution channels; and secondly, service portals which allow more and more sectional title business to be transacted either telephonically or electronically and be automatically underwritten. claims cost control and automatic invoicing. In the long term this will evolve to include claims applications (apps) that will let home owners report claims on their mobile phones, or speak to someone immediately.” These developments are in line with cuttingedge technology that has recently become available in South Africa for the sectional title and homeowners’ association industry, which provides customised accounting functionality, and has smart management and communication tools that will assist trustees and managing agents in the day-today management of schemes, while at the same time providing the transparency and convenience required by homeowners.

Charlé Halgryn, Managing Director, Corporate-Sure


ecause of this, explains CorporateSure managing director, Charlé Halgryn, having the most comprehensive product no longer works in your favour, and the race is on to become ‘top of screen’ in an intermediated channel. This is why specialist sectional title and community schemes insurance underwriter, Corporate-Sure (C-Sure), is transforming its technological capacity in response to the rapidly changing claims environment and constant complexity involved in this niche market. Migration to more technologically advanced platforms can have huge implications on products, underwriting, rating and operational requirements, and C-Sure will design products

that are suitable for e-trading, develop automatic underwriting and rating capabilities, and so on. “We are heavily investing in technology that will become an underwriting decision support tool that can automatically filter bad risks in future,” says Halgryn. She adds that technology can assist throughout the supply and value chain, particularly when it comes to doing the right thing in the right sequence. “Hence we are also developing functionality that managing agents and brokers can use to report geyser claims, for example. This automatically triggers a message to the plumber, followed by a text messaging procedure that facilitates incident management,

The bottom line is that the supply and value chain want fast and simple ways of interacting with C-Sure that form an holistic experience. For this reason C-Sure is improving its back-end capability by integrating managing agent, broker and supplier communications and driving massive value in the claims management arena, while at the same time improving service. “Effortless interaction, therefore, will come from technology that allows our policyholders, managing agents and brokers to choose when and how they engage with us. We will ensure that each engagement is a positive experience. We are also developing self-service functionality, letting our supply and value chain view policy, claims and premium information and allow them to update contact information in line with these developments,” says Halgryn. C-Sure has spent the past year developing methodologies to increase the quality of underwriting and to address the range of challenges faced in evaluating risk and claim information while pricing risks. Automating underwriting and rating processes offers the promise of better information and greater efficiencies. 


In a market characterised by unrealised opportunities to reduce claims and operational costs, greater efficiency allows for improved competitiveness and profitability in the sectional title market. “We have to realise that systemic issues in our market influence risk significantly and that these must be managed along with traditional risks to ensure long-term sustainability. The use and quality of the supply and value chain is a major opportunity for claims cost reduction, in addition to the benefits provided in terms of operational costs and service quality; we will therefore focus our claims cost-reduction strategies on the integration and improvement of our supply chain – where incident management, procurement and claims strategies are aligned with our underwriting strategy,” emphasises Halgryn. This alternative approach to underwriting allows C-Sure to differentiate itself in the sectional title market, where products have been commoditised over the years, leaving few opportunities for players to differentiate their products, and resulting in unhealthy competition based on price only.

Mitigating risk Taking the benefits of technology even further, Halgryn says that in future, the sectional title insurance market can look forward to more real-time information that will keep the supply and value chain up to date with everything from relevant sectional title news, to weather warnings that could minimise the impact of hazards like flooding and hail through mitigation. For C-Sure, the destructive hailstorm in Gauteng on 28 November 2013 represented the most severe loss the company has experienced to date, with more than 92 schemes that suffered losses. Damages ran well into the multimillion Rand mark, affecting between 15 and 450 units/houses per scheme. It is instances such as this where proactive technology-based warnings to people throughout the value chain could prove extremely beneficial, perhaps not in preventing the loss from occurring, but taking the necessary actions in anticipation, during and immediately after the loss to ensure its effects are minimised and that people affected are given immediate support. C-Sure is underwritten by Santam, which is also strongly driving proactive risk mitigation strategies such as these. “We will also develop mobile services to encourage things such as regular maintenance, with the aim

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of preventing potential claims from happening. This will create awareness of why our clients need to insure for certain risks.” When it comes to managing risk, Halgryn says that C-Sure’s top risk management objective is to promote ‘aspirational communities’, and ensure that trustees and managing agents are not merely administrators, but community leaders who need to provide inspiration and build social and civic well-being in the community. Halgryn says that this is because the market is viewed as being in desperate need of community building. The focus is currently on building architecturally pleasant buildings in safe and convenient locations with facilities to meet market expectations. “We have reached the conclusion that most community associations and management structures for these schemes operate under the premise that it is essentially a ‘housekeeping’ entity with a purpose to maintain common elements and enforce rules. Thus they tend to regard a high level of resident apathy as a compliment; a perception that residents must be happy if they’re not showing up for annual meetings or casting votes. Sectional title trustees or managers should be people who express a sense of passion and idealism about community.

These trustees or managing agents must be convinced that their role is to provide leadership and inspiration and not merely administration. We need to inspire them to engender a sense of caring, civic pride and shared responsibility for active risk management,” says Halgryn. Rather than signalling less personal interaction, technology could in fact help to foster a greater sense of community. C-Sure values ongoing conversation and an integrated engagement model that involves customer needs identification and analysis, as well as learning and participating on the front lines. Allowing all members of the supply and value chain, including homeowners, trustees, managing agents, brokers and suppliers to proactively understand the opportunities, challenges and aspirations, will encourage innovation and game-changing product development. With continuously constrained margins, and the fact that there are currently about 16 new and planned legislations/regulations that might affect the insurance market in general and the sectional title and community schemes market specifically, C-Sure will make the most of the tools available to continually improve the business.


Mental in a

RENTAL Anton Pretorius

Sometimes we underestimate just how expensive a rental car can be. Through so-called insurance, renters will have you believe that the vehicle is covered (I mean, who has time to read all the fine print?) However, the insurance you’re buying is not insurance after all, and in most cases, it is your client who is left to foot the bill when a car-break-in, pothole or an unexpected hailstorm, leaves them in all sorts of financial trouble. 46 8 4


ne of the most common misconceptions of the car rental business relates to the provision of insurance to the renter. Car hire companies, in general, are not registered financial service providers, and as such, are precluded from selling insurance products. What they sell instead, is a waiver. The difference between a waiver and insurance is that an insurance company will offer you full cover, while a waiver is simply an agreement between the rental company and the renter, and limits the claim against a renter in the event of loss or damage to the vehicle. Usually, consumers have the option to choose between standard waivers, or the more expensive super waivers. Proper explanation of this agreement can be a severe pitfall for most consumers, who are unaware of all the terms and conditions when dealing with car rentals. In an industry where time is of the essence, the agent often fails to run through all the company fine print with the customer. Yet, the significant differences between the

various waivers is something that almost never gets disclosed at the counter as you sign next to the circled ‘super waiver’ option. There are several other situations which could cancel your waiver altogether, and leave you liable for the entire cost of replacing or repairing the vehicle. All of which often results in a credit card shock for those who land up in the dark pits of a pothole or experience windscreen damage from a hailstone the size of a golf ball.

vehicle was a Hyundai i10 and she parked the vehicle outside the building where her business meeting took place. When she returned, a hailstorm had caused significant damage to the windscreen of the vehicle. She filled in the damage report and assumed that was the end of the matter. But the following month, her bank statement reflected a debit order on her credit card for R3 000 – the excess amount of the windscreen.

Know what you’re buying

It was discovered that the company’s SCDW excludes damage to the windscreen and consumers must take out a separate tyre and glass waiver at an additional R60 per day. “The car rental company employee did not discuss the waiver with me, other than my choice of standard CDW or super CDW,” she says. Are agents being discouraged from advising clients on waivers? Are they worried about landing in hot water with the Financial Services Board (FSB) as very few of these car rental agents are qualified in giving insurance advice? Maybe not, but the truth is that many consumers will have second thoughts about the deal, if only they knew the extent of their risk. 

Case in point, a source close to RISKSA hired a car from one of the country’s leading car rental companies during a recent business trip to Johannesburg. She arranged car hire from her hotel and asked for the most affordable model as she was only travelling short distances. The agent only offered the option of a super collision damage waiver (SCDW) at an additional R20 per day, and according to our source, even referred to it as “insurance”. She says she accepted the waiver without being advised of any other limitations. Her rental


Here are some of the other things we found when contacting some of South Africa’s leading car rental companies:

How they get around it According to Peter Donald, director at Paladin Underwriting Managers, your own domestic/ personal lines policy will have a “driving other cars” extension, which will give you cover for any liability you incur (for example, the damage you sustain to another vehicle or someone’s front gate), but won’t automatically cover you for the damage you do to the other car you happen to be driving, like the rental you just jumped into at the airport. “But, what the car rental companies will tell you (for this is how they get around it) is that they aren’t selling you insurance. What they are doing, is simply entering into a rental contract with you for the rental of that vehicle.” “In terms if that rental contract, the rental company will hold you liable for any damage you do to their car, subject to an arbitrary first amount payable, which he will swipe off your credit card as you start the hire period. The argument is that you, the renter, are not at any stage entering into a contract of insurance with an insurer, and therefore they aren’t selling insurance per se,” Donald says. Zakes Sondiyazi, motor manager at the South African Insurance Association (SAIA), reiterates this. “In most cases, a policyholder who has comprehensive car insurance does not need to take additional car rental insurance because their underlying comprehensive car insurance transfers cover over to the rental vehicle during the time the vehicle is used by the policyholders.” However, he stresses that policyholders are urged to know the limitations of their own car insurance. “Additional drivers who are not on

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policyholder’s policy, would need to take car rental insurance if they do not have their own comprehensive insurance policy.” But surely if those without a comprehensive insurance policy need to take car rental insurance, car rental agents are essentially providing insurance advice and need to be FSB-compliant or have some form of broker training in order to do this. But according to Sondiyazi, most car rental companies normally sell one product from one insurance provider and do not compare multiple policies or products of different insurance companies. “This is purely seen as giving features and benefits of one product and not as offering insurance advice to customers,” he says. But then this begs the question: Why not make car rental agents compliant, to legally give expert insurance advice? Perhaps this would allow consumers to make better, informed decisions on the waiver products, and avoid big insurance claims, as in the case of our source. Sondiyazi adds that most short-term insurance companies are aware of the dire consequences of non-compliance. “It is their duty to ascertain that consultants are fit and proper to sell their insurance product (car insurance) to customers and that relevant information is given to customers and are able to make an informed decision.” Many situations such as travelling on a gravel road, hitting a pothole, water damage, damage to the undercarriage of the car, and not reporting the accident or loss to the company in time will result in the renter being held liable. One company even gives clients just two hours in which to report the damage or loss of the car.


On a bottom-of-the-range Hyundai i10, Budget’s standard CDW costs R180 per day with a liability excess of R11 300. Super CDW costs R320 per day with a liability excess of R3 200. Theft loss waiver (R30 per day), and tyre-and-glass waiver (R30 per day) are all separate waivers and not included under your standard or super CWD.


On a bottom-of-the-range Hyundai i10, Europcar’s standard CDW costs R274 per day with a liability excess of R11 500. Super CDW costs R336 per day with liability excess of R2 400. Theft is included in the standard and super CDW; however, windscreen-and-tyre waiver is separate, and is added onto your super CDW (R358.50).


On a bottom-of-the-range Hyundai i10, Avis includes standard CDW (R79) in their daily rental rate of R250 per day with liability excess of R12 280.70. Super CDW (R118) is included in their daily rental rate of R311 per day with a liability excess of R2 631.58. Theft waiver is included in both CDWs (R53 per day) and windscreen-and-tyre waiver is separate (R20 per day).

First Car Rental

On a bottom-of-the-range Hyundai i10, First Car Rental’s standard CDW costs R269 per day with excess liability of R5 500. Their super CDW costs R295 per day with liability excess of R1 300. Both waivers include theft and damages. Tyre waiver (R35 per day) and windscreen waiver (R35) are sold separately. All prices are excluding VAT.

Over 120 Fitment Centres Nationwide


Fidelity guarantee insurance – an absolute necessity for businesses guarantee policy. But, as the morals, values and principles of both white and blue collar workers of South Africa have steadily deteriorated, so has the cost of, and difficulty risen, in obtaining fidelity cover.

Jimmy Fermor risk administrator at Renasa Insurance Company Ltd


he socio-economic situation in South Africa has caused many job losses. With breadwinners struggling to feed their families, many are forced, in the absence of a regular income, to turn to crime in desperation and in the hope of not being discovered. But the unemployed are not the only ones who resort to crime. Some employees turn to crime to enrich themselves, by misappropriating from their employers. Then, there are those who, in order to maintain a certain standard of living or, as the saying goes, “to keep up with Joneses”, have to supplement an insufficient income. There are also those who struggle with an addiction and cannot afford a habit that needs feeding, be it alcohol, drugs or gambling. Eventually desperate and with no way out, they turn to illicit solutions, generally pilfering from their employers. Inevitably they are caught and land up with a criminal record. In an attempt to mitigate against these losses, employers generally insure and claim under a fidelity

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The purchase of fidelity guarantee insurance has traditionally been a means of comfort and peace of mind to employers which they gain from transferring the risk to their insurer. Whether there is the theft of cash, stock or goods by employees, employers can be reimbursed for their losses by their insurer. In former years it was the exception rather than the rule to purchase fidelity guarantee insurance. The premiums were low and terms not prohibitive because there was not a great demand for this insurance. A laborious procedure by insurers preceded the placing of such cover. Insurers often required references from previous employers, family and friends for employees joining a company; or from schools and church leaders for those leaving school who were joining the workforce for the first time. Cover was usually required only for employees in a responsible position such as cashiers, bookkeepers, accountants and for those who made deliveries in vehicles and who could be acting nefariously in collusion with other employees. Over the years and in more recent times, theft, fraud, corruption and dishonesty by employees has become a great concern of employers. Premiums charged for, and terms for the provision of fidelity guarantee insurance by insurers and reinsurers alike have become increasingly onerous and many employers have been forced to self-insure for this class of

insurance. However, self- insurance also comes at a price. Employers are forced to take very stringent and often costly security measures, to prevent losses. Responsible employees, such as risk managers, must be engaged to monitor banking procedures and the reconciliation of bank statements; to ensure regular stock taking in stores and departments of stores; to perform spot checks on a regular basis; and to ensure regular auditing of records both internally and by independent auditors at least annually. Insurers require submission of fully completed proposal forms which convey to them how employers conduct their businesses, especially the measures they take to prevent theft, fraud, corruption and dishonesty by their employees. With the information technology explosion of the past few decades and the utilisation of computerised systems, the challenge to insurers to keep abreast of the companies they insure is likewise burgeoning. To alleviate the associated increase in risk, insurers must now insist on being provided with an in-depth insight into the modus operandi of the IT departments of their prospective clients so that they may assess whether the checks and balances that are in place to avoid computer fraud are adequate. All of these factors have contrived to increase the risk associated with fidelity cover and, in the absence of a commensurate improvement in internal controls and risk management generally of employers, to drive up the cost fidelity cover. However, with rising crime rates, modern businesses have no choice but to purchase fidelity guarantee insurance even though the premiums may appear to be exorbitant and the terms onerous.


Keep your clients and their families, Always Visible. Proud associate sponsor of the Titans cricket team. With the ability to monitor a vehicle’s location via SMS and real-time tracking applications on a smartphone, tablet or computer, keeping the family visible throughout any journey is child’s play. So do your part and recommend a Ctrack tracking system, that comes with stolen vehicle response services, to your clients today.

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The name is Bond...

CAT Bond Dominic Uys

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Catastrophe bonds are nothing new in the reinsurance game but recent years have seen an upsurge in the sale of these insurance-linked securities (ILS) to eager investors in developed countries around the world. A market that is not known for massive shifts, has started moving in a new direction and RISKSA investigates how the new international trends will affect the South African market.


t the end of last year, Willis Re noted that there has been a steady flow of investor capital honing in on natural catastrophe risk since late 2011. According to the company, the responses in the market have been quite divergent, with some market insiders warning a bubble is developing in the market, and others commenting (albeit somewhat prematurely) that the traditional reinsurance model is about to be pushed out completely. The company notes that the third quarter of 2013 saw $1.4 billion of non-life catastrophe bonds issued and a number of well-known issuers of these bonds, including Zenkyoren, Groupama and Swiss Re have once again started doing significant business. The first quarter of 2014 saw $1.2 billion of non-life catastrophe bond capacity issued in six deals, and recently it was announced that Assicurazioni Generali S.p.A had issued its first catastrophe bond to Lion I Re, which saw catastrophe bond market enter Italy for the first time. While this has mostly been confined to the European and American markets, Stuart McMurdo, head of reinsurance at Santam, points out that the rest of the world also needs to take heed of what is taking place.

Cat bonds in the South African context McMurdo starts by explaining that catastrophe bonds have historically not featured on the South

African market for a number of reasons. “The cost of catastrophe bonds has generally been significantly higher than traditional reinsurance in the South African context.” The second issue is that catastrophe bonds operate under a parametric trigger, as opposed to an ultimate net-loss trigger, upon which the conventional reinsurance model is based. Under an ultimate net-loss trigger, if the sum of the total losses from a catastrophe passes through the attachment point of the insurer’s catastrophe programmes, the company would make reinsurance recoveries. In the case of a parametric trigger, the trigger point is subject to a number of specific conditions. If for instance, the bond covers an earthquake event, the magnitude of the earthquake would typically be predetermined. If an earthquake event of a lower magnitude does occur, the bond is safe from having to pay out. As a result, however, the insurer faces the risk of suffering significant losses that he may not be able to recover. Traditionally, catastrophe bonds can also not be reloaded like conventional reinsurance. A catastrophe bond’s investors can actualise their obligations to avoid getting burnt by a loss and the bond is dissolved after a claim is instated against it. “Lastly these bonds have generally tended towards markets where there is widely used vendor modelling in place and in South Africa,  this is still not the case,” McMurdo says.


Evolution of an old model Catastrophe bonds have been around for many years and, while their popularity in the market has fluctuated slightly in that time, the sector does not tend to witness big shifts. The concept of ILS has however steadily been growing in significance. Recently, and over the last year, it has really come to the forefront of the international stage. McMurdo tells RISKSA that there has been acceleration in their growth, off the back of methods like quantitative easing. New developments in the market are now occurring almost daily. “Some reinsurers are now fronting catastrophe bond structures to insurers in the form of ILS vehicles. Sitting behind the ILS vehicles, are investors or investment funds looking for non-traditional capital. When they look at the traditional places where they have invested, the yields they want are difficult to find. A lot of investors are turning towards reinsurance for those higher yields and we are definitely in a benign catastrophe cycle that will allow this,” he says. “These ILS vehicles have, to a large extent, moved towards ultimate net loss recoveries as well as offering reload or reinstatement. The reinstatement is of course taken care of by the reinsurers fronting these ILS vehicles. The reinsurer is therefore on risk for a second catastrophe event if there is a major loss, making the ILS vehicle much more attractive to cedents,” McMurdo continues. Robust tax modelling is however still a necessity and catastrophe modelling still has to be done by globally recognised catastrophe vendor models. Substantial progress has been taken place in developed markets like the United States, United Kingdom and the rest of Europe. “The beneficiaries of these ILS vehicles are typically large US and Canadian pension funds. Investment managers in these markets have been hunting for yield. The danger is that in the hunt for yield, the additional capacity that this

creates, drives down market prices. When a mega-event does occur, there is a real risk that reinsurance markets and ILS vehicles will realise that there simply wasn't enough premium in the pot, and that the prices that they were charging were insufficient,” McMurdo warns.

Leaving the developed market As stated, the catastrophe bond market still does not have a footprint in South Africa. That is not to say however, that South Africa and the rest of the developing world are unaffected. “Traditional reinsurance capacity in the US, UK and Europe is being replaced in certain areas by ILS capacity. That traditional reinsurance capacity now has to find a home, so in the South African context we are seeing that there is now an influx of additional reinsurance capacity to our markets,” McMurdo says. “I believe it is driven by three things. Firstly, it is driven by the ILS development in the developed market where there is robust vendor modelling. Secondly, it is driven by large international insurers such as Allianz, Generali, Axa who are rationalising their global reinsurance programs and taking large volume cessions out of the marketplace,” he continues. Lastly, McMurdo adds that large reinsurance companies are approaching large homemarket insurance companies in developing markets, with the intention of putting down significant lines of capacity across their entire reinsurance program. “What that means, is that you suddenly have significant growth capacity available to the South African reinsurance buyer. In that sense, ILS has an indirect impact on our market.” This has resulted in a softness in the South African reinsurance market. “In fact I think you will find that if you go to places like China, South Korea, India or any of the more significant developing markets to come out of the emerging economic world, there is a softening in those markets, as well as traditional reinsurers

start to pull out of the US and European markets. Berkshire Hathaway, to name but one example, has already announced that it would no longer write cat business in the US because they no longer believe that the US market offers the correct level of pricing,” McMurdo says. “The question then has to be: so where do they deploy their extra capacity and whether [or not] they are doubling up their lines in other countries.”

Speculating on the future Looking forward, McMurdo states that one needs to take a lesson from history. “There is no doubt that the current market cycle that we are in, from a reinsurance point of view, is soft, just like it was before the 911 catastrophe. That mega-event changed the game overnight and pushed the reinsurance market into a hard cycle once again. Market commentators are speculating that for this to happen again, the world would need about an $80 billion loss,” he says. Barring another mega-event, McMurdo states that large single losses over the course of a year may have thwse same effect. “We might see that individual markets may turn towards a hardening position as a result of attritional significant large singlular losses. Generally one sees one large loss of real significance in a market due to a fire or something like that,” he says. “A recent example in China is a loss called SK Hynix. It was a fire at a semiconductor plant and the loss was estimated to be at around $1.2 billion. Some reinsurers had some significant lines on that, and if we were to have 10 or 15 or 20 of those size losses over the course of the year, it may be enough to shift the market. The real danger is that the world could be ill-prepared for a loss of this size, because the pot of premium in the marketplace has been eroded by the developments in the ILS market,” McMurdo warns.

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when medical aid falls short Increasing medical aid rates and the accessibility of certain procedures are driving an increase in financial aid interest that benefits the lending market and medical practitioners. 56 4 8

he says. “The plastic surgery industry has come a long way over the past five years. People are a lot more outspoken about having a procedure done, so discussing the financing of it is also a new thing.” While breast augmentation is the most popularly funded procedure across the board, there are a number of other surgeries paid for with medical finance loans including weight loss, dentistry, laser eye and hair restoration. These loans are also utilised in cases where medical aid covers only a portion of a procedure’s total cost, such as hip replacement surgeries or reconstructive plastic surgery. “Medical finance is a way for a patient to have the needed medical treatment now, and not have to wait and save until they can afford it, which can exacerbate a medical situation,” says Sive. In fact, there are no restrictions on the type of procedures that fall within medical finance support schemes, says CEO of Incred Medical Finance, Warren Katz. “We will provide financial support for any procedure, as long as the client is creditworthy,” he says. The approval process for medical finance loans follows the same process as bank loans, and providers operate under the statutes put forth by the National Credit Registrar and the National Credit Act. Clients must have a healthy credit record and pass an affordability test on repaying loans, as well as submit all FICA and related know-yourclient documentation, De Jager explains.


nterest in medical financing, or loans for medical procedures not covered or only partially covered by medical aid, is on the rise in South Africa. Due to increasing annual rates among medical aid companies and the accessibility of elective procedures, financial providers are seeing a growing number of clients applying for their services. “There is an increasing amount of interest month on month for our services,” says Tiaan de Jager, CEO at Medifin Financial Services. “Medical aid companies are increasing their annual rates, and in some cases provide less cover for fewer procedures. Medical finance is also becoming more attractive as the consumer can choose what procedures to pay for.” At First Health Finance, increase in applications has risen 30 per cent year on year, according to director Jason Sive. “The most popular procedure we finance is breast augmentation. The average age of this client is 33 years old,”

“The rates are always competitive, but in some cases can be cheaper than bank or credit loans. As the loan is provided for a specific medical reason or purpose, which can be verified by the medical practitioner, it reduces the medical finance company’s risk,” he says. The approval process for these loans is also quicker than bank loans. At Medifin, for example, a formal quote can be supplied to clients within one hour of application. Upon acceptance of the quote and loan agreement, payment can be made within 48 hours. “Financing can even be approved while you are at your doctor’s office,” says the company. Unlike bank loans, however, medical finance funding is paid directly to medical practitioners. “One hundred per cent of payment goes directly to the doctor before the procedure starts, providing peace of mind to the customer and the doctor that the procedure is paid for,” says De Jager. According to him, their growing market has a knock-on effect for medical providers. “Medical practitioners are starting to see the

benefit of referring customers to medical finance companies as they are satisfied with the cash upfront procedure as offered by financiers, versus the sometimes delayed settlement issues experienced with medical aid companies.” Medical financiers do not have direct relationships with medical providers, in that they do not offer incentives for referrals. However, they do support a mutual referral system that builds a robust business model for the lending and medical markets. “We spent a lot of time educating doctors as to the benefits of offering payment plans to patients,” says Sive. “Doctors don’t generally discuss finance with their patients, so many did not know what was required. There were a few doctors who believed their patients did not need finance, but they actually did. We have incredibly good relationships with many doctors, who understand that they should offer all payment options to patients and let the patient decide how to pay. We have a few practices where we continuously finance more than R100 000 a month worth of treatment for its patients. That is not small money for them,” he says. Sive says the mutual benefits of medical finance are recognised internationally, with doctors in practices in the US, Europe and Australia following the same model. However, he acknowledges that interest rates in South Africa are generally higher than global averages. In Australia, for example, the largest patient finance business lends at between 15 and 17 per cent. With only 38 per cent of South African consumers in debt up to date with their payments, those higher rates could be significant. Indeed, De Jager says South Africans are more eager to apply for finance compared to other western countries that may be more debt adverse. Medical financing, however, may fall within a niche arm of the unsecured lending industry. “Consider that many South African consumers have become comfortable with financing clothes over two years, but only wear them for six months,” says Sive. “Now consider that many of the procedures we finance are life changing and financed over 36 months,” he says. For example, where loans have financed an IVF cycle where a client falls pregnant, “That’s hardly a comparison. You’re financing life,” he says. “I believe that this market will continue to grow, but at a controlled rate, as more and more practices start appreciating the value of offering medical payment plans,” he concludes.




Fixed property Property price growth has slowed down significantly from the bumper growth it saw about 10 years ago; yet the idea still persists that property is a ‘sure bet’. RISKSA looks at why investors are better off in equities than investing their money in a single property. Neesa Moodley-Isaacs

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vs unit trusts A

ccording to the Absa House Price Index, house price growth has continued to slow down on the back of poor household finances and decreased consumer confidence. Absa’s property analyst, Jacques du Toit, says single-digit nominal house price growth is forecast for 2014, while real price growth will be constrained by consumer price inflation, which is expected to be just below the six per cent level for the year. “Continued low interest rates will support the housing market and the demand for mortgage finance,” he says. Berry Everitt, managing director of estate agency, Chas Everitt, says South African property market values are expected to grow by around 10 per cent this year in the most sought-after areas, and less in areas where there is less demand or no real estate housing stock shortage as yet. “Revenue growth, which has been very strong for the past two years, will continue to come mostly from increased volumes of sales,” he says. Property specialist and chief executive of Rode and Associates, Erwin Rode, says that as with all investments, timing is paramount. Secondly, location is important, especially when acquiring a new property at replacement costs. This risk is less when buying an existing property, as the price should reflect the good and the bad of the location. Accessibility is becoming crucial in light of the worsening traffic congestion in some nodes (like Sandton CBD) and the placing of e-toll gantries.

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Lastly, if you lack the technical expertise, get a consultant to advise you on the technical health of the structure. You always would need an electricity compliance certificate, rates clearance certificate from the municipality (and a levy clearance certificate from the body corporate if sectional title). In the case of a sectional title scheme, be sure to study the latest financials of the body corporate; you do not want to buy into a scheme that is nearly bankrupt, or which is poorly managed. Shaun Latter, director and founder of Quaestor Wealth Management, says if you look back as far as 1980, house prices lagged inflation for many years before a huge uptick in 2003. However, over a 30-year period from 1980 to the end of 2009, residential house prices only beat inflation by 0.75 per cent a year. The Absa House Price Index shows that over that same 30-year period, residential property as an asset class provided returns of 11 per cent a year. The JSE All Share Index, on the other hand, provided annualised returns of 18 per cent over the same period. An investor needs to take three factors into consideration: risk, taxes and liquidity.

Risk Residential property is less risky than the stock market but there are other risks that most investors fail to take into account. Concentration risk is the main one. Investors ideally want to have diversified investments to reduce their risk but an investment in a single

property – in one street, one suburb, one city – is risky if you are pinning all your retirement savings on that investment. There is a tenant risk to take into account. According to the National Credit Regulator, in March this year, the number of credit consumers with impaired accounts numbered 19.74 million. “This means that these consumers are likely to be denied home loans by the banks and will be forced to rent. As a landlord, the investor may be accepting risk that the banks find unpalatable. This, coupled with strengthened tenant rights when it comes to eviction, is a cash-flow risk that should not be overlooked,” Latter warns. Shaun Ruiters, the head of strategy and positioning at Sanlam Investments Retail, points out the other risks associated with investing in a single property: • Interest rate risk: Property prices are highly sensitive to interest rate changes. Once interest rates start to rise, the growth in property prices become suppressed. • Area/devaluation risk: Property returns are very dependent on location. Returns differ widely across location. Socio-economic changes in the neighbourhood could result in lower or even negative capital growth. • Regulation/regime risk: Government can amend income tax, capital gains tax, estate duty and other legislation affecting the value of the property. • Maintenance cost risk: Maintenance costs could escalate by more than inflation and could be substantial if properties are rented out. • Rates, taxes, electricity and other services-

related risks: Property owners need to consider the impact of unexpected rates, taxes and service cost hikes. • Municipal revaluation risk: Related to the previous point, the investor is exposed to the risk of municipal revaluation which could result in rate hikes.

Taxes A property investor has to pay capital gains tax (CGT) at 33 per cent of the gain when he sells the property. He will also have to pay income tax on any rental income he receives. If the investor invests in unit trusts, he will still have to pay CGT on disinvestment but tax is withheld on dividends. Interest is taxed at the investors’ marginal income tax rate, but the first R23 800 of interest earned each year is exempt for investors under 65. A retirement fund, which invests in unit trusts, offers tax-deductible premiums, no tax on capital growth, and the fund is excluded from the investor’s estate when they die, so they do not pay any estate duty tax on the money in their retirement fund.

Liquidity Investing in a single property poses a high liquidity risk. “Properties are rarely disposed of at the desired selling price within a few days,” Ruiters says. Unit trust investments, on the other hand, are fully liquid and an investors is able to make part or full withdrawals at any stage. The maximum amount of time an investor would have to wait for their money is five days while selling a property could take anything from a few weeks to a few months. 

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Comparison of unit trusts vs fixed property UNIT TRUSTS



Unit trusts are highly liquid. It is possible to disinvest within 48 hours, although the funds with significant equity, offshore or property allocation ideally need an investment term of at least five years.

Physical property tends to be relatively illiquid and incurs costs on every sale.


Based on client choice, it offers diversification across a mix of asset classes, reducing the risk of being exposed to only one asset class, e.g. property.

Lack of diversification. Investors are exposed to one asset class and often to one property within the asset class only. Significant concentration risk.


Publish holdings at quarter-ends. Publish daily prices. Strict auditing requirements.

Valuations infrequent. No external auditing of accounts.

Initial costs

Initial asset management and administration costs have become rare, but potential for initial advisory fees.

Transfer duty, conveyancing costs, bond registration are but a few of the initial expenses. These costs are significant.

Ongoing costs

Asset management, auditing, custodian, banking, service, financial adviser and administration fees. With the exception of the financial adviser and administration fees, these costs are included in the price and the total expense ratio (TER) of the investment.

Maintenance, rates and taxes, and body corporate levies.

Source of returns

Equity unit trusts: dividends and capital appreciation. Multi-asset unit trusts: interest, dividends and capital appreciation. Fixed interest unit trusts: mainly interest.

Rental income and capital appreciation.

Use of gearing

Not yet possible.

Possible to obtain loans of up to 100 per cent of the value of the property. This gearing opportunity makes it possible for investors to leverage returns.

Income tax

Tax is withheld on dividends. Interest is taxed at investors’ marginal income tax rate, but first R23 800 is exempt forunder 65s.

Rental income is taxable as if the investor is carrying on a trade. All expenses that are not of a capital nature can be deducted from rental income, e.g. interest on mortgage, rental agents’ fees and rates and taxes.

Capital gains tax

33.3 per cent of the gain (only payable upon disinvestment) is taxable, but first R30 000 excluded for natural persons.

If the property is not the primary residence of the investor, 33.3 per cent of the gain (only payable upon sale) is taxable, but first R30 000 excluded for natural persons. All expenses of a capital nature can be added to base cost, e.g. maintenance.

Estate planning implications

Assets need to be bequeathed in investor’s will. On death, capital gains tax (CGT) and estate duty is triggered. Part of the unit trust investment can be sold by heir to cover the taxes due. Possible to donate part of unit trust investment to intended heir every year to minimise estate duty when investor eventually passes away.

Assets need to be bequeathed in investor’s will. On death, capital gains tax (CGT) and estate duty is triggered. Heir cannot sell part of house to cover taxes due. Similarly, it is not possible for investor to donate R100 000 of value of house tax-free every year to heir as estate duty optimisation technique. Non-unitisation of property limits the investor in terms of estate planning.

Table supplied by Sanlam Investments Retail 62

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Holy smoke

– the impact of e-cigarettes on life insurance Anton Pretorius

E-cigarettes don’t produce real smoke, yet they’ve ignited a firestorm of controversy. If your client thinks that smoking the popular and alleged ‘healthier’ e-cigarette might reduce their life insurance premiums, then you, as a broker, need to nip that notion in the butt.

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o conclusive evidence exists that validates e-cigarettes as the healthier alternative and as a result, insurers are in no rush to reduce life insurance premiums for smokers – whether the cigarette is electronic or not. Globally, smoking is on the decline. The Journal of the American Medical Association (JAMA) states that, overall, age-standardised smoking prevalence decreased by 42 per cent for women and 25 per cent for men between 1980 and 2012. Yet, 1.1 billion smokers worldwide still find it hard to quit smoking.

RYNO Killing himself with 30 a day.

The South African Government’s tobacco control policy has halved adult smoking over the past 20 years, according to the Human Sciences Research Council (HRSC). According to the latest national statistics in the South African National Health and Nutrition Examination Survey, smoking has decreased by 15.6 per cent (from 32 per cent in 1993 to 16.4 per cent in 2012). The study also found that approximately 30 per cent of South Africans are classified as smokers. While the significant drop in smoking figures can be largely attributed to stricter smoking legislation, advertising limitations and steeper tobacco prices, many smokers are still looking for alternative ways to finally kick the habit. The use of electronic cigarettes is on the rise worldwide and considered a $1 billion revenue service in the United States. Electronic cigarettes have been lauded, albeit controversially, as a healthier alternative to normal cigarettes, which could help to lessen the burden of disease caused by conventional tobacco smoke. However, many ask whether the healthier label is merely ‘smoke-and-mirrors’ and a ploy to help grow sales numbers. E-cigarettes are often seen as a safe substitute for regular cigarettes, and many smokers are using them as a stepping stone to quitting, once and for all. Nicholas van der Nest, divisional director for risk products at Liberty Retail, says that they do not believe e-cigarettes are necessarily any healthier than normal cigarettes, “The key difference between a conventional cigarette and an e-cigarette is that an e-cigarette does not contain tobacco. But, it isn’t just the tobacco in cigarettes that cause cancer or cardiovascular diseases.” For primary school teacher Riaan Bailie (30), e-cigarettes seem like a favourable alternative. A pack-a-day smoker since the age of 18, the Cape Town resident first learnt about e-cigarettes from a friend, and has since built them into his daily routine. “At work, there is hardly any time to go outside and take a smoke break,” he says, “So I’ll take a puff of an e-cigarette to take the edge off, because they don’t smell and you can smoke them inside.”

65 5

According to a new SA study, a team of doctors supplied 349 patients with e-cigarettes over a period of eight weeks, and found that 45 per cent of South African smokers who use e-cigarettes were able to quit tobacco smoking within two months. Despite positive reviews from e-cigarette users, very little is currently known about their safety and potential long-term health effects. For this reason, most insurance providers in South Africa will not regard you as a non-smoker if you use e-cigarettes and you will still be charged smoker’s rates, says Dr Pieter Coetzer, chief medical adviser at Sanlam.

The device itself also falls under the Act, as it is considered a delivery device for a scheduled drug. According to Van der Nest, the proposal from the Food and Drug Administration (FDA) in the United States to classify e-cigarettes as tobacco products, will technically categorize e-cigarette users as smokers. “Even if they don’t get classified as tobacco products, they still contain nicotine which most insurers will continue to classify as smokers,” he says.

According to Van der Nest, conventional cigarettes contain chemicals that are harmful to your health, and e-cigarettes still contain some of these chemicals. “Nicotine is one “The only thing that distinguishes e-cigarettes of the chemicals found in both from traditional cigarettes is that conventional and e-cigarettes. It is they do not contain tar. In most highly addictive and has been shown cases, they still contain nicotine to reduce bone health,” he says. in liquid form, along with various The amount of other chemicals, some of which cancer deaths that According to an analysis done by the are used to vaporise the liquid. would be averted Food and Drug Administration (FDA) In fact, e-cigarettes may even in a world without in the United States, e-cigarettes contain more toxic chemicals tobacco contain detectable levels of known than regular cigarettes. So, even carcinogens and toxic chemicals though the vapour is tobacco to which users could be exposed. Since free, it is probable that using e-cigarettes can e-cigarettes also contain many of the same still increase a user’s risk of cancer and other toxic chemicals as normal cigarettes, there is serious illnesses such as heart disease and no reason to believe that they will significantly stroke,” he says. reduce the risks of exposure.


The health label myth

New regulations on e-cigarettes are set to take effect in New York City as of May 2014. Legislation in the ‘Big Apple’ now sees e-cigarettes fall under the same set of regulations as tobacco cigarettes and other tobacco products, which means they may not be used at bars, restaurants and several other public areas, including city parks. The shift comes as the debate over the health benefits – or consequences – of e-cigarettes continue to wage on, between public health officials and the e-cigarette industry. In South Africa, the e-cigarette is regulated under the Medicines and Related Substance Act, that classifies nicotine as a schedule three drug, requiring it to be sold only at pharmacies and with a doctor’s script.

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A study by the French National Consumers Institute, has also found harmful chemicals in electronic cigarettes, sparking renewed concerns about the products that are often hailed as a healthier alternative for smokers. After testing for cancer-causing molecules in the vapour from 10 e-cigarettes, three types of e-cigarettes tested positive for the chemical formaldehyde, at levels close to those of typical cigarettes. The toxic compound acrolein, which changes to vapour when heated, and which

has been shown to damage the lungs, was also found. For some e-cigarettes, acrolein levels were higher than in normal cigarettes. Unfortunately, there are no long-term studies to back up claims that the vapour from e-cigarettes is less harmful than conventional smoke either. Cancer takes years to develop whereas e-cigarettes are a relatively recent invention. “It is almost impossible to determine if a product increases a person’s risk of cancer or not, until the product has been around for at least 15 to 20 years,” Van der Nest comments.

as nicotine patches and chewing gum.” All clients who have indicated that they are non-smokers undergo a routine blood test to determine the level of cotinine (a by-product of nicotine) in the bloodstream. Coetzer continues, “The premium differential for smokers is significant and depends on factors such as age and gender. The differential is based on our claims experience that smokers have more or less double the mortality rate than non-smokers, including causes of death not related to smoking.”

RYNO Pays a packet for risk insurance as a smoker.

Van der Nest also says that smoking In the South African Medical Journal, Dr Brian e-cigarettes won’t allow policyholders to qualify Allwood from the University of Cape Town’s for non-smoker rates or lower premiums, “The (UCT) Division of Pulmonology, argues that price difference in premium rates between these tiny machines might be the smokers and non-smokers can be lesser of two evils for those who as much as double, depending struggle to kick the habit. on your age or gender. Nicotine Americans killed products, such as cigarettes, cigars, every year by “It is highly unlikely that e-cigarettes pipes, e-cigarettes, snuff, hubbly second-hand are as toxic to human tissue as bubbly (hookah) and any other smoke conventional cigarettes,” says associated products, would qualify

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Allwood. He adds that e-cigarettes still allow potential quitters to participate in the psychological and social ritual of smoking. But fellow UCT Pulmonologist Dr Richard van Zyl-Smit disagrees. He states that current research has been limited to a few hundred people and also faults the design of some studies.“The evidence for there being an effective method for smoking cessation is unconvincing,” he says. “Safety has not been proven in large studies of long-term use. They may even encourage more habitual use of nicotine, which, in time, might encourage a switch to cigarette smoking … or act as gateway devices to cigarette smoking,” writes Van Zyl-Smit. “E-cigarettes may be less dangerous than tobacco, but given that tobacco kills 50 per cent of its users, what would not be safer?”

you as a smoker for life insurance purposes,” he says. “As e-cigarettes contain nicotine, their users will test positive for cotinine when the underwriting tests are performed. This means that those who use e-cigarettes will be classified as smokers and pay a higher premium than non-smokers,” says Van der Nest.

6 million

The number of deaths caused by smoking-related illness each year. Almost twice the number killed by HIV and tuberculosis combined

Insurers: there’s no smoke without fire

He adds that it is not possible to say definitively whether there has been a rise in claims for smokingrelated diseases compared to previous years. “However, Liberty’s claims experience for 2013 shows that lung cancer was responsible for about one in six cancer claims for smokers but only one in 20 cancer claims for non-smokers. Smoking significantly increases the likelihood of being diagnosed and claiming, as a result of cancer. Experts say around 90 per cent of lung cancer cases are due to tobacco smoking.”

Coetzer says that most insurers in South Africa, and indeed, worldwide, have taken the view that the potential impact on a client’s risk profile for longevity-related products such as life insurance, dread disease and disability products, is the same as that of a smoker.

Coetzer says that much more work needs to be done to determine the long-term effects of using e-cigarettes. “Because it is a relatively new product, there is no conclusive evidence that e-cigarettes are a safe alternative to regular cigarettes or, for that matter, effective in assisting smokers to kick the habit.

“At Sanlam, we have recently adapted the application questionnaire we give to clients to include a question on e-cigarette use, along with traditional tobacco products. You will only be deemed a smoker if you have not used any of these products for longer than 12 months. This includes smoking cessation products such

Most insurers therefore prefer to err on the side of caution. However, none of our underwriting policies are cast in stone – if it is scientifically proven that e-cigarettes do not increase users’ risk of contracting dread disease such as cancer, we will certainly relook our policy and pricing model,” Coetzer concludes.

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Planning for the future starts with securing the present

Many South Africans are facing crippling financial difficulties, and growing lapse rates across the industry bear testimony to an increasingly beleaguered consumer.

Susan Gonnerman Head of Claims at Altrisk

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any may survive the cancellation of a life or critical illness policy, for a short period of time until they get back on their feet, without any negative repercussions. They are the very fortunate ones. But as life and circumstance would have it, things very often turn out tragically for the people who can least afford it. The test of your mettle as a professional financial adviser truly comes into play when your client is down and out, in financial despair and when you’re called upon to become almost evangelical about the importance of financial security for loved ones and family. It will be up to you to deal out the harshness of reality checks and show your client that luck has an awful habit of evaporating when you lean on it. When it comes to financial security, we all have tragedies to deal with, and hoping for the best is simply not the wit needed to deal with the problems of life. If you’re really committed to your role as a professional financial adviser, it is essential to find a way for your client to retain their cover when they cannot see the wood for the trees. The consequences of not convincing them may weigh heavily on you for many years to come. When independent financial planner Rafieq Saville met with his client, Aasim Khan, in June 2013, he had no inkling of the turn of events that would follow little more than seven months after this meeting. Forty-nine-year-old Khan had been retrenched and he and his wife, Samira, were going through a torrid financial time, trying to support their two very young children on his wife’s much smaller salary. They had cut back drastically on their standard of living, and soon they were culling their health and life cover as a last ditch means to try and make ends meet. With no cover in place, Saville was alarmed by the inherent risks and insisted on discussing this with his clients. The conversation was neither pleasant nor easy, at times the mood bordered on hostility. Khan was a proud man and had always been the provider for his family. Dealing with the

retrenchment and his inability to continue to provide for his family created enormous emotional and psychological stress. But with perseverance and commitment, he agreed to take out a new life policy with Altrisk in July 2013. At 49, he was a very fit man and a qualified football referee. He trained and exercised every day. He had the usual visits to the doctor for minor ailments but nothing stood out in his medical tests or family history to raise any flags. His cover was put in place without any loadings or exclusions. Khan came home one afternoon in January this year and mentioned that he was feeling a little tired and under the weather. His wife put it down to his earlier work out and the stress of their ongoing financial predicament. Right there, life took a terrible turn for the family. On his way upstairs to the bedroom, Khan collapsed, suffering a massive, fatal heart attack. In her early thirties and as a young widow with two small children, Khan’s wife was terrified of the predicament she faced raising her children on her own. She was deeply concerned that the life policy was just seven months old and was expecting all measure of complications. However, within three days, the policy paid out. Saville assisted her with the family’s future financial planning and securing her children’s education and quality of living. The loss and heartache of Khan’s sudden passing weighs heavily on this young family and no amount of money can provide solace for the trauma. But as Saville points out, it could have been an entirely different situation if they not had the heated but crucial conversation just seven months earlier. In Saville’s words: “You never look forward to receiving a client’s claim because the reasons for claiming are mostly unpleasant. But when you see that your work makes the world of difference to the people your client loved and left behind, it makes all of this worthwhile. As an adviser, I believe we have to fight hard to make our clients understand the need for risk cover. We cannot just stand back if a policy lapses and not interrogate the reasons why and find a way to work through it. I became a financial adviser because, first and foremost, I care about people and because I really find it astonishing how little most people know about looking after their money. I believe the world would be a much better place if we could teach people to become financial planning evangelists and show them that part of being able to plan for the future means being able to secure their present.” (This is a real-life case, the clients’ names have been changed to protect their privacy.)

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We’re your type of risk insurer.

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

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The benefit

of income Dominic Uys

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Income protection specialists FMI has recently announced the launch of its new Life benefit. In what is being hailed as a first for South Africa, the Life benefit will provide both a lump sum payment and an on-going income benefit on the death of the Life Insured, to ensure that beneficiaries are taken care of, as intended. RISKSA has a look at this departure from the traditional life cover model.


MI marketing actuary, Paul McKillen explains that there are many theories why income protection benefits might be better than lump sum benefits on death. “When it comes to disability many people buy a combination of lump sum benefits to settle on-off debts, and income protection benefits to protect their future income stream. The same logic should apply when people buy life cover. Part of the reason why people buy life cover is to protect their dependants in the event that they can no longer earn an income and support them into the future,” he says. “For instance, the client may want to provide for his spouse for a period of 20 or 30 years. That same client might also want to provide for his children to make sure they receive a sound education and are taken care of until they become financially independent, or reach a certain age. Therefore, part of the client’s life cover planning is preparation to replace the income stream he would have earned, for the benefit of his dependants and their different circumstances,” McKillen continues. FMI sees the disability and the life markets as being similar in terms of need. In both cases, the client is insuring against the risk of no longer being able to earn an income. While the cover may be for different risk events, the outcome is essentially the same.

Timing is everything While there have been a number of insurers who have offered some manner of income benefit in the past, FMI still considers its product unique in a life cover market that traditionally offers only lump sum cover. There are a number of reasons for the company’s claim. McKillen points out that FMI took advantage of a recent major change in the industry, “In the past, and up until March of next year, premiums on disability products have been tax-exempt while the life cover market had no such advantage. Any income benefit that was paid out for life cover was defined as an annuity and this benefit was taxed. The client didn't enjoy the advantage of any kind of premium deduction so essentially they were paying the full price premium and receiving less of the benefit,” he says. This made income-based life benefits taxinefficient. From March 2015, however, the proceeds from all life policies will pay out taxfree, regardless of whether they are lump sum or income benefits. “This means that you will get more value for your premium. That is the sort of paradigm shift that has opened up this market,” McKillen explains. The other reason that the rest of the life insurance industry may have been slow to adopt this approach is a more difficult one, according to McKillen. “The fact is that insurers

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don't have much data regarding longevity, which means that pricing a benefit that pays out an income for life is difficult. This may be part of the reason why insurers have shied away from this solution in the past,” says McKillen. In contrast, lump sums have been much easier to price. “Whenever your client dies, you pay the required amount, and your responsibility to the client is met without the need to factor in unknowns, like how long the client will live or how future economic factors will affect the ultimate cost of the benefit,” McKillen continues. “We are not the first to provide an income benefit, but what we have done is to expand that universe. What you could buy in the past was a very limited subset of the range of customisable options that we are now offering clients. In this regard, we are definitely ahead of the pack,” he says.

Choosing lump sum or income McKillen is quick to point out that lump sum and income protection cover are not mutually exclusive options. “It is still very much up to the needs of the individual client. Lump sum benefits will always be the best option if there are home loans or large liabilities to be settled. And there is no point in using an income benefit when you actually require a few million in cash right away,” he explains. However, when part of the client’s requirements is to provide for their spouse, children, or other dependants, an income benefit can be most beneficial. There

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are also certain business applications where it would be more beneficial for the business to receive continuing income rather than a lump sum, and an income benefit would be better suited to that. “I would say that there is a definite space on almost all our clients’ portfolios for some kind of an income benefit,” McKillen adds. The solution according to McKillen, will almost always be a combination of the two options.

The benefit of income McKillen argues that there are substantial advantages to taking out a life income policy. The first of these occurs when setting up the cover in the first place. “As soon as you try to use a lump sum to cover your future income liabilities, you need to calculate how much lump sum cover you are going to have to provide your beneficiaries with to meet those costs. This calculation requires numerous assumptions about future inflation, investment returns, and longevity,” he starts. With a monthly income benefit, the client decides how much they want their beneficiaries to receive every month. This can either be for a set time or for the rest of the beneficiaries’ lives. “We can work that out without introducing the uncertainty of converting that income stream into a lump sum amount,” McKillen adds. “Using a lump sum to provide for dependants also introduces risks to the beneficiaries at the time of the pay-out as they now need to reinvest that lump sum on the terms available in the market at the time.

“They will also have to manage longevity and inflation risks themselves. In effect, a lump sum pay out transfers risk from the insurer to the beneficiary. With an income benefit, upfront, there is a much more intuitive match between the client’s needs and the solution that the cover provides,” McKillen explains. According to McKillen, many clients do not understand the risks involved in life cover planning. “With good financial advice there is no doubt that these risks can be managed, but what we’re saying is that an income benefit presents a much lower risk and a much neater solution. Especially when opposed to rolling the dice with lump sum where the life insured takes on a number of serious risks,” he says. FMI’s Life product is still quite new, having only been introduced in April this year, “This is definitely what we call phase one, so we certainly have the intention to evolve this product annually going forward. We've already had some very good feedback from the market about options and features that are not included in our initial product but that are really good ideas. As time goes on, we will be able to better define our pricing models and I think, will be able to offer more options to the market. I cannot predict the future but I suspect that this product will evolve substantially over the next five years,” McKillen states. What is not likely to change, according to McKillen, is FMI’s philosophy on the subject. “We believe that if you face an income-based liability then you should be looking for an income-based solution,” he concludes.


Structuring an estate plan I

t is estimated that clients will spend 76 800 hours building their estate during their lifetime. If they don’t plan correctly, they could lose up to one quarter of their estate on unnecessary expenses and taxes. In addition, their dependents may never receive what is due to them.

Tiny Carroll, fiduciary specialist at Glacier by Sanlam

Estate planning is so much more than simply drawing up a will and planning for death. Estate planning can be described as the accumulation of wealth during a lifetime, the protection of that wealth against inflation, creditors, unnecessary taxes and expenses and finally the onward distribution of that wealth to the next and succeeding generations, in accordance with their wishes. Estate planning is not death planning, but life planning. This article looks at the six key steps in structuring an estate plan.

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Identification of goals

Planners often make the mistake of believing that estate planning is all about saving taxes. Estate planning must start with the evaluation of your clients’ goals and a determination of their wishes, for the devolution of their estate. Once these goals have been established, it is the task of the planner to structure the plan in such a way that they are able to pass as much of the clients’ estate as possible on to their beneficiaries by: • Protecting the estate against insolvency and inflation • Reducing any estate duty liability • Reducing capital gains tax liability • Reducing income tax liability • Ensuring that there is sufficient liquidity in the estate to meet estate expenses and settle liabilities • Ensuring the smooth and efficient administration of the deceased estate’


Evaluation of the external environment

One has to look at current legislation as well as consider anticipated changes and whether or not this will have a bearing on the circumstances.


Evaluation of the estate assets

The next step is to examine your clients’ estate assets. Is there sufficient liquidity in the estate to settle all debts, in the event of the clients’ death? Are there assets that should be channelled through a trust instead? It is also important to consider who the heirs are, what is being left to them, and how old they are.


The formulation of a strategy to achieve those goals

The strategy will involve putting the underlying structures in place to assist with the accumulation, preservation and distribution of assets. By setting up the necessary instruments, be it a correctly drafted will, or a complex structure involving multiple companies and trusts, you afford your client the opportunity to give effect to the plan. Without these structures the opportunity is lost.


The implementation of the strategy

It is critical that your clients understand each element of the plan. Only then should they proceed with its implementation. Be careful of estate planning that is designed only to sell a life policy. A life policy may be absolutely critical to provide liquidity in the estate, but it

is not an estate plan. Similarly, a document on its own is not enough, the client needs to be able to implement the plan and update it on a regular basis.


Ongoing evaluation and updating

An estate plan should ideally be updated on an annual basis to ascertain what steps can be taken to either implement, or improve on, the strategy. Minor changes may include changing the wording in the plan if, for example, the estate duty amount increases due to legislation. A major change could be as a result of an event such as a divorce or the death of a spouse or planned emigration. Your duty as a qualified estate planner is to listen to what your clients want to achieve, and advise them on the most financially effective way to do it, within the laws and taxes that apply to their financial activities.

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Premium patterns – help your client make the right choice One choice your client has to make when purchasing long-term insurance is the premium pattern. Many clients don’t realise that the premium pattern they choose will determine how their premiums change every year, and this can have a significant impact of their finances, especially as they age.


hile premium pattern choice is a significant insurance decision, it often does not get the attention it deserves. To help a client choose the right premium pattern for their needs, ask them two important questions:

Do you know that there are different premium patterns available? Your client needs to understand that there are three main types of insurance premium patterns: Nic Smit, Product Actuary at FMI

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• Level premium patterns: Every year the premium remains the same for as long as the cover remains the same. • Compulsory increases: Every year the premium increases by a compulsory percentage (this is usually 5per cent) for as

long as the cover remains the same. • Age rated: Every year the premium is adjusted to allow for the fact that the client is a year older. The change in premium is in proportion to how much more likely they are to claim at this older age. As such, age rated premiums don’t have as predictable a development as the other two premium patterns. For example, your client wants a quote for life cover. Premium pattern options include: • A level premium pattern, which costs R400 per month initially. The monthly premium will remain at R400 for as long as the cover remains the same. • A compulsory increase premium pattern of five per cent, which costs R300 per month initially. When the policy commences, the premium is R300, but every year it will increase by five per cent.

A comparison of premium pattern developments for an example policy

Consider this example: Jim is a 50 year old man, earning R50 000 per month. His financial adviser calculates that he needs R2 million critical illness cover. The adviser also recommends that he selects the option for his cover (note: not his premium) to increase by 5per cent every year in order for his benefits to keep pace with inflation. As expected, the cover on the age rated premium pattern is initially the cheapest option. But what about in the future? In the table below, we compare the different premium patterns in the first and fifteenth year. We can see both the monthly rand amount of the premium, and the premium as a percentage of his earnings before tax, (Consider the table below).

How do we choose a premium pattern that’s right for you? Clients need to understand that premium patterns are ultimately a decision around how they want to structure their payments for insurance cover. Basically, the more they pay now, the less they pay later.

• An age-rated premium pattern; When the policy commences the premium is R270. Every year, the premium increases in proportion to how much more likely the client is to have a claim as they age. While level premium patterns are usually more expensive when a policy commences, other premium patterns involve bigger increases over time.

When deciding on premium patterns, policyholders often choose compulsory increase or age-rated premiums in order to enjoy cheaper cover when the policy commences. However, as seen above, these premium patterns can quickly become unaffordable as the policy runs its course. For age-rated premiums, this problem is compounded as the client get older because their likelihood of having a claim increases exponentially. This means that the premium increases get steeper as the client ages. Choosing agerated premiums in order to save money when a policy commences, can ultimately lead to unaffordable premiums for those most likely to need the cover.

Premium in first year

So, while the age rated premium is initially 3.3per cent of his earnings, after 15 years his age rated premium would be 8.4per cent of his earnings, before he pays tax. The level premium pattern starts off more expensive, but the premium after 15 years is much more manageable. While 15 years might seem like a long time, in life insurance, it is not uncommon to have a policy for double that amount of time. And, the longer a policy like the one above runs, the bigger the gap between age rated and level premiums become.

Help your client make the right choice Before deciding on a premium pattern, clients should consider all their options (a projection of possible premiums over the lifetime of the policy is shown on every long-term insurance quote). Spend time talking to your client about the impact of increasing premiums over time, and if these increases are manageable. Decisionmaking based on a long-term view can help your client to choose the best premium pattern for their situation.

Premium in fifteenth year

Premium pattern

Rand amount

As a percentage of earnings

Rand amount

As a percentage of earnings

Level premium

R2 274


R6 372


5% Compulsory increase

R1 847


R8 429


Age rated

R1 634


R10 088


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It's your

mess... Dominic Uys

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ne of the most widely publicised case studies to come out of the year thus far, from a liability point of view at least, has been the debacle surrounding the landmark ruling against the director of Blue Platinum Ventures. Matome Maponya, the managing director of Blue Platinum Ventures, was found personally liable by the Naphuno Regional Court in Limpopo for environmental degradation caused by the mining company’s operations, outside Batlhabine village, near Tzaneen. The ruling has made Maponya the first director in South Africa to be held personally liable for a miningrelated environmental offence. He was given a five-year suspended sentence, on condition that the damaged area is rehabilitated within three months. The cost of rehabilitation was estimated by the court at R6.8 million.

Chemical spillages and pollution not only leave the perpetrators liable to the cost of clean-up, but also to legal action from the surrounding businesses and communities. The law is getting tougher on polluters and recent developments have prompted many policyholders to relook their liability insurance.

“The landmark ruling against the director of Blue Platinum Ventures is the strongest motivator in the need for increased responsibility and development at board level, for environmental, health and safety issues. It has certainly placed the spotlight on greater awareness for increased liability on directors for impairment caused by the company in which they act, and the impact of the company’s operations on the community and the environment,” Michele Ravenscroft, head of financial institutions and professional practices at Aon South Africa, says. “Strategies and action plans must be put in place to establish where improvements can be made to ensure compliance with environmental legislation across the organisation. This would apply to all statutory regulations and requirements in which the directors may be exposed, most common in the mining industry. This is further emphasised in the King Report III which places specific focus on joined sustainability reporting and the importance of integrating safety, health and environmental issues into the policies and procedures of the company and would need to be dealt with definitively at a board level,” Ravenscroft adds. According to Ravenscroft, communities and regulators are pushing harder that mines in particular have more at stake when it comes to environmental legislation. In terms of managing risk, all companies are subject to the costs and liabilities of environmental exposures, even those that are not directly involved with hazardous materials or activities. She opines that risk managers in virtually every industry must proactively analyse environmental risk issues to determine vulnerabilities. The case has sparked a significant amount of debate in both the legal and insurance circles and has become

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Risk management lacking


Ramolodi indicates that the landscape has become significantly more difficult from an 0 underwriting point of view. “We generally do not cover businesses that deal with storing or transporting of highly hazardous chemicals anymore. The risk in that arena has become too big, because when things go bad, they usually go very bad. I do think that there is very limited capacity for high-hazard businesses at the moment and there is a lot of underinsurance around that in the marketplace right now. Premiums have also been on a drastic increase in the past two years,” Ramolodi says. “We are now starting to see a few specialist underwriters moving into that field now, and they certainly have some space to grow in this arena,” he adds. “When we do underwrite liability cover for businesses that may pose an environmental or pollution risk, we have a partner company that conducts a survey of the company to assess their exposure and check on the proper protocols that need to be put into place at the operation, before we can cover it,” Ramolodi continues. However, he points out that in the majority of the cases, proper risk management measures are conspicuously absent from the day-to-day operation of the business. “There are exposure risks that need to be looked at seriously. Among these is the evaporative risk relating to fumes, uploading and offloading spillage and a few others. Static electricity build-up around storage containers and the grade of tools that the operation uses also need to be looked at, to mitigate fire risks. Unfortunately we often find that they do not have procedures and measures in place,” he says.

one of the first points mentioned in many liability conferences. A case could also be made for liability insurance from an incident last year, in which an oil spill on the N3 toll road in KwaZuluNatal, causing a section of road to be shut down for clean-up. Madikane Ramolodi, underwriter for general liability at Camargue, tells RISKSA that in this instance, the trucking company was held liable for the spillage, and SANRAL instituted a claim against the company for pure financial loss during the clean-up. Add to this, the company’s responsibility

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to the clean-up costs themselves and the rising cost of doing business with possible pollutants. “Similarly, if your chemical operation is located next to a golf course and there is a spillage onto their premises, the situation can become quite complex, as we’ve also seen from a real life case study. Not only will you have the environmental liability and possible damages and rehabilitation that will need to be taken care of on the conservation side of things, but you are also liable for business interruption costs on behalf of the golf course for the entire time that the course will be out of operation,” he adds.

In terms of intermediaries, Ramolodi points out that one of the most common mistakes taking place in this field today, is not even asking for pollution liability. “You get a lot of brokers who assume that pollution liability is automatically included with their company’s public liability however pollution liability is often offered as completely separate cover. As an underwriter, I can leave out pollution cover when I feel a client is high-risk, and many brokers neglect to follow that up,” he states. The amount of environmental regulation in South Africa is increasing, and compliance is becoming ever more onerous. Environmental issue are becoming more of a minefield for every business sector and unticked boxes when it comes to taking out liability cover could mean the difference between survival and failure.

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Success does not come from eliminating risk.



We help you balance your strengths against the risks that come with growth.

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MARSH AFRICA Africa’s pre-eminent Insurance Broker and Risk Advisor | +27 11 060 7100 An authorised financial services provider | FSB/FSP: 8414



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marine cargo

Top 10 insurance risks for

As early as the 12th century, transportation of goods between ports around the world ran the risk of falling prey to the perils of piracy and the untameable spirit of the high seas. As a result, transporters had to insure their cargo, making marine insurance one of the first well-developed branches of insurance. It was not until the 20th century though that comprehensive cover against virtually all risks was introduced.

Naomi du Plessis


he volume of exports is growing at a rapid pace, which is not only good for shipping companies and country’s economy, but also for the marine insurance industry. Even though the risks involved in modern marine cargo transportation are far less than those experienced by our seafaring forefathers, the possible threats and risks experienced are still daily concerns in both the shipping and insurance industries.

The risks Rain on your parade: In life, there are many situations that are out of our control. The same could be said for the weather in the insurance sector. Acts of God, as we like to call them, make up a significant percentage of damage

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the amount of containers they carry. This is particularly the case if an accident were to happen in a remote area.

brand clothing or shoes. This is followed by electronic goods such as televisions, as well as cellphones”, said Missy Good, marine account executive at Aon South Africa. Land ahoy: Grounding or stranding account for 25 per cent of cargo losses, according to the IUMI. This in turn affects the delivery time of cargo, and in cases where fresh produce is involved, will affect their sell-by date. and total loss experienced in marine cargo transportation. According to the International Union of Marine Insurance (IUMI) 2014 Spring Statistics, weather-related incidents represented almost 50 per cent of the total losses between 2009 and 2013. A recent increase in rogue waves has not only resulted in the damage of vessels, but also hundreds of containers being washed overboard annually. Global warming is thought to be a contributor to this, as weather-related damage and loss is becoming more common. Unseaworthy vessels: The neglect of regular and significant maintenance of fleets and vessels often results in breakdowns and stranding. Old tonnage is also an added risk because of their age. According to the IUMI, more than 60 per cent of the dry cargo ships lost during the period between 2009 and 2013 were more than 25 years old, which demonstrated the risk that old and neglected vessels present.

Water damage: Not only does water damage include seawater entering the ship or container, but it also includes mildew odour on items such as clothing, due to the presence of moisture in the container from a small leak. Good adds that ordinary leakage, mould and infestation are often excluded under the marine cargo policy. Non-delivery and delay: “Marine cargo insurance covers only physical loss or damage to the cargo, therefore any subsequent loss such as loss of market or delay will not be covered in terms of the policy. In some instances though, some of the elements might be written back into the policy. For example, the Institute Frozen Food Extension Clause will cover damage to fresh produce in the event the vessel is delayed,” says Good.

Pillage and plunder: To the lay ear, piracy sounds like a problem of yesteryear, but there is still a high frequency of theft and criminal activity within marine cargo transportation. This will largely depend on the type of cargo that the vessel is carrying, which includes items that are in high demand or that are easily sold on the black market.

Handle with care: Breakage or damage due to bad handling and packing is a significant issue within cargo safety. “It is very difficult to put a percentage to poor handling. However, packing or preparation of subject matter is crucial, and goods insured must be packed to withstand the ordinary incidents of the insured transit,” notes Good on the significance of correct packing and handling. Damage due to poor temperature control is also an issue with regard to the preservation of frozen foods.

“Food, drink and clothing are targeted the most in South Africa, especially higher value items such as alcohol, energy drinks and

Vessel size: Salvage from modern mega ships might require unprecedented efforts and complex operations due to their size, and

Fired up: Fire and explosions on board cargo vessels are one of the main risks that marine insurance covers, according to Good. This may be due to electrical malfunctions, lightning or petrol leaks. General average: General average is an ancient concept, but is still one of the main risks that marine insurance covers as these sacrifices or jettisons are very common.

Thoughts for the broker An all-risk cargo policy, which covers the most common marine risks, is the go-to policy for insurers, but it is up to the broker to make the client aware of the exclusions that may not fall under all-risk, such as common losses. The broker, as well as the client, needs to ensure that they are fully aware of these possible risks and to make sure they are properly covered in an additional clause. It is also vital that the broker knows and understands the needs of the client in order to assist them with obtaining the best tailor-made policy for their business needs, whether it be an annual policy or shipment by shipment policy. “It is the broker’s responsibility to highlight to the client exactly what their cover entails, and to ensure they are adequately covered. We list the exclusions under the marine policy in the prerenewal documents we send to all our clients, and discuss these exclusions with the client at renewal. Some of the risks, such as container liability and credit risk, are available in the insurance market, and we will assist the client in obtaining quotations, or direct them to the right department,” says Good. By examining past claims and case studies, brokers are able to learn how to better improve their risk engineering, which in turn will benefit the customer. Through understanding risk engineering, the broker is enabling informed decision-making regarding measuring risk improvements, and is able to better service the client’s needs.

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shipwrecks in the 21st century Luka Vracar

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The arduous process of salvaging a shipwreck is not without increasing costs and evolving complexities that continue to affect the framework of maritime insurance. Last year Lloyd’s of London published a report detailing the rise of costs associated with maritime salvage operations. The impact of shipwrecks in the 21st century remains a significant one.


n August 2013, a capesize bulk carrier lost all engine power during nine meter swells shortly after leaving the Richards Bay Coal Terminal for China. Left to the adverse weather conditions, the MV Smart ran aground on a shallow sandbar. Thirty minutes later she split into two and took on water until she was partially sunk. The SA Maritime Safety Authority (SAMSA) has described the incident as the largest and most challenging wreck removal operations in South African history. The salvage operation began immediately. South African company Subtech announced that, in a joint venture with Smit International, they successfully removed 2 000 tons of fuel in adverse conditions. On 7 October, the salvage team successfully raised the stern before towing it to sea, where it was deliberately sunk in deep water (scuttled). Commercial shipping is usually covered against most of the loss which might befall the venture. Cargo that is carried and damage to hull and machinery are covered by insurance companies, while third party liability is usually covered by a membership to a Protection and Indemnity Club (P&I Club). Lloyd’s indicates that wreck removal is one of the liabilities covered by P&I Clubs, and this includes salvage as well as the removal of fuel and oil pollution. Furthermore, the 13 principal P&I Clubs make up the International Group (IG), and they cover 90 per cent of the oceans’ ships. For the benefit of the shipowners, all the IG clubs pool their larger risks, and losses are shared between the participating clubs. Should a single claim exceed $70 million, reinsurance can be obtained from the insurance market, and this includes collective overspill up to $3.07 billion. Lloyd’s established the following as the reasons for the increasing costs faced by insurers in the case of shipwrecks: location; contractual arrangements; cargo recovery from container ships that are consistently increasing in size; and the nature of bunker fuel removal operations. Most importantly, the pressure and demands faced from local government authorities and public is leading to costlier operations as it may determine or request certain operational methodologies or results – which are not always the easier or most affordable options.

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surrounding environment is not damaged. Lloyd’s reported that between 1994 and 2011 International Salvage Union members had salved just over 17 million tons of potential pollutants from the sea. Crude oil and bunker fuel make up the majority of the potential pollutants, and these are the most damaging in the event of a spill. However, coal, ore, refined chemicals and physical damage to local habitats at the place of the wreck also complicate salvage and removal. Bunker fuel (the ship’s own fuel) is the most common pollution hazard during a salvage operation, and its removal is a significant undertaking. This is covered by insurance and usually the first major cost to be accrued when salvaging a wreck. To clearly illustrate the rising costs associated with the clearing of a wreck, Lloyd’s further reports that the typical bunker removal operation in the early 2000s cost between $1 million and $4 million, whereas that cost presently could be up to $20 million, particularly if the salvage is under a daily rate contract. Removing the bunkers from the Costa Concordia cost around $25 million. Increasing ship size affects the ability of the salvage contractors to handle wrecks of the largest vessels, as they produce more wreckage and carry more cargo. The removal of cargo is usually slow and, consequently, expensive. However, this is unlikely to change as the size of container ships will continue to grow. Container ships are the fastest growing ships. In fact, Lloyd’s reports that the average size of a container ship has tripled. In 2013, the largest container ship had a capacity to carry 16 000 twenty-foot equivalent units (TEU). This is up from 5 000 teu in the 1990s.

Increasing expenses Shipwrecks are cleared under contracts by salvage companies usually that are contracted after bidding for an offered tender. However, this process could have detrimental effect on the contractor should they not be awarded bid, as the preparation and survey for the bid itself is extremely expensive. The cost to insurers rises when the contract is given under a daily rate for the personnel, vessels, and equipment needed – as opposed to a lump sum. The location of the salvage operation can impact the operational cost in a number of ways. Firstly, jurisdiction of the shore-based

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authority with responsibility over the wreck site can influence the methodology used for the salvage operation. And while based on the global position of the wreck, all of the ideal or necessary equipment might not be available. According to Lloyd’s, most heavy-lifting equipment tends to be concentrated in Europe, Singapore, North East Chine, Japan and the Gulf of Mexico. Furthermore, local weather conditions, reefs and the nature of the ground a wreck lies on all contribute to the complexity of the operation. Environmental factors have significant influence on the salvage operators to ensure that no toxic pollutants are released and the

Matthias Galle from the Germanischer Lloyd classification society has indicated that there is no reason why ships of more than 20 000 teu should not be constructed. Lloyd’s report emphasises this fact by indicating that MSC Napoli and the Rena, some of the costliest wreck removal operations in recent years, were not even fully laden, with 2 300 teu and 1 300 teu respectively. Still, the extraction of containers from both wrecks took months to clear. While salvaging a wreck might take months, or even years in particularly difficult circumstances, pressure from the media, public opinion, nongovernmental organisations, and the local government influences the operation. In their report Lloyds makes use of the Costa Concordia example. While it may have been cheaper and quicker to cut up the Costa Concordia as it laid where

she was grounded, local authorities and environmental concerns ordered that the ship be removed in one piece.

The Lloyd’s report indicates that the general rise of reinsurance has been 8.5 per cent across the clubs.

In the case of the MV Smart, the entire operation is being supervised by the South African Maritime Safety Authority, the Department of Environmental Affairs, and the Richards Bay Port Authority. The decision to have the wreck refloated and scuttled in deep waters at sea is somewhat old fashioned. More commonly, government authorities can request that the wreckage must be safely transported to recycling facilities.

Shipping is a demanding industry, vital to the global economy. While shipowners are enjoying record levels of capacity by the insurance sphere, should the costs of shipwreck salvage or removal continue to rise due to an increase of severe incidence, such as the ongoing salvage of the Costa Concordia (which has cost $760 million to date), insurance and reinsurance capacity will diminish.

Negotiating capacity The rising costs of shipwreck salvage and/ or removal affects the insurance industry as it increases the likelihood that the $70 million IG pool will be exceeded and reinsurance cover will be needed. Since insurance companies are also responsible for the hull and machinery of the shipwreck, the cost of reinsurance will rise. This means that the premiums will rise and shipowners will increase their operating costs.

If the insurance companies have to lift their premiums accordingly, shipowners will face critical challenges, especially since they already have to negotiate lowered rates, rising fuel costs, vessel depreciation, increased regulatory pressure, and reduced access to funding.

Common interests Earlier this year the third phase of the MV Smart salvage at Richards Bay began after a tender was put out for the removal of 147 650 tons

of coal from the remaining middle and bow sections of the ship. SAMSA announced that American company Titan Salvage won the tender and subcontracted Subtech to remove the coal. Once the coal is removed, the bow will be refloated and towed out to sea where it will be scuttled. The middle section which is completely submerged will be cut into pieces and removed. The salvage is expected to be completed in November 2015. In order to cut costs, Lloyd’s emphasises collaboration between national government, relevant authorities, shipowners, insurers and relevant contractors to ensure fair and consistent wreck removal across all territories, with minimal political pressure; reducing the gap between the increasing size of ships and the equipment required to handle them; encouraging contractors and P&I Clubs to work together to ensure the reduced costs of bidding, and that the contractor that receives the tender can afford participating in the operation.

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Closing the gap left by unrest

Willis recently launched a new facility to combine all political violence, terrorism and war risks under a single policy, closing an important gap in the traditional cover model. Dominic Uys


he on-going crisis in the Ukraine is once again underlining the risks that companies face when transporting cargo in and around regions where political stability is volatile. The uncertainty surrounding the possibility of a civil war or violent protests in the region have rapidly increased the country’s risk factor and may well leave many companies exposed. In the last few years, there have been around $100 million Dollars in unrecovered cargo losses around the globe, in many cases, as a result of political violence. According to Willis Group Holdings, a significant gap exists in coverage for cargo risks and standard all-risks cargo insurance policies may not respond to losses arising from various types of violent unrest. The company recently pointed out that traditional cargo policies generally exclude losses due to civil war, insurrection, rebellion, derelict weapons of war for land transits and storage, as well as terrorism for goods in store.

Political violence policies, on the other hand, typically exclude transit exposures, looting and derelict weapons of war, and tend to cover fixed assets rather than stock. Finally, waron-land policies exclude goods in store and transits by sea or air. In addition, further issues become clear when it is taken into account that each policy has a different definition of what constitutes war, insurrection or terrorism. To address this shortfall, Willis developed its Undercover facility, launched in mid-April of this year, which protects companies against all their cargo exposures, regardless of whether that cargo is on land or at sea, in transit or in store. The intent is to protect cargo both in transit (over sea or land) and in store, against all types of political violence, terrorism and war risks under a single policy. Importantly, the company also managed to reduce premium costs by removing duplication of cover. The new product has received support from a

panel of leading London market insurers and Willis has stated that there is currently no other such facility available in the market. “It is apparent that many companies misunderstand their cover. They think they’re protected when in fact they are not. With the unrest currently sweeping across the world it can be difficult for companies to be assured that they have the right cover in place, particularly when the definition of violent acts is open to interpretation. The violence in Syria, for example, has been inconsistently reported as a civil war, a rebellion and an insurrection. And yet, how these events are defined, has a critical bearing on whether or not insurance policies will respond,” Trevor McGarry, executive director of Willis’s marine insurance business says. “With that in mind, and given the extraordinary volume of losses that are not recoverable under traditional cargo insurance policies, Willis created Undercover.”

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13.08.12 09:18


ILAB lives on Dominic Uys

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It has recently been announced that the Insurance Laws Amendment Bill had lapsed when parliament’s term came to an end in May. The insurance sector can however, still expect to see many of the Bill’s proposed changes taking place in the near future.


he Insurance Laws Amendment Bill (ILAB), which was tabled before parliament in June 2013, contained a number of proposed amendments to the Long-term Insurance Act (LTIA) and the Short-term Insurance Act (STIA). The intention of the bill was to address regulatory gaps in accordance with new international regulations to improve stability, and reduce risks in the sector. The proposed amendments included: the introduction of insurance group supervision; strengthening the governance, risk management and internal controls of insurers; and addressing regulatory gaps in South Africa’s adherence to international and financial regulatory principles and standards. However, at the end of April, Minister of Finance, Pravin Gordhan requested that the Insurance Laws Amendment Bill (ILAB) be withdrawn, stating that it was about to lapse since it had not been passed in time. That said, Johan Henning, partner and head of insurance at Webber Wentzel, tells RISKSA that the provisions in ILAB may have been taken off the table but, contrary to what many people now think, the most vital parts of the bill have now found other avenues into the insurance industry.

“To start, the registrar can now issue undesirable business practice notices, which it has already started doing. Long-term insurers also now only need the approval of the registrar when selling part of their portfolio, instead of having to seek court approval like before,” Henning says. The registrar is now also able to issue policyholder protection rules, as well as to inform insurance companies when they do not comply with the Act. “The way that he will deal with directive is now different because it seems, based on our interpretation, that it is not merely a question that he will interpret existing legislation. The registrar could assess a situation and tell an insurer to stop a certain practice if he feels customers are disadvantaged. This could create some interesting constitutional issues that can be debated,” he adds.

Twin Peaks and group supervision The first draft of the Financial Sector Regulation Bill (also called the Twin Peaks Bill) was published for comment in December 2013. Treasury announced in May that a revised second draft Twin Peaks Bill would be published after the elections.

Powers of the registrar

At the time of writing, the second draft had not been made available yet, but Gordhan stated that a formal framework for another of the ILAB amendments, insurance group supervision, would be added to the Twin Peaks process. The effective date of implementation of the formal framework for group-wide supervision is expected to be announced later in this year.

The first of the changes that the industry needs to start taking notice of, according to Henning, came into effect in February of this year, as part of the Financial Services Laws General Amendment Act. These relate to granting significant new powers of the registrar.

“We do quite a lot of work with mergers where insurance groups are involved and the Financial Services Board (FSB) is already starting to implement some of the group supervision principles. The implementation of further group

“ILAB is based on international insurance core principles and many of the provisions in it are being written into, among others, the Twin Peaks Bill, which actually makes a lot of sense,” Henning starts.

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supervision laws will have a substantial impact on these groups,” Henning says. “What will happen is that insurance groups or conglomerates are going to require a non-operating holding company in South Africa. This entity will serve as the controlling company of the group. Most of the laws and provisions that apply to the insurance companies will now also apply to that nonoperating holding company,” he continues. Henning states that the FSB will then look at the solvency of that group, including the controlling company, which must have enough capital to ensure that the various entities in that group (including banks and retailers) is solvent. If the holding company does not adhere to that requirement, the FSB will be able to take steps against the group, similar to the ones that it would have been able to take against the insurance company. “It also places substantial duties on the board of the insurer. The board is responsible for both the insurer and the policyholder. So if there is a change within that insurance

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group, like a merger or an acquisition or sale of insurers in their group, the board of the insurer will have to consider what the impact of this action will be on their policyholders and if they now have a different holding company, whether it will put the policyholder in a better or worse position,” he says. The FSB will also start considering transactions between the different entities within the insurance group to determine whether those create risks for the insurer. “That can also impact on the solvency of the insurer because the FSB can look at the type of agreements that it has with other types of entities’ such as banks. The FSB could then potentially decide that a bank assurance contract between the insurer and a bank for instance, may increase the insurer’s risks, and then require said insurer to hold more capital.” Henning outlines two more significant changes that will be brought to the industry. A major point of change, according to him will be around outsourcing. The issuing of Directive 159 in last year, outlined a number of principles for outsourcing in the insurance industry and further changes are expected.

Treasury states that the proposed amendment to the Financial Advisory and Intermediary Services Act (FIAS) which seeks to bring product suppliers rendering intermediary services within the ambit of the FAIS Act, may be given effect through either a consequential amendment, in a schedule to be published in the revised second draft Twin Peaks Bill or through a separate Financial Services Omnibus Bill. “Another one that is quite interesting relates to when one acquires control in a group shareholder, for which one will need FSB approval. Likewise, if there are changes in control of the group’s holding company, similar FSB approvals will be required. So it is very clear that the FSB will now be regulating the entire group and not just the insurers within that group,” Henning concludes. While the industry still awaits further announcements later in the year, Gordhan has stated that Treasury has set itself a deadline of 1 January 2015, by which time the critical amendments should come into effect. Henning, for one, anticipates that this topic will spark some interesting debate in the coming months.

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CFOs face increased liability risk Neesa Moodley-Isaacs

Being a CFO has traditionally been regarded as a top-end job. But changes in legislation mean that CFOs now face personal liability under the Companies Act, significantly decreasing the attractiveness of the job. RISKSA examines the issues.

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he Companies Act of 2008, the Consumer Protection Act and the Protection of Personal Information Bill have all raised the bar for chief financial officers in that the risk of personal litigation against company directors and officers is more prevalent than ever before. The Companies Act, which now governs all corporate entities in South Africa, adopts a stakeholder approach as opposed to a shareholder approach, with the term ‘stakeholder’ now encompassing a much wider group including, among others, employees, creditors and the environment. One of the key issues raised by the new act is that of director liability and the perception that directors now have greater personal liability. “The new Companies Act has, to a large extent, decriminalised transgressions, but it has also codified the old common-law duties of directors,” says Larey van der Westhuizen, managing director of Statucor, the company secretarial and corporate governance arm of the BDO Group. “Their duty is now towards the company, with most of their liabilities being for losses that the company has suffered. The new act has also introduced solvency and liquidity tests as a replacement for the old capital maintenance rule.” Van der Westhuizen says there is a need to determine who is a prescribed officer in an organisation. This is a new term introduced by the act, which applies to people who are in executive positions, but who are not directors, yet have the same duties and liabilities as directors.

Increase in reported fraud According to the third KPMG Fraud Barometer study, South Africa has the highest number of reported fraud cases on the African continent. The study shows that there has been an increase in the number of fraud cases being reported. “In South Africa, foreign investors and South African companies investing on the African continent are increasingly conscious of multinational and national anti-fraud

legislation. They understand that not playing by the rules can have a significant impact on market capitalisation and are therefore more accountable when it comes to fraud and corruption,” says Petrus Marais, KPMG’s global leader of forensics. “We also see a number of enforcement agencies, such as the National Prosecuting Authority of South Africa, working hard to bring perpetrators to justice. Prosecution is increasing but still remains low compared to reported cases. We do note improvement, but also understand that it may take more time.”

Catch 22 Tertia Barrett, head of sales and marketing at CQS Technology Holdings, says fraud is not limited to larger corporations but has also mushroomed in smaller companies. “The Companies Act changed the requirements stating which companies need to be audited. So, smaller companies no longer need to be audited. Although this move was intended to reduce the cost of doing business in South Africa, it has opened the door for fraudulent activity,” she says. “A chief financial officer (CFO) can now be held personally liable for fraud because he signs off on all financial statements. So, it’s a catch 22 situation – not all companies need to be audited and the CFO now risks personal liability,” Barrett explains. Barrett says accountancy training is still too basic with insufficient focus on internal auditing and fraud prevention tactics. The South African Institute of Chartered Accountants (SAICA) has stepped in to provide training. “Reducing the risk of fraud outweighs the cost of the training,” Barrett says.

Regulation and compliance a concern Research by accounting firm, Ernst and Young, shows that the percentage of board members with a finance background has increased significantly over the past 12 years. In 2002, for example, just eight per cent of board members at some of the world’s largest companies were either current or former

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CFOs. By 2012, that figure had climbed to 12 per cent. In 2002, just 19 per cent of audit committee chairs were experienced CFOs. By 2012, this had risen to 41 per cent. One of the main reasons for the change is changing regulatory requirements in different countries. Graham Stockoe, Ernst and Young’s Africa Private Equity leader, says: “For CFOs of African companies, we expect more focus on regulation and compliance as this area rapidly evolves with continued focus on how the CFO and their financial team can add value to investment professionals and the firm’s portfolio companies. However, Ernst and Young found that 45 per cent of CFOs across the world put regulation and compliance at the top of their list of concerns for 2014. They (CFO) also said the increased regulatory demands had put a strain on their firms’ resources and had limited their ability to focus on key priorities. As a result of regulatory changes, 83 per cent of CFOs expect to see an increase in costs.

Are CCs on the way out? The act raises the question whether there is any benefit in keeping close corporations (CC). “I don’t think there is any benefit in keeping CCs and my advice would be to convert them to private companies,” Van der Westhuizen says. “The same rules apply to both, but in a CC all members have the liabilities of a director; it is not possible to be an owner in a CC without also being regarded as involved in management. A company provides that opportunity by separating shareholders from directors. Also, a CC always has 100 per cent of interest issued, and the only way to acquire an interest in an established CC is by acquiring it from an existing member. A company can issue more shares and raise capital by doing so.” On the subject of the Memorandum of Incorporation, Van der Westhuizen explained the importance of preparing this correctly. “This is effectively the document in which a company tailor-makes the corporate governance principles and rules that will apply to them by altering the default terms of the act capable of amendment. In doing so a company makes use of the opportunities and benefits provided by the new act ensuring that it suits their specific needs. It is essential that this document is precise and that it includes the correct terminology to avoid problems down the line.”

Solutions Barrett says purpose-written software can provide a solution. “Software with a built-in audit trail and drill-down functionality can allow a CFO to interrogate every figure on a financial statement,” she says. Liability insurance can indemnify directors and officers against claims

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for which they are legally liable, as a result of an innocent act, omission or error in judgment. This type of insurance can cover CFOs’ costs in the following instances: Civil or criminal defence costs Legal representation expenses • Damages • Judgments • Settlements • A written demand (whether or not for monetary compensation) • A formal administrative or regulatory proceeding or an arbitration proceeding • Misrepresentation or mismanagement • Breach of fiduciary duty • Negligence • Unfair trade practices • Consumer protection contraventions • Breach of franchise agreements • Copyright, patent or trademark infringement • Wrongful interference with a contract • Arbitration services incurred in attempting to resolve a dispute that could potentially give rise to a claim.

Case study In South Africa, the criminal prosecution of high-profile business personalities is relatively rare. However, on 1 October 2013, the Supreme Court of Appeal ruled that a former company director, Jeff Levenstein, should serve eight years imprisonment. Levenstein, a qualified accountant and auditor, had appealed against his conviction in the South Gauteng High Court on several counts, including common law fraud and breaches of the now-repealed Companies Act 1973.
 His appeal was partially successful, with his conviction on some counts being set aside, and on other counts confirmed.
However, the overall effective sentence was eight years’ imprisonment, which was reduced from the initial 15year imprisonment sentence. 

 Levenstein was the executive director of Regal Treasury Private Bank, which collapsed in 2001. The company’s problems began in February 2000, when the auditors, Ernst and Young, raised questions regarding the valuation of an unlisted investment.
The valuation was published in Regal’s financial statements and then corrected a few days later. In February 2004, Regal was placed into final liquidation by which time Levenstein had retired. The asset valuation that had been called into question was an amount derived from a valuation model based on potential rather than actual income. This flew in the face of Generally Accepted Accounting Standards (GAAP) and Ernst and Young declined to approve the value determined by Regal.

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The difference between the two methods of valuation was substantial; Regal was pushing for a valuation of branding income of R55 million for the year, but Ernst and Young was not prepared to go beyond R5.5 million. 

 Levenstein instructed the company’s chief financial officer to redraft the financial statements so that the value of the shareholding in the branding companies was reflected as R5.5 million. However, in order to inflate Regal’s apparent profits, Levenstein also instructed the CFO to defer R6 million in expenditure for the year and to prepare the final financial reports on that basis. 

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97 7

Zombie fallout


Dominic Uys

Recent reports of investigations into the scourge of Zombie retirement funds had UK investors in a mass panic. The fallout from the news may have done the insurance industry more harm than good. 108 98 8


t the end of May this year, United Kingdom regulatory body, the Financial Conduct Authority (FCA) leaked to local media that it would be looking into around 30 million pensions, endowments, investment bonds and life insurance policies sold by doorstep salesmen, between the 1970s and 2000, and worth around £150 billion (R2.6 billion). The days following the announcement were turbulent for the FCA and the insurance industry alike. The intended investigation would explore whether customers were being exploited by closed retirement funds, commonly called ‘Zombie funds’. The announcement sparked a media frenzy that may have harmed the regulator’s efforts to better the industry. While closed funds in themselves are usually above board, the FCA’s initial statement pointed out that some insurers in the industry had been exploiting the policyholders who invested into these funds, charging high fees and extortionate exit penalties for substandard service and inflexible products. A number of prominent companies own some of these closed funds, including Admin Re, a subsidiary of Swiss Re. The FCA review, planned to start at the end of this year, would also question whether or not insurers were using their returns from the zombie funds to cover other operational costs within their businesses. UK newspaper, The Telegraph reported on this development on the morning of 28 March 2014 and, armed with an eyecatching headline, stated that the industry watchdog had promised clients of these funds a potentially free exit. This was several days before the regulator was ready to present a detailed business plan for its investigation. The FCA confirmed the information only six hours later, clarifying that the regulator’s investigation would not be as wide-ranging as the initial report seemed to indicate. Importantly, the FCA also declared that modern rules would not be imposed upon these funds retrospectively.

In reaction the Association of British Insurers (ABI) made a public call for the resignation of the head of the FCA, Martin Wheatley, also appealing to Chancellor of the Exchequer, George Osborne to intervene. The ABI accused the regulator of handling its announcement in a confusing and fuddled manner. John Griffith-Jones, chairman of the FCA, responded in a statement that the regulatory body would set up an independent inquiry into how the announcement was handled, admitting that what had transpired was not the FCA’s finest hour. The response from Griffith-Jones seemed to placate investors and prompt at least some recovery in the stock market.

Life insurers under fire In spite of the stock market recovery, UK’s life insurers have still been nursing substantial losses. A further announcement regarding the industry also did not help to make the sector any less uncertain for investors. The UK government also unveiled plans in April, to establish new price controls on workplace pensions. Naturally, this is expected to hit pension providers’ profits and the government has been publicly accused by a number of industry insiders of waging a war on profit margins. However, in spite of a tough month for the industry, a number of long-term investors insisted that they were standing by the insurance companies. “Insurance is a sector under pressure, but it is not time to be too hasty and cut positions,” says one fund manager. This view is echoed by a fund manager who is a top-20 shareholder in L&G. “We are looking at the insurance sector closely, but we are not abandoning our stake or selling down. The reforms on annuities will take

years, and the investigation by the FCA does look to have been somewhat hyped in the press,” he says.

The investigation continues While the FCA promised to conduct an internal investigation, the ABI and other stakeholders criticised the undertaking, stating that the authority cannot be left to merely investigate itself. As a result, law firm Clifford Chance has been brought in to run the investigation. In addition, the regulator also confirmed it had appointed a committee of non-executive FCA board members to oversee the law firm’s independent review. As for the zombie fund review, the regulator has remained quiet on how it plans to proceed with its inquiry. For now the official plan is for the FCA to begin its supervisory work around October of this year, looking at companies and practices, as opposed to reviewing individual policies. The FCA has also made a call to consumers who have policies languishing in these ancient funds, pointing out that it may be worth digging out paperwork to find out which firms are looking after their money, as well as confirming how much they are paying in fees. The regulator has said that the zombie fund review will not trigger repayments of premiums. And since the FCA has also taken applying current standards retrospectively off the table, it is unlikely that policyholders will get back years’ worth of fees. However, if the review does discover that consumers have lost out significantly due to certain practices or products, it is possible that, ultimately, firms could be forced to reimburse affected policyholders.

The FCA’s clarification stated that the investigation would be conducted by external lawyers. “This is not a review of the sales practices for these legacy customers and we are not looking at applying current standards retrospectively – for example, on exit charges,” the regulator said. The FCA clarification however, came too late to prevent insurers from suffering a combined loss of around £2.4 billion (R41.5 billion) loss as investors on the London Stock Exchange hastily dumped their insurance shares.

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Melissa Wentzel

As a financial adviser, your most valuable asset is time. RISKSA chats to experienced financial advisers, for insights on how to structure your day and your time to maximise productivity and improve your business. 100 8 4

Keeping it simple The biggest time-waster for new advisers, according to McWalter, is that they attempt to reinvent the wheel. The general thought process of young advisers coming into the industry is that they can do it better, smarter or faster. These days there are innumerable tools to help an adviser do their job and it is too easy for a new adviser to look so ‘busy’ crafting beautiful 20-page financial plans or designing tech-savvy spreadsheets and applications that they forget the only way to succeed in this industry is to be in front of people and not computer screens. “Don’t become busy with the wrong things,” he warns. David Stein of Stein Financial Services is a qualified chartered accountant and has represented Liberty Life as an adviser for the past 34 years. He can attest to the success of keeping it simple. When he sits down with clients for the first time, he takes down their information manually, not on a laptop or tablet. When he comes back to present their shortfalls and his recommendations, all he needs is two to three pages. This is an executive adviser who is not only top of the Liberty Life Cape Town Agency, but also ranked third in the country in Liberty Life’s agency division for 2013 because of his productivity. He is an achiever group executive consultant and has achieved executive consultant status every year since he joined the industry in 1980. An even more telling indicator of his success is the fact that two of his three sons, Brent and Ryan Stein, followed in their father’s footsteps and are now financial advisers working with him at Stein Financial Services. During the time Stein has been in the longterm insurance industry, the products may have been moulded and modified, but the needs of the client have not changed. As he puts it, “You sell the sizzle, not the steak.”


his is a practice, not a job, notes Andrew McWalter, a financial adviser for Liberty Life with 21 years’ experience in the long-term insurance industry. McWalter is qualified as a Certified Financial Planner (CFP) and has received the professional designation of executive consultant. “What you put in you get out,” he adds. An experienced adviser with a track record of success will naturally have an established structure for daily productivity, but how does an adviser who is new to the industry decide exactly how and where to invest their time to get the greatest return?

He adds that as long as a prospect has all of three things: a need, insurability and affordability, you focus on and sell to that need. A new adviser should be wary of becoming fixated on information and rather do what an adviser is meant to be doing: see the people and sell to the need.

The law of the vital few The Pareto Principle (also known as the 80-20 rule) dictates that, in many cases, roughly 80 per cent of the effects come from 20 per cent of the causes. Bruce Lister, who spent just over half of his 32 years with Liberty Life in Johannesburg before moving

down to Cape Town Agency in 1999, believes in the 80-20 rule. “Eighty per cent of your business will come from 20 per cent of your clients,” says Lister. He achieved FA status this year and, among other things has a black belt in karate, a brown belt in judo and has completed the Cape Town Argus Cycle Tour 12 times. He believes in nurturing top-producing professional relationships with clients. McWalter advises a similar principle when prospecting, “Work on your top clients for referrals. People usually refer on their own level and down.” He also emphasises the importance of finding suitable centres of influence (COI). He says a COI needs to be well positioned to give you a continuous flow of leads. Stein says a new adviser should align themselves with an accountant and an attorney as early as possible to refer business. Strategic business partners are vital for the referral of business and will save a lot of time looking for new leads.

The chains of habit Samuel Johnson once said that the chains of habit are “too weak to be felt until they are too strong to be broken”. We are all creatures of habit and new advisers need to make sure their daily habits are constantly contributing to, and not detracting from, their career goals. “The mistake a lot of new advisers make is that they change their activity in accordance with how good or bad of a month they’ve had,” notes Stephen Wishnia, a qualified CFP who has been in the industry for 24 years and prides himself on his excellent retention record. He recommends obtaining referrals at each appointment and warns, “No referrals are as damaging to your business as a lapse.” Lister says a new adviser should make calls every morning with a goal in mind, “If you commit to making 20 calls, don’t leave until you’ve done it.” McWalter adds that a new adviser should be working late at least two nights per week and the odd Saturday as well. He also strongly recommends hiring an assistant as early as 18 months into the business to create a minimum 40 per cent increase in production. The biggest time-saver to any adviser is to listen to advisers who have been in the industry longer than themselves and have a proven track record of success. The difference between being productive and just being busy is the difference between spending your time and investing it in activities where the return is greater than the time invested.

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How to make lemonade out of lemons


Michelle Camps


It is important to determine the type of criticism to ensure a constructive response. As social media is essentially a conversation, tonality is always important. Don’t become combative and defensive in your reply. If a legitimate complaint has been made, ensure that you immediately offer a sincere apology and offer a resolution or reason. Understand what the complaint is about and don’t jump to conclusions.

o clients want to be on social media, “because you have to be and everyone is on social media”. However, take a step back and ensure that you have a proper social media strategy and, more importantly, that you have someone regularly managing it. Information must be relevant and up to date; social media is immediate and it is no use posting yesterday’s news.

There are also those who have nothing better to do than use social media as a forum to whinge to get the required reaction. It is important to ensure you identify this type of complainant from the genuine complaints.

Social media is a fun, interactive way to engage with your customers, but what happens when they decide to use your fun, positive medium to take pot shots at you and it becomes rather nasty; and it is in a very public and social forum. According to Raphala Mogase, senior account director at The Riverbed Agency, a leading corporate communications agency based in Johannesburg, it is critical that you establish the root cause of such negative trending posts and feedback from the audience. It would be futile to spend time and energy trying to address issues on the surface. If there’s something the company has done that is frowned upon, for example, or there’s been an unfavourable incident with a product, it is best to apologise outright about the situation and respond by emphasising how the situation will be resolved. Not every post warrants a response, but it is advisable



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to respond to those posts that present an opportunity to address predominant issues that are being raised by the audience.

According to Raphala, the best course of action is to monitor these “reckless commentators” closely and carefully, and at best, ignore them, so as not to fuel their recklessness. It is only in very extreme cases that you would consider blocking reckless commentators as it would be evident to everyone that they add no value to the engagement.

Raphala adds that an active engagement and availability by the client also strengthens the relationship between itself and its audience. The audience is most appreciative of a responsive company especially in this digital age. A client who can demonstrate that they are able to deal with a legitimate negative phase will stand the test of time with its audience.

The lesson learnt from those who have come up trumps in social media, especially when under threat, is to have a proper strategy and to ensure you have the right people who understand social media to manage your responses timeously. Social media can be a fun way to engage with your customers. Don’t be afraid of this interactive platform but ensure you know how to make lemonade out of lemons.

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

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Centre for Business Management

Enrol now for a qualification that will enhance your career prospects in the financial services industry Study by correspondence from anywhere in South Africa or even abroad. PROGRAMMES IN INSURANCE

Learn the principles and practice of short-term insurance or retirement fund management in order to equip yourself to become an associate or a fellow of the Insurance Institute of South Africa (IISA). For more details please visit or send an e-mail to PROGRAMME IN RISK MANAGEMENT

Learn how to identify, assess, and mitigate risk. The programme covers an introduction to enterprise-wide risk management (ERM), the role of statistics, the impact of economic circumstances, business management, risk finance, and risk control. For more details please visit or send an e-mail to PROGRAMME IN BUSINESS CONTINUITY MANAGEMENT

For more details please visit or send an e-mail to COURSE IN FINANCIAL MANAGEMENT

Learn how to manage the profitability, liquidity and solvency of a firm. The course includes budgeting, time value of money, risk and return, and the management of cash, debtors and stock. The course is ideal for non-financial managers. The course enables you to apply for credits for a module of the BCom or BBA degrees offered by Unisa, or for two of the modules of the Programme in Financial Management. For more details please visit or send an e-mail to Registration periods: Semester 2 of 2014 – 2 June to 11 July Semester 1 of 2015 – 28 November 2014 to 23 January 2015 For 2015 year programmes – 28 November 2014 to 18 March 2015

Learn how to manage risk exposures that may threaten the effective continuation of the business should such a risk event materialise. The programme covers the fundamentals of risk management, BCM planning, the identification and evaluation of risk incidents, and how to compile a business continuity strategy and plan.

Admission requirement:

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Tel: (012) 352 4288 / 4335 / 4320 / 4326 Fax-to-email: 086 225 4796 Email:


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Learn how to manage the profitability, liquidity and solvency of a firm, as well as how to create value, manage risk and/or how to avoid tax. This programme is aimed at managers, accountants, bookkeepers; people involved in the financial services sector and business owners.

Learn without limits.


Old medium,

new technique Dominic Uys

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added to the queue and dealt with in the order that they were received. The biggest problem, however, was that if the same broker contacted the centre at different times, regarding changes or adjustments to the same account, new instructions were added to the back of the queue.

Technology has drastically changed the way in which communication takes place between client, broker and insurer. However, the traditional broker contact centre still has an important role to play. Santam recently demonstrated how existing models can be made more efficient.


ince the rise of the Internet, e-mail and mobile apps, the options and frequency of communication between brokers and insurers have increased drastically. It has subsequently been argued that the traditional contact centre model has become redundant.

consistent client experience,” Pharo says.

While it is true that many companies have drastically decreased their call centres in terms of size, Louise Pharo, Santam’s head of commercial contact centres, argues that the medium will always have a place in the insurance world, and that choice of interaction is paramount.

With the six centres consolidated, operations were moved to the company’s offices in Tyger Valley in the Western Cape. The company’s Pretoria satellite centre was left intact to maintain a footprint in the Northern part of the country and a contact centre for Santam’s agricultural insurance business was established in Bloemfontein. All in all, Pharo states that the commercial contact centre workforce now stands at around 300 agents.

That said, the company’s contact centres needed to keep up with the workflow environment of modern business. Santam’s Commercial lines call centre has just concluded its two-year pilot programme and the solution is about to be rolled out to the rest of the company’s call centres. So far, the company states that the contact centre has achieved a 28 per cent increase in productivity and breathed new life into an old model. “In Santam, we’ve had contact centres for many years and, in fact started the second contact centre in South Africa in the early nineties. We actually opened it one day after the first contact centre in the country. Subsequent to that, we’ve built on the contact centre as the solution for many of our business areas, including the commercial insurance division where I am involved. Our clients are the policyholders, but the vast majority of our contact centre’s interaction with them is via intermediaries,” she starts.

Out with the old “The process started for us in 2012, when we decided that we would consolidate the six regional commercial contact centres. The reason for this is that it was extremely difficult for us to manage them remotely and ensure a

Naturally, this standardisation presented some opportunities for optimisation. “First we would handle the consolidation and then start looking at automation,” Pharo adds.

Pharo states that skilled call centre agents remain difficult to find. “Skills are a challenge for the industry, and all contact centres hold onto their skills as much as possible. It also takes 12 to 18 months to get a new agent up to the correct level of skill,” she says. To speed up the training process, new agents are placed in a ring-fenced training environment and monitored by experienced trainers as well as underwriters within the company, for guidance.

Automating the centre Pharo states that the centre next needed to implement a customer relationship management (CRM) system. “The term CRM gets thrown around quite loosely, but what it means for us, is a much better management of the work flow,” she says. Brokers interaction with the call centre via phone, fax or mail was traditionally processed with internal e-mail boxes. “It was a very elementary system because it just created a queue,” she says. Brokers’ requests or instructions were

“This happens almost every day. We would get an instruction regarding the account, and later in the day the broker contacts us again, having changed his original instruction. His cancellation request is added to the back of the queue and both requests are still processed in succession,” she says. To address this issue, Santam brought in Microsoft CRM technology, which assigns a service request number to the broker’s request. “Any interaction after that will link up with the initial request and we can handle all of the broker’s requests in the same job bag. For the first time we have full visibility throughout the entire policy life-cycle and that really improves the customer experience where the broker is concerned,” Pharo says. “We also do skills-based routing, which has gone a long way in helping us work with complex policies. When a broker sends us a request for work that needs to be done, we assess the work item and assign it to the staff member with the correct accredited skill to handle it. This gets rid of a lot of disruption problems by making sure that new requests are handled only once before being passed on to the right agent,” Pharo says. “If you don’t have that in the system, a request could potentially be sent back and forth from agent to agent until it finally reaches the right one. These spirals of referrals not only extend turnaround times to well after the 24-hour benchmark, but also increases frustration levels for the broker,” she adds. Putting this system in place was, however, a major challenge for the company. “I have to admit, this was one exercise that really tested us,” Pharo starts. While the CRM tool that Santam brought in as a software solution was expected to be easy to implement, Pharo states that customising the software for the contact centre’s requirements was a work in progress. “We have been using the system and tweaking it for almost a year, and we have now reached a stage where the system works the way we want it to. The management information that we are now getting out of it is absolutely phenomenal,” she states. With the results speaking for themselves, the next step is to follow the procedure for each of the divisions within Santam. Pharo is optimistic that the implementation process in the other departments will only gain speed from here.

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Don’t fear the tech: The benefits of technology for financial planning Christy van der Merwe


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obile technology has revolutionised financial planning and wealth management, allowing advisers to access unlimited content from wherever they may be, without having to download it and store it on a device, which is viewed as a security risk. In addition to significantly simplifying everyday operations, the well-informed use of smartphones and tablets goes a long way to enhance the image of an adviser, because clients will be able to see firsthand that their adviser is forward-thinking and embracing new ideas and technology.

SSP Ad Campaign A 2014 RiskSA.pdf


Networking and marketing: 1. 2.

3. 4.


Taking down information has also become a different ballgame. Before, during or after meetings with clients, advisers can take extensive notes for storage, or retrieval from your mobile device to your contact management solution. While face-to-face interaction is always preferred, this is not always feasible, particularly if clients live in remote areas or have very little time available to get to a meeting place. Video conferencing applications mean that advisers can conduct a video chat to help fully understand a client’s standpoint. Another benefit of mobile technology is that it is a lot easier to keep track of your clients’ hobbies, interests and prospects, because you can use news and special interest apps to get insight into certain sectors. Sharing news and updates with clients shows that you care about their interests; and the mobility means that you can access this information anytime and anywhere. The iPad or tablet is viewed as the must-have business tool for advisers. Of course, having the latest business tool does not mean much if you are not making the most of it. There are a host of applications that can be downloaded onto tablets, the choice is sometimes overwhelming. Simply searching or browsing in your device’s app store can unearth many options for all manner of things, such as creating infographics or charts to present information, to make connections, and even how to manage your time more effectively. RISKSA highlights some of the recommended apps for busy financial advisers.

Digital Insurance at your fingertips Join the digital revolution...

Productivity: 1. 2. 3. 4. 5.

Beesy: Take notes, create to-do lists and track tasks and projects. DropBox: A cloud-based hard drive, which allows you to share and store information. PaperPort notes: A highly recommended note-taking tool (US accounts). Evernote: A way to keep track of web clippings and notes to reference later. Paper: Allows you to write down notes or C draw ideas, and save your sketches for later.

Finance: 1.





Applying the right digital technology at the right time will enable you to become connected, analytic and agile. Digital is not just a new distribution option for your business; it offers you a new way of operating, impacting on all of your strategic and functional areas as an insurer.



HomeBudget Lite: A useful budgetingCM tool that can be shown to clients for their MY own personal use. Quotestream: Acts as a portable stockCY exchange that lets you monitor clients’ CMY investment portfolios in real time. Journal of Financial Planning: A K US-based organisation, but available as a free download. Piktochart: An infographic tool that allows you to turn boring data into engaging infographics. CFP Exam Prep: Helps you to prepare for the CFP exam on the go.

Get the digital advantage that starts with SSP Multi-Channel Distribution. Call us on +27(0) 11 384 8600 email or visit

Life and entertainment: 1. 2.




Flipboard: A personal magazine that combines your interests in one place. TripIt: Allows you to store flight, accommodation, itinerary and hotel information. It checks flight status and even keeps track of your reward points. Pocketplan: Provides updates on events taking place in Johannesburg and Cape Town – from foreign language classes, to salsa dancing, exhibitions and bands. Waze: A navigation system that provides information on traffic, accidents and police in your area, as supplied by other users reporting on the roads. Zite: A daily magazine, customised to your preferences, allowing you to keep up to date on specific interests without wading through different publications.

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Smartphones and tablets mean that when meeting with clients, advisers can do immediate scenario planning. Mobile technology enables advisers to adjust goals, spending priorities, assets or other information online from their mobile device, show clients the results in real time, and explain what the impacts will be. This mobility also means that advisers can easily open client statements, confirmations, scanned images of documents or financial plans using a mobile device, and answer their questions without ever needing to print hard copies.

Twitter: Share your own information and reach out to the right markets. LinkedIn: Manage professional relationships and connect with people you meet immediately. Skype: Allows face-to-face video conferencing. FullContact Business Card Reader: Uses the devices camera to transcribe the information on cards into text and imports the contacts. MailChimp: Allows you to create and manage your e-mail campaigns, e-mail marketing lists, add new subscribers, and view reports.

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Laura Owings

Boost business with


With more than five million users nationwide, Facebook should be attracting social mediasavvy brokers who want to grow their client base and reputation. But building and managing a business page takes time and dedication. Angelique Robbertse, product and marketing manager at Job Mail, shares her tips for brokers looking to make the most out of Facebook. 108 8 4

Build a ‘friend’ foundation

Target your message

If you invite only your personal Facebook friends to your business page, you'll build up a base of followers, but you won’t get the people you really want or need. Brokers must ensure their target audience knows about their page. They can start by getting all their employees or customers to ‘Like’ and share the page, and put the Facebook link on all forms of communications from the company. It is also helpful to put Facebook links onto your website, so your customers know that you have it available as a channel for communication and interaction. The key is to first spread the word to your current customers, and then use Facebook to find new potential clients.

You can target the audience you’re looking for by using Facebook’s paid tool, which analyses user data to help businesses connect with the right people. You can also create marketing funnels by utilising your customer database. Choose different styles of marketing that speak to different age groups and genders. This should ultimately let you reach the right audience and give them an opportunity to interact with you. Also, remember that there’s nothing more off-putting to customers than being bombarded with promotional messages, so be mindful of this and keep these messages to a minimum.

Invest in a big future

Social media is a two-way street

When you start, it is good practise to monitor your Facebook page at least twice a day, then more as your fan base grows. Update the page with relevant content, respond to requests and queries, and most importantly, keep the conversation alive. This will also bring about an opportunity for brokers to learn what people are saying about their products or services, detect grievances customers might have, and therefore be able to rectify them accordingly. But, be prepared for that to take up more time as your like-count increases. For example, some companies have up to eight people monitoring their page for at least 14 hours a day.

A good strategy for keeping your page active and engaging is to post at regular intervals and keep your updates creative and fresh. Use images and respond to comments as soon as possible. Remember that social media is a two-way communication medium, so you should listen and respond, not just talk about your business. Contrary to popular belief, there are still real live people behind the keyboards who are posting comments, statuses and images on Facebook, so it is important to connect with them.

Learn by example

Don’t avoid negativity

I don’t mean to brag, but I think we do things right at Job Mail. We have over 150 000 fans and we try to respond to each and every comment and message that we receive. Other good examples are FNB and Vodacom; despite having over 300 000 fans, you can expect a response from either of these pages within an hour.

You should always respond to negative comments. Try to deal with these individually, unless you are bombarded with negativity. If that should happen, think about posting a press release to all of your fans instead. In such a case, you should link your press release to each negative comment that you receive, so the customers can see that you responded to their calls.

Think before you post

It’s not just for friends

The biggest mistake Facebook business page managers make, is posting irrelevant content. Ask yourself what value your clients are going to get out of it before posting. It doesn't mean that you can’t be funny on your page, just try to be funny in a relevant way. There’s humour in any industry, you just have to find it or create your own brand of funny.

Just as you use it to keep in touch with your friends, you can use Facebook to keep in touch with your current and potential customers. Brokers can promote products and services and respond to questions about a product or service. Through Facebook’s paid advertising model, they could also gain a new group of potential clients to whom they can market their services. Think of it as a valuable communication channel and be prepared to give it the same level of attention as any other form of communication that you already use, such as e-mail or the telephone.

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If you are looking to develop your value as a professional and as a leader, mastering the art of public speaking and effective communication may be the single most powerful place to start.


PERFECT T Sarah Bassett

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his was billionaire Warren Buffet’s suggestion at a recent gathering of Harvard business students. “Developing this ability is critical. It is an asset that will last you all your life and it is a liability if you don’t like doing it,” Buffet suggested.

each speech, members receive peer feedback on what they did right, what they could have done better and tips and suggestions on how to improve. Awareness of weaknesses and tendencies helps people make adjustments and improve rapidly.

RISKSA takes a look at the nearly 100-yearold Toastmasters programme and how it can transform your communication and leadership abilities – not just for the big speeches, but the daily interactions that make all the difference.

Members also practice speaking off the cuff for one or two minutes, by responding to general topics of interest, and are given time to interact, network and build a supportive rapport. While public speaking may be the most immediately apparent benefit, the additional benefits are diverse:

Founded in 1924, the non-profit organisation has grown to more than 250 000 members in 106 countries, with 12 500 clubs worldwide. Most Toastmasters clubs meet weekly for one to two hours and follow a fairly set agenda. Working through the Toastmasters Competent Communication manual, members are given opportunities to prepare, rehearse, and then deliver presentations on a diverse range of topics in front of their fellow members. After

Communication It’s perhaps a given that working through a Toastmasters programme will improve your public speaking. What many people don’t consider is that the skills learnt in mastering public speaking are core skills needed for dealing with other people. These are the communication skills you use many times every


day,” says Duncan Ngandu, co-vice president education (VPE) for the Ernst and Young Toastmasters club in Cape Town.

Listening skills By watching other members’ speeches and evaluating their performance, you yourself become a better listener. Evaluating fellow club members forces participants to pay attention and listen carefully, creating the habit of listening, absorbing and analysing. Most Toastmaster meetings also have a grammarian report where word usage is scrutinised and ‘ah’s’ and ‘um’s’ are counted. This helps members become aware of their use of these distracting filler words. “As you become more conscious of these words, you’ll be less likely to use them yourself, though this can be one of the hardest habits to overcome,” warns Ngandu.

Leadership Toastmasters clubs offers various opportunities for taking on leadership roles and developing leadership skills through fulfilling different roles in club meetings. As members become more comfortable as a speaker and more experienced in their club, they can serve as a mentor to new members, or can become actively involved in the running of the club.

Job interview skills The process of practising your speech and making sure it’s clear and concise will help you in your interviews. “I know that this has helped me walk into interviews feeling more confident in my ability to talk about my background and tell quick stories of my accomplishments,” says Fatima Arendse, who has been a member for nearly three years.

Think quick

How to Join Anyone over the age of 18 can join Toastmasters, provided they have the desire to improve their communication and leadership skills. There are multiple Toastmasters clubs across South Africa, so search a little and find the ones in your area. Each club has a different membership policy, but most will allow guest visits for a couple of meetings before membership is required. This way you can test the Toastmasters experience prior to joining, and can try out several clubs and choose the one that suits you best and feels like the right atmosphere. Toastmasters is a self-paced programme and members can work through it at their own speed. There are 10 projects laid out at

the Competent Communication level. Once completed, members can move on to the Advanced Communication series, for which there is a bronze, silver and gold level. The same certificate levels from competence through to advanced gold are also available for leadership. The Competent Leadership manual features 10 projects to be completed while members fulfil various club meeting roles. Membership costs fluctuate with the exchange rate as these are set in Dollar international rates – but the initial member fee costs around R1 000 for a six-month membership with all materials, and six-month membership renewals are around R700.

Each Toastmasters club has a part of the meeting known as ‘table topics’ where members respond to a statement or answer a question without preparation. Questions might be as simple as: What is your favourite holiday memory? or something as complex as: what should South Africa do to boost economic growth and employment? The key is to listen carefully and be ready to be called in case you are asked to share. This impromptu and improvisational speaking opportunity is excellent preparation for on-thespot requests and moments of uncertainty in other parts of life.

Networking Toastmasters is an excellent way to meet new, interesting and successful people in a diverse range of industries.

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Department of Transport partners with SAICB The Gauteng Department of Roads and Transport signed a memorandum of understanding (MOU) with the South African Insurance Crime Bureau (SAICB), intended to help curb fraud and corruption in the motor vehicle industry. The agreement will see an increased exchange of information between the Department and the SAICB relating to fraudulent activity as well as corrupt practices related to the licensing of drivers and vehicles. The SAICB will also engage in skills transfer and training projects with the Department.

Santam acquires Brolink Short-term insurer, Santam, has announced its 100 per cent acquisition of information technology and business process outsourcing company, Brolink. According to Santam, Brolink will be positioned independent of Santam’s insurance activities as a strategic investment to boost efficiencies. Santam CEO, Ian Kirk, says Santam wants the Brolink acquisition to provide greater scale and sustainability in insurance administration activities, and improve operating costs and efficiencies in intermediated distribution channels. “As an established industry player, Santam needs to continue improving efficiencies as our sector faces a variety of challenges and regulatory changes. We believe Brolink’s intimate understanding of the requirements of professionals and intermediaries in the outsourced business channel will help Santam to drive further efficiency and growth,” adds Kirk. The terms of the acquisition have not been disclosed and Santam has stated that it would give further comment once the Competition Commission of South Africa has given its official approval for the transaction to continue. Brolink was established in 1994 and performs insurance administration of personal lines and commercial lines portfolios. Various national and independent brokers use Brolink’s insurance offerings, which are supported by major insurers including Santam, Mutual & Federal and Lion of Africa.

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“We will be holding monthly meetings with the department to identify the key areas of cooperation. We will also be conducting training in the fraud and forensic space, to establish the skills within the department that will allow it to see cases through to disciplinary or criminal procedure stages,” says SAICB chief operating officer, Hugo van Zyl. “The SAICB has established itself as a potent, effective and valuable instrument in the fight against insurance crime. It has brought closer together Business Against Crime (BAC) and the South African Insurance Association (SAIA) in the broader fight against commercial crime, particularly as it relates to the motor vehicle industry,” said Gauteng Transport MEC, Ismail Vadi at the signing ceremony.

POPI Information Regulator established In line with the requirements of the act, an information regulator to oversee the Protection of Personal Information Act (POPI), has been established. Advisory services firm KPMG highlighted that this means that companies cannot rest on a belief that the establishment of the regulator will cause further delays with regard to POPI implementation. The Information Regulator is the body which will be responsible for monitoring and enforcing compliance with the act; handling data subjects’ complaints regarding alleged violations to their personal information; and facilitating cross-border co-operation in the enforcement of privacy laws. Companies and public organisations have been urged to assess their level of compliance with POPI provisions, and consider implementing any compliance processes, procedures and policies which may need to be established and implemented. POPI was promulgated in November 2013, and commencement has been outlined for 2014. The act gives a one-year compliance transition period, with a possibility of that being extended for up to three years.

Insurance Laws Amendment Bill withdrawn Finance Minister Pravin Gordhan has requested that the Insurance Laws Amendment Bill (ILAB) be withdrawn as it lapsed because it was not passed prior to the end of parliament’s term. The National Treasury and the Financial Services Board (FSB) are considering alternative interim measures (through board notice or other bills) to give effect to the intention of the ILAB. The ILAB contains proposed amendments to the Long-term Insurance Act (LTIA) and the Short-term Insurance Act (STIA), both of 1998, and was tabled before parliament in June 2013. Generally, lapsed bills are required to be revived by a motion of parliament once the new parliament convenes after the elections. The amendments proposed under ILAB included: introducing insurance group supervision pending the finalisation of the broader review of the Insurance Laws and Solvency and Asset Management (SAM) project; strengthening the governance, risk management and internal

controls of insurers; and addressing regulatory gaps in South Africa’s adherence to international and financial regulatory principles and standards in respect of insurance, as identified by the IMF/World Bank Financial Sector Assessment Programme evaluation. National Treasury also outlines that the bill provided for various other critical amendments to the LTIA and STIA, such as enhancing licensing requirements. It is proposed that these critical amendments will also be provided for through consequential amendments to the LTIA and STIA, via the revised second draft Twin Peaks Bill, and further consulted on as part of the Twin Peaks public comment period. The envisaged effective date of these other critical amendments is 1 January 2015.

CMS registrar suspended The Department of Health (DoH) has confirmed the suspension of the Council for Medical Schemes (CMS) CEO Monwabisi Gantsho, following allegations of corruption, suggesting he requested a R3 million kickback. Health Minister Aaron Motsoaledi also confirmed the extension of CMS chief financial officer Daniel Lehutjo as acting chief executive and registrar of the CMS until completion of the investigation. CMS head of stakeholder relations Dr Elsabie Conradie said in a statement that the task team consisting of council members had finalised the appointment of forensic investigators, Edward Nathan Sonnenbergs (ENS).

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Economic confidence up in SA The first quarter 2014 PPS Graduate Professionals Confidence Index (PCI) from mutual insurer PPS shows that South African graduate professionals are more upbeat on the outlook for South Africa’s economy and the prospects for the Rand than they were in the fourth quarter of 2013. Survey respondents reported a confidence level of 54 per cent on the economic outlook for South Africa over the next 12 months – an increase of four percentage points over the previous quarter. Gerhard Joubert, head of group marketing and stakeholder relations at PPS, said that while professionals are still concerned about the value of the Rand, an increasing percentage of them believe that the slide in the value of the currency has been halted. This increased confidence is also in line with the Bureau for Economic Research (BER) Consumer Confidence report which showed that South African Consumer Confidence increased to -6 in the first quarter of 2014 from -7 in the fourth quarter of 2013. The survey also showed that 60 per cent of respondents are confident they have saved enough to retire comfortably, which is up one percentage point quarter on quarter; 10 per cent of respondents believe the tax incentives offered by government are enough to encourage South Africans to save; and 67 per cent of respondents believe compulsory preservation is necessary to force South Africans to save.

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Sanlam P2strategies investment offering approved Sanlam Investments has received regulatory approval from the Financial Services Board (FSB) to offer its P2strategies investment solution in South Africa. The investment, which uses a mathematical formula to manage the risk of investing in equities, will help investors who are risk averse and nearing retirement to stay invested in equities, as the product helps ease panic during times of volatility in the market. Sanlam came across Bermuda-based investment firm P2international in 2009 and bought a majority stake in the company in 2012. Sanlam is launching a Rand-based version of the fund. In this type of fund, a client in South Africa can invest in Rand but Sanlam P2strategies will take the exposure in foreign currency. The funds can be bought and sold at any time as they are packaged as foreign unit trusts. The funds, which were launched in the international offshore market in June last year, come in five flavours across global, UK, North America, emerging market and Europe markets, and are denominated in Dollars or Sterling.


INSURANCE VACANCIES Location: Sandton, Pretoria, Western Cape, KZN, Eastern Cape, Benoni,

BUSinESS DEVELoPMEnt conSULtantS - REPoRting LinE: Business Development Manager Job purpose A Reputable Insurance Company is looking for Business Development Consultants with a minimum of two years sales experience to generate new business and develop client and corporate relationships. Key attributes for the position include FAIS compliant | Regulatory examination for representatives (RE) | Minimum of two years experience in Insurance sales (Short Term and/or Long Term).

Guardrisk is new FMI licence partner Income protection specialist FMI announced that Guardrisk Life will replace Lombard Life as its licence partner as of 1 July this year. The Lombard Group will remain a significant shareholder in the FMI business. Guardrisk Life Limited is a licensed cell captive insurer and a subsidiary of the Guardrisk Group, a wholly owned subsidiary of MMI Holdings. By partnering with Guardrisk Life, FMI achieves cost efficiencies while maintaining independence and sound financial backing. The new licence partnership will enable FMI to continue growing in a competitive market, diversify its business and develop new customer-centric products, the company reported in a statement released today.

Personal attributes Good analytical ability | proven sales track record | deadline-driven | self-driven | good interpersonal and problem solving skills | good organisational ability and time management | ability to work independently and generate own leads | good presentation skills and the ability to interact with clients. Competitive remuneration package Application accompanied by your CV should be submitted to HR department at: Samantha Lakhraj Only shortlisted candidates will be contacted

FMI CEO, Brad Toerien, has increased his effective shareholding. Craig Harding has joined as a new shareholder alongside Toerien and Lombard, and will play an active role in the growth of the company. He brings extensive financial and operating experience in the African financial services market. “With the continued involvement of Lombard and the introduction of Craig to the team, as well as our new partnership with Guardrisk Life, we are ideally placed to take FMI to new heights and lead the market with innovative products built around our income protection philosophy,� says Toerien.

An authorized financial services provider. License number 30414.

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New software solution for Hollard Israel-based insurance software provider, Sapiens International Corporation this week announced a new contract with Hollard Insurance Group which will see the company’s Sapiens reinsurance solution managing Hollard’s reinsurance portfolio.

providing support for operational reporting, management information and business analytics, statutory requirements and compliance. “We will be implementing the Sapiens reinsurance solution not only for support of Hollard’s new contracts, but also all of its existing contracts, which implies migrating data from legacy systems. This is always a challenge in terms of time and can require ‘data cleansing’. But we do have a migration methodology and we are working closely with Hollard to manage that,” Greenberg said.

newappointments Martin Greenberg, product manager for reinsurance at Sapiens told that implementation of the new software will start in July of this year. The solution features a single repository for all information,

Old Mutual

Ingrid Johnson has been appointed to the role of group finance director of Old Mutual plc. She succeeds Philip Broadley, who announced his resignation in December last year. She joins from Old Mutual subsidiary, the Nedbank Group, where she was group managing executive of retail and business banking. Ingrid Johnson

“Under Ingrid’s leadership, Nedbank Retail has been repositioned into a client-centred

Greenberg adds that the Sapiens reinsurance solution is flexible enough that it can be tailored by Hollard in-house to the requirements of any of its existing and new contracts.

and aspirational bank for all with excellent risk management practices and Nedbank Business Banking’s strategic positioning has been substantively enhanced. The strength of Nedbank’s franchise has grown significantly as a result. We are sad to see Ingrid leave Nedbank but she has been offered a new and exciting challenge within the greater Old Mutual group,” Nedbank Group chief executive, Mike Brown, comments.

Infiniti Insurance Infiniti Insurance Limited is pleased to announce the appointment of Gavin Horn in the position of broker relationship manager with a special focus on new business. Horn, formally of Aon Insurance Brokers, brings over 30 years of short-term experience,

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having held a number of senior management positions both at Commercial Union and at Mutual & Federal. An associate of the Chartered Insurance Institute of London as well as the Insurance Institute of Gavin Horn South Africa, Horn is well known and respected in the broker market. “We are proud to have employed someone of Gavin’s calibre and diverse experience, and know that he will be a valuable asset to our team. In addition to his business development role, he will be focusing on an exciting new commercial product for us,” comments Sharon Paterson, CEO of Infiniti Insurance.

PROFIDA’s leading technology is available in desktop or web-based solutions. Large size clients even have the choice of employing a combined application, extending logins to advisers and policyholders alike. PROFIDA follows “best practice”, basing its financial planning process on actuarial calculations and modern school of thought. It incorporates CRM, Astute-downloads, record keeping, to-do-lists, data mining, bulk newsletter campaigns, customised reports and letters. Its unique extension framework means it can grow with you and adapt as your business changes. PROFIDA manages life and non-life insurance as well as investments on one platform to accommodate your entire product spectrum now and in future.


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news international

USA Willis launches undercover policy

Global risk adviser, insurance and reinsurance broker Willis Group Holdings, has launched a new insurance facility to protect cargo both in transit and in store against all types of political violence, terrorism and war risks.



China opening up for foreign business

Italian firm enters ILS market

The China Insurance Regulatory Commission has ruled that both foreign and domestic insurers will be allowed to own more than one company in the same segment of the industry.

Trieste-based Assicurazioni Generali S.p.A. last month closed a catastrophe bond that offers the insurer protection from European windstorm losses over a three-year period. The bond, which offers €190 million of reinsurance coverage, was issued by Ireland-based special purpose vehicle Lion I Re Ltd.

The ruling, which comes into effect in June of this year, will also make it possible for investors to take out loans to finance up to 50 per cent of their acquisitions. It is speculated that the relaxation of rules for deal making in China’s insurance sector could potentially widen the playing field for foreign investors in the sector. “Domestic insurers have been grabbing market share by competing aggressively on price, but foreign insurers haven’t been able to do that because they have no scale in China,” said Jerry Yang, analyst with Daiwa Capital Markets. China’s top five life insurers command around 70 per cent of the market. The remaining 30 per cent of the market share is divided between a further 63 smaller companies.

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The deal is the first catastrophe bond closed by Generali, and the insurer has become the first Italian sponsor to enter the insurance-linked securities (ILS) market. “Leveraging the consolidation of the group’s reinsurance since 2013, this catastrophe bond allows us to further optimise the purchase of reinsurance protection while maintaining a good degree of flexibility and diversifying the panel of capacity providers in order to mitigate counterparty risk,” said Sergio Balbinot, chief insurance officer of Generali.

The company states that in recent years, cargo losses worth more than $100 million have not been recovered under traditional cargo insurance policies due to critical exposures being excluded. According to a company statement, traditional cargo insurance policies typically exclude certain losses, such as those arising from civil war, insurrection, rebellion and terrorism for goods in store. Political violence policies, which usually respond to these types of risk, can exclude transit exposures and cover fixed assets rather than stock. Willis also said that the new facility, named Undercover, has received support from a panel of leading London insurers and that it wraps up the coverage provided by these different policies under a single facility, eliminating gaps in coverage and reducing premium costs by removing duplication of cover.

Europe A.M. Best upgrades Ace ratings

Ratings agency A.M. Best has upgraded Ace Europeans Group Limited’s (AEGL) financial strength rating (FSR) to A++ (Superior) from A+ (Superior) and the issuer credit rating (ICR) to ‘aa+’ from ‘aa’. The outlook for both ratings has been revised to stable from positive. The ratings reflect AEGL’s stand-alone risk-adjusted capitalisation, consistently strong operating performance and excellent business profile. The positive rating actions are driven by ACE Group management’s consistent focus on underwriting profitability, through effective risk selection, and on maintenance of pricing standards, appropriate policy limits and exposure to catastrophes, including the use of reinsurance to manage net retentions. AEGL benefits from this focus, and has made a significant contribution to the group by consistently generating strong earnings and cash flows.

Africa Aon upgrades Ghana and Uganda risk ratings

The 2014 Political Risk Map from Aon Risk Solutions reveals improved risk ratings for Ghana and Uganda, both upgraded from a medium-high risk rating to a medium rating. Though concerns have been raised about Ghana’s fiscal overspending and rising inflation, increases in revenues and investment reinforced its political institutions. Uganda continues to suffer from an overly centralised government and significant human rights issues; the stabilisation of donor finance improved its ability and willingness to pay debts and reduced political interference. The map measures political risk in 163 countries and territories, in order to help companies assess and analyse their exposure to exchange transfer, legal and regulatory risk, political interference, political violence, sovereign non-payment and supply chain disruption. Continental Re moves into North Africa

Continental Reinsurance, Africa’s largest private reinsurer outside of South Africa, has announced the opening of a regional office in Tunis and the introduction of its Shari’ahcomplaint Takaful offering. The insurance industry in North Africa is the biggest in total market gross premium written in Africa, outside South Africa. “Our strategically positioned local office in Tunis is a central location, which greatly extends our reach into the Maghreb and North African markets,” commented Dr Femi Oyetunji, group managing director and CEO of Continental Re. He said the opening of the regional office in Tunis is part of Continental Reinsurance’s strategic approach to develop the African reinsurance market and to realise the company’s vision to be the premier pan-African reinsurer. “It’s important for Africa’s development and growth to have strong, robust and large reinsurance institutions so that African premiums remain in Africa,” said Dr Oyetunji. The launch of the Tunis office is coupled with the introduction of Continental Reinsurance’s Takaful offering, which will serve clients and partners from Africa, the Middle East and Asia. Mrs Dorsaf Sassi has been appointed as the regional director for the newly established Continental Reinsurance office in Tunis. She brings to the region her extensive reinsurance experience in the Tunisian and North African markets.

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A T than it was 20 years ago, but it has left 70 per cent of its people behind in this improvement. This is the greatest crisis South Africa faces,” Whitfield added.

Forensic claims management South African companies lose R160 billion a year to fraud and corruption, CEO of the Association of Certified Fraud Examiners South Africa, Jaco de Jager, told delegates. “Globally, the average business loses five per cent of annual revenue to fraud, with 40 per cent of all fraud committed with the help of someone inside the business,” he warned. “Avoiding information and data sharing is simply stupidity,” he emphasised. “The edge comes in sharing information in order to implement processes to safeguard business.”

SAUMA Conference 2014 The recent election results and the South African political future, along with the impact of international regulatory changes, as well as claims fraud were key topics at this year’s SAUMA Conference. The South African Underwriting Managers Association hosted close to 400 delegates in Johannesburg, representing underwriting managing agents (UMA), insurers, brokers and service providers to the industry.

There is little indication that Zuma will be removed from power as some had hoped prior to the elections, he said, noting that the recent announcement of an Nkandla report review makes it clear that the party is closing rank around its leader. “An ethical leadership is probably what we need more than a leader who has successfully avoided jail,” he summed up, stressing this as an obvious area for concern.

SAUMA CEO, Tersia Davey, opened the conference, encouraging UMA entrepreneurs and professionals to make their voices heard and engage in the changing industry landscape to keep the industry sustainable.

On the matter of policy, he added, “I have never believed that our fundamental problem is policy. It is unethical leadership, lack of skill and lack of political will to do the right thing. This in addition to a private sector that sees assisting in the public sphere as a value add rather than a responsibility,” he emphasised.

Political analyst Eusebius McKaiser suggested that the recent election results would have little impact on government’s responsiveness and accountability in the next administration, arguing that the result would have done little to change the ANC government’s stance. He suggested also that there would not be rupture to policy over the next five years and that there was no cause for business panic in this regard.

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Also examining the current political temperature, business journalist Bruce Whitfield suggested that South Africa’s Parliament will become more interesting with the EFF in it. “Significantly, the strong result from the fledgling party reflects that a notable portion of South Africa desires and agrees with policies of redistribution. South Africa is better off today

On managing the risk of paying out fraudulent claims, he stressed the need for thorough knowledge of what legal documents from different issuing dates look like. Identity books, for instance, have been updated and changed multiple times over the last two decades, requiring different checks depending on the date of issue.

International regulation, local impact The South African Insurance Association’s general manager: technical, Advocate Suzette Strydom, emphasised the impacts of international regularity reform on the local market, suggesting that this transformation will be ongoing for the next five years. “South African insurers and underwriters need to keep up with these changes and learn to leverage international experience as our market follows suit,” she concluded.

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IIG Charity Auction Things got wild at this year’s IIG Charity Auction, held at Cresta Barnyard in May, as some of the insurance industry’s biggest names were bidding big, for a great cause. Among those who made significant bids and contributions for charity, was Fulcrum Group’s CEO Vaughan Jones, who outbid fierce competition, to snap up a three-night stay at the Timbavati Game Lodge. The 2014 IIG Charity Auction saw R602 000 raised on the night – the highest amount raised at the event to date. This year’s theme was ‘Born to be Wild’ and Jones said his purchase fit in perfectly with the theme, and was thrilled to have participated in the auction. “The work done by the IIG is very important and makes a massive difference in a lot of people’s lives. It’s a pleasure to contribute where we can,” he said. IIG president, Justin Naylor from Hollard, was thankful for the participation of those in the industry, “We are all here to celebrate our incredible industry, to catch up, laugh, have a bit of a party and above all, acknowledge the causes we, as the IIG, are vested in.” Each year, the auction raises funds for Oasis Haven, Frederic Place Old Age Home and the Wetnose Animal Rescue Centre. This year a fourth charity, the Timbavati Foundation, was added. Sponsors included Altech Netstar, Hollard, Swiss Re, Global Choices, GIB, Santam, Zurich and Mutual & Federal.

AWII Potjiekos Day The Association of Women in Insurance (AWII) hosted their fifth annual potjiekos competition at the Pinelands Club in Cape Town in May. Even though it was a cold and rainy day, the atmosphere proved warm and fun. Ten teams took part in this potjie cook-off competition, each judged on their speciality potjie, theme, décor and team spirit. In third place was colleagues from Profida Software Solution (Indian theme) who impressed with their lamb rogan josh potjie, while second-place finishers Administration Plus (Cape theme) made a mouth-watering Karoo lamb, waterblommetjie and Cape gooseberry pot. The well-deserved first-place went to none other than ONE Financial Services (Wild West theme). The team blew everyone away with their chicken and sweet potato Sishebo.

KPMG Sasria Workshop In April, KPMG’s insurance specialist team in Johannesburg presented a half-day Sasria training course. This course was aimed at accounting staff in insurance companies, responsible for the preparation, administration and completion of the returns to Sasria. The agenda for the day was jam-packed with the topics like; how to apply the Sasria policy fee structure and commission rates, application of magnitude discounts, and complexities that arise when dealing with group schemes and UMAs. It also looked at the efficiencies that can be obtained between agent companies and their auditors.

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PSG Konsult

Conference 2014

Thriving as an independent adviser in an increasingly regulated environment

Christy van der Merwe


n eye-opening statistic showed that the average adviser is spending a mere nine per cent of their time face to face with clients, because they are getting so caught up in the red tape of compliance with regulation, legislation and administration. “That is unacceptable,” laments PSG Konsult chairman Willem Theron, adding that an adviser should be spending about 70 per cent of their time with their clients, and the admin should be made a lot easier for them. “That is why PSG Konsult, with its support structure, is there to help them spend more time with their clients,” Theron notes. PSG Distribution CEO, Dan Hugo, highlighted that the challenge of complying effectively with regulation, while at the same time ensuring that costs don’t go through the roof, is one that is facing the industry at large. This forms the crux of PSG’s value proposition. “We have a very effective compliance processes, and this is driven by having the right compliance people on board, the right risk management people, and developing the right systems and processes

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to be able to drive compliance through systems and technology. We have been very successful with that and obviously our advisers are benefiting from that,” Hugo says.

Consolidation and growth Hugo adds that given the challenges facing the industry, there is bound to be increasing consolidation of independent advisers in the industry. “I believe it is going to become very onerous and costly for an independent adviser to adhere effectively to the draft of legislation and to be able to comply with it. And that is going to aid us in growing our business by creating opportunities for those types of practices to join us,” says Hugo. He adds that PSG Konsult is a growth company and is looking to acquire new businesses. Over the last 16 years since start-up, the company has grown to where it stands today – 193 offices across South Africa, with 242 teams comprising over 600 advisers. Having more quality advisers helps to sustain this rate of

growth. “Part of how we have achieved this growth is through acquiring independent advisers and that remains one of our strategies. We are always on the lookout for opportunities to acquire new businesses,” affirms Hugo. He says that the PSG Konsult value proposition contained a number of other benefits, including systems for an adviser or a group of advisers to run their business more effectively. Technical support, HR systems, financial administration, premium collection and access to an array of product providers were all a part of that. PSG Konsult CEO, Francois Gouws, explains that the business grew overall earnings by 44 per cent over the last year, and he was very pleased with the results across all portfolios. So impressive has the growth of the company been, that it will join the growing number of companies within the parent PSG Group, to list on the Johannesburg Stock Exchange (JSE). This is expected to take place in June, and the company is very excited about the prospect of listing, as governance of the company has always taken place within the parameters of

The way in which regulation is shaping the financial services industry was emphasised at the 2014 PSG Konsult Conference, which was held at Sun City from 7 to 9 May. RISKSA was there in full force, and brings you all you need to know.

a listed company, and it will now be able to access the additional benefits of listing. “We will be in the limelight and will have the support of investors. When we need to expand, and we need funds, it will be easy for us to tap into that investor market, as we will be well known to all those large corporates,” Theron states.

of them may be minimum production levels that you have to acquire or reach in order to maintain that contract. With PSG Konsult, that is not the problem. Because of the scale we have and the leverage thanks to the number of advisers, it gives us the ability to service a large number of product suppliers.”


The challenge for companies like PSG Konsult is, once again, a regulatory one; more specifically, having to conduct due diligence on 213 product suppliers and their products. “How big a due diligence team will we have to employ to be able to do that? I think that is a challenge that we don’t yet have the answer to, but we are looking at ways and interacting with our product suppliers to determine how big that panel should be,” Hugo notes.

Another major part of the PSG Konsult value proposition to independent advisers, is that the company has relationships with 213 product providers, allowing advisers to give their clients access to a true variety of options. There is, however, a flip side to this; too much variety can add a layer of complexity and create additional challenges. Hugo explained that deciding how many product suppliers to have on the panel is one that is constantly debated. “As we all know, if you are an independent adviser, and you have a contract with certain product suppliers, some of those contracts have requirements, some of them may be financial guarantees that you have to provide, some

Here too the PSG Konsult value proposition provides benefits to advisers because they don’t have to conduct that due diligence themselves. “An independent has to cross all those hurdles on their own. The question is how do they go about doing that? It is taking time out of their client relationship

day and their marketing day because they now have to do due diligence for product suppliers,” he explains. The conference also gave advisers the chance to interact with product providers, where not only product information was on offer, but massages, shoe shining, frozen yoghurt and luxury chocolates, among other interesting giveaways, were vying for adviser attention. PSG chairman Jannie Mouton emphasised that the conference gave the delegates a chance to interact and learn from each other, and return to the office fired up with new industry and product knowledge. Theron concluded by stating that the best way to gain the advantage in the financial services industry was to maintain the personal contact and face-to-face interaction with clients seeking advice. Having the backing of PSG Konsult support services with regard to administration, compliance, infrastructure and financials means that advisers can spend the bulk of their time actually advising and supporting clients.

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Office of the Year WINNER: PRETORIA EAST

Platinum Club Awards This award recognises financial advisers, stockbrokers, portfolio managers and short-term advisers who achieved more than R10 million in gross commission and fees over the past financial year. In 2014, this group grew from 17 to 23 members. They are Johan Borcherds, Pretoria East; Nerine Brink, Pretoria; Cornelius Brink, Pretoria; Leon Ferreira, Pretoria East; Jonathan Fisher, Sandton; Chris Foulkes, Cape Town; Marius Hugo, Tygervalley; Handre Janse van Rensburg, Roodepoort; Dawie Klopper, Pretoria East; Manie Malan, Paarl; Leon Mostert, Pretoria East; Hougaard Pieters, Constantia; Don Richter, Melrose Arch; Heinrich Richter, Melrose Arch; Hannes Smuts, Hermanus; Riaan Strydom, Port Elizabeth; Willem Theron, Tygervalley; Louis van der Walt, Tygervalley; Kenneth van Zyl, Tyger Lake; Chris Wehmeyer, Pretoria East; Lynton Welby-Solomon, Melrose Arch; Riana Wiese, Pretoria; and Sue Zanninello, Durban.

2014 PSG

Konsult Awards

Financial Adviser of the Year Riaan Strydom, Port Elizabeth

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Best Growth in Production WINNER: Eben Nel, Port Elizabeth

Portfolio Manager of the Year WINNER: Heinrich Richter, Melrose Arch

Healthcare Practice of the Year WINNER: Karen Kaufman and Henriette Hugo, Paarl. Although they were not in attendance, the award was accepted by John Cranke.

Short-term Adviser of the Year WINNER: Gerhard Visser, Vredenburg

Support Division of the Year WINNER: FINANCE: DISTRIBUTION (Johannes Theron and team)

Professional Firm of the Year WINNER: Brandfin, Durban

This year’s awards were presented at the gala dinner at the Sun City Superbowl on 8 May. Political analyst Piet Croucamp delivered an engaging speech on the state of the nation, which was particularly pertinent since it was right before the election results. After the awards were announced and dinner was enjoyed, delegates had the chance to take to the dance floor while rocker Dozi took to the stage.

Stockbroker of the Year WINNER: Drikus Combrinck, Pretoria East

Employee Benefits Practice of the Year WINNER: Cornelius and Nerine Brink, Pretoria

PSG Asset Management: Outstandin g Achievement Award This award was given for consistent, superior long-term performance since 2004, proving one can get equitylike returns at less risk, and for growin g the fund to over R4 billion. WINNER: Jan Mouto n, Constantia

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Coining it Sarah Bassett

With the end of South Africa’s bull market surely drawing nigh, could the answer be to cash-in for coins?

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or investors looking to diversify their portfolios with an investment in coins, the options are split between investing in gold bullion coins, linked to the value of the gold price, and investing in rare coins which derive their value from their scarcity. Gold bullion coins, such as the South African Kruger Rand, are minted by national governments and are not collectibles, deriving their value from the underlying value of the metal. They can be bought and sold through reputable gold dealers for a price relatively close to the commodity price of gold, with the addition of a dealers’ commission. “The gold bullion medallion market is very liquid and value is tied to the gold price. This means investors can track value daily by looking at the gold price and can convert the investment whenever desired,” explains Craig Nicholls, treasurer of the South African Association of Numismatic Dealers. According to Nicholls, this type of coin buying is much less risky since the price of gold or silver is more stable than the price of a rare coin, and the gold market is liquid. “People continue to buy gold when the price is up and when the price is down,” he says. “There is a sense of security in gold investment and people tend to turn to it when the market feels risky. Immediately after 9/11, for instance, the price of gold and hence gold bullion coins shot up because people weren’t sure what would happen next; they feared world war would break out, and they turned to the security of gold,” he adds. “Gold coin investments provide an easy and low-entry option for diversifying an investment portfolio.”

Rare coins Rare coin investment is much like any other rare collectable asset class, with value driven by rarity, sentiment and demand, the key determinant being rarity. “As a broad rule for assessing the value of a particular coin, the total number of a coin originally minted interacts with the number of coins remaining in existence and the condition of the particular coin,” Nicholls explains.

How grading works The condition of a coin is indicated by its grading. In the Sheldon scale system, used internationally, the prefix MS stands for mint state and refers to a coin that is uncirculated. The number of imperfections that an MS coin has is shown by its score on a scale from 70 to 60. An MS70 is a perfect uncirculated coin, an MS65 has minor imperfections and an MS60 has scratches prominent enough to see with the naked eye. The rarity of a coin in a particular grade can be determined by checking the population reports, available from the grading companies. For example, a member of the Numismatic Guaranty Corporation (NGC), the most popular grading company, can log on to the NGC website and find out how many of a particular coin have been awarded a particular grade by the NGC. Circulated coins, as their designation suggests, are coins that have been used as currency for a period. The grading scale for such specimens stems from Poor-3, applicable to an example so worn its features are barely visible; to About Uncirculated-58, which denotes a near-to uncirculated appearance. While theoretically the better the condition a coin is in, the greater its value, Nicholls explains that this is more to do with rarity than the condition itself. “Often there will be fewer near-perfect coins, making them more valuable. But if there are in fact more MS69 versions of a coin than there are MS68, the lower graded coin would be rarer and therefore more valuable.” “Buy first for rarity and then for condition,” Brink Laubscher, a partner at Cape Town Coins and Collectibles, agrees. “The third consideration should be how many of the mintage still survive.”

Supply and demand Another key factor in value is demand. According to the South African Mint, “How many collectors want it and how badly they want it will greatly influence coin values. Some

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is willing to pay. For an investment buyer, establishing a fair value is crucial. Annual catalogues provide guidelines to what prices have been realised for the sale of coins and medallions. “Prices are regulated by the regular publication of catalogues. These reflect prices being realised at coin shows and auctions and by dealers who are members of the South African Association of Numismatics Dealers,” says Nicholls.

coins that are relatively plentiful but are more popular with collectors may command higher prices than scarcer coins.”

indicate that demand is driven by enthusiasts. According to Nicholls, 90 per cent of buyers are investors rather than collectors.

Demand may be driven by sentiment, as in the case of the Mandela R5 coins released for his 90th birthday in 2008, or may often be because of historic interest. “Veldponde coins, for example – coins manufactured by the Boers under siege conditions in the veld in 1902 – are among the most iconic South African coins.

Age can also be a factor in value, however, investors should be careful not to assume that a coin is valuable because it is old, warns Laubscher. Ancient Roman and Chinese coins, for instance, are worth very little because there are so many of them still to be found. On the other hand, the 1913 Liberty nickel is worth millions of Dollars because there are only five known specimens.

They have obvious historical interest; they have a story. And provenance (the chain of ownership) is one of the defining characteristics, along with rarity, of any object that is a true collectable,” Nicholls explains. But this does not

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Learn the market Ultimately, a coin is worth whatever a buyer

A further important way to establish an estimate of the value of a coin or medallion is to speak to people who know the business and to recognised dealers. “Investors need to do their homework and price check across a number of dealers. See what they would pay you if you were selling the coin that you currently want to buy. If the price they offer is 10 to 15 per cent less than the price you’re considering, then it’s not a bad buy.” Good collectible coins appreciate slowly over time, and should be treated as a longterm investment, says Nicholls, to factor in a reasonable buy/sell spread and time for growth. This means committing to at least five years in the investment. If done right, Nicholls suggests that investors can expect to see returns of 40 to 50 per cent a year on rare coin investments, if a willing buyer can be found.



The Range Rover Evoque Pure

There must be few automotive manufacturers brazen enough to put a concept car into production without diminishing its style. Yet such a rendering came to pass at the Land Rover workplace in 2011. Luka Vracar

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he Range Rover Evoque wandered into office parks and game lodges, shedding any notion of insignificance. And people were drawn in. Now, Land Rover has offered its best-selling model in the past three years a raw stance, stripped of clutter – the Evoque Pure. We took the entry-level turbo diesel for a drive. Once behind the wheel, the Evoque is comfortable. It shares its interior styling cues, such as the T-shaped centre console and touch screen, with the bigger and more expensive Range Rover and Range Rover Sport. And even though it may not be as equipped as the Dynamic and Prestige trim levels, expect a comfortable and stylish cabin. The satellite navigation was noticeably absent and is perhaps the first optional extra most potential buyers would miss when looking at the price. The sunroof, larger alloys, rearmounted camera, wade sensing and reverse traffic detection are all optional extras. And while these are not entirely necessary, we lamented the lack of storage space inside, particularly for the driver. The new Evoque models are the first cars in South Africa to offer a nine-speed transmission.

We found that this allows the engine to linger at a humble 15 000 rpm; saving fuel while cruising at highway speeds. Land Rover claims that our model will be good for an average of 6.3 litres/100 km. There is a manual override in the form of paddles behind the steering wheel, but due to the number of gears available, often a single downshift does not place you in the Landy’s power band. Power is delivered by way of a 2.2 litre turbo diesel which produces just over 140 kW and 420 N.m of torque. While that may sound low for a new Land Rover, it is more powerful than the closest BMW or Audi alternative. It hums through the gears with ease, capable of 0-100 km/h in roughly 8.3 seconds. Sadly, it does not always feel that way as the car we drove suffered from crippling turbo-lag each time we accelerated from standstill. However, when the Landy got up to speed the lag became marginal. For a tall all-roader, the Evoque is grippy through the bends, lower over its haunches somewhat, and body-roll is minimal. However, the car can become vague and wobbly when pressing on through tight corners. Not that it should, with its weighty,

commanding steering wheel and its rugged chassis; it is telling that the Evoque, even with all its conceptual prettiness, was made for being part of the landscape, not running away from it. When we had to take our Landy off the asphalt, the Terrain Response system, which optimises the engine and transmission outputs to best deal with the nature of the road surface, had no problem negotiating with the powdery beach sand that awaited us. We were able to choose which type of road condition we wanted to tackle by using the on-board presets which cover almost any eventuality. As you would expect, the Evoque comes with hill assist and decent. The reaction to the Evoque has not changed since the Land Rover LRX concept was unveiled at the 2008 North American International Auto Show. Even today, six years later, it looks like it has just rolled off a plinth. Crucially, even with less standard equipment, the Evoque Pure still looks like an Evoque, which is reason enough for most of its admirers. It also drives smoothly, more like a grand saloon than an SUV, and its off-road capabilities should not be underestimated either. It may not be fast, but that is not the point.

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Cape Town International Airport

STORE DIRECTO Anton Pretorius

Perhaps that four hour stop-over on your overseas business trip allows you some much-needed down time. Maybe your flight is delayed, and you need to kill some time. Modern day airports can be a sanctuary where travellers are able to unwind, grab a good cup of coffee or perhaps even pick up a nice gift for the wife and kids. With 14 million passengers passing through its gates annually, Cape Town International Airport is a hive of activity, incorporating all manner of shops and leisure facilities. We look at what’s on offer. Next month, we look at OR Tambo International Airport.


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NAVIGATION 3 La Senza 3.

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Being away from home for long periods can put strain on a relationship. Reignite the passion by stopping in at La Senza – renowned international lingerie retailer. Here you will find a selection of well-presented and stylish lingerie. A great gift idea for the missus (just make sure you get the size right). Shop number: 65 Contact: (021) 934 0905

Catch up on your reading while you wait for your flight, or while relaxing in the business lounge. Teddies and soft toys make great gifts for relatives and whether it’s stationary, photographic equipment, computer programs or entertainment you need, CNA @ Airports will have what you’re looking for. Shop number: 59 Contact: (021) 936 8173

ECTORY 2 Link Pharmacy 2.

Air travel can sometimes be taxing on your health. Whether you are ill, or have forgotten your chronic medication, Link Pharmacy is able to tend to all your prescription, cosmetic, health and beauty needs. Shop number: 52 Contact: (021) 934 5217

44 . Cape Farm & Wine Emporium

Feel like a Saffa again by visiting the Cape Farm and Wine Emporium. Here, you’ll find biltong and droëwors hanging from wooden beams and bunches of freshly cut Proteas stacked among rustic wine barrels. Add to this, seventy of the Cape’s top wines, including local brandies, sherries and port, smoked snoek and locally produced jams, chutneys, vinegars and dried fruit. Shop number: 26 Contact: (021) 936 8171




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6.6 Lere’s Shoe Shine Experience My mom always said that you can tell a lot about a man by looking at his shoes. A quick five-minute shoe shine before boarding will leave a lasting impression at that big meeting in Johannesburg. Lere’s Shoe Shine stand has a relaxing atmosphere and light-hearted staff. Where: Domestic departures terminal Contact: 072 422 1172 7 Bureau of Exchange 7.

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A quick pamper session before meeting with that all-important client could make the world of difference. The Yemaya Express Nail Bar does a quick, clean 15 – 30 minute job. No appointments, only a convenient waiting list system. Nail services include manicures, pedicures, UV gel nail overlays and foot massages for ladies, gents and teenagers. Treatment prices range from R80 – R260. Where: Domestic departures terminal Contact: 072 713 3912

Before you purchase anything, make a quick stop at the Bidvest Bank Bureau of Exchange, especially after a long overseas trip. Other solutions include, import/export foreign exchange, spot and forward cover contracts, trade services and exchange control services. Shop number: 54 Contact: (021) 936 2280


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8.8 Cellini Having your luggage break as you step foot into the airport equates to Murphy’s Law. You need a new one desperately. Cellini, with its chic, Milan-style atmosphere, stocks all manner of baggage for the needy traveller, from convenient backpacks to roomy holdalls and carry bags. Shop number: 27 Contact: (021) 936 2342

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9.9 Touch Down Taxis Authorized taxi companies are available in abundance at the airport. Touch Down Taxis travel almost everywhere, and run to and from the airport until late. At R12 per kilometre, they’re competitively priced and come well recommended. Where: Central terminal building (Transport Plaza) Contact: (021) 919 4659


Mugg & Bean

A good, strong coffee is always a blessing when you’re on the 06h00 red-eye flight. Mugg & Bean is a South African favourite, with a great selection of hot and cold beverages as well as light meals. Shop number: 72 (3rd Floor) Contact: (021) 934 1198 12

Cape Executive Parking

You’ve had no time to make arrangements for your car as you head to the airport for that unforeseen flight to Durban. Hand Cape Executive Parking your keys, and rest assured that they’ll keep your car safe through undercover parking and 24 hour surveillance. A complimentary wash and vacuum means that upon your return, you can simply get in your car and go. Where: Parkade 2 (P2) Ground Floor Level Contact: (021) 936 3480 13 10

Bidvest Premier Lounge

Regular travellers will tell you how important relaxation time is, when you’re in between flights. Whichever airline you fly, and whatever class of ticket you hold, Bidvest Lounges are an oasis of comfort, relaxation and pleasure. Facilities available include: smoking lounge, showers, free Wi-Fi, complimentary newspapers, restaurant and much more. Bidvest Premier Lounge is well worth the visit. Prices: Domestic – R159 for 90 minutes; International – R269 for 180 minutes. Where: 4th Floor Domestic Departures/ Mezzanine Level International. Departures Contact: (011) 390 8660 or

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Alba Smoking Lounge

This might be your last opportunity to get your nicotine fix before that long flight to London. Kent has an upmarket, well-ventilated smoking lounge overlooking International Arrivals with a fully licensed bar and snacks. Where: Duty Free Mall (near boarding gates A5 and A6) Contact: (021) 934 1345 14

Sunglass Hut

A nice pair of Ray-Bans or Dolce Gabanas would complete that sleek, stylish look. Stop in at Sunglass Hut for a range of quality sunnies. Shop number: 47 Contact: (021) 934 2243

What the airport suggests Deidre Davids, communications manager at Cape Town International Airport, says that the Mothercity’s airport offers a range of other facilities for regular travellers. Here are some of her suggestions: • Medical Facility The airport has medical facilities located in the main terminal building, towards international arrivals. They are linked to most medical aids. For emergencies, contact: (021) 935 0709 • Prayers facility The Muslim and multi-faith prayer facility is located on the ground floor, Parkade P2; just past the SAPS office to your right. Anyone is welcome here, no matter your religion. All prayer schedules are available from the website, • Self check-in machines The airport has 12 self check-in machines. Eight are located in the check-in area, foyer and undercover parking areas – Parkade 1 and 2.

More useful information • Important contacts: Call Centre – (021) 937 1200 | Security Control Room – (021) 937 1288 | South African Police Services – (021) 927 2900 | Katanga Parking Management – (021) 936 3612 | Landside Hotline – (021) 935 3737 or customercare.cpt@ • Airport Wi-Fi login: Always On Power points located throughout the airport for laptops, chargers, etc.


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Health precautions for first-time African travellers At the risk of propagating an old cliché – Africa remains one of the last frontiers of travel. Largely rural, Africa is one of the few destinations where adventure and danger lurk around every bush, scrub or ‘unexplored’ pathway. While Africa is any quintessential traveller’s dream, disease and sickness pose a serious threat to travellers. Finding out what vaccinations and immunisations you need before travelling into Africa is an important part of planning your trip. We consulted a travel clinic medical adviser for more information.

Anton Pretorius


mmunisations help protect travellers from some of the diseases they may be at risk of being exposed to on their travels. Unfortunately, there are many more diseases one may encounter while travelling in Africa that cannot be prevented by vaccination (for example diarrhoea and malaria). Many countries require travellers to have a certificate showing valid vaccinated against yellow fever (and sometimes cholera) before allowing access into the country. Wherever you are going, it would be wise to ensure all immunisations are recorded on an official certificate – usually issued by a doctor or travel clinic. This is useful for your own information and knowing what you are protected against. Some vaccinations, like those for rabies, are administered in a series and travellers need to plan at least a few months ahead of departure to fit them all in. A general practitioner probably will not be able to give you all the vaccinations required, so you should contact the nearest travel clinic for an appointment. Doctor Pete Vincent, medical adviser to the Netcare Group of travel clinics in Cape Town, says that it is important for travellers to visit a travel clinic. He stresses that travellers need

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to get a breakdown of potential medical risks and what vaccines are recommended. “Most importantly, you will be told what the malaria risk is and if prophylactic medication is advised.” A prophylactic is medication given not because you have a disease, but to try and prevent a disease from ever happening in the first place. When visiting a travel clinic travellers will be asked to fill out a health form detailing their

medical history and allergies, as well as past vaccinations. “What has been shown is that as we approach adulthood our immunity to childhood vaccines previously given wanes, and a single booster of vaccine given, can provide lifelong immunity for that disease entity,” says Doctor Vincent. He continues, “We advise all travellers to ensure their tetanus status is up to date. There is a vaccine that combines tetanus,

polio, diphtheria and pertussis (whooping cough) in one vaccine, and is known as the ‘travellers’ tetanus’. It offers lifetime immunity for three of the diseases and 10 years of protection.” The most common problem in Africa is traveller’s diarrhoea, which affects 27 per cent of travellers within three days of arriving at a new destination. “In Africa, food supply is usually good, with fruit and vegetables in plentiful supply.” However, buying meat in the market place should be avoided. “Don’t drink tap water when travelling, only if it’s bottled or treated. Remember, bringing water to the boil for a minute is enough to sterilize the water. A teaspoon of bleach in a litre of water can be used to sterilise vegetables and salads. Don’t put ice in your drinks unless it comes from bottled water. “Any freshwater exposure in Africa raises the possibility of developing bilharzia (schistosomiasis). If you swim or wade in Lake Malawi for any length of time you are almost 90 per cent guaranteed to have been infected with the parasite and will need a blood test three months after the exposure to confirm the infestation,” warns Doctor Vincent.

HEPATITIS A Yellow fever vaccination recommended

YELLOW FEVER Yellow fever vaccination is an international requirement to have when entering into, returning from, or transiting through a designated yellow fever country. The vaccine is effective from 10 days after receiving the vaccine, and for a period of 10 years. “You’ll not be allowed back into South Africa if you have visited a yellow fever country and do not have your stamped yellow fever card showing the date of your vaccination, without some fuss. The yellow fever card is a big source of bribery in Africa, especially on the western coast of Africa. I advise my clients to staple it to their passports as it is often removed by custom officials who demand money to give it back,” Doctor Vincent says. African countries with high yellow fever risks: Angola, Benin, Burkina Faso, Burundi, Cameroon, Central African Republic, Chad, Republic of the Congo, Democratic Republic of the Congo, Côte d’Ivoire, Equatorial Guinea, Ethiopia, Gabon, Gambia, Ghana, Guinea, Guinea-Bissau, Kenya, Liberia, Mali, Mauritania, Niger, Nigeria, Rwanda, Senegal, Sierra Leone, South Sudan, Sudan, Togo, Uganda.

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According to the good doctor, it is also very important to be covered against hepatitis A, which is spread by food handlers via the faecal-oral route. “This can be done with a very effective vaccine requiring two shots six to eight months apart, which will help give travellers lifetime immunity. This vaccine can be given alone or combined with a typhoid vaccine or hepatitis B (vaccine). It’s vital that all travellers be covered with immunity to tetanus and hepatitis A, before you ever think of crossing our borders,” he adds. To avoid hepatitis A in Africa, do not eat the following: • Food served at room temperature • Food from street vendors • Raw or runny eggs • Raw or undercooked meat or fish • Unwashed or unpeeled fruits and vegetables • Peelings from fruit or vegetables • Salads • Unpasteurised dairy products • Bush meat (monkeys, bats or other wild game)

RABIES If one is touring Africa for any length of time and camping, then a rabies vaccination can be a life-saver, and is well worth the three vaccinations required. If you are bitten by an animal, or scratched by a bat, all you require is a single dose of rabies vaccination after the bite. “Without this protection, you’ll need immediate medical evacuation back to South Africa to source rabies immunoglobulin and a series of vaccinations to try and give you some chance against certain fatality if not treated properly. Always clean a bite immediately with soap and water,” Doctor Vincent advises.


is an important fact to remember, as a fever occurring before 10 days is unlikely to be malaria. It can strike at any time once bitten by an infected mosquito for up to six months after entering a malaria area. One should always have malaria excluded first as a cause of headaches and fevers with a blood test, and follow up the test results. “For travellers going to remote regions there are rapid diagnostic test kits that the travel clinics can provide, as well as stand-by treatment, but the necessity of getting to a medical facility to have the diagnoses confirmed is always emphasised. Malaria is easy to treat in the first day or two, but [may]become deadly if not diagnosed and correctly treated within 24 hours,” the doctor concludes.

Malaria is the biggest threat in Africa and an important reason to visit a travel clinic as they will be able to tell you the likelihood of exposure you will face and what precautions to take. Always remember that if you don’t get bitten, you won’t get malaria. The female Anopheles mosquito bites from dusk to dawn. Therefore, lightweight long sleeves and pants (with socks) should be standard gear. “There are three anti-malarial medications used for prophylaxis: Mefloquine, Doxcycline and Atovaguone-proguanil, and the travel clinic can assess which is the most suitable choice for the traveller. They all have their pros and cons, but are essential to take as prescribed,” says Doctor Vincent. Malaria causes fever and a flu-like illness 10 days after entering a malaria area, which

Recommended products While there are many products available that make all manner of claims, we recommend using HHL Technology’s Vital Protection insecticide repellent during your next trip through Africa. Independent testing demonstrates treated surfaces are proven to effectively repel and knock-down mosquitoes as well as other dangerous, biting insects. Licensed by the South African Department of Agriculture Forestry and Fisheries, the application is simple and effective, providing long-lasting protection. In addition to helping stop the spread of malaria and keeping both dangerous and annoying bites at bay, Vital Protection provides anti-bacterial and anti-fungal benefits as well. The range consists of three retail products, two textile applications in the form of AM1 Soak and Dry and AM2 Spray-On as well as the widely used AM3 Paint Additive. The full range is available from Builders Warehouse stores across the country, and the textile applications are available from Cape Union Mart, Outdoor Warehouse and Campworld – to name a few. There are also online ordering channels. Visit

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


Kuier with Carel

ike many others in the industry, I was delighted with the introduction of Conflict of Interest (COI) regulations a few years back – for the simple reason that it allowed good intermediaries to grow their business honestly and made it onerous for those underwriters and intermediaries who relied on incentives. Long, expensive, boozy lunches (more often found in the short-term industry) and even longer and more expensive trips overseas (more commonly experienced in the life industry) used to influence the inappropriate pacing of business, are a thing of the past. Thankfully though, sharing a meal, often with a good bottle of wine thrown in, is still an effective way of building and maintaining relationships between reinsurers, underwriters, intermediaries and their clients.

but also the value of great broker service. For more positive restaurant insurance PR (as well as more great Italian food), you need look no further than Tortellini D’Oro in Oaklands. I have spotted our Reserve Bank Governor Gill Marcus, head of marketing at Hollard, Heidi Bauer, as well as that Jewish insurance powerhouse that needs no introduction to RISKSA readers, enjoying some Italian hospitality.

I love hearing the legendary stories about the lunches of years gone by when deals were done in less time than it took to order an avaocado ritz. The brothers of Turn&Tender hosted many a raucous lunch and it is no surprise that some of their offspring, like Danny Aaron from 3 Way Marketing, now work in our industry.

And then there is, of course, the prize-winning Mosaic restaurant near Pretoria. Started by Cobus du Plessis of Legacy (a man known not only for the impressive financial services business he built across our country, but also for his humility, generosity, good taste and hospitality). He oversees what is, for my money, the best wine list in South Africa.

Other young insurance turks, like Allan Bader (ex-Nedbank Insurance Brokers and currently underwriting at Hollard) continue to support this brand (I think the R36 for 300g steak and chips does the trick!). Still others, like La Cucina di Ciro in the Jozi suburb of Parktown North, despite having moved premises, continue to host ex-FIA president Brian van Flymen and have been doing so for over 30 years. This intimate Italian gem has also hosted the 50th birthday breakfast of insurance consultant Stewart Barret (who, by the way, has some interesting predictions on the SA insurance industry of 2050) and countless 60th insurance dinners. Small surprise then that Ciro himself is a big proponent of not only the value of insurers,

While we all have our favourite spots to eat and drink, some brokers, like Wayne Visser from FPM, have found more commercial ways to enjoy their passions. Visser started Great Domaines a few years ago and this boutique wine business is one of the best places to find delectable imported wine at very reasonable prices.

Rene Otto, CEO of MiWay, has been seduced by the Mosaic ambience. I have seen him take out his guitar to show that not only is he a brilliant insurance underwriter and marketer, he is also a man who can string and sing (small wonder that his wife is a recruiter in insurance and his son the first South African to study drama at Julliard in New York). I sign off by imagining what would be a great insurance lunch. I think it would be quite fun to book a big table at Wombles (love the steak tartare, great service and the old-world, African ambience mix), and have it hosted by Andy Mark, publisher of RiskSA. As a man who knows how to cook, edits Hotelier magazine and can kickstart any conversation,

he’ll need all his social skills and grace to keep my guests in line: Gideon Galloway, CEO of KingPrice – this man has more energy than the Energiser bunny – and puts it to good use building a great company: Leon Vermaak of Telesure Investment Holdings is a man who has been there, done that numerous times, and still continues to improve, challenge, build and grow insurance businesses; a mentor and inspiration for many up-and-coming youngsters. Justin Naylor and Zuriel Naiker, the current president and deputy president of the Insurance Institute of Gauteng. It would be good to hear where Naylor finds time to have three beautiful kids and how Naiker managed to marry a 6-foot intelligent blonde. Yegs Ramiah, People & Brand guru from Sanlam and Santam. A superb mum to her kids, she is keeping the market on its toes with cutting-edge brand practice. Yegs is definitely a leader to watch with interest. Georgie Graham from CIA in KZN. With style, good humour and grace, Georgie has shown how to build a great UMA and inspired many to follow in her footsteps. Caroline da Silva – from insurer to regulator, Caroline’s brain and laughter is always a welcome addition to any insurance conversation. Junior Ngulube – the Munich Re stalwart who once bought me a beer in Germany. I still owe him a drink. And finally, an elder statesman, Miles Japhet, chairman of Lombard – we need a chairman to raise the bar, but one like Miles who will remind us to take what we do (insurance and being the bedrock of society) very seriously. But not ourselves.

Enjoy your next meal, until next time (I don’t know what I will be writing about as this industry may just throw up a few surprises for us all!)

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RiskSA June 2014  
RiskSA June 2014