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

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CONTENTS

SEPTEMBER 2011

18

10

62

28

86

in this issue 10

On the prowl – The hunt for acquisitions

18

Cows and ploughs – Agri insurance focus

28

After the disaster – The role of the loss adjustor

62

Healtcare’s new horizon – A prognosis for NHI

Life

85

86

Micro-insurance – Thinking out the box

Enterprise risk management

97

136

4

regulars

RWC 2011 – Insurance experts give their predictions

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Short-term insurance

17

Medical

62

Finance and insurance

71

Better business

105

News

122

Lifestyle

133


riskSA from thepublisher Dear reader, We take a look at mergers and acquisitions in our lead story this month. If you are in the market to sell your brokerage, or perhaps you have already sold your business, please drop us a line. We’re looking at doing a follow-up story describing the benefits and pitfalls of selling short-term brokerages in the current market: what to look out for; how to achieve the best price for your business; etc. If you feel you have some advice to share with our readers, we would love to hear from you. Please e-mail angelique@comms. co.za with your contribution. We’re also keeping an eye on the tragic rhino poaching scourge that is enveloping our country. If you’re involved in big game insurance, perhaps you have some ideas on how this could be combated. Again please e-mail us or call the editorial office on the numbers provided elsewhere in this magazine.

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More than 1,400 votes were received in our online flash poll for our 2011 RISKSA Support Star competition for personal assistants (see page 123). Be sure to look out for the full story in next month’s issue of RISKSA, and congratulations to the winners ... where would our industry be without you?

Enjoy the read.

Andy Mark


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On the prowl If your business has the funds at its disposal, it’s a buyer’s market out there. Angelique Ruzicka peruses the South African mergers and acquisitions landscape and asks whether the country is keeping up with the momentum of the rest of the world. She scratches around Aon’s acquisition of Glenrand MIB to find out if any lessons can be learnt from it and speaks to industry experts to get advice on how best to close a deal.

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Last year, general merger and acquisition activity in the sub-Saharan region reached a record $44 billion (R316 billion) according to Thomson Reuters. Its 2010 Sub-Saharan Africa Investment Banking Analysis report revealed that South Africa was the most targeted country in the area. South Africa was also the most acquisitive sub-Saharan nation for 2010, capturing 93 per cent of the deals. The largest deal recorded was not in the insurance industry but rather in telecoms with Nigerian business Zain Africa BV being snapped up by India’s Bharti Airtel for an impressive $10.7 billion (R76 billion). This year is almost over but already industry commentators believe that 2011 will surpass the record R316 billion cited in Thomson Reuters’ 2010 report. Analysts from international financial conglomerate, Citigroup, said they expect a pickup in activity in a recent research note. Certainly, the Walmart/Massmart deal is set to ensure that 2010’s record figure is surpassed.

“The company had to agree that there would be no retrenchments of employees earning below R15 000 and that it would cap the number of retrenchments of those earning between R15 000 and R30 000 at 24 for a two-year period.” The insurance industry in South Africa is certainly not a stranger to M&A activity. Most noteworthy was Aon’s purchase of competitor Glenrand MIB and the merger between Momentum and Metropolitan to create the third largest life insurer in South Africa, MMI

Holdings. The announcement that Aon was going to purchase its rival was first made in December 2010, but the deal itself was only approved this year, creating one of the largest broking and risk management companies in South Africa and Africa. The deal was structured in such a way that around R523 million was paid for Glenrand MIB, consisting of R2 per ordinary share, plus R24 million payable to BEE shareholders. Glenrand’s strong presence and with organic growth proving difficult in the current climate, the best way for Aon to get ahead, particularly in Africa, was to snap up its rival. “The acquisition has created more critical mass not only in South Africa, but also on the continent. Glenrand wasn’t as distributed as we were but it did give us an owned operation in Namibia, which is an important country to be involved in. Through the Africa network, we now have a seamless network of offices in all the key centres. Through those means we are able to roll out our global best practice across various industry segments, bring innovation and access to insurance market capacity for clients who are regionalising,” said Guy Scott, CEO of Aon’s risk solutions business. Changes After a merger or acquisition, the parent company usually initiates several steps to integrate the purchased company into the fold. The Aon Glenrand MIB deal was no different. After getting permission from the Competition Commission to purchase its rival, Aon subsequently delisted Glenrand from the Johannesburg Stock Exchange (JSE), ending its 12-year listing. Some changes are not so straightforward to implement. Aon’s next move was to rationalise information technology and operating systems (a step it is still following through on) and installing a new management structure. This is, however, where Aon hit a wall. Sensing the job cuts, the Competition Commission fettered Aon’s plans, preventing it from making sweeping retrenchments following its acquisition of Glenrand MIB. The Competition Commission proved a thorn in the side for MMI’s merger plans, too. In January this year, MMI was forced to withdraw its appeal against employeerelated conditions imposed by the Competition Tribunal, which stipulated that there would be no retrenchments resulting from the merger in its South African operations for a period of two years starting 1 December 2010. The condition, however, does not apply to senior management. But Aon continued fighting, appealing to the Competition Tribunal and winning its case. In August, the Competition Tribunal ruled in favour

of Aon’s proposal, with conditions attached. The company had to agree that there would be no retrenchments of employees earning below R15 000 and that it would cap the number of retrenchments of those earning between R15 000 and R30 000 at 24 for a two-year period. “We wanted unconditional approval, we didn’t get it, we had to appeal and we won our appeal. The issue was around employment and the loss of jobs,” said Scott. He explained that in some cases it was crucial to eradicate duplication. “Obviously [there were] different business models. We work on a centralised accounting model, whereas Glenrand works on a decentralised model so you had accounting staff in its branch infrastructure. Looking at synergies, they have an impact but to a lesser extent on our employee numbers. To realise the benefits of acquisitions you have to generate synergies.”

R316 billion was reached last year in general merger and acquisition activity in the sub-Saharan region.

Aon and MMI are not the only companies to suffer under the might of the Competition Commission’s rules and regulations. US retail giant Walmart got the go-ahead to purchase a majority stake of Massmart, a leading South African retailer of household goods but it had to reinstate the 503 retrenched workers that Massmart cut in anticipation of the merger. The Commission added that existing labour agreements with Massmart had to be honoured for three years. Scott said that reaching an agreement with the Competition Commission was a difficult hurdle to overcome. He warned that restrictions could scare off future investors and interest from abroad. “We need to be in the business of job creation but you also have to allow for foreign direct investment and understand that synergies need to be created.”

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He acknowledged that job cuts would be inevitable in some situations but argued that if companies were allowed some autonomy there would be opportunities further down the line for more job creation. “A larger business at a point in time will feed the economy in various ways in terms of skills development and ongoing growth will require more employment. We have been a net employer of people and created jobs, but when it comes to integration you have to ensure that your business model is sound and sustainable and from there you can launch a platform to continue to grow and look for talent,” he said.

Fuelling the fire With such notable M&A activity in 2010, 2011 and more set to follow, it begs the question: why now? There are several reasons behind the M&A frenzy. One of them is the fact that in today’s volatile and soft market conditions it’s tough to grow organically, forcing companies to look at buying established businesses. Scott said the purchase of Glenrand MIB accelerated Aon’s growth. “Organic growth would have been slow especially in the difficult economic circumstances that we are all faced with. Over the past two to three years, we have made an acquisition in tough economic times and we are now in a good position once the economy does turn round.”

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Regulation is another reason for the increase in M&A activity. For smaller brokers, the burden of complying with regulatory exams, conflict of interest (COI) and treating customers fairly (TCF) to name but a few has been enough to encourage owners to throw in the towel and sell their businesses. In June, Clint Harker, managing director of Gen-Assist Insurance Brokers cautioned that on top of regulatory exams, rising costs and skills shortages would also contribute to M&A activity over the next five years among smaller short-term insurance brokers in South Africa. He said these factors will force these operators to seek partnerships and may result in 300 000 job losses in the financial services industry. He said that businesses with a premium turnover of less than R20 million a year would feel the pinch the most. “These brokers are at a distinct disadvantage to their larger peers. Not only do they face an industrywide skills shortage and salary demands way in excess of inflation, but their businesses cannot offer the career prospects that the socalled Generation X is looking for.” For smaller insurance companies, implementing Solvency Assessment Management (SAM) may be enough to force them to seek the solace of a partner or a larger parent company to cover the costs. If events in Europe are anything to go by, SAM is set to be quite costly. In Europe, SAM’s equivalent, Solvency II, is creating massive headaches for companies struggling to become compliant with the regulation.


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Then, for some South African companies, acquiring another business is a sure way of widening the footprint in Africa. Even though Aon already has a presence on the continent, the Glenrand purchase has increased its reach, particularly in Namibia. “Namibia is significant in terms of its minerals, natural resources and leisure industry and it was a missing link for us in the SADC region,” said Scott. “We were in Botswana, Zambia, Mozambique and Angola and now we have completed the SADC region footprint,” said Scott.

With so many reasons for companies to merge or acquire other businesses, South Africa and Africa is set to continue to see a hive of M&A activity for the foreseeable future. If businesses are able to obtain capital and overturn or comply with Competition Commission conditions, there will be no stopping them.

“After getting permission from the Competition Commission to purchase its rival, Aon subsequently delisted Glenrand from the Johannesburg Stock Exchange (JSE), ending its 12-year listing.”

He believes, given time, Zimbabwe could return to its former glory, too. “We are still in Zimbabwe ... we are committed to it because we still have an office there of close to 100 people.” Scott points out that the country has benefited since it dollarised its currency and that there is business to be done there. “You can’t externalise profits but it’s still a reasonable environment to operate in. When the politics comes right we believe it will return to what it once was – the bread basket for Africa.”

Don’t forget the tech: Sometimes, when getting caught up in a lucrative deal, discussions about technology and integrating systems can take a backseat. But neglecting the back office could prove costly. According to Steve Symes, CEO of Genasys Technologies, merely moving the data from one system to another can cost anything from half a million to R6 million depending on what needs to be done. “Work effort is about three to four months a system. When looking at the price of the acquisition, you have to take into account the cost of technology,” he said. With such huge sums at play, it’s essential to get it right. Symes said that when it comes to

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companies within the same industry, the largest savings are from consolidation of operating platforms into a single system. “Both systems must be evaluated to see which is better suited to the new entity.” Symes advised that companies take these four factors into account when choosing which system to go with: 1. Scalability of the different options. 2. Availability of resources to provide ongoing support. 3. How far the systems have been integrated into the different businesses. 4. Hardware requirements, e.g. one system may be running on AS400 while the other is operating on Microsoft.

Symes warned that cultural differences must also be taken into account and addressed, especially if the following are apparent: 1. Some staff, familiar with the old system, may be resistant to change, features, or feel like they are lacking control. 2. The new system imposes additional controls that may not be welcomed. 3. There are changes in the power structure with the old system’s ‘super-users’ feeling disenfranchised. “[Consider] the staff morale of the system [they are familiar with] being discarded. They have worked to get the system going, they have pride in their work, and now it’s being replaced by outside forces,” he said.


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M

s: ys plo rance em re, u y l t s c o plough industry ditrsemany mplay in al s and rriculturaelcitnly supspaobrle role to n ag indir r. spe he Cow re t e and n indi l secto e ricultu h l a w a p r s y ntr peo try ha ricultu ag cou 000 us ag In a 600 ce ind rica’s r f n r nd out jubstof ove nsura uth A te i o the ring S asenes tofinfids the jo u s i sec d d the sc r and n justo ehi s b ss ad one. r the e o asy tg a lo righ to be t an e Afte W o nca kes is n

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Cows and ploughs: agricultural insurance I n a country where the agricultural industry directly employs over 600 000 people and indirectly supports many more, the insurance industry has an indispensable role to play in securing South Africa’s agricultural sector. Hanna Barry dug up the facts on agricultural insurance and discovered just how complex the risk management considerations can be and the importance of brokers and underwriters in managing these risks effectively.

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R3 million

risks that apply to every farmer in all locations include weather patterns and unusual weather such as excess wind, heat, hailstorms and drought. Change in weather conditions is responsible for 80 per cent of the variability in agricultural production.

worth of food lost in a fire when a feeding lot caught alight

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bout 10 years ago on a farm in the Klerksdorp area, a big feeding lot caught alight after a piece of carbon dislodged from the front-end loader that was mixing the feed. The carbon flew into a haystack and R3 million worth of food was lost in a fire. Farming brings with it a range of complex and sizeable risks. Andre van der Walt, head of Etana Agri and founding partner of specialist agricultural underwriter Sentrisure, now merged with Etana, explained that farming risks vary widely depending on what sector you are dealing with, as well as which area of the country you are situated in. He

said that risks that apply to every farmer in all locations include weather patterns and unusual weather such as excess wind, heat, hailstorms and drought. Change in weather conditions is responsible for 80 per cent of the variability in agricultural production. Among the most common risks experienced by farmers, Anton Rohrs, marketing manager of Safire Insurance Company, listed fire and storm-related damages, flood damage, theft and burglary, spread of fire and accidental damage to vehicles and agricultural implements. Some of these risks are uninsurable and others, such as

hail damage on potatoes, are not worthwhile covering from an economic point of view because they are so expensive to insure and it doesn’t make financial sense. Van der Walt explained that when evaluating risk, brokers and insurers need to determine whether a farm can be insured on a sustainable level or not. He lists frequency of a specific loss, the severity of such a loss and the utility or value of assets, as key determinants in deciding whether or not to insure a risk. Group manager for agriculture at Mutual & Federal, Andries Wiese, warns that farmers should not avoid insuring their farms even if it is expensive. Some of the more expensive risks to cover occur

frequently so it is vital to ensure that there is adequate cover in place for them. Risk of fire cover is a case in point. This risk is particularly high in areas with summer rainfall. The grass grows high during the summer months, yielding a large amount of combustible material, which is (in Wiese’s words) “waiting for a match” during the dry and windy winter months. Fire can damage both crops and assets, making it a high risk that can potentially cost a fortune – as with the veld fire that occurred just outside Bethlehem a few years ago. A farmer in the area decided to pull his milk herd into short grass to protect them

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cattle put down after a veld fire – fire is a high risk that can potentially cost a fortune

“Experts advise brokers and insurers to keep themselves informed about issues affecting the agricultural industry. Remain up to date with what is happening in the industry and the issues at hand... Keep abreast of releases from the State Veterinary Services, so that if there is a foot and mouth disease outbreak you will be able to inform your client of this and be aware of the subsequent potential losses.”

from the fire. While it looked as though they had been saved, it was later discovered that their udders had been burnt in the fire. The farmer had to put down the entire herd of 120 cattle. Public liability for the spread of a fire is another consideration. Wiese explained that the minute the fire spreads, if it started on your client’s property (whether or not they were guilty of starting it), they can be held liable by whoever suffered a loss as a result of the fire. Rohrs added that underwriters need to consider the following when calculating spread of fire cover: the types of farming activities conducted on neighbouring farms, for instance, grasslands would be a lower risk and attract a lower risk than timber; details of all firebreaks on the farm and the extent thereof; the available operational fire-fighting equipment on the farm; details of trained on-site fire-fighting teams; the number of years’ experience in farming and previous spread of fire claims.

Bespoke solutions Farming in South Africa can be broken into a myriad different sectors (such as citrus, wine and wheat) that are impacted by varied weather conditions (for instance, winter and summer rainfall areas), the type of crop being cultivated, as well as the way in which it is cultivated. “There is no one-size-fits-all option,” remarked Wiese, explaining that it is important to understand the processes involved in a particular farmer’s operations. “No two wine farmers or wheat farmers do their business in the same way,” he continued. Even farmers farming the same product will cultivate it differently, and therefore need different implements and ultimately different insurance. “It’s very difficult to be generic about these things,” he added. Wiese explained that insurance products need to be flexible enough to accommodate this wide-range of farming types and techniques. For instance, developments in technology have led to motorised tractors and combine harvesters that are operated like computers. This is known as ‘precision farming’. Ordinary motor policies (under which many tractors are insured) don’t make provision for such electronic equipment, which may cost the farmer large sums of money if it means he loses production time and capacity. Similarly, livestock farmers need specific products that address challenges such as illness and liability.

In the know Wiese warned that farmers may wear shorts and khakis, but that brokers should not underestimate their knowledge and the potential risks they face. Many of them have a tertiary education and will quickly catch

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out ill-informed brokers and underwriters. Farmers want a broker who will appreciate that he is different from his neighbour and therefore needs a bespoke solution. Van der Walt noted that due to the extreme uncertainty of the farming environment, specialist and individualised agricultural insurance is fundamental to effective cover. “Objective professionals are able to spot vulnerable areas, which people too close to the situation are unable to spot,” he remarked. For example, farm buildings do not require plans when being built, which often results in inadequately constructed buildings that are unable to withstand normal weather conditions. This causes conflict at claims stage as underwriters question whether a loss could have been avoided had the building been constructed adequately. “It is advisable that the broker does a full risk survey checking on the construction of the buildings and its general maintenance,” Rohrs counselled. “If problem areas are found, it is best to advise the client and take action prior to the occurrence of a claim.” It is vital that the broker and/or insurer covering the farmer have extensive knowledge of the agricultural industry and issues affecting this industry. “You cannot take an insurer to a farm who doesn’t understand the farming risk,” Wiese said. “An ordinary commercial risk loss adjustor would be lost if you asked him to look at crop risk.” Experts advise brokers and insurers to keep themselves informed about issues affecting the agricultural industry. “Remain up to date with what is happening in the industry and the issues at hand,” Wiese continued. Keep abreast of releases from the State Veterinary Services, so that if there is a foot and mouth disease outbreak you will be able to inform your client of this and be aware of the subsequent potential losses. Contact with formal agricultural bodies, such as the Agricultural Business Chamber, will also help keep you informed. Climate change is an everyday reality affecting farmers. The energy crisis represents another influential factor that insurers need to consider and make provision for in their services and products. Facilitating a switch to solar-powered geysers, for example, demonstrates the type of agility that can accommodate various risks with effective solutions. “It’s about becoming practical about realworld issues,” Wiese said, adding that intermediaries and insurers need to be sufficiently involved and responsible, since “farming is not a static risk.” Although farmers are increasingly using the Internet, very few will purchase [products] electronically and still prefer to deal with brokers face to face. This means that the role of the intermediary remains critical in guiding a farmer through the process of securing the correct cover.


Fodder for thought Assessing a farmer’s risks is a complex business. If you’re not yet convinced, below are a few considerations that illustrate just how nuanced the process can be. • A farmer’s water supply is often a combined unit supplying the household, those of the staff and labourers, as well as the irrigation system. Since this is not strictly a household or commercial risk, your insurance product needs to make provision for it. • Consider the transport risks on the property. If the farmer is transporting a load of fertiliser worth thousands of Rands, there needs to be cover for it should it topple off the tractor or the driver have an accident. • If the farm is on two sides of a national highway, make sure their vehicle is registered for public roads and all drivers are licensed. • If the farmer is a livestock farmer, they need to have liability cover for roaming cattle and cattle in public roads should one of the herd break loose and cause a road accident. • Ensure the cattle insurance includes cover for illnesses or even impotency (especially if your client is a stud breeder). • If the track on the tractor tyres is cut by a rock or implement, this could cost up to R80 000 on a big tractor and, on some tractors, the entire set of tyres may have to be replaced.

• Centre pivots, used for irrigation, may fall over in windy weather, bend and be rendered useless. One centre pivot could easily cost upwards of R100 000, and most farmers have got three or four. Furthermore, people tend to steal the mechanics and electrical components of these. • Theft of cabling forming part of ancillary equipment such as pumps and centre pivots is on the rise, fuelled by the lucrative street value of copper. This has resulted in certain underwriters granting cover only subject to the installation of cable guard mechanisms. Advise your client to install security measures in order to mitigate losses and secure sufficient cover.

R80 000

the cost of track that’s been cut on big tractor tyres

“Farmers may wear shorts and khakis, but that brokers should not underestimate their knowledge and the potential risks they face. Many of them have a tertiary education and will quickly catch out ill-informed brokers and underwriters.”


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Fighting fire with fire

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ublic liability, as a result of the spread of a fire, is one of the largest and most common risks many farmers face. Whether or not they were responsible for it, a farmer can be held liable for fire damage suffered by neighbouring farms, if a fire started on their property. More than four-and-a-half thousand hectares of land have been burnt in the eastern Free State over the past month and farmers without firebreaks could be held accountable for negligence, according to Mutual & Federal. Adding fuel to the fire “Due to an extremely dry winter in some parts of the country, recurring fire outbreaks are unfortunately inevitable, particularly in farming areas,” noted Andries Wiese, group manager for agriculture at Mutual & Federal. He explained that grass, plants and other vegetation, in abundance after the past summer’s rains, become extremely dry in winter, creating a lot more fuel for veld fires. “All the summer rainfall areas are affected and could be at risk. Cultivated crops, infrastructure, capital equipment, lives and

livelihoods are being lost and, without proper construction and maintenance of firebreaks, farmers may be left with a potentially devastating financial scenario,” continued Wiese. In addition, young, developing farmers often do not understand their responsibilities in terms of firebreaks and the prevention of fires. “In these instances, the exposure to fires multiplies. Farmers could suffer losses as a result of not having the adequate firebreaks in place, which are required by law,” highlighted Wiese. Safeguarding a livelihood “There is an urgent need for all farmers to be vigilant about ensuring they protect their own land, livestock and future harvests, as well as that of their neighbours, through the construction of firebreaks,” he added. Often farmers use the presence of heavy winds as an excuse not to make firebreaks. However, these winds only intensify the spread of fires and the lack of firebreaks could have a huge impact on the whole country. Furthermore, farmers need to understand that even though fire-made firebreaks are the cheapest method of fire control, taking a more expensive route on windy days could prove to be more cost-

effective than allowing a fire to spread and paying the costs of being negligent after thousands of hectares have been burnt. “There are many other manual and chemical firebreak options available to farmers, which are far more advanced than the traditional method. They may be more costly in terms of time, labour and capital layout, but ultimately can mean the difference between saving your livelihood and leaving your land to the mercy of the elements,” explained Wiese. A proactive solution In this challenging and high-risk environment, preventative liability cover allows landowners to include firebreaks and other preventative measures in their insurance cover, thereby covering themselves for both their own losses and those of other parties, in the event of a fire. “If a farmer sees that a nearby fire on a property may spread and place properties and people in danger, we are the only insurer that will reimburse them for preventative actions taken to stop that fire from spreading and causing further destruction. This solution eliminates legal proceedings and further losses as a result,” Wiese concluded.


THE ROLE OF THE LOSS ADJUSTER Bianca Wright goes behind the scenes to find out just what it takes to be a loss adjustor and finds the job of a loss adjustor is not an easy one.

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t its heart, the role of a loss adjuster is simple: to confirm that an insured event has taken place, that this event has resulted in a loss and to assist in the quantification of the actual loss. It is also to keep all parties happy. This includes the insurance companies, the insured clients and the contractors (builders, suppliers, etc). “Although this may seem pretty simple, the reality is that this is not always as easy as it seems, with insurance companies trying to save costs, clients seeking fair reinstatement and builders who cannot always keep to the rates prescribed by insurers,” said Jeffery Smith of BVA Loss Adjusters. The job of a loss adjuster is not an easy one. “From a consumer point of view, insurance is a grudge purchase, and no-one really wants to pay the premiums for a product that they will use only every now and then. The general public has heard the stories of claims being declined, and the rumours that insurance companies almost never pay claims,” added Smith.

“Although this may seem pretty simple, the reality is that this is not always as easy as it seems, with insurance companies trying to save costs...” It is with this preconception in mind that when a loss adjuster meets a client to handle a claim, they immediately represent the enemy. “You’re the one that’s going to swindle them out of what they deserve,” he said. “This is one of the first challenges that a loss adjuster will find: to reassure a client that the claim will be handled fairly, a task proven to be even more difficult when there is a possibility that the claim will be declined. On a number of occasions I have come across blatant hostility from insured clients.” Professionalism is thus paramount. The Institute for Loss Adjusters of Southern Africa, ILASA, is the regulatory body that oversees the industry, although it must be noted that it has jurisdiction only over its members. ILASA enjoys support from most of the local insurance companies who insist that, in order for an individual to be appointed by them to assess a claim, such an individual must be a member of ILASA. Non-members may perform similar tasks and may even call themselves loss adjusters, although assessors is a better term. The term ‘loss adjuster’ has been registered by the ILASA with the Bureau of Heraldry. In order to be accredited with ILASA, a loss adjuster must meet certain requirements such as subscribing to the ethical code, having professional indemnity insurance and having obtained some minimum academic qualifications and/or have passed the ILASA exams. ILASA members adhere to a strict code of conduct that dictates behaviour in the field. For example, the first clause of the code states that, “A loss adjuster must at all times render his services honestly, fairly, with due skill, care and diligence, and he must maintain the highest degree of integrity in the interests of his clients, principals and their clients, and without breaching the relationship of trust with his client.” The code also covers issues of disclosure, conflict of interest, recordkeeping and other legal and ethical stipulations.


There is a complaints procedure in place in case any of those things are not adhered to and this is clearly described in the disciplinary code, which is available on the ILASA website (www.ilasa.org.za). In addition to regulating the behaviour of those in the industry, ILASA is also mandated to regulate the education of loss adjusters, through their continuing professional development programmes and accreditation process. So what do you need to become a loss adjuster? To begin with, loss adjusters must have knowledge of insurance as the insurer is their client. “Loss adjusters have the mandate from the insurer to, among other things, valuate the loss, analyse facts, look at recovery, and report to the insurer, underwriting manager or sometimes the broker,” said Lesley du Toit, director of ILASA. Loss adjusters do not have the authority to settle a claim; this must come directly from the insurer.

the event that brought the claim about, to each client, a simple burst geyser or pipe may feel like an utter catastrophe,” he said. “Thus one of the more important actions that a loss adjuster can take is to reassure the client that the matter will be resolved without delay, and furthermore to deliver on this reassurance.” He cautioned, though, that this reassurance cannot be given irresponsibly, and lead times, delays and so on are to be explained to the insured, prior to them having occurred. “Clients expect fast turnaround times and immediate resolutions, which is not always possible. There is always a friend or neighbour who had exactly the same claim, and their insurers sorted the problem out in two days,” Smith added. Strong moral and ethical principles are also a requirement. Every loss adjuster comes across a client of somewhat questionable

Smith emphasises the human qualities needed. Empathy is important. “It always is prudent to bear in mind that regardless of

There are, luckily, procedures in place that prevent these kinds of attempts at being successful.”

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morals. Overinflating a claim is quite a common occurrence, or even worse, inaccuracy in describing what or how something happened. “There are, luckily, procedures in place that prevent these kinds of attempts at being successful,” Smith said. “It does, however, happen that a loss adjuster may come across an individual who they know is being dishonest, but despite the application of the standard procedures, is unable to prove the insured client as being morally decrepit.” He continued: “The difficulty with these situations is that the loss adjuster must still remain impartial to all parties, and can furthermore never state his suspicions in writing (recorded telephone calls, etc).” A loss adjuster’s report must contain factual information, valid hypotheses and accurate predictions. “There is no place for suspicious feelings in a loss adjuster’s


M report. Of course, this would put any morally sound person in an uncomfortable position, but being a loss adjuster, we can take solace in the fact that we have performed our duties with distinction,” he said. Remaining impartial can be difficult. Smith cites the example of a claim for items lost following a severe motor vehicle accident that he handled a number of years ago. Unfortunately, his client’s wife was a fatality of the accident. “The client was obviously sensitive about the loss of his wife; however, I still needed to explain to the insured that his claim was severely limited,” he said. Smith advises that the skills required for a loss adjuster include: 1. The ability to communicate with clients. 2. The ability to interpret clients’ statements into a proper description. “Often this proves quite difficult, as not all clients communicate in the same way,” he said. 3. The ability to manage clients, contractors and insurers. 4. The ability to view a problem from multiple circumstances, and analyse each instance in detail. 5. The ability to gain the trust of clients, contractors and insurers, and then prove that their trust is deserved.

6. The most important: the ability to be impartial to all parties at all times.

“You would not use a liability adjuster to look at a business interruption claim, for example. Although some loss adjusters are able to work across disciplines.” Insurers looking for a loss adjuster should take into consideration the type of insurance claim involved. “Is it a liability claim where there’s a third party claim or is it a damage to property claim that is between the insured and insurer,” said Du Toit. Depending on the type of claim and the field – property or crime-related losses, for example – the skill set required in a loss adjuster may be different.

“Some have a legal degree or at least work closely with attorneys,” said Du Toit. “Many come from the building industry as quantity surveyors or engineers; others being qualified mechanical, electrical or even chemical engineers. Some are qualified chartered accountants, specialising in dealing with business interruption claims following an insured event. The day-today assistance of the general adjuster who specialises in general property and crimerelated claims adds tremendous value to the insurance industry. A loss adjuster dealing with a property claim needs to be able to estimate the property value as well as determine the extent and value of the damage. All loss adjusters must know and understand the policy wording related to the claim.” Du Toit recommends choosing a loss adjuster who is right for the claim needs. “You would not use a liability adjuster to look at a business interruption claim, for example. Although some loss adjusters are able to work across disciplines,” she said. She advised that insurers looking for a loss adjuster should go to the ILASA website. All members are on the website and their qualifications are listed there. Looking at the qualifications can give an indication of the kinds of claims the loss adjuster might be best suited for.


Insurance Zone Administration

Passionate about doing short-term insurance the honourable way

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ince launching in 2007, Insurance Zone Administration has relentlessly focused on delivering unique insurance solutions through personalised and excellent customer service. It is a philosophy which is the cornerstone of the company’s values. “We want to do business with a select group of quality brokers. This endorses our way of doing business which is selling insurance the good old-fashioned way. By giving prospective and current clients individual attention with customised solutions,” said Alan Johnston, co-founder and director at Insurance Zone Administration. “We’re a niche quality player, serious about doing business in a principled manner.” Insurance Zone Administration provides insurance administration services on behalf of various insurance companies, effectively operating as an extension of the insurer; by serving as a one-stop service provider, which includes product design, underwriting, policy administration and claims management.

The business, backed by Hollard, offers a full range of products and services for body corporates, engineering and marine, as well as personal lines, motor fleet and specialist cover solutions; for example, their new Leisure Zone scheme which covers motorcycles and small craft. Staffed by over 60 professionals, Insurance Zone is based in one of the most iconic buildings in Bedfordview, east of Johannesburg. Being a one-stop service makes Insurance Zone Administration an ideal partner because it allows brokers to focus on their

Insurance Zone Administration shareholders from left to right: Andrew Roos, Brian Snyman and Alan Johnston. most critical activity, managing relationships with their clients. Additional benefits of working with Insurance Zone Administration include: • Direct access to the senior management team. • Relevant pricing on policies based on actual trends collected from a broad base of insurers. • Rapid response times on underwriting and claims decisions and assessment services. • Managing of individual brokers loss ratios therefore ensuring that premium increases are done when applicable on relevant clients and not on a crosssubsidisation basis. • Professional and knowledgeable staff with many years of experience in insurance and administration. The company strives for a best-of-breed position by reducing the administrative burden and, in so doing, making brokers’ lives easier. Insurance Zone Administration co-founder Andrew Roos, said, “Our private banking ethos is an appealing value proposition. We understand that our broker’s time is a

precious commodity. Our select brokers get round the clock personalised service, making it a win-win situation for all. They get to manage their core business, while we provide an efficient back-office service.” Alan and Andrew are doyens in the insurance industry with combined experience of more than 50 years. Andrew’s expertise is in employee benefits and solutions for high net worth individuals. He is an accredited corporate benefits adviser, an associate of the Financial Planning Institute. He has won several industry awards including the International Quality Award in recognition of quality underwriting service to the public. Alan, an entrepreneur at heart, has immense expertise in short-term insurance, having co-founded and run a multi-million Rand insurance brokerage. He left his previous business and subsequently helped establish Insurance Zone. He said, “We are in the business of risk. We put our capital and reputations on the line each time we write a new policy. In good or tough times, we always put our customer first and provide them with first-rate trustworthy advice.”

For more information about Insurance Zone Administration and its services, call (011) 601 8800, e-mail admin@insurancezone.co.za or visit www.insurancezone.co.za


WINDING UP WIRELESS

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nsurers nationwide will be relieved to learn that copper cable theft may be a thing of the past, in light of hightech gadgetry that can detect body heat and identify cable thieves.

The welcome news comes after the latest figures from the South African Chamber of Commerce and Industry’s copper theft barometer registered theft of the metal at R15.84 million in July 2011. This is up from the figure in June of R14.37 million but still below the average of R16 million and R18 million a month.

households countrywide have been left without landlines for weeks on end due to stolen telephone cables. The technology for combating cable theft involves attaching a thermal imager to a laser rangefinder and a GPS system, enabling the detection of body heat and, together with other security equipment, visual confirmation of a criminal attack. This means that police can be alerted to crimes in progress.

Product manager for Carl Zeiss Optronics South Africa, Roberto Bruzzaniti, told Business Day that the company had offered its long-distance thermal imaging technology, used to give tanks a covert advantage in warzones, to Gautrain operator, Bombela.

Large objects, such as vehicles, can also be detected at up to five kilometres. In fact, Port Elizabeth has been using the technology as a crime deterrent since the Soccer World Cup, when it was initially adopted as part of a drive to increase security measures. It has lead to the arrest of at least 27 people and is being used to monitor illegal abalone poaching.

Cable theft has brought the Gautrain to a grinding halt twice since it opened its Pretoria-Johannesburg line on 2 August, and

Bruzzaniti said that Carl Zeiss SA is also in discussion with Eskom and Transnet, as well as other large parastatals.

Copper theft facts: • It is estimated that copper theft costs our economy R10 billion per year. • Pieter van Dalen is the chairperson of Copperheads, a task team appointed to combat syndicates responsible for copper theft in Cape Town. • Between 200 and 300 people were arrested every year since Copperheads’ inception. • On average about 50 council workers were arrested a year, indicating that in some cases, copper theft from municipal property is an inside job. • In 2007, when Copperheads was established, R22 million worth of copper and other metals were stolen. In 2009, that number fell to R500 000. • Theft of brass water meters was reduced from 1 700 a month in 2007 to 10 a month in 2009. Source: Democratic Alliance

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US quake causes little shake

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he east coast earthquake, measuring 5.8 on the Richter scale, struck Virginia, near the town of Mineral, on 23 August – much to the amusement of many west-coasters, who found the shake completely unimpressive. Earthquakes are far more common on the west coast (hence the scoffs heard in California), which is why the shock factor probably had a part to play. The tremors experienced on the east coast scared employees out of office buildings. Reduction in productivity is perhaps the greatest financial loss to have come out of the quake as a result of lost work time. According to The Independent, one San Francisco resident wrote on Facebook: “A

5.8? I wouldn’t even wake up to a 5.8 if I was asleep.” The east-west rivalry continued on Twitter, with Rob Sheridan writing, “The collective eye-rolling of everyone in California is probably moving the earth more than the east coast #earthquake.” Light banter aside, it seems that those on the west coast, weren’t far off the mark when it came to actual damages. Catastrophe modelling firm, AIR worldwide, told UK-based publication Insurance Times that the quake is unlikely to cause any significant structural damage to buildings. Although buildings were rattled and large-scale evacuations ensued across the east cost of the USA, AIR explained that the dense rock of the central and eastern United States can spread seismic energy more efficiently and over a much larger area than in the plated boundary

region of the western United States. With the ground motion low, there should be minimal structural damage to buildings. However, Virginia’s more historic buildings, often characterised by unreinforced masonry, may experience more significant damage. There could also be non-structural damage in the form of superficial cracks in the walls of buildings and other engineered structures, AIR stated in a report. Tremors were felt as far north as Toronto, North Carolina, New Brunswick and as far south as Charleston, South Carolina. Insurance Times reported that the east coast’s quake is the largest to have struck the area since 1887, when a magnitude 5.9 quake hit Giles County. Tremors were felt in 12 states.


Turning point for Zurich? Angelique Ruzicka catches up with Guy Munnoch, chief executive officer of Zurich Insurance Company South Africa about the company’s half-year results and its plans for 2011 and 2012.

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ome things, because of their sheer size, aren’t able to do an immediate about-turn. Things like freight ships, pantechnicons and tanks spring to mind. Zurich South Africa is another example. In February 2010, Zurich announced that it would embark on a transformation programme that would incorporate everything from process and technology, through to people and locations. Guy Munnoch, CEO of Zurich South Africa said at the time that this would be about “right sizing and not downsizing”. More than a year later and the industry is now seeing some fruits of Zurich’s hard labour to turn things around. But it’s slow going. For its financial results for the six months ending 30 June 2011, Zurich reported an underwriting deficit of R11.6 million compared to the underwriting surplus of R10.8 million for the previous half year. Munnoch said this was expected and blamed the decline in the underwriting

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result on lower premium volumes, adding: “We expect to improve our performance through the delivery of a focused growth strategy, which will flow into 2012.” Growth, for Zurich’s CEO, is a priority but more so is profitability. Making underwriting profitability the most important thing on the agenda has meant that Zurich’s results have been impacted by a 14 per cent decline in business volumes to R2.1 billion compared to R2.4 billion in 2010. “The one thing you will notice is the top line decline of 14 per cent, driven by what we set out to do last year which is to ensure we are writing for profit. Maintaining that underwriting integrity is very central to what we are doing,” said Munnoch. But there are highlights to point out, too. The company announced a profit after tax of R37 million as opposed to the previous half-year loss of R42.7 million for the six months ending June 2010. Investors

received a dividend of 100c per share and the group maintains its transformation, alongside a number of claims initiatives, have impacted on the cost of claims, which at R1.1 billion is an 18 per cent improvement from the R1.3 billion reported in the prior period. This result was achieved despite major weather-related losses in the first quarter of the year. “We are pleased with our claims improvement which is down to R1.1 billion considering the storms and floods that hit us at the beginning of the year. Also expenses; we have controlled those extremely well.” Munnoch admits that growth is currently difficult to obtain within current market conditions, but he has refused to veer off the transformation path. “This year is all about stabilising and improving profitability and, as a result, we’ve had to walk away from certain opportunities. From now on, we are focused fundamentally on a controlled growth strategy as we have high ambitions for this and next year after


M getting the right structure and people in place. It is tough to walk away but you have got to hold your nerve.” Munnoch promises that the months running up to the end of 2011 and 2012 are set to be interesting with an increase in capacity and product launches. Drawing on RISKSA’s reference to Zurich as a sleeping giant in an earlier article, Munnoch said: “We are a giant and we have been sleeping but we are now really moving on getting that capacity in and have had very strong and upbeat conversations with all the key global brokers. We, unlike others, can leverage our global capability. We are already driving growth in marine, engineering, high net worth and liability. We are launching new products and propositions in the second half of this year around agriculture and hospitality. So there is a lot on the go.” While Zurich’s strengths lie in books of business such as marine, engineering and high net worth, it’s still unclear what the company will do going forward in areas that it is not excelling in. When asked, Munnoch refused to speculate on what would happen but hinted that Zurich could have a rethink on certain books if improvements aren’t made. “We are not at the stage yet [of closing certain books

of business]. But I’ve always said our strap line is that we are the leading empowered insurer in a chosen market. So my personal sense is that if you are not likely to be in the top three over time (and we always think longer term), then why would you be in that particular market? We are there (or there about) but if we ever got to that stage, we haven’t been shy to make those kinds of tough decisions,” he said. Expanding into Africa could also be on the cards. The company has a 100 per cent shareholding in Zurich Botswana and Munnoch admits that it is currently looking at opportunities elsewhere. “We have identified 12 countries and are right at the point on deciding where to move into,” he said without revealing which African countries would appeal. Reinsurance treaties come up for renewal in October. While there has been much debate on whether rates will harden thanks to world catastrophes experienced in 2011, Munnoch is unfazed by that prospect. “If you can get them to move the rates up we will be delighted,” joked Munnoch, explaining that companies would benefit from an increase in reinsurance rates as this would invite insurers to do the same. He added: “But my sense is that despite the

[catastrophes within the] first 10 weeks of this year with Christchurch, Japan, etc, a lot of the reinsurers are not going to shift their rate too much.” So what can we expect from Zurich going forward? Munnoch brings us back to the aim of the transformation which is profit: “We will not chase volume for the sake of it,” he assured. Claims will be handled better, too.” Referring to problems Zurich has had in the past Munnoch said: “When you’ve had a challenge around your service, very often you emerge far stronger, so I am delighted with that situation and our service levels across the board. We have segmented our broker base and they will be benefiting from the proposition. It’s a proper partnership.” Following on from Santam and M&F’s rebrand, Zurich is also set to embark on a marketing campaign, the details of which Munnoch is not yet open to divulge. “With our present positioning and ambitions for the future, it has to be twinned with a marketing campaign. We will roll out a marketing campaign through the backend of this year and the next that will work alongside these company ambitions,” he concluded.


Results roundup Hardy reports net loss for Q1 “The reported losses were as a result of Australian floods, cyclone Yasi, the New Zealand quake and the Japanese quake.”

Scor boasts €120 million net income French-based reinsurer, Scor, reported a 5.5 per cent increase in gross written premiums, up €1 735 million compared to the second quarter in 2010. Net income stood at €120 million, the same level as the second quarter in 2010, following what it said were strong technical performances in both life and non-life reinsurance. The reinsurer’s property and casualty gross written premiums reached €991 million, up 15.9 per cent compared to the second quarter last year. The non-life combined ratio stood at 92.6 per cent. It said 5.5 positive impact points are linked to a legal action over the World Trade Centre, with a ratio of 6.6 per cent for natural catastrophes, of which 1.6 points are due to events in the first quarter of this year.

Specialist insurer and reinsurer, Hardy Underwriting Bermuda Limited reported a net loss estimate for Q1 in the range of £28 million to £33 million, an increase from its original estimate of £21 million to £26 million. The reported losses were as a result of Australian floods, cyclone Yasi, the New Zealand quake and the Japanese quake. “Following the recent receipt of updated loss information from ceding companies, there has been a deterioration in the level of market loss from both Japan and New Zealand and the revised estimate for Q1 catastrophe losses, after all reinsurance recoveries, has increased to a range of £28 million to £33 million. In addition, the series of tornadoes in the United States in Q2 has resulted in £3 million of net claims,” announced Hardy in a trading statement released in late July. London-based trade magazine, Insurance Times, reported that Hardy’s stocks took a 9.7 per cent tumble the day after the announcement was made but recovered soon after reaching 264.50 by 11h00. The Lloyd’s insurer added that it was seeing significant rate increases on the property treaty and the direct and facultative property portfolios, but admitted that the rating environment continued to be challenging in the noncatastrophe exposed lines.

Hardy: comparison of 2010 with 2011 written premium (Gross of commission, incepting between 1 January and 1 July and an indication of the rate change.)

Cat losses contributes to Amlin’s £152 million loss “Exceptional catastrophe losses in the first half of 2011 have taken a heavy toll on the reinsurance industry and Amlin has been no exception,” said Charles Philipps, chief executive of Amlin, after the reinsurer reported £152 million after tax. “While our results are disappointing, the core underwriting businesses in London and Bermuda are well placed to take advantage of an improving rating environment, particularly in catastrophe lines. We remain focused on addressing areas of underperformance and I am confident that Amlin can continue to deliver excellent long-term returns for our shareholders,” he added. Gross written premiums were up 1.9 per cent at £1 514.6 million compared to £1 486.2 million in the first half of 2010. The combined ratio stands at 121 per cent compared to the 88 per cent it reported in 2010.

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2010 £m

2011 £m

Change £m

Renewal rate change

Marine and aviation

41.1

47.0

5.9

-0.3%

Non-marine property

49.3

61.4

12.1

4.5%

Specialty lines

44.8

38.2

(6.6)

-0.9%

Property treaty

93.8

98.1

4.3

7.8%

Total

228.9

244.7

15.7

4.1%

(All figures are at Q4 2010 rates of exchange ($1.57; CAD1.56; €1.17; JPY126.98) and are gross of commissions.)


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Business Insurance vs

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perating a business is always a challenge, but in South Africa, even more so. Despite the nation’s optimism, crime remains an ever-present reality, and according to Jonjon Smit, sales director at CIB Insurance Administrators (CIB), statistics indicate that commercial crime claims have increased in 2011. Nevertheless, insurance is usually among the first cut-backs made by small to medium businesses (SME) to combat the effects of the recession.

“With around two million small businesses in South Africa, employing just over half of the country’s total labour force, the SME market is crucial to the continuing growth of the local economy, particularly in the current economic environment.” Although many businesses find themselves strapped for cash in the wake of the global recession, it is critical that they have the right cover in place to combat the negative impact of the high rate of commercial crime. Businesses cannot afford to cut back on their insurance and security measures, despite the financial challenges they face, since “without adequate insurance protection, businesses would struggle to recover from the high costs to replace critical assets in the event of a theft-related claim. The consequential losses of not being able to operate efficiently could also potentially affect an enterprise’s bottom line”, said Smit. Smit added that by being proactive and taking the time to identify any weakness in a company’s security systems and processes, business owners can reduce key risks. “Security measures such as alarm systems that are fully operational and tested regularly; surveillance cameras; security gates and burglar bars; access control to and from the premises; and changes in day-to-day

routine can minimise the risks involved of a loss, due to a crime being committed.” Effective security measures support insurance policies to ensure that any loss or damage, as a result of crime, does not negatively impact the ability of a business to continue to provide its goods or services and to maintain its profitability. Smit advised business owners to ask their broker or insurer to conduct a risk assessment. “The nature of the business, stock levels, nature of goods and equipment being kept on the premises and what security measures are in place must be taken into account. Every business is different and faces its own unique challenges.” Insurance cover should take all necessary eventualities into consideration, including the possibility of injury or an attack on a staff member at the business premises; and despite the challenges of the current economy for SMEs, the long-term and widely felt effects of failing to insure and take adequate security measures cannot be underestimated.


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ADVERTORIAL

Stilus levy guarantees

INSURANCE POLICY AND ADMINISTRATORS

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dministrators are invariably endeavouring to give their members a competitive edge with insurance policies they can be proud to offer. The competitive edge empowers their members to not only retain existing clients, but also to gain market share and expand their book of business. An opportunity has arisen for brokers dealing with sectional title schemes to do just this. One of the inherent weaknesses in the sectional title industry over the past few decades has been the failure of body corporate members to pay their monthly levies. Within a short time, the body corporate becomes illiquid and is unable to pay creditors or maintain its property. This in turn leads to falling property values, which is to the detriment of all parties concerned with the wellbeing of the body corporate.

“A niche insurance policy designed to supplement a body corporate’s cash flow by guaranteeing that defaulting members’ levy payments are settled within 10 days of claims being registered.” With the advent of Stilus in August 2010, an insurance policy underwritten by Santam, a new era in the sectional title industry has dawned. Stilus, an acronym for sectional title insurance levy security, is a niche insurance policy designed to supplement a body corporate’s cash flow by guaranteeing that defaulting members’ levy payments are settled within 10 days of claims being registered. Thus the body corporate is invariably able to meet its financial commitments because its cash flow is fully funded by Stilus. Administrators will be aware that bodies corporate are obliged to insure and renew their material damage policies on an annual basis in terms of the Sectional Title Act of 1986. Stilus recommends that its policy is utilised as a valueadded product by administrators when material damage quotations are being prepared for consideration by bodies corporate. The inclusive premium will give the administrator’s members the always sought-after competitive edge, to enhance their own business and, of course, their client’s financial security. Administrators interested in pursuing the Stilus proposal outlined above, kindly e-mail michael@stilus.co.za or call (021) 914 9002 in order to take matters forward.

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Mutual & Federal’s

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Allsure New and improved

utual & Federal (M&F), a member of the Old Mutual group, has announced the launch of its enhanced Allsure personal insurance policy. The policy, which is the company’s flagship product, has been designed to offer comprehensive cover, flexible options and value-added options, in line with new legislation and industry requirements such as the Consumer Protection Act, Policy Protection Rules and the SAIA Code of Conduct. “The Allsure makeover is a result of many months of hard work and commitment,” said Peter Todd, managing director of M&F. Of particular interest to clients and intermediaries is Allsure’s pricing overhaul. New pricing techniques and technology have led to greater differentiation between policyholders. “Quite simply,” Todd explained, “if you are a better insurance risk, you are charged better prices. Our risk-based rating approach means that we treat our clients fairly and acknowledge their individual circumstances. Thus policyholders get better value for money.” Although the Allsure policy has been revised to a great extent, M&F has kept the value-added benefits clients are familiar with. These include Swiftcare (a 24-hour, 365-days-a-year roadside, home and medical assistance service), Swift Accident Management Solutions (a towing service in the event of an accident) and the Critical 5 HIV Prevention Plan (an immediate medical assistance and preventative treatment in the event of accidental exposure to HIV). With the Consumer Protection Act, Policy Protection Rules and the

SAIA Code of Conduct in play, perhaps the most evident change to Allsure lies in the wording of the policy. “These regulations require that all policies be written in language that is clear and easy to understand, less technical and unambiguous,” Todd explained. The policy aims to meet these demands to ensure that clients are fully aware of benefits and limitations, ultimately aiding with better communication, transparency, claims and customer service processes.


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SINK OR SWIM:

THE IMPLICATIONS OF INADEQUATE MARITIME INSURANCE down on expenses such as insurance.

overlooked by international traders is that of the commercial terms of sale between

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he uninsured oil tanker, MT Phoenix, which ran aground off the Durban coast in July this year, has highlighted the potentially devastating impact of inadequate insurance for industry players in South Africa’s growing marine sector. – According to Andre Brooks: Customer Relationship Manager – Marine, at Lion of Africa Insurance, market conditions have caused the emergence of a worrying trend whereby industry players take immense risks, cutting

In recent years, an increasing number of ships have fallen prey to the South African coastline and experienced tremendous losses as a result. In 2008, the MSC Napoli suffered structural damage, resulting in uninsured cargo losses in excess of R120 million. Other noteworthy casualties include the Seli 1, which ran aground in Blouberg in 2009, and the Safmarine Agulhas, stranded in East London in 2006. The impact of environmental factors and climate change are increasingly evident and the need for adequate insurance when transporting cargo is essential. In response to the announcement that the cost of salvaging the MT Phoenix is estimated at over R30 million, Brooks said: “Uninsured losses of this nature could have a crippling effect on smaller to medium businesses with very few companies being able to absorb these types of catastrophe losses to their bottom line. A factor often

the parties. These commercial terms usually govern the transfer of the financial risk and responsibility between the traders and they need to be carefully scrutinised and negotiated to ensure cargo is adequately covered throughout.” Risks that vessels and their cargo are exposed to include loss or damages arising from piracy, fire, when a vessel runs aground or sinks, and these should be foremost in the minds of any exporter or importer of goods hoping to swim through the tide rather than sink under the weight of financial losses. Marine insurers should also take care to fully comprehend the risks faced by companies transporting cargo in order to do extensive risk analysis and underwrite these risks effectively, so that all parties are assured that they are taking adequate financial precautions.


CARS NOT ALWAYS AS SAFE AS HOUSES

WHY LEAVING BELONGINGS IN A CAR OVERNIGHT CAN LEAVE YOUR CLIENTS EXPOSED

Christelle Fourie Managing Director of MUA Insurance Acceptances

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or many clients, their motor vehicles are an extension of their homes – a place where they feel safe and comfortable. As a result, it is a common mistake made by many to simply leave certain belongings in the car overnight believing that they will be safe until the morning. According to a recent survey conducted by Allianz Insurance, drivers in the UK leave up to £3 billion worth of belongings in their cars overnight. Even more worrying, over half of these drivers do not lock their car while they are sleeping. In South Africa, we tend to be far more cautious on the issue of theft and safety, as a result of our high crime rate. However, the reality is that many clients do still leave belongings in their vehicles, and sometimes on full display to potential burglars. At MUA, we receive a number of claims for items that have been stolen from our client’s motor vehicles. In fact, these claims have increased markedly following the recent criminal ‘trend’ of thieves interfering with the remote control locking of vehicles, an issue I raised in a recent RISKSA column. Motorists press their remotes believing they have locked their vehicle. However, interference – deliberate or otherwise – by third party remotes being pressed at the same time reportedly interferes with the locking process leaving the vehicle open and exposed to petty criminals. The problem for the insurance industry in these cases is that signs of forced entry are usually required by the insurer in order to

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show that the vehicle was broken into. If there is no sign of forced entry, the insurer must work on the assumption that the client simply failed to lock the car. In doing so, any claim would be rejected as the client failed to act with due care and diligence.

“In order to ensure that a claim will be covered, most insurers will insist clients keep items left in an unoccupied car within a locked compartment such as a cubby-hole or boot.” The advice may not be new but it is certainly worth repeating. Clients must ensure that when they leave their vehicle it is securely locked. If this involves going back to the vehicle to double check, then advise them to do so as failure to do this may leave them at risk of having a claim repudiated. Often, the types of claims that would arise from belongings being left in a vehicle are small items such as sunglasses, GPS navigation systems, iPods, laptops and bags with personal possessions. However, while these items may be small they can often prove very expensive to replace. It is also advisable to remind clients that unless belongings left behind in a vehicle were hidden from view, it is highly likely that

such a claim may be repudiated. In South Africa especially, terms and conditions stipulated by most insurers insist that belongings not be left on display. It is also important that clients are made aware of the fact that this general restriction often applies regardless of whether the client has unspecified all risks cover in place, as such a theft would be seen as negligence on the part of the client. In order to ensure that a claim will be covered, most insurers will insist clients keep items left in an unoccupied car within a locked compartment such as a cubby-hole or boot. If the vehicle does not have a boot in which bigger items may be stored away, then it is possible that an additional excess will apply. The best advice, however, is to ensure that any expensive and/or sentimental belongings are not kept in a vehicle at all. The next time you do speak to your client, it may be an idea to ask them to consider what items they regularly leave in their vehicles overnight and explain to them the risks of doing so.


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Crime still a major risk FOR SOUTH AFRICAN BUSINESSES Louise Pharo Head of Santam Commercial

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rant Thornton’s 2011 International Business Report on business owners’ perceptions of crime reveals that 50 per cent of South African businesses have been directly affected by crime over the last year. When business owners where asked how crime had impacted on their business operations, increased cost of security (48 per cent) and decreased staff motivation (20 per cent) were the two most important factors identified. In light of these statistics, Santam, South Africa’s leading commercial insurance company said that the impact that crime has on a company’s financial wellbeing can be mitigated by adopting tighter risk management principles through increased security measures and appropriate insurance cover. “Although it may not completely stop crime, there are security measures that companies can adopt to protect themselves against break-ins, theft of equipment, damage to property and general crime. Crime is still a major issue for South African businesses, whether large or small, but with proper insurance and tougher security measures, the financial impact on a company can be dramatically decreased,” said Louise Pharo, head of Santam Commercial. As an intermediated business, Santam offers a range of insurance policies that protect companies against risks specific to their size, location and business profile. “The insurance industry is complex. Commercial businesses and their management don’t necessarily have the time or expertise to navigate the wide spectrum of insurance products available, and this is why the intermediary is so important. They know their client’s business, know what insurance products are best suited to mitigate the risks that are specific

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to the client or its industry, and are in tune with an evolving risk climate. All of this, put together, saves time, money and effort and, in many cases, ensures the continued success of the business.” “A good intermediary will guide commercial clients, ensuring that their insurance policy covers eventualities that are most appropriate and that meet the security risks that are prevalent in their industry or area,” said Pharo. Besides the obvious protection that a business can adopt through insurance, there are security measures that a company can deploy to protect themselves and to lower their premiums. These include alarm systems, surveillance cameras or window bars that can help to lower the premiums for a business as the insurer will view these measures as a proactive mitigation of risk. Santam’s tips for reducing or preventing crime at a business Santam advises intermediaries to provide their clients with the following security tips which are aimed at assisting business owners in reducing their crime risk and, by adopting some of these measures, can also reduce insurance premiums: • If your client’s business is in a high-traffic or potential crime area, advise that they install a security fence or wall, hire a reputable security company and night watch, install an alarm, burglar bars, CCTV monitoring and security lights and ensure there is signage to inform potential criminals of the measures that have been installed. • Business owners should make sure that security measures, such as security lights, alarms and security personnel are in place, are clearly visible and activated on the premises. These should be tested regularly to ensure all these security measures are in working order.

• Advise your client to take the time to ensure that the security strategy is understood by all staff members, that they know what to do in case of an emergency and that everyone has the correct procedures and telephone numbers. The same goes for fire emergencies; make sure that employees know where the fire exits and extinguishers are located. • To make sure that your client’s customers feel secure and are protected at the same time, they should ensure that the business entrances, parking and pathways are well-lit at night. • If your client’s business has a cash register, they must remove all money at night and leave the register open to deter break-ins. • If a business has a safe, the owner should make sure it is fire-proof and security anchored. If employees have access to the safe, it is advisable to change the combination when they leave the company and always deposit money at the bank as often as possible. • If a staff member leaves the company, they must return keys or access cards and the alarm or access codes should be changed after they leave. • Business owners should ensure that plants and bushes on the premises are trimmed so that there is a clear view of potential hazards. • Most importantly, business owners must be aware that if someone enters the premises and they are perceived to be a potential threat, to sound the emergency alarm or alert security. Also, they should take note of their gender, ethnicity, age, height, weight, hair and eye colour and note what clothes they are wearing. This information will be useful to police after a criminal activity has taken place.


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Managing the insurance cycle WITH SPECIAL EMPHASIS ON THE MOTOR PORTFOLIO Frank Jordaan | Regional Manager Free State

1. What is the insurance cycle? This is a worldwide phenomenon that has been recognised since the 1920s and is considered an insurance fact of life. These volatile cycles cause insurers’ underwriting results to vary considerably from one cycle to the next. Furthermore, the unpredictable nature of the insurance industry makes it highly unlikely that the cycle can be eliminated. Nature of the phenomenon The insurance cycle refers to a repetitive series of conditions that impact on all shortterm classes of business.

• The second stage implies a sudden change to rapidly increasing profitability (also referred to as the insurance crisis). • In the third stage profitability remains high but is no longer increasing. • During the fourth stage, profitability gradually declines and the industry returns to a period of low profitability. The last two stages are generally known as a soft market as competition for new business and strategies to retain existing business intensify with the result that it eases up on underwriting standards and severe pressure on rating.

The four stages of this cycle can be summarised as follows:

This tends to produce adverse loss ratios and only through a combination of stricter underwriting measures and rate increases can this scenario be addressed.

• The first stage is marked by several years of low profitability.

It is obvious that the fourth stage of the cycle poses serious threats to industry

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players and any catastrophe during this period could have severe financial implications for a number of companies in respect of capital and solvency margins. 2. D ealing with the cycle It is absolutely vital that insurers do not let their business decisions be completely dictated by the fluctuating markets otherwise it will compel them to put shortterm results before long-term financial gain. The downside of this is if insurers do not write business in a soft market, it will be hard to win this business back in a hard market due to loyalty issues. Therefore, cycle management is essentially proper timing and monitoring of the market, predicting market trends and accurately assessing prices play a vital role. With approximately 105 short-term


companies currently operating in the South African market, the issue is achieving profitability in the face of such intense competition while still retaining existing business and acquiring new clients. The biggest challenge facing most insurers is the continuous decline in the profitability of the motor account and that the current market conditions are not conducive to rectifying an already problematic issue. 3. T he soft cycle versus sustainable motor insurance It is a fact that recent interventions by most insurers to address the continuous decline in the motor book ratios are being sabotaged by the current market conditions and decreased client loyalty as a result of fierce competition. Insurers, in an effort to return or gain market, have no alternative but to reduce rates and lower underwriting criteria. These factors coupled with the neverending increase in the price of motor spares and number of incidents pose a serious threat to the industry as a whole and if allowed to continue unabated could lead to a possible motor industry meltdown. This would obviously have a snowball effect with the end user being the ultimate loser. Another sobering fact is that the number of vehicles on South African roads increased by a massive 20 per cent from 2005 to over 10 000 000 in 2010. This substantial increase combined with ever-deteriorating infrastructures, lack of law enforcement and inexperienced drivers is a recipe for disaster unless relentlessly managed and controlled. During the same period under review, it is estimated that the number of vehicles which are not roadworthy increased by 13.69 per cent to an unacceptably high figure of 428 000 units – almost four per cent of all vehicles on the road. Furthermore it is estimated that the number of learner driving licenses increased by about 70 000 to almost 1 300 000 as at the end of 2009. New driving licenses issued in 2009 increased by 360 000 to 8 816 000 as at the end of 2009. These statistics are a clear indication of the number of inexperienced drivers on our roads and can be partially blamed for the rapid increase in the number of accidents currently experienced.

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According to a report released by Arrive Alive, the main contributors to road crashes can be categorised as follows: • Human • Vehicle • Road environment Since the release of the report in 2009, the deterioration of all roads excluding national roads has reached alarming proportions and is now a main contributor to almost 800 000 motor accidents that occur on South African roads annually. Our roads are considered to be the third most dangerous in the world. Combined with this, only 30 per cent of all vehicles on South African roads has some form of insurance which effectively means that close on 7 000 000 vehicles are using our roads without any insurance. This places a further burden on insurers and their clients. No wonder the motor class of business produces one of the worst returns as a financial services product. In our local industry where the motor accident premium could well be an excess of 50 per cent of gross written premium, the financial implications when running this book of business at a loss could have serious implications for not only insurers, but the industry as a whole. It is vital to become proactive even in a soft market to ensure viability of this book of business and to prevent a huge drain on the capital of an insurer. I firmly believe that the following steps will assist an insurer during the tough times and improve results once the insurance cycle returns to normality: • Do not follow the patch – establish a walk-away price and adhere to it at all times. • Selection of risk – a soft market does not necessarily mean that you are forced to accommodate all risks at uneconomical rates. Identify risks based on past history, current rates and low to medium exposure. • Retention of existing portfolio – do not chase after new business while neglecting your existing base. These are

the clients whom, when treated fairly, will remain with you once the market hardens. • Claims processes must be improved all the time in order to address leakage and other claim costs, e.g. salvage, recoveries, towing and storage. In a soft market, high claims leakage + lower rates = disaster. • Utilise tools such as scientific underwriting, address trends and analyse market intelligence in order to manage and exert some control over a soft market. Failure to do so will have a serious and negative impact on the affordability of motor insurance once the cycle enters the crisis mode (hard market) with premium increases being determined by adverse loss ratios, experienced during the fourth stage (soft market). This will further exacerbate the current situation with regard to uninsured vehicles, increasing the burden on insurers and consumers who can still afford motor insurance. This in itself will create another vicious circle with a disastrous result for the industry. • Keep your sales force motivated and informed at all times – a demotivated sales team will become defensive and allow competitors to attack your book of business without fear of retaliation. • Focus on service delivery with special emphasis on claims to force your current clients to think twice before moving to a competitor who is promising lower rates. Since the insurance cycle affects all areas of insurance except life insurance and where there is enough data and a large base of similar risks to accurately predict claims, insurance companies will be able to minimise the risk that the cycle poses to the business. Insurers who follow this strategy will be able to circumvent the crisis mode and ensure retention of the client base by implementing minimal rate increases. However, the increase in severity of weather-related storms and natural disasters could possibly have an impact on the magnitude and duration while the cycle is in the fourth stage (soft market).

Sources: 1. Lloyd’s – The cycle challenge (August 2007) 2. High Beam research – Managing the cycle (October 2006) 3. North American Actuarial Journal, Vol 13 4. Road Traffic Report for 2009 (Road Traffic Management Corporation) 5. Crisis in Car Insurance – Adri van Zyl (Business News – 20/06/2010)


Insurance Conference 2011: SUSTAINABLE DEVELOPMENT OF THE INDUSTRY

Former South African President FW de Klerk made an appearance on the second last day of the Insurance Conference and gave a pertinent presentation on the constitutional requirements for sustainable development in the insurance industry. Gugulethu Mkhabela looks at the key issues De Klerk highlighted and his suggestions on improving the country.

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he Insurance Conference 2011 took place at Sun City from 24 to 27 July 2011 attracting more than 700 people, including 43 exhibitors and representatives from 17 countries. Industry stakeholders had the opportunity to address their concerns over the sustainability of the short-term insurance sector, in South Africa and globally. The conference was cohosted by the Insurance Institute of South African (IISA), the Financial Intermediaries Association (FIA) and the South African Insurance Association (SAIA). There were 20 speakers and each topic covered key issues ranging from insurance as an enabler of economic development to the sustainability of motor insurance. FW de Klerk deemed it appropriate to consider the whole question of sustainable development as the industry is built on risk assessment. “Your actuaries are forever calculating the odds that will affect premiums and payouts in virtually any circumstances. This is because our ability to sustain the rate and type of development that the world has witnessed since the beginning of the industrial revolution has become untenable.” The former statesman believes that South Africa’s national risk profile has fundamentally improved as the people were able to create one of the best constitutions in the world, which further opened the way to economic growth and progress. He listed several facts that South Africans can be proud of: being the 27th largest economy in the world; our public debt being less than 36 per cent of the gross domestic product (GDP); our external debt of only 16 per cent of the GDP; our legendary natural resources; and the fact that our auditing and reporting standards and regulation of securities exchanges are the best in the world according to the World Economic Forum’s Global Competitiveness Report. He also commended the soundness of South Africa’s banks, financial services and praised the country for becoming a member of BRIC, joining Brazil, Russia, India and China – a group of burgeoning emerging market countries. Cause for concern While South Africa may be performing well on several fronts, De Klerk highlighted that there are several developments that are causing national and international actuaries to start reassessing the country’s risk profile. These include reports on recurrent corruption by senior officials and political office bearers without any convincing action being taken by government. ANC

M Youth League’s Julius Malema’s call for the nationalisation of mines and the seizure of agricultural land without compensation was also cause for concern. Diagnosis The National Planning Commission’s (NPC) Diagnostic report, published in June this year, identified nine issues of concern. These included: unacceptable levels of unemployment; substandard education; poorly located and inadequate infrastructure; spatial challenges that continue to marginalise the poor; a growth path that is highly resource intensive and unsustainable; an ailing public health system; a poorly performing public service; corruption that undermines state legitimacy and service delivery; and the fact that South Africa remains a society divided by race and class.

“There were 20 speakers and each topic covered key issues ranging from insurance as an enabler of economic development to the sustainability of motor insurance.” Treatment De Klerk said South Africa needs to find a national remedy that will guarantee long-term sustainable development. He suggested a couple of treatments as solutions, the first being to eradicate the ideology. “Our point of departure should be our constitution and the realities of the world. It should not be some or other model of how the world should be and how people should behave,” he said. Ideologists seek to get people to conform to their models and this always leads to dire repercussions. “Just think of Stalin, Hitler, Mao tse Tung and Pol Pot. South Africans should remember the enormous disruption, deprivation and humiliation that previous governments caused when they tried to force South Africans to comply with the ideological model of separate development.” Denial is the second issue. “President Zuma, Zwelinzima Vavi and the NPC are quite right when they identify unemployment as being one of our biggest national

challenges. Unemployment levels of 75 per cent of our youth and almost 40 per cent of black South Africans make sustainable development impossible. Unemployment is the main cause of continuing poverty and inequality in our society and is a major contributor to crime,” he explained. The main issue though is that South Africa needs to stop denying that rigid labour laws and the irresponsible behaviour of trade unions are the main cause of unemployment. De Klerk questioned how South Africa could expect to attract foreign and local investment in job creation when it is developing a reputation as a country with one of the worst labour relations records in the world. “We simply cannot continue to lose more than 25 million man days in strikes every year and support wage increases which are double the rate of inflation in an environment of static or declining productivity.” De Klerk likened denying the role of labour law rigidity and trade union irresponsibility in helping to create our unsustainable levels of unemployment, as the labour market equivalent of denying that unprotected sex causes HIV/Aids. De Klerk said it was crucial that people work together to improve the country’s education system. He reiterated that education is crucial to the promotion of equality and the creation of job opportunities. “In fact, we do worse than many other poorer African countries. According to a survey in Newsweek, South Africa holds the 97th place in the area of education out of the 100 countries that were considered. The problem is not a shortage of funds but that we’ve taken the wrong decisions and have allowed our core management systems to collapse.” Upholding the constitution Overall, the message was that sustainable development depends on South Africa’s ability to transform its society to the benefit of all the people. De Klerk concluded with a question to the representatives of the insurance industry who were gathered the conference. “All of us are aware of the need to insure against the risks that face us in virtually every area of our lives. We are happy to pay hundreds each month to insure our cars and our household contents. We willingly pay to cover our homes against the risks of fire, flood and natural disasters. We take out insurance to provide for our families in the event of untimely death. We insure ourselves against loss of limb and livelihood. We are prepared to pay good money every month to cover ourselves against all these risks. But what are we prepared to pay to uphold the Constitution, on which virtually everything else depends?”

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New kid on the block

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ith the volume of goods distributed by road in South Africa increasing year on year, specialised insurance for the heavy vehicle transporters is a growing and competitive industry.

Randburg-based Resolution Insurance Group has recently extended its services in the heavy vehicle transportation market with the acquisition of SAMIB Underwriters (Pty) Ltd, aiming to exploit opportunities to provide heavy vehicle transporters with innovative products. SAMIB will now operate as Lynx Heavy Commercial Vehicle Underwriters (Pty) Ltd. The company is complementary to Lynx Transit Underwriting Managers (Pty) Ltd, formed last year by Resolution Insurance Group to focus on goods-in-transit insurance. New kid on the block doesn’t mean the company is a rookie though.

The founder of SAMIB, Dr Frans Beetge, has joined the company as a consultant and Resolution Insurance chief operating officer, Wayne Phillips, confirmed: “We have appointed a new managing director, Dan Cloete, who has left the broker market to join us. He has many years of experience in the insurance industry as an insurer, broker and underwriter and, through this experience, knows what clients expect as well as the value of tailor-made products for client needs.” Cloete said Lynx Heavy Commercial Vehicle Underwriters is positioned to offer rapid response to underwriting and claims handling related to heavy vehicle fleets. “Transporters need assistance in many ways beyond just the insurance of their vehicles. Our services pack includes specialist cover such as Hazmat (hazardous materials spillage and treatment), and a 24-hour support system for vehicle breakdown, towing and recovery as well as load recovery.”

Cloete added that the company objective is to provide specialised insurance products for the high growth heavy vehicle market. “Beyond this we are looking at excess buy-back covers and Hazmat covers and we will also be able to assist our clients with sourcing discounted tyres and spares through the support networks we have established.” Lynx Heavy Commercial Vehicle Underwriters’ portfolio will include insurance products for heavy commercial vehicles, trailers, light delivery vehicles, private type vehicles and special vehicles; excess buy back cover; fleet management assistance; risk-sharing schemes; personalised broker services; goods-in-transit cover; funeral cover for drivers and their families; and expeditious claim settlement.


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on the extinct list? “There are too many people in South Africa with too little to lose,” writes Dr Ruben Richards in his book Bullets to Ballots. Dr Richards explains that this results in an unstable society and that our challenge as South Africans is to stimulate the economy and defend, rather than destroy, our country. Imported windscreens are infiltrating the South African market and damaging economic growth. While they are cheaper than locally manufactured windscreens, they are costing the economy in the long-run as revenue is taken out of the country and local manufacturers battle as a result, leading to higher levels of unemployment and increased crime. Dr Richards quotes statistics that pitch unemployment at between 45 per cent and 50 per cent, and cites prisons as being 170 per cent overcrowded. He believes that the only way to remedy this is through industrialisation, development and protection of the manufacturing sector. PG Glass supports South African products which will grow the economy through the manufacturing index and create employment. The local manufacturing imperative In an article published in Business Day on 21 July 2011, entitled ‘No fuss as our manufacturing dies’, an individual from the windscreen manufacturing industry, Keith Luyt, writes that Chinese windscreens are sold at below his cash cost of manufacture (i.e. glass, PVB interlayer, electricity and transport). This excludes rent, salaries, wages and other fixed costs. “And the situation is not getting better,” Luyt continued. “If one annualises the windscreen imports from China for the first four months of this year, it is almost equivalent to the whole market – meaning the local manufacturers are effectively excluded from the market. “In the past 18 months, I have gone from running three shifts, six days a week to a single shift, four days a week. This resulted in over 80 people losing their jobs.”

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Luyt notes that other industries are also experiencing difficulty, such as tyres and aluminium extrusions. “The de-industrialisation of SA is gathering pace and manufacturing operations are going to close, never to open again,” he warned. Luyt wrote this article in light of reports surrounding the purchase of Massmart by Walmart, and the various conditions that government imposed on the purchase. He couldn’t understand the fuss that was being made over Walmart’s procurement policies practices, when cheap goods are already in South Africa – devastating longestablished manufacturing businesses. “All the effort going into creating jobs is quietly being eroded by established businesses closing and losing jobs,” Luyt observed, adding that “the R100 million fund from Walmart to establish local supply will simply be attacked by cheap Chinese goods and come to nothing.” “Someone in the government and the unions needs to look closer at the plight of established industries before worrying about Walmart and its procurement policies and procedures,” Luyt concluded. Join PG Glass in our support for South African manufacturers, and experience benefits such as world-class quality, excellent warranties, a stimulated economy, local recourse and job creation.


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Healthcare’s new horizon:

A PROGNOSIS FOR NHI

Spiralling costs of private healthcare and the dire state of the public healthcare sector are some of the issues touched on in the green paper on National Health Insurance (NHI) released by government in August. Hanna Barry takes a closer look at some of the pertinent issues raised by NHI and the green paper, and chats with industry experts to get their views.

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elephones were ringing off the hook at Genesis Healthcare Consultants after announcements surrounding NHI, as concerned members questioned how they would be able to afford contributing to NHI, losing their tax rebates and paying for medical aid on top of it all. Managing director of Genesis Healthcare Consultants, Clayton Samsodien, explained that there is so little trust in public healthcare institutions that as it stands, people will want to keep their own medical aids as well as contribute to NHI – which may or may not be affordable. In a poll on health24.com, 38 per cent of South Africans said they would not use State facilities if the NHI plan comes into being, while 41 per cent said they would if these facilities improved. Five per cent said they use these facilities already, 10 per cent were unsure and seven per cent chose ‘It will never happen’. The poll had a total of 1 616 votes. Counting the cost While the green paper does not specify at what income level South Africans will have to start contributing to NHI, it is clear that if you earn above a certain income you will be required by law to make a contribution to the NHI Fund. According to Health Minister Dr Aaron Motsoaledi and the Department of Health, this is so that “all citizens of South Africa (and legal long-term residents), regardless of their employment status and ability to make a direct monetary contribution to the fund, will be assured provision of essential healthcare”. Samsodien suspects that the level at which people have to contribute to NHI will be around the same level at which people have to pay tax, as he feels it would be unfair to ask people to contribute to NHI if they don’t contribute to tax – unless of course the tax base is lowered. Capping tax deductions has also caused concern. Currently, individuals can get tax rebates if they belong to a medical aid, which incentivises people to join medical aids and means that expenses not covered by medical aids can, in theory, be recovered from tax rebates. However, according to senior associate at Bendels Consulting, Tana Russon, as of 1 March 2012, it is expected that medical aid contributions will be converted to tax credits. Treasury is proposing to cap tax deductions, at 30 per cent across the board, irrespective of the tax bracket a person falls into. This is in order to equalise the playing fields between those falling into

the 18 per cent to 40 per cent tax bracket. “In this sense it is a bit of a triple-whammy,” remarked Samsodien, “in that people will be paying for the NHI, paying for their medical aid and losing their tax subsidy.” Pricing of healthcare in the private sector was listed by Motsoaledi as something that needs to be tackled seriously if the NHI is to succeed. Samsodien agreed that private hospitals are one of the cost drivers for medical aids and curtailing spiralling healthcare costs will drive down costs in medical aid contributions. However, if the ministry starts regulating specialist and GP rates, this may lead to an exodus of skills.

“In this sense it is a bit of a triplewhammy,” remarked Samsodien, “in that people will be paying for the NHI, paying for their medical aid and losing their tax subsidy.” If the State can provide quality healthcare on a primary level, medical aids will lower costs and it may be affordable to have both NHI and supplementary medical aid. This is also dependent on the cost of NHI contributions. The state of public health Unfortunately, widespread quality healthcare in the public system is not a reality. Motsoaledi acknowledged that “improvement of quality of service in public hospitals must be non-negotiable”. The first five years of the NHI, seen as a 14-year project, will consist of a process of building and preparation; strengthening the public health system in areas such as management of health facilities and health districts, quality improvement and infrastructure development. To ensure adherence to basic core standards, an independent watchdog body called the Office of Health Standards Compliance will be established by an act of Parliament. However, Samsodien expressed concerns over the independence of the body, since it reports to Parliament. Shadow minister of health for the Democratic Alliance (DA), Mike Waters, agreed that “for quality management to genuinely be

improved, this office needs real power and independence”. “Insufficient funding is not the biggest problem facing public healthcare,” stated Waters, quoting the Finance Technical Task Team of April 2009, who compiled the report of the Minister’s Advisory Committee on Health, and pointed out, “The failure to achieve substantial health status improvement appears unrelated to South Africa’s allocation of public funds which are not low by international standards.” “The task team identified poor management systems and lack of sufficient oversight as key problems facing the public healthcare system,” Waters explained. “These are all structural problems that will not simply disappear as a public healthcare system is extended. “Unless these structural problems are corrected, no amount of money or complicated bureaucracy will make the healthcare system any better,” he added. The end of medical aid? Motsoaledi highlighted that the NHI is not a competition or “beauty contest” between the public and private healthcare sectors. Rather, it aims to use the strength of both of these sectors to better serve the people of South Africa, and make the private sector more sustainable by making it levy reasonable fees. “The affluent will find their own way to pay for private healthcare and the companies that perform well will still provide subsidies to their staff,” commented Samsodien. “I don’t think it’s the end of the medical aid industry by a long shot.” There have been concerns over lowincome earners giving up medical aid and negatively affecting risk pools, since statistically they claim less. But this all depends on what the contribution to NHI will be. Samsodien said that medical schemes will readjust their contributions and financial advisers and healthcare planners will have to adjust the needs analysis they do with their clients, comparing what NHI offers to what their medical scheme offers, and finding a supplementary benefit to meet their client’s needs. “We are extremely resilient people; you come up with one law and we come up with another strategy,” assured Samsodien. He used the example of how, when the Government Employees Medical Scheme (GEMS) was introduced, everyone thought

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it would be the end of medical schemes, as 1.3 million government employees (who are statistically low-claimers) moved off medical schemes onto GEMS. Yet the schemes signed on more individuals and corporate companies and are still surviving. “The crux of it is that there is a definite partnership between private healthcare and government,” Samsodien explained, referring to the fact that some medical schemes are already using State hospitals as healthcare providers, such as Groote Schuur in Cape Town, which has a private wing reserved for patients with medical aid. Samsodien also emphasised that government does not have the expertise to administer a fund as large as the NHI, and so it will have to rely on the expertise of medical schemes.

NHI will fit into that regulation, as it would be impossible to say that medical aid is a financial product and NHI isn’t.

“Everyone should remain calm and provide constructive criticism. Let’s go back to the drawing board and see what we can put on the table for the lowincome earners.”

“The medical schemes support the fact that everyone should have access to quality healthcare,” he added, saying that he suspects that medical aid will remain a topup or supplementary cover to NHI.

The Freedom Front Plus has dubbed the NHI “unconstitutional” because taxpayers will be forced to belong to the NHI and to contribute toward it in the form of taxes, in opposition to section 18 of the Constitution (freedom of association).

Throwing a few curve balls Samsodien explained that medical aid is termed a financial product, which means that it falls within the ambit of the Financial Advisory and Intermediary Services (FAIS) Act, for which there is a whole host of regulation. He is interested to see how

Looking ahead The first five years of NHI will include pilot studies and strengthening the health system. A special conditional grant will be provided in the 2012 Budget to fund the pilot projects, commencing in April 2012 in 10 selected districts, so that people will not

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have to make NHI contributions in 2012. Chief executive officer of Fedhealth, Katy Caldis, believes that piloting the NHI is critical, in order to learn from actual implementation. “At present, we have fragmented care and this will hopefully address the issue,” she commented. “It is also encouraging to see a strong focus on primary care. Similarly, the focus on performance-based monitoring and recognition will add real value to our total healthcare system. “If NHI is successful, we believe it will achieve its objective and truly benefit all South Africans with universal care created for all,” continued Caldis, adding that “the private sector is paying a lot for medical coverage without receiving the widely desired outcomes.” “Everyone should remain calm and provide constructive criticism. Let’s go back to the drawing board and see what we can put on the table for the low-income earners,” Samsodien added, comparing getting behind the NHI to getting behind the Springboks or Bafana Bafana, “in true South African style”. “We just need to support the process, be innovative and come up with ideas; we may even be trendsetters for the rest of the world,” he concluded.


The big skinny:

THE COST OF OBESITY IN SOUTH AFRICA

A

study done by Momentum Health in 2007 revealed that the average risk cost per beneficiary per annum for a hypertensive member was 334 per cent more than a non-hypertensive member and 203 per cent more than the cost for the average member on the scheme. Those whose hypertension was controlled (i.e. under treatment) cost the scheme 27 per cent more than the average member, whereas those whose hypertension was not controlled cost the scheme a staggering 622 per cent more (or 933 per cent more than a nonhypertensive member).

Momentum also did a health risk assessment (HRA) that measured hypertension, diabetes, blood pressure, BMI and cholesterol, which revealed that those classed as not well by the HRA, who also suffered from non-controlled hypertension, cost the scheme 979 per cent more than a non-hypertensive classed as well. Those classed as not well whose hypertension was controlled cost 53 per cent more than the average member, and those classed as well who did not suffer from hypertension cost the scheme 31 per cent less. Damian McHugh, head of sales and marketing for Momentum Health, explained that if they were take everyone in their scheme from non-controlled to controlled hypertension, they would hardly need annual increases on the scheme at all. Connecting the dots Not only is there a high correlation between hypertension and obesity, but obesity also puts people at increased risk for type 2 diabetes, hypercholesterolemia (high levels of cholesterol in the blood), coronary heart disease and cancer. A study by the South African Medical Research Council (MRC), ‘Chronic Diseases of Lifestyle in South Africa: 1995-2005’, quotes the findings of a population-based survey including 195 005 randomly selected American adults, which found that obesity was associated with a relative adjusted risk of 3.5 for hypertension. According to the World Health Organisation/International Society of Hypertension (WHO/ISH) guidelines for hypertension, approximately 21 per cent of the adult South African population are hypertensive. Overseas studies illustrate a direct correlation between BMI and an increased risk of type 2 diabetes. In one of the US-based Nurses’ Health Studies, which included 114 281 female nurses, the risk of diabetes increased 40-fold when BMI increased from 22 to 35.50.

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by Hanna Barry A similar relationship was observed in the Health Professionals Follow-up Study that included 51 529 men. In this study, they found that the relative risk of developing diabetes was 42 in men with a BMI greater than 35 compared to those with a BMI under 23.51. Obesity in South Africa South Africa is following closely on the heels of more developed countries, with 61 per cent or nearly two in every three South Africans classed as overweight, obese or morbidly obese, according to a 2010 national health survey commissioned by pharmaceutical and healthcare company, GlaxoSmithKline (GSK) and conducted by global marketing consultancy, Added Value. A study by the MRC conducted in 2003, found that 56 per cent of women and 29 per cent of men are overweight. The GSK national health survey also found that South Africans believe they are healthy, even when they are overweight and obese: • Seventy-four per cent of South Africans think their fellow citizens are overweight, while only 34 per cent of people considered themselves overweight or obese. • Seventy-eight per cent of obese people think they are somewhat healthy or very healthy. • Fifty-two per cent of morbidly obese people think they are somewhat healthy or very healthy. • Forty-nine per cent of South Africans don’t exercise. • Seventeen per cent of South African children aged one to nine years are obese. • Forty-six per cent feel obesity will impact South Africa economically. Stemming the tide McHugh explained that it is important to find the right incentives to change behaviour. For instance, members of Momentum Multiply, a wellness programme offering a range of benefits such as discounts at gyms and on airfares, as well as encouraging control of chronic conditions, claim up to 27 per cent less and their chronic illnesses are 44 per cent lower than those who are not members of this programme. McHugh emphasised how important it is that medical schemes engage in preventative, and not only curative, care. “I believe medical schemes that won’t play there won’t last,” he added.


“Medshield’s approach involves contracting independent auditors to ensure compliance and measurement of its implemented SLAs.”

MedShield: Staying on the right side of the CPA

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lthough a degree of uncertainty still exists as to how the Consumer Protection Act (CPA) will affect medical schemes, the Commissioner for the National Consumer Commission (NCC) has been clear on some points for medical schemes to ensure that they are doing all they can to ensure a fair, accountable approach to their members. Currently there are 110 medical schemes on offer in South Africa, with a multitude of different healthcare options. These present a veritable minefield for consumers and, while working through a broker can help consumers to find an appropriate plan for their budget and needs, the financial stability and track record of a scheme also needs to be considered. So too its customer service reputation, since a scheme that is financially secure but cannot process a complaint or provide comprehensive and understandable marketing material is certainly bound to attract negative attention, whether service

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levels are under direct control of the CPA in the future or not.

Medshield Medical Scheme’s executive principal officer, Duduza Khosana, commented, “From a customer service perspective, the Medical Schemes Act stipulates minimum levels of service that members can expect to receive. These provide a critical benchmark for schemes wanting to offer the kind of service that will win them favour with their members and hopefully prevent them from moving to competitors.” Medshield further said that schemes should be implementing their own processes or service level agreements (SLA) in order to regulate and constantly improve on the service their members receive. For consumers and brokers, understanding the basic levels of service they should be receiving is a key matter. Traditionally, South Africans have had a high tolerance for poor service and this will only change when the rights enshrined in the country’s legislation is taken seriously.

Typical service delivery issues exist around call centre answering speeds, claims processing turnaround times, new member activations and member complaints turnaround times. Medshield’s approach involves contracting independent auditors to ensure compliance and measurement of its implemented SLAs and this approach could be the best way for medical schemes to ensure that they stay on the right side of the law. Regardless of whether the proposed exemptions to the CPA are granted to medical schemes, the principles of the CPA are a good business model for schemes going forward, giving medical schemes the opportunity to truly excel and take customer service to a new level. Dealing with ill health or injury is always a matter close to the heart of consumers and, as such, deserves the sensitivity and serious treatment South Africans demand.


Striking a balance “In order to manage and contain the cost of healthcare in South Africa, all parties need to work together to make the system more sustainable by improving outcomes and reducing cost.”

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he National Health Reference Pricing List (NHRPL) was instituted in 2004 to promote greater transparency in the healthcare profession and to offer medical aid schemes a guideline to appropriate contributions and reimbursement rates. Although the NHRPL was in no way binding on health professionals, since it was set aside by the Pretoria High Court in July 2010, amid tremendous criticism of how the list was managed and compiled, medical schemes have had to tread carefully adjusting tariffs and increases this year. Katy Caldis, CEO and principal officer of Fedhealth, said that the problem with having no reference price is that it leads to ambiguity. She believes that providers ideally need a guideline of what the medical schemes reimbursement rate will be to set their charges. Without these parameters, there is confusion in the industry which can lead to unintended outof-pocket payments from consumers, even in cases where healthcare professionals are not aiming to charge higher rates. While some of the bigger schemes (such as Fedhealth and Discovery) have been able to negotiate rates directly with healthcare professionals, in an effort to ensure minimal co-payments by their members, many medical schemes have not successfully publicised their adjusted rates since the NHRPL became null and void. The greater challenge, however, remains

that medical inflation continues to outstrip CPI annually. “Increases are a complex issue and always incur much debate,” said Caldis. “When you begin to unpack the factors influencing medical increases you become aware of just how complex the situation is.” Where previously a medical plan may have stipulated that it would pay 200 per cent of the NHRPL rate to reimburse a medical professional for a particular consultation or treatment, medical schemes now have to revise their rates across the board and often times this results in members unwittingly incurring additional expenses and co-payments. From a brief survey of 2011 increases levied by various medical schemes, we established the following: • Sanlam Health Services – 2010 NHRPL + 9.6 per cent • Discovery Health – 7.9 per cent increase on all plans • Cape Medical Plan – 7.0 per cent increase on all plans In the absence of the NHRPL, schemes may consider adjusting tariffs in line with the Health Professions Council of South Africa’s tariffs; however, since these are the highest fees health professionals may ethically charge for a consultation or procedure, they are often more than three times the equivalent of the old NHRPL fees and would result in excessive increases to members’ contributions. This in turn would discourage

many individuals and families who have lower cost medical plans and the industry would suffer. Complicating the scenario is the fact that competition in the healthcare environment does not work in the same way as it does in normal business. “While innovation and new technology is often of value in the healthcare environment, it generally comes with an exorbitant increase in costs. You would expect these costs to decrease over time as more people make use of the new technology, but in healthcare the costs tend to remain high even as utilisation increases. On the other hand computers, TVs and cellphones get cheaper despite higher specifications and functionality every year.” In order to manage and contain the cost of healthcare in South Africa, Caldis stated that all parties need to work together to make the system more sustainable by improving outcomes and reducing cost. This requires partnership, dialogue and true sharing of responsibilities between consumers, healthcare professionals and funders/facilitators of healthcare. Such cooperation would promote a system which does not necessitate strict regulation and yet provides for the needs of each individual in need of and subject to healthcare, with the aim of making healthcare and medical aid more accessible to South Africans.

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Driving the Conversation: CAR DEALERSHIPS USING SOCIAL MEDIA

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by Bianca Wright

hen Mike Stopforth was in the market for a new car, he knew exactly which make and model he wanted: a Mercedes Mercedes-Benz 220CDI – and he wasn’t afraid to let everyone know it, tweeting on his Twitter feed which has over 5 000 followers. Nothing unique there, but what was unique was Mercedes’ competitor BMW’s reaction to his tweet. Within a short period, Monique Coetzer, a former sales representative of the year for BMW, had called him up, found out where he was and told him she would be right there. She arrived with a BMW 330d and a deal that completely blew him away, said Stopforth. Stopforth bought the BMW.

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FI Getting into the conversation The power of social media to reach customers and potential customers and, even more importantly, to foster engagement with them cannot be denied. Social networks are creating platforms for users where they can and do comment on brands, products and services. Car dealerships are missing out on a valuable opportunity if they ignore these platforms. “We keep telling our clients that the conversation around their brands, or their industry, exists on Twitter whether they like it or not,” said Stopforth, who is CEO of South African communications company Cerebra. “Brands that listen and empower their employees to engage online immediately differentiate themselves.” The moral of the BMW story is that listening to your potential customers (and those of your competitors) can translate directly in sales. Not only did BMW woo Stopforth over to their brand, but it is also now benefiting from Stopforth’s endorsement through Facebook, Twitter and his own blog – endorsements that are likely to translate into more customers. So the question becomes: are car dealerships using social media? And if so, are they getting it right? The answer seems to be yes and no. “Social media in the automotive industry isn’t as increasingly popular as it is in other industries. The only social media platforms the automotive industry should stick with are Facebook and Twitter,” said Wesley Lynch, founder and CEO of Realmdigital, a South African e-business strategy and technology partner, specialising in Internet and mobile platforms. Realmdigital has worked with local and international brands such as Ford and Mix Telematics (Matrix Vehicle Tracking). Having a presence on social media does not mean reaping the benefits, though. Speedy Car Sales in Klerksdorp, for example, is active on Facebook, Twitter and YouTube, but has not attracted a large following. As of 9 August, it had just 54 Facebook followers, one YouTube subscriber, 6 191 YouTube Channel views, and 16 Twitter followers. Despite this, the dealership is active, with numerous updates, photo uploads, comments and 15 video clip uploads on YouTube. Is big better? Larger brands, such as Imperial Select, however, seem to attract more attention. Imperial Select’s Facebook page has over 22 000 followers. It has used incentives such as giveaways and competitions to drive traffic to its Facebook page and

fully integrate all its digital experiences – website, Facebook, Twitter, YouTube – across all of its platforms. The result is an integrated user experience where the initial touch point is irrelevant. Interestingly, Imperial Select’s Twitter account has attracted only 55 followers. Facebook seems to be the primary social media tool being used by the company. Speedy Car Sales has the right approach, though. Regular updates, relevant information and continued interaction, but it is missing the key element of an audience interested in its message. Marketing your social media presence is the second half of the battle after establishing it, so that you can reap the benefits of those social connections. Imperial Select’s use of incentives is one way to attract users to a page. The opportunity to win something, even something relatively minor, has the potential to attract users and to encourage longer term engagement. The trick is to ensure that your social media interaction is consistent, transparent and valuable and that you deliver on the promises you make. It can be time-consuming and requires dedication to start it up and keep it going. Car dealerships are definitely embracing digital by having websites and advertising on online portals such as Car Find, Gumtree and Auto Trader classifieds. The Digital Marketing and Media Association has conducted research which shows that people do prefer online research when purchasing a car. Not all sales centres have recognised the potential of online beyond the very basic website interaction and few have moved into social media at all. “Second-hand car dealerships, however, have not moved away from print advertising,” said Lynch. That is not to say that this conservative approach is without merit. Lynch said that second-hand dealerships selling cars for the lower LSM will find that targeting their market through newspapers will attract more customers than creating a Facebook page or being on Twitter. “This is because it is harder to reach the lower LSM through digital due to their lack of Internet access. But mobile is going to be a game changer. Most car dealerships will be advertising on mobile platforms as so many people have access to this,” he said. Access to social media is increased through the use of these mobile platforms. The right mix Mobile Internet use is set to outpace wired Internet access, with little differentiation

between urban and rural users. According to the Mobility 2011 study by South African research company, World Wide Worx, mobile Internet access is available to 9.54 million people, more than double the number of people with wired Internet access through a PC. However, only 33 per cent, or six million, actually use that access. This figure is set to grow as feature-rich and smartphone handsets become more accessible. Lynch believes though that luxury car dealerships such as BMW, Mercedes and Audi should definitely have a Facebook page and be on Twitter. “Unlike secondhand car dealerships, customers who buy a new BMW will continue to visit that outlet for services, accessories, and so on,” he said. “These clients are of an elite market and if something goes wrong, the first place they will complain is on social media platforms. These brands can also create brand awareness through the use of social platforms.” He cited the example of Jeep, which created a Facebook application to showcase its new Jeep models. “It is therefore crucial for these car dealerships to include social media in their corporate communications strategy,” he said. The BMW dealership that contacted Stopforth recognised that social media is about engagement, interaction and, above all, customer service. The company didn’t stop there either. The morning after Stopforth purchased the car, he received an e-mail from the general manager for communications at BMW, Guy Kilfoil, welcoming him to the BMW family and offering his personal support and service in Stopforth’s decision to change brands. Since then, Stopforth received an invitation to join Kilfoil in a four-ball at a Springbok golf day at Serengeti – BMW being the official vehicle sponsor for the Springboks. “Guy Kilfoil invited me to play golf because he knows from my Twitter bio that I love golf and rugby. Genius in its simplicity,” Stopforth said. Making the most of what social media can offer is about more than simply being on Facebook or Twitter; it means understanding what customers want from their interactions through those channels and finding imaginative and unique ways to attract them to your pages. Car dealerships need to think very carefully about what they want to achieve through social media before embarking on any campaign and be sure that they can maintain the interaction going forward. The potential rewards are significant – if they get it right.

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New vehicle sales up but show signs of slowing

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hile July 2011 new vehicle sales in all segments registered an improvement on the corresponding month last year, the National Association of Automobile Manufacturers of South Africa (NAAMSA), commented that there are clear signs of slower underlying momentum in demand for new cars.

July 2011 aggregate industry domestic sales improved by 4 358 units or 10.5 per cent to reach 45 703 vehicles from 41 345 vehicles sold during July last year. Total year-to-date domestic sales in 2011 remained 15.0 per cent ahead of the corresponding seven months in 2010. July 2011 export sales had registered modest growth, rising by 1 893 units or 8.1 per cent to 25 147 vehicles.

Overall, industry reported sales of 45 703 vehicles in July, 80.9 per cent or 36 986 units represented dealer sales, 12.8 per cent represented sales to the car rental industry, 3.4 per cent sales to government and 2.9 per cent represented industry corporate fleet sales.

New car sales Total new car sales during July 2011 at 32 030 units reflected an improvement of 2 819 new cars or an increase of 9.7 per cent compared to the 29 211 new cars sold during July 2010. There was a substantial decline in the growth momentum of new car sales and the year-on-year increase represented the lowest improvement in the past 18 months. The new car market received support from strong demand by car rental companies, with the car rental industry accounting for 17.4 per cent of total sales. Following 18 months of solid growth in new car sales, slower growth and demand for new cars in the domestic market was anticipated over the balance of the year in line with developments in the broader economy. Commercial vehicle sales Sales of industry new light commercial vehicles, bakkies and minibuses at 11 420 units reflected an increase of 1 054 units or a gain of 10.2 per cent compared to the 10 366 units sold in July last year.

For the first seven months of 2011, new light commercial vehicle sales were ahead by only 5.8 per cent compared to the corresponding period last year.

Medium to heavy vehicle sales Sales of vehicles in the medium and heavy truck segments of the industry at 765 units and 1 488 units, respectively, recorded an increase of 146 units or 23.6 per cent in the case of medium commercial vehicles and a gain of 339 units or 29.5 per cent in the case of heavy trucks and buses, compared to July last year. Sales of extra heavy commercial vehicles registered an exceptional performance rising by 43.8 per cent from 719 units in July last year to 1 034 units in July 2011. Total year-todate sales of medium, heavy commercials and buses remained 25.0 per cent ahead of the corresponding seven months of last year. The performance reflected positive fixed investment associated with major infrastructural projects. Export sales Exports of South African-produced motor vehicles at 25 147 units reflected an increase of 1 893 vehicles or 8.1 per cent compared to the 23 254 vehicles exported during July 2010. While the momentum of new vehicle exports remained positive, the July export numbers had been adversely affected by the fact that various automotive plants had lost a few days of production during the month as a result of widespread strike action in the steel and engineering industry and associated industries. Future sales There are increasing indications that the macroenvironment going forward is likely to become less supportive. The decline in the purchasing managers’ index for the fourth successive month as well as continuing declines in the Reserve Bank’s leading indicator, suggest a slower pace of expansion over the medium term. Subdued growth in private sector credit extension and in money supply, combined with sharply higher than inflation administered price increases and rising electricity and fuel costs will impact negatively on consumer disposable income and demand for durable goods. In addition, the impact of widespread industrial action and counter-productive rhetoric about nationalisation and expropriation negatively affects consumer and business confidence in South Africa. As a result, new vehicle sales over the balance of the year are likely to come under increasing pressure. Export sales remain dependant on the performance of the global economy and demand in the major northern hemisphere markets.

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Gearing up for JIMS 2011

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he long-anticipated Johannesburg International Motor Show (JIMS), a joint venture between the Johannesburg Expo Centre and the National Association of Automobile Manufacturers in South Africa (NAAMSA), will take place from 6 – 16 October 2011 at the Expo Centre, NASREC.

last JIMS and the fact that there is such a high participation factor from the industry shows the confidence that the industry has in the show organisers, who are working hard at delivering an unprecedented show from a facility and quality perspective. It’s well worth the investment, as such a show should stimulate demand which will translate into retail sales.”

The event, held once every two years, has been on a three-year break as a result of the 2010 FIFA Soccer World Cup. Eagerly awaited by the public and industry stakeholders, JIMS is an important event and opportunity for the South African motor industry to showcase the way it has restructured and become more efficient to address the key challenges in the automotive business environment.

While the show promises to be a great spectacle for the public and vehicle enthusiasts, there will also be plenty of forecasting, industry assessment and analysis taking place as the automotive industry’s top names gather for the event.

NAAMSA president, David Powels, said: “JIMS is an opportunity for the motor industry to showcase not only our current ranges, but introduce new models and show concept cars that would normally only be seen in print. We aim to reinforce confidence in the buying public about the strength and resilience of the industry in South Africa. Our visitors have more than 1 700 models to choose from and are able to see many of these in one place. The ability to make objective comparisons can only be good for both the industry and the consumer. It’s been three years since the

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One of the highlights will be the CAR Conference, hosted by the publishers of CAR magazine, RamsayMedia, to be held on 12 October. Speakers at the conference will include: Tim Lee (president of GM International Operations), David Powels (NAAMSA president and MD of Volkswagen), Xavier Gobile (MD of Renault) and other experts, such as Greg Levine (sales and marketing director for McLaren Automotive) and JP Landman (political and trend analyst). These and other key figures in the industry will discuss not only the current role of the industry, but also its future and its place in the global automotive marketplace. “The South African car market has seen tremendous growth and decline during the last few

years; in the passenger market, sales grew by 85 per cent between 2003 and 2006 and by 2009 had fallen back again by 46 per cent,” said Powels. “Since 2009, we have seen steady growth with 2010 delivering a 31 per cent increase and we are forecasting 19 per cent year-on-year growth for 2011. Growth requires a wellfunctioning economy with sound macroeconomic policies in place. We now need the fairly strong recovery phase to continue for sustainable growth which will ensure future investment and the ongoing viability of our industry.” Having cemented its place on the international and local industry calendar, JIMS promises to be an event to see and be seen at, as stakeholders gather to discuss product and investment plans, celebrate successes and understand where the future of the automotive industry is headed. JIMS 2011 – Highlights to look forward to: • Exotic Experience • XS Drifting Track • Motorcycle Mecca and biking exhibits • Maxxis Rock Crawlers • Honda ASIMO Robot Show • Kingsley Holgate Experience with Land Rover • Win-A-Car competitions


Dynamite – Toyota Aygo wins TOTAL Economy Run

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arlier this year, Toyota introduced a new entry-level, small, passenger car: the Aygo. Despite a competitive market in this segment, the Aygo has done well during the last few months. With youthful styling and competitive pricing, Toyota threw its new star into the fray at the 2011 Total Economy Run, to prove its worth. The 35th Total Economy Run was held in and around Thaba ‘Nchu in the Free State and delivered some surprising results. Vehicles with petrol- and dieselpowered engines were tested in various classes over a distance of more than 1 109 kilometres. Drivers were required to keep to specific speeds and arrive at check points at specified times, travelling through urban areas and on open highways, their vehicles running on TOTAL Evolution Fuels.

to its overall efficiency and success at the 2011 TOTAL Economy Run. Weighing in at only 67 kilograms, the Aygo’s engine, equipped with variable valve timing, 12 valves and double overhead camshafts, is among the lightest internal combustion engines to be found in a passenger vehicle. Behind the victory was Team Total’s rally duo, Craig Trott and Robbie Coetzee, taking the trophy with a consumption figure of 5.191 litres per 100 kilometres. Other notable achievements by Toyota include: - The lady rally crew, in a class A6 Toyota RunX came third overall in the petrol category. - A Toyota Prius, piloted by celebrity couple, Riaan Venter and Michelle Garforth-Venter, won the hybrid category.

Toyota’s new Aygo proved its fuel efficiency and economy by claiming the overall category winner for petrol vehicles. Equipped with a three-cylinder, one-litre petrol engine, the Aygo boasts engineering solutions such as resin air intakes and engine cover and fuel injector ramps, all of which contributed Total Economy Run 2011 winners Category

Driver

Vehicle

Consumption (l/100 km)

Overall

Bielfeld

VW Golf 1.6 TDI

4.396

Best diesel

Bielfeld

VW Golf 1.6 TDI

4.396

Best petrol

Coetzee

Toyota Aygo

5.191

1400 cc diesel

Ferreira

VW Polo 1.2

4.445

1600 cc diesel

Bielfeld

VW Golf 1.6 TDI

4.396

2000 cc diesel

Gearing

BMW 520d

4.960

2500 cc diesel

Dippenaar

GWM Steed 5

7.858

Open diesel

Du Plessis

Jaguar XFS

6.068

SUV diesel

Van Niekerk

Subaru F

5.850

1100 cc petrol

Coetzee

Toyota Aygo

5.191

1450 cc petrol

Young

Mazda 2 1.3

5.451

1600 cc petrol

Wilken

Ford Fiesta

5.815

1800 cc petrol

Noble

Ford Focus

6.450

2000 cc petrol

Britz

Hyundai Sonata

8.379

2500 cc petrol

Martin

BMW 125i

8.371

Open petrol

Rousseart

Jaguar XF

9.147

Hybrid

Venter

Toyota Prius

6.064

SUV petrol

Van Vuuren

Mini Countryman

7.888


E-toll tariffs a threat to trucks

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espite reductions in tariffs, the Road Freight Association (RFA) believes that the e-toll tariffs are still too expensive. The association said that customers and ultimately consumers will have to carry the costs of truck operators. With the proposed toll of R2.00 a kilometre for trucks (Class C) and R1.00 a kilometre for medium-sized vehicles (Class B), cost increases of 11 per cent (and a profit margin as low as two per cent or R0.75 a kilometre) will lead to the closure of many businesses, as most of these operators are SMME operators, earning a total revenue of R1 800 a pickup. Far-reaching effects The courier industry will also be affected by the rollout of e-tolling. On average, a courier vehicle (bakkie) will travel 150 kilometres a day on the e-toll network, with average toll costs of R60 a day; a 17 per cent increase in costs. For an operator with a fleet of 100 bakkies this would cost approximately R100 000 a month, which is a huge cash outlay for any business. Many of the large courier companies outsource their business to owner drivers – a major avenue for BEE empowerment. As owner drivers usually have high cost structures due to their inability to cross subsidise (as they have only one vehicle), the e-tolls represent a major threat to owner-driver schemes.

A furniture removal operator charged on a volumetric basis rather than per axle is compromised as these trucks are not loaded to the 56 tonne gross vehicle mass (GVM), as most other trucks of this size would be. They are not likely to be more than 25 to 30 tonnes GVM. On average, these removal operators would be expected to pay R75 000 a month which would have to be transferred to home owners who want to move house.

National Roads Agency Limited (SANRAL) costs for the following two years, after which time the financing would reduce to R500 million for two years and toll fees could be increased again. In this period, the Gauteng Department of Transport and Public Works could increase spending on public transport and road infrastructure, so that after four years there would be suitable alternative routes and an efficient public transport network.

Savings in maintenance costs as a result of the GFIP roads will not outweigh the cost of tolls, as not all the routes travelled by the trucks are well maintained, which results in high maintenance costs once off the toll network.

A ring-fenced fuel levy should also be considered for national and provincial roads and perhaps even main metropolitan roads to ensure that there are dedicated funds available for the road network.

Spending wisely The RFP emphasised that spending should be better prioritised in many provinces in the country. For instance, Gauteng will spend R469 million on roads in the 2011/12 financial cycle, while KwaZulu-Natal will spend R1.98 billion on roads over the same period. In other words, the busiest province with the most vehicles spends less than a quarter of the budget allocated than a poorer province on road infrastructure, making for high vehicle maintenance costs in the economic heartland of the country.

A bleak outlook The RFA listed the nine-day strike experienced by the freight industry earlier this year, as well as increasing license fees for Gauteng operators and increases in the overall cost of business as placing strain on many businesses, especially SMMEs. Those with already strained resources may not be able to absorb GFIP tolls, leading to the closure of small operators, which will negatively affect truck operators, resulting in the downsizing of operations and ultimately closure.

The association is of the opinion that a further reduction in tolls is possible if government were to finance R1 billion of the South African

The RFA said that while it has cautioned both the minister of finance and the minister of transport of the consequences that the tariffs will have on operators, this seems to have gone unnoticed.

“The proposed toll will lead to the closure of many businesses, as most of these operators are SMME operators, earning a total revenue of R1 800 a pickup.�

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The Johannesburg Truck and Bus Show 2011

READY FOR SOME HEAVY LIFTING

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he Johannesburg Truck and Bus Show forms an integral component of the Johannesburg International Motor Show to be staged at the Expo Centre, Nasrec, in October. With the South African truck industry enjoying improved sales in 2011, the mood at the show is expected to be very positive.

Although the bus industry has suffered an unexpected decrease in sales during the last 12 months, the overall truck and bus market has seen growth of 22 per cent in the first six months of 2011 compared to the same period a year ago. The biggest gain in sales volume has been seen in the extra-heavy segment of the truck market, with growth of 49 per cent for the year to date. This sector will enjoy the limelight at the Truck and Bus Show, with a number of new and improved models on display. The truck and bus exhibit will be housed in Hall 5 at the Expo Centre, measuring more than 7 000 m 2. Additional truck and bus displays will be located outdoors, with trailers situated on Terrace 1. NAAMSA’s executive director, Nico Vermeulen, commented: “There is strong support from the industry and this year’s truck and bus hall will be the best yet at South Africa’s bi-annual automotive showcase.” Truck and bus brands that will be housed in Hall 5 include: DAF, Hino, Irizar, Kia, Marcopolo, Mercedes-Benz, Navistar, Peugeot, Powerstar, Scania, Tata, UD Trucks and Volkswagen. Alongside these brands, companies such as Alcoa, Angelo Kater Motor Trimmers, Cummins SA, MCV South Africa – De Haans, Travelstar/ Oberaigner Automotive SA and TFM Industries will also have displays. Manufacturers exhibiting outdoors will include MAN (in and around the MAN Centre), FAW, certain Mercedes-Benz models, Foton, Irizar, VDL Bus and Coach and DongFeng. With so many participants, the scene at the Johannesburg Truck and Bus Show promises to be far more buoyant than was the case when this show was last staged in 2008, at a time the global economic meltdown was at its worst.


“The winner of the Auto Express Car of the Year prize really needs to break the mould – and the Range Rover Evoque does exactly that.”

destined for greatness

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nveiled on local soil for the first time early in August, the Range Rover Evoque has already made waves internationally.

Last month, Auto Express, one of the UK’s biggest motoring magazines, announced its top buys in 18 classes of the new car market, as chosen by a panel of industry experts. Key criteria included fuel efficiency, driver appeal, practicality and reliability. From among the 18 class winners, the British-built Range Rover Evoque – chosen as the Best Compact SUV – was chosen as Car of the Year.

Citing the Evoque’s striking looks and driving dynamics as key factors in its success, the magazine also praised its pricing. “The Evoque puts the hugely desirable Range Rover brand within the reach of compact executive car buyers for the very first time,” said Auto Express acting editor Graham Hope. “The winner of the Auto Express Car of the Year prize really needs to break the mould – and the Range Rover Evoque does exactly that.” Colin Green, managing director of Land Rover UK, has welcomed the recognition:

“To receive an accolade such as this so soon, and from such a respected journal as Auto Express, is a huge boost for the talented and dedicated professionals who have worked so hard and so long to bring the Evoque to market.”

In addition to the Auto Express Car of the Year, the Range Rover Evoque was also awarded 2010 Car Design of the Year for Best Production Car at the Geneva Motor Show last year. See it on display at the Johannesburg International Motor Show or available at commercial outlets from October.

Land Rover drives Rugby World Cup 2011

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and Spanish and will provide up-to-date information for rugby fans around the world, including live match commentary and score updates, half-time and full match video highlights, tournament news (fixtures, results, stats and standings), stadium information and details about RWC events in New Zealand.

In addition to providing the official vehicles for the tournament, Land Rover is the primary sponsor of the Official Rugby World Cup 2011 App. The app will be free to download for Blackberry, Playbook, iPhone, iPad, Android and Windows Phone 7 in English, French

A special feature of the Official RWC 2011 App will be the opportunity for rugby fans to interact with current and former players through ‘Tackle the Pros’, allowing them to upload their questions which will then be put to game experts. The app is expected to attract more than one million downloads during the course of the tournament.

n August, Land Rover handed over a fleet of 30 specially branded vehicles for use as the official vehicles of the Rugby World Cup 2011. The fleet of Range Rover Sports and Land Rover Discoverys have been customised with Rugby World Cup (RWC) 2011 branding, number plates and commemorative badges and will be on sale to the public once the tournament has been concluded in November.

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Welcome back Asimo!

H

onda is one of the world leaders in advanced robotics and to demonstrate that fact they are bringing ASIMO, the humanoid robot made by Honda’s research and development engineers, back to South Africa.

An earlier generation ASIMO appeared for the first time in South Africa in 2006 at the Auto Africa show (the forerunner of the Johannesburg International Motor Show). The current ASIMO robot, which can now run, walk, transport goods on a trolley and shake hands, will be visiting South Africa at the Johannesburg International Motor Show in October. The name ASIMO is derived from ‘Advanced Step in Innovation Mobility’ and Honda views the advances in humanoid

robotics represented by the ASIMO project as an example of its free-thinking spirit, an important aspect of Honda’s commitment to engineering excellence, design and technological developments in other spheres.

The latest version of the robot has a greater range of motion enabling it to twist bend and push. This is a great feat when you consider that without an inner ear, ASIMO requires posture control technology to enable it to maintain its balance and prevent its feet from slipping while running. ASIMO is able to recognise people, stationary and moving obstacles, understand and respond to a number of voice commands and, at 130 centimetres and 54 kilograms, ASIMO is the perfect size to help around the house or assist a person confined to a bed or wheelchair. Powered by a rechargeable lithium-ion battery located in its backpack, ASIMO requires just one person to control it, using a laptop or portable computer and a wireless network, and is sure to create a stir at the motor show.


Taking ‘green’ to the next level

T

he understanding of branding and ‘green’ consciousness has come a long way in the last 30 years. Today, environmentally-aware, planetfocused, corporate citizenship is something that every company strives for. With the knowledge that the efforts of the world’s most valuable brands are the ones most likely to have the largest impact, international brand consultancy, Interbrand, undertakes an annual assessment survey to determine the world’s greenest brand.

The first of its kind, the measurement methodology for Interbrand’s Best Global Green Brands report was developed together with Deloitte, with the Green Performance Score designed to be applicable across differing industries. Performance data were sourced from publicly available information as well as data from Thomson Reuter’s ASSET; and

for a comprehensive assessment, Interbrand also interviewed some 10 000 consumers across 10 of the world’s largest markets (including the UK, France, Germany, Italy, the USA, Japan, Brazil and India) to gauge consumer perceptions of a brand’s green performance.

Assessing brand performance in 2010, Interbrand’s findings from this global survey have recently revealed that Toyota is the world’s greenest brand with a top Green Performance Score of 64.19 points. This score takes into account environmental performance coupled with public perception of a brand’s environmental sustainability. Other automotive manufacturing companies managing to make it into the Top 10 of the Best Global Green Brands report include Volkswagen at number six and Honda at number seven. The Interbrand report said that

Toyota is “a leading example of making the environment a core management priority, while also engaging in a meaningful way with audiences around the world”. A key factor in determining Toyota’s Green Profile was that: “Overall, environmental sustainability is deeply ingrained in the brand and has been a core management priority since 1992, when Toyota adopted the Toyota Earth Charter. This focus on green has resulted in solid improvements in energy use, water consumption, waste and toxic emissions.”

Toyota’s development of full hybrid technology is a key contributor to Toyota’s strong green performance, notably with the Prius – now in its third generation. Since 1997, Toyota and Lexus have amassed more than 3.2 million hybrid vehicle sales worldwide, a key contributor to consciousness of these companies’ commitment to the environment.

In reaction to the findings, Calvyn Hamman, senior vice-president for sales and marketing at Toyota South Africa Motors, said that the international accolade was further proof of Toyota’s total commitment towards attaining environmental sustainability. “One of the core principles in Toyota’s global vision is to develop sustainable mobility solutions in harmony with the environment,” said Hamman. “Toyota is very clear in its philosophy – to respect the planet through innovative new products, aiming to exceed customer expectations.”

Interbrand’s ranking of the Best Global Green Brands rank

brand

brand

1

TOYOTA

AUTOMOTIVE

2

3M

DIVERSIFIED

3

SIEMENS

4

JOHNSON & JOHNSON

5 6

rank

brand

brand

64.19

26

INTEL

ELECTRONICS

53.89

63.33

27

COCA-COLA

BEVERAGES

53.38

DIVERSIFIED

63.08

28

CANON

ELECTRONICS

53.13

FMCG

59.41

29

PEPSI

BEVERAGES

53.04

HEWLETT-PACKARD

ELECTRONICS

59.06

30

MICROSOFT

COMPUTER SOFTWARE

53.02

VOLKSWAGEN

AUTOMOTIVE

58.90

31

XEROX

ELECTRONICS

52.61

7

HONDA

AUTOMOTIVE

58.85

32

PHILIPS

ELECTRONICS

52.58

8

DELL

ELECTRONICS

58.81

33

SHELL

ENERGY

52.47

9

CISCO

BUSINESS SERVICES

57.66

34

CATERPILLAR

DIVERSIFIED

52.08

10

PANASONIC

ELECTRONICS

57.32

35

CAMPBELL’S

FMCG

50.94

11

HYUNDAI

AUTOMOTIVE

57.18

36

KELLOGG’S

FMCG

50.81

12

BMW

AUTOMOTIVE

56.81

37

AVON

FMCG

50.36

13

APPLE

ELECTRONICS

56.43

38

SAP

BUSINESS SERVICES

50.16

14

DANONE

FMCG

56.15

39

IKEA

HOME FURNISHINGS

49.32

15

L’ORÉAL

FMCG

55.84

40

SANTANDER

FINANCIAL SERVICES

49.26

16

MERCEDES-BENZ

AUTOMOTIVE

55.24

41

AXA

FINANCIAL SERVICES

48.39

17

NIKE

SPORTING GOODS

54.94

42

STARBUCKS

RESTAURANTS

47.99

18

SONY

ELECTRONICS

54.73

43

NINTENDO

ELECTRONICS

47.78

19

IBM

BUSINESS SERVICES

54.68

44

CREDIT SUISSE

FINANCIAL SERVICES

47.07

20

FORD

AUTOMOTIVE

54.67

45

MCDONALD’S

RESTAURANTS

47.06

21

ALLIANZ

FINANCIAL SERVICES

54.55

46

CITI

FINANCIAL SERVICES

46.97

22

NOKIA

ELECTRONICS

54.51

47

BARCLAYS

FINANCIAL SERVICES

46.90

23

ADIDAS

SPORTING GOODS

54.48

48

HSBC

FINANCIAL SERVICES

46.54

24

GE

DIVERSIFIED

54.24

49

UPS

TRANSPORTATION

46.12

25

SAMSUNG

ELECTRONICS

54.06

50

ACCENTURE

BUSINESS SERVICES

45.76

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sector

sector


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: uranceastly s v in ms, nd omiu lture a e r r p u y c i l box f p cs h ic ont nce o the to arkets nd m m e f h t u r the i fl o n M ) a fo outdoing awaacykwing theereinjust soiems efor Ahfroicoal (USB-ED inding ficance odf even unnpgomas wce Strateugsiness Sc m A ink the signirings anrs and sao-insurannbosch B(Cenfri). thderstandpinrgoduct owfiftech doctmoe in Msiitcyrof StedlleInclusion Un ging ch as ogram niver on an n r U ti cha ition su t the P y the egula b al R a d d a d i e te tr uss anc hos disc shop for Fin k r wo entre C the

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85


A mind for micro-insurance: thinking U out the

nderstanding the significance of doing away with monthly premiums, vastly changing product offerings and even unpacking the influence of culture and tradition such as witch doctors and sangomas, were just some of the topics discussed at the Programme in Micro-insurance Strategies for African Markets workshop hosted by the University of Stellenbosch Business School (USB-ED) and the Centre for Financial Regulation and Inclusion (Cenfri). Hanna Barry takes a closer look at the challenges of catering for the needs of a low-income market.

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box


W

e live in a rainbow nation, a multicultural society, but that concept has not always hit home with those who sell insurance products. Some insurance companies often expect their clients to adapt their way of life to suit the products they have on offer, but don’t think of how they could adapt their products to fit into their client’s lifestyle. This point was the main focus of Dr Mélani Prinsloo’s presentation on microinsurance. She is the founding partner of Infusion Research and Knowledge Hub and the non-profit organisation, the Centre for Democratising Information (CDI), a community-based research project that focuses on issues within the South African context. The problem is that often insurance companies take products into a market, educating consumers through advertising and consumer campaigns, rather than finding out how people live and what it is that they need from insurance. The message was: rather than trying to change the mindsets of millions of people, change the products and the mindset of your company.

43 million

live below the poverty line or on social welfare

Dr Prinsloo said that in South Africa the formal economy is comprised of less than seven million people, while the informal and mixed economy, and those living below the poverty line or on social welfare totals 43 million. Yet 70 per cent of most research budgets are spent on the 6.75 million, referred to as ‘the market’, while 30 per cent is spent on researching the low-income market. Despite this, many of us still think that we know and understand what the low-income market wants and needs. Dr Prinsloo highlighted the importance of meaningful research in leading to a thorough contextual understanding, which will ultimately result in relevant and feasible products. CDI aims to address this shortage of reliable, detailed information on under-developed markets by training unemployed people from national metropolitan townships to act as fieldworkers, gathering data for surveys designed to investigate context and lifestyle in townships. Recent clients include Sanlam, the Financial Services Board, Standard Bank and Cell C. Mind shift “Innovation cannot be immersed in the traditional body but it cannot be

removed from it; it has to be adjacent to it,” explained Gillian Samuels of Sanlam’s icover, an insurance provider for the low-income market. She explained that it is very difficult to innovate only one element of the insurance offering; rather, the entire value chain needs to be re-examined when catering to the low-income market. Various studies have revealed just how radical the mind shift needs to be, and that sometimes it’s necessary to scrap monthly premiums. According to a FinMark Trust study conducted in Malawi, Zambia and Namibia and Zambia, the most common source of income is from farming, while in Namibia the most common source is friends and family. This translates into fluctuating income levels, which means that regular payments are one of the biggest barriers in product designs. Out of pocket Studies by the CDI across South African townships found that a budget among many low-income earners (and probably many higher-income earners, too) is more of a priority list, determining where money goes first, rather than operating as a constraint-based mechanism. This was illustrated by the fact that close to 80 per cent of people said they drew up a budget every month, 76 per cent of those said they strictly kept to their budget and 58 per cent said they always overspend. Savings, investments, life and funeral cover rank low both in people’s performance in those areas, as well as in how they affect happiness. With 60 per cent of people not having enough money to meet basic needs and 46 per cent saying that only sometimes did their money last until pay day, insurers have their work cut out for them. Asking the right questions The CDI found that seemingly straightforward questions, such as the number of household members, became more complicated as people’s definition of household members differed. They found that asking people how many rooms are in the house; how many rooms are used for sleeping and then asking about the number of people that usually sleep in each room, yielded far higher numbers than the traditional research question on the number of

household members. Since this number is the actual reason behind the strain on the household income to a much larger extent than the original question, this was the right question to ask. So, when conducting research, don’t take for granted that people will interpret questions the way you intend them to be interpreted, and bear in mind that the questions you ask will to a large extent determine the responses you get. Tried and trusted Low-income individuals are wary of new innovations and products in insurance, and prefer to deal with older, more established insurance companies with tried and trusted policies. The CDI thought that people would be hostile toward insurance companies that existed during the apartheid years, but this was not the case. This presents a challenge for newer and emerging insurance companies. The important thing to realise is that low-income earners and especially those living in under-serviced areas, deal with a large amount of risk on a daily basis, and what you may view as a new and exciting innovation, many of them may simply view as risky. Make sure that those you are trying to reach feel financially secure with your product. Rising to the challenge These challenges are only some of those facing insurers and brokers wishing to offer micro-insurance. “Have a fascination for people and the larger market; not just insurance,” advised Dr Prinsloo. People are complex and insurance providers need to understand and embrace this if they wish to design the right products.

60%

of people do not have enough money to meet basic needs

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product showcase

A cash injection when needed most PRODUCT SHOWCASE: METROPOLITAN FUTUREBUILDER CASHBACK HOSPITAL PLAN

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T

he Metropolitan FutureBuilder CashBack Hospital Plan is a health insurance policy which provides income replacement in the event of hospitalisation to offset the associated costs of being hospitalised.

The policy owner chooses a daily benefit amount between R75 and R4 000 that will be paid out for every day the insured life is in hospital. If the insured life is in the intensive care unit (ICU), the daily benefit amount will be doubled for the days spent in ICU. In addition, there is a loyalty and no-claim bonus which is paid out every three years and is equal to 10 times the daily benefit amount. The no-claim bonus is paid if no claims are made in the three-year period. In order to qualify for the loyalty bonus, premiums must be paid to date. Recent enhancements to the FutureBuilder CashBack Hospital Plan • The rate structure has been simplified • The four different rate structures have been reduced to two categories only: 1. One category for the ‘member only’. 2. The other category for ‘family’. Jam-packed with new optional benefits • A maximum of four parents can be added for the hospitalisation benefit. • Funeral cover of up to R10 000 can be taken as part of this plan for a maximum of six family members (this includes immediate family members, parents and extended family members). This benefit should not be viewed as a replacement to a funeral cover product but rather as supplementary or top-up to existing funeral cover. • A premium waiver benefit at death of the principal life insured means that no further premiums are payable if the principal

“In addition, there is a loyalty and no-claim bonus which is paid out every three years and is equal to 10 times the daily benefit amount. The no-claim bonus is paid if no claims are made in the three-year period. In order to qualify for the loyalty bonus, premiums must be paid to date.” life insured dies. But the rest of the family will remain covered in the event of death (before the age of 65 years) of the first life insured. Plus, the no-claim bonus will continue as before. However, the loyalty bonus benefit will lapse. The premium waiver benefit must be added at application stage. • Accidental death and disability/impairment benefit of R50 000 for the principal member or spouse. If the accident results in physical impairment, a percentage of the accident benefit will be paid out for the principal member or spouse. • The Family Assistance Benefit includes 24-hour access to services such as transportation to the most suitable hospital or care facility via ambulance or helicopter in the event of an emergency. These and other services are supplied through our partnership with Europ Assistance SA. With these new enhancements to the FutureBuilder CashBack Hospital Plan, the product is not only more competitive, but packed with benefits that customers really need. It is an all-inclusive package that presents the perfect opportunity to custom-make the right solution for customers. For more information on this product, contact your nearest Metropolitan regional office.

Support services, just a phone call away with the Family Assistance Benefit During a difficult time, we’d like to know that customers have access to the services they need. Hence, the Family Assistance Benefit provides access to a 24-hour helpline providing the following services: 1) Emergency medical services This benefit provides 24-hour emergency medical assistance, including the following benefits: • Medical information over the telephone. • Appropriate emergency transportation and evacuation. • Referrals to doctors and other facilities. • A maximum of R2 000 for the admission to hospital, refundable by the member or the member’s medical aid. • Arrangements for the escorted return of minors after an accident. • Repatriation of mortal remains after a fatal accident to an appropriate facility at the deceased’s normal place of residence. 2) EA Touch: trauma, assault and HIV protection cover This is a 24-hour emergency assistance helpline which will arrange for the necessary help an insured life may require in a

situation where (violent and non-violent) trauma and/or assault and/or HIV infection as a result of an assault occurs within the borders of South Africa. 3) Funeral assistance benefit The bereaved family and next of kin will receive assistance with the funeral and cremation arrangements. 4) Legal assistance A telephonic advice line manned by qualified and experienced in-house attorneys who will provide guidance and information on legal matters. 5) Repatriation of mortal remains Assist the bereaved family and next of kin with the repatriation of the insured life’s mortal remains, to a funeral home closest to their normal place of residence. This also includes the transfer of ashes to their place of normal residence after the cremation. All of these benefits are available as a free service to FutureBuilder CashBack Hospital Plan policy owners via a service provider, Europ Assistance Financial Services, 24 hours a day, 365 days a year and it’s just a phone call away.

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“Ultimately it is ensuring the entity, being the farm, against the person working for the farm dying or being injured.”

Taking new ground:

cover for farm labourers As if fluctuating weather patterns, uncontrollable fires and large-scale disease aren’t enough for farmers to contend with, a regular turnover of staff generates further challenges. Hanna Barry found out about a tax-deductible product that ensures labour-force security to farmers by providing personal accident cover to their farm labourers.

H

ealth and Accident Underwriting Managers’ Groundbreaker product is designed to provide accidental death and disability cover to farmers and farm labourers. At a reduced premium (as little as R10 per month for R40 000 worth of disability cover), different amounts of cover can be purchased by the farmer to cover supervisors, farm workers and temporary labour. Managing director of Health and Accident, Adrian Hofman, compared the product to an employer buying public liability cover on all the staff, so that the employer is the one paying but all employees are covered. “Ultimately it is ensuring the entity, being the farm, against the person working for the farm dying or being injured and as a result of the injury being unable to work, which would result in a loss of turnover,” he explained. Due to the regular turnover of staff, it is very difficult for a farmer to provide employee benefits as affordability becomes an issue. This is especially true for farmers who employ temporary labour during the harvesting season. In the Ceres Valley in the Cape, where labourers manually pick oranges

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over a three-month period, some farms will quadruple their staff complements for just that period. On some farms this can translate into an additional 8 000 people. Occupation-based cover Underwriting is based on the primary occupation of people (so a premium will differ between someone operating a combine harvester versus somebody picking strawberries) and the quantity of staff to be insured; so that depending on the size of farming operations, there will be discounts for volume of staff. Well covered The cover is international, which is particularly useful for those farmers who have farms in Mozambique and Swaziland. It includes 24-hour travel, for both work and holiday purposes. It also covers farmers and labourers for injuries incurred after hours, for activities unrelated to farming, as the organisation will make a loss if that individual is not able to work. There is a slight reduction in premium if cover is only for during work hours; however, Hofman noted that 80 per cent of claims occur after hours.

Breaking into the market “This product was designed so that the admin is low, the premium is low, it’s tax deductible and the farmer owns it,” Hofman commented. Since most farmers live off the beaten track, the products are distributed through cooperatives that already sell crop insurance and are registered financial service providers. Unfortunately, the people distributing the products at the co-op don’t often tell people about the product. Hofman explained that although group personal accident and medical travel insurance fall under their FSP license, subject to them receiving the necessary training, it’s so far removed from their normal product offering, that it is not always grasped by everyone. Furthermore, the co-ops need to understand the particular labour needs of the farmers they are serving, but the only contact they have with a farmer is when he or she comes in to buy stock and supplies. Thus educating the market is the biggest challenge, as many farmers don’t even know this product exists, which is why the role of brokers in keeping farmers informed cannot be overemphasised.


Does your client’s insurer treat them as an individual? employed individuals, family orientated individuals, the elderly; they all have a unique set of insurance needs. Looking at these needs with a one-size-fits-all approach does not work. This is especially relevant when one explores the diversity of a self-employed individual and assesses their risk.

Brad Toerien (Chief Executive Officer at FMI)

I

nsurance products should be flexible and dynamic with the ability to adapt with your client’s lifestyle. A static insurance portfolio is definitely not ideal in today’s fast-paced, everchanging world. Younger lives, salaried employees, self-

Self-employed individuals are unique and deserve to be recognised for their varied duties. Unfortunately, traditional risk assessment models based on occupation are flawed in this regard. The unique behavioural psychology of a self-employed individual should be rewarded. Think of a plumber, Jack, who has started a business and spends most of his time running the business and sourcing new clients, while employing specialist plumbers to do the actual work. Rating the disability risk which Jack faces in the same way that you would assess the occupational risks

faced by plumbers in general is clearly not fair. A plumber such as Jack would need to consider how his inability to work would affect those who are dependent on him. His staff, his wife and his children would all be affected with a significant impact on their lifestyle. Insurance products need to protect your client and those they care about when they cannot. Additionally, being able to consolidate all your client’s disability solutions under a single provider makes it easier for you to eliminate and manage risks such as aggregation and benefit interactions. As insurers start to understand their customers better, there are benefits enjoyed by all, such as reduced liability for the financial adviser, improved claim certainty for the customer, and premiums that more accurately price the risk.


TAKING A STAND on sustainability: Crisa

S

ustainability is the capacity to endure and is increasingly on the forefront of the minds of individuals, businesses, organisations and governments as a motto, an ideal, a way to do business and live your life or a call to action. This also rings true for the economic and long-term investment environment internationally. Since the United Nations launched the international Principles for Responsible Investment (PRI) initiative in 2006, South Africa is the second country (following the UK) to formally encourage investors to integrate environmental, social and governance (ESG) sustainability issues into their investment decisions.

principles have attracted the support of the Financial Services Board (FSB) and the Johannesburg Stock Exchange (JSE).

The Code for Responsible Investing in South Africa (CRISA) was launched in Johannesburg in July and aims to provide the investor community with the guidance needed to give effect to the King Report on Corporate Governance South Africa (King III) as well as the UN’s PRI initiative, said John Oliphant, chairman of the stakeholder committee that drafted the Code last year.

Oliphant, who is also head of investments and actuarial at the Government Employees Pension Fund (GEPF), pointed out: “The Code aims to put in place the checks and balances needed to make this voluntary framework successful. Together with the King Report, which is not legislation but rather principles and practices that are adhered to on an apply-or-explain basis, the new Code will seek to encourage best practice conduct by shareholders and companies.”

While the code is voluntary, Finance Minister Pravin Gordhan suggested at the CRISA launch that if the voluntary code was not effective to promote more open and broadly beneficial investment, there might be more active involvement by the government. Widely encouraged and supported CRISA has been endorsed by the Institute of Directors in Southern Africa (IoDSA), the Principal Officers Association (POA), and the Association for Savings and Investment South Africa (ASISA), and its

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The PRI initiative has also expressed its support for the Code. Dr Wolfgang Engshuber, chairman of the initiative, said: “We strongly support the CRISA Code. It is important that pension funds and investment managers operating in South Africa understand clearly their responsibilities and invest for the long term. The successful adoption of this Code sends a clear signal to other regulatory agencies around the world that they can and should play an important role in encouraging responsible ownership practices.”

Duty calls Oliphant stressed that the world is currently facing serious sustainability challenges, ranging from the devastating effects of the financial crisis to socio-economic challenges and climate change. “As long-term investors with fiduciary duties, we simply cannot afford to ignore the importance of integrating sustainability issues, including ESG, into long-term investment strategies. As institutional investors we have the ability to influence and encourage the


companies in which we invest to apply sound governance principles and to care for the environment in which they operate,” Oliphant explained.

“While the code is voluntary, Finance Minister Pravin Gordhan suggested at the CRISA launch that if the voluntary code was not effective to promote more open and broadly beneficial investment, there might be more active involvement by the government.” Principles of the Code Principle 1 – An institutional investor should incorporate sustainability considerations, including ESG, into its investment analysis and investment activities as part of the delivery of superior risk-adjusted returns to the ultimate beneficiaries. Principle 2 – An institutional investor should demonstrate its acceptance of ownership responsibilities in its investment arrangements and investment activities. Principle 3 – Where appropriate, institutional investors should consider a collaborative approach to promote acceptance and implementation of the principles of CRISA and other codes and standards applicable to institutional investors. Principle 4 – An institutional investor should recognise the circumstances and relationships that hold a potential for conflicts of interest and should proactively manage these when they occur. Principle 5 – Institutional investors should be transparent about the content of their policies, how the policies are implemented and how CRISA is applied to enable stakeholders to make informed assessments. In short, the Code requires institutional investors to develop and implement policies on how they incorporate sustainability considerations, including ESG, into investment analysis and activities. This responsible approach should extend to shareholding and engagement with companies and the prevention of insider trading as defined by the Security Services Act. Institutional investors are also encouraged to work with other shareholders, service providers, regulators, investee companies and ultimate beneficiaries to promote CRISA and sound governance, as well as to develop policies to manage and monitor conflicts of interest and compliance with the policy. The Code furthermore requires institutional investors to fully and publicly disclose the extent to which the Code is applied in their business as well as reasons for not applying one or more of the principles of the Code. The full Code can be downloaded from www.iodsa.co.za, www.asisa. org.za or www.unpri.org.


Rob Rusconi Rob Rusconi is General Manager of Lombard Life, a licenced long-term insurer that seeks to meet customer needs through partnerships. Lombard Life is a member of the Lombard Insurance Group.

O

ur analytical thinking is flawed. This we know from the insights provided by the field of behavioural economics. We are not great at separating emotion from logic. We overestimate our ability to pick winners. We understate the importance of the long term. We trade too much. And we tend to forget that trading is not cost-free. The results of a comprehensive study of the share trading performance of American individuals make for interesting reflection. Overall, men fared poorer than women. This is an interesting result on its own. But we mustn’t stop there. We need to break it down a little further to find out why. On pure investment performance, actually, the results were identical. On average, the results followed the market. But those who traded spent money on those trades. Since trades realised, on average, no performance benefit, high traders fared worst. Men traded more than women. Type-A personalities – those strong-willed higher blood pressure folk around us – did worse than their mild-mannered peers. Again, this is not because they made poor decisions, but because they spent money trading. On average, their trading decisions returned, in relative terms, zero. A WORLD OF MERCHANTS We are trading junkies. We consider ourselves experts in property transactions and are always on the lookout for the hot stocks. We change our cars every three years and upgrade our telephones every two years. As a result, the large part of our economy

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– a significant part of the perhaps euphemistically named ‘service industry’ – offers trading services. And services they are. Estate agents provide a good understanding of all of the ins and outs of property transactions. Brokers provide access to traded securities. Financial advisers help us through the process to a good product. But they are sales people as well, remunerated on turnover they generate and incentivised to convince us to act on the transaction. They are supported by marketing efforts to make the product or service look good and to convince us that failure to purchase would be a bad idea. So we need to remember that trading costs. And these costs are not always obvious. While we can usually tell quite clearly what it costs to buy or sell a share, we tend to ignore the fact that this cost is not recoverable. If, on average, these transactions do not improve value, we are left with nothing but the fees. Other forms of cost are probably not as transparent. • Long-term insurance policies come with a complex range of fees – up-front and ongoing, for example, fixed, relative to premium and relative to assets – that make comparison of offerings very difficult, even with the standardised statistics available. Cancellation costs can be the most difficult to follow as the consequences of policy surrender are frequently unclear. Fortunately, FAIS legislation makes it mandatory for the adviser to make completely clear the benefits of a switch from one policy to another. • Unit trusts are much simpler in their fee structures. But we should not ignore the charges completely. Three per cent of premium – five per cent if commission is also payable – needs to be made up before you’ve crossed the gain line. • Property transactions involve considerable

costs, some of which are related to the value of the properties, but many fixed and unpredictable. But there is a more dangerous cost, more difficult to put a value to, that investors and their advisers frequently forget. The time it takes to make each of these decisions, the time to act on them and the complexity that each successive transaction can add to a portfolio, all add intangible cost to an individual, before we get the costs of consequential activities, tax management, for example. The sleep-easy benefits of a straightforward portfolio vary from person to person, but are seldom considered. LEARNING LESSONS So trading costs matter. Tangible or intangible, these costs have an impact on the long-run performance of a portfolio or the sense of control and confidence of the investor. What might this mean for the advice that we give to our clients? • Plan for the long term. Putting to one side short-term dreams and pressures, determine the most important long-term saving, protection and investment priorities and put in place the plan required to act on them. Once implemented, make sure that the motivation for the plan is understood so that it is complemented by short-term actions, not undermined. • Be careful of fads. Products come and go, and so do investment ideas. Do not recommend a product or concept just because it is new; it must meet customer needs within the context of their long-term requirements and existing products. • Watch expenses. Transactions are not cost-free. Make sure that they are worth it. For every buyer there is a seller. But there is frequently also a go-between, often a number of them, who need to earn their keep. Don’t forget that you are putting bread on their table as well.


On the flip side of market turmoil

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rom the uprisings in Egypt and soaring oil and commodity prices, to the risk of nuclear meltdown in Japan and the US and European debt crisis bringing national economies to their knees, 2011 has been marked by events causing erratic behaviour on the international stock markets. In the wake of recent turmoil, South African investors have been warned not to make emotional decisions, but to rather ride the wave and persevere while markets settle down. Scott Campbell, managing director and fund manager for renowned firm, MitonOptimal Multi Asset Management, has chosen to look on the flip side of the market turmoil coin. “We remain optimistic about the SA Rand’s potential to remain attractive to yield-seeking global investors. Also, that local interest rates will stay lower for longer as this US and EU economic calamity plays itself out,” Campbell said. Emerging economies currently grow two to three per cent faster than the developed world and, as a result, once investors realise that more than 60 per cent of the world’s population and consumer base (as a source of potential economic growth) are located outside of the United States and Europe, irrational market behaviour should start to settle down, with the monetary, fiscal and economic stability offered by China, India and Asia promising to drive global economic growth in the future.

The debt, banking, fiscal and growth repair process in the US and EU will have many years to run and will have to continue through unstable market conditions. However, while many feared a repeat of the 2008 markets crash, money and corporate credit markets have not yet seen the strains of a similar collapse. Rather, Campbell suggested, there are signs that the US has woken up to the need to change its approach to long-term difficulties. The same could be said for the EU. Meaningful deficit reduction can be achieved only through a combination of revenue increases and carefully targeted spending cuts.

“Meaningful deficit reduction can be achieved only through a combination of revenue increases and carefully targeted spending cuts.”

“We remain in favour of global equities to generate long-term capital growth in local and offshore portfolios,” Campbell said. Investors should not fear a repeat of the collapse three years ago as these ups and downs are seen in any system in recovery.

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The need

for fair treatment By Samantha Burns

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re companies deliberately trying to treat their customers unfairly? Generally, not. Are companies trying to maximise profits for shareholders? Generally, yes. Is there a risk that in the attempt to drive profits, customers could be treated unfairly, even without realising it? Yes. Is this risk properly assessed and mitigated? Maybe not. Do customers sometimes find, to their detriment, that they have been treated unfairly by certain financial services firms? Sometimes yes. Is it worth it then to introduce regulations to compel companies to proactively manage the risk of unfair customer outcomes? In my opinion, probably. Before I get shot down, the fact is, even though companies may have no intention to be unfair, if consumers were always treated fairly there would be no need for the introduction of regulations enforcing their fair treatment. The Financial Services Board (FSB) has published a Treating Customers Fairly (TCF) framework, which is designed to enforce six outcomes of fairness, as most financial services firms know by now.

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Outcome 1: Consumers can be confident that they are dealing with firms where the fair treatment of customers is central to the corporate culture. Outcome 2: Products and services marketed and sold in the retail market are designed to meet the needs of identified consumer groups and are targeted accordingly. Outcome 3: Consumers are provided with clear information and are kept appropriately informed before, during and after the point of sale. Outcome 4: Where consumers receive advice, the advice is suitable and takes account of their circumstances. Outcome 5: Consumers are provided with products that perform as firms have led them to expect, and the associated service is of an acceptable standard and as they have been led to expect. Outcome 6: Consumers do not face unreasonable post-sale barriers imposed by firms to change product, switch provider, submit a claim or make a complaint.

All retail financial services firms are required to produce evidence that these six outcomes are being delivered throughout the product and customer life-cycle. Before getting to the question of how this is done, let’s first look at why the TCF is necessary. TCF addresses the imbalance of knowledge Not only is TCF based on international best practice, but it specifically addresses the inherent imbalance that exists in the financial services sector. Consumers are vulnerable in their lack of knowledge about the intricacies of the workings of financial products. Even well-educated, experienced business people often know little about how certain medical aids, financial instruments or insurance policies work, let alone the average man in the street with literacy and financial literacy levels ranging from very poor to expert level. Consumers don’t realise that they lack knowledge and therefore they don’t even begin to ask the right questions. They don’t know whether they have made a good or bad decision in selecting a certain financial product. Sadly, sometimes customers realise that they made a poor decision only after many years of paying for the product.

are surely enough regulations in place to adequately govern the conduct of financial services companies. Indeed, various legislation already exists such as FAIS, CPA, NCA, FICA, PPI, Financial Institutions Act, Banks Act, Medical Schemes Act, Long-term Insurance Act, Short-term Insurance Act, to name a few. The issue is an holistic and coordinated consumer protection regulatory framework – that applies consistently across the financial services sector and is tailored to address the market conduct risks peculiar to the sector – has been lacking. Gaps exist between the various acts, and TCF intends to fill them. Furthermore, instead of being reactive like most legislation, the TCF framework is designed to be proactive and pre-emptive. It gives the FSB power to intervene and inspect before any overt wrong-doing. The primary purpose of TCF is to foster the development of certain trustworthy and fair culture within every financial services organisation – a TCF culture that consumers can rely on. In this context, financial services firms will be more transparent and disciplined in the way they deal with customers; and customers will receive and enjoy appropriate products and services. Ultimately, TCF serves to support

the sustainability of a healthy financial services industry to the benefit of both consumers and business. TCF is a business opportunity In my view, the implementation of TCF can prove to be a commercial advantage. It can help financial services firms to clarify and refine their customer value propositions and ensure the consistent delivery of those propositions throughout their organisations. I believe TCF can serve to help companies identify gaps in customer-focus. Executives can use the rigour of TCF to engage their leadership team and employees towards achieving the higher goals of customer engagement and retention and ultimately greater returns. In this way, TCF is by no means a burden, but in fact a good business opportunity. It is worth taking a perspective of TCF that looks beyond compliance. TCF could be a cumbersome, bureaucratic, box-ticking exercise, or an invigorating, challenging journey towards better business results. Yet TCF is being met with mixed feelings Leanne Jackson, head of TCF at the FSB, expresses that many financial services firms,

On the other hand, financial services firms and advisers have all the knowledge and expertise at their disposal. They know how customers frequently misunderstand their offerings. They realise that certain products are not suited to certain customers, and yet some institutions or individuals allow the customer the freedom of choice to make a regrettable purchase. In light of this imbalance of knowledge, TCF is extremely applicable. It induces financial services firms to put the customer hat on more frequently, and take the necessary risk management steps to avoid potential adverse consequences for their customers. TCF is an holistic, co-ordinated, preemptive approach to regulate market conduct Some still question the need for yet another piece of legislation, by saying that there

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opinion that they are already treating customers fairly. The fact is, many financial services companies already have laudable visions and values and customer focus. But TCF is not explicitly part of their culture and the risks of unfair treatment have not specifically been identified, assessed and mitigated. To implement TCF, adopt the following steps:

intermediaries and industry associations, in their direct conversations with her, have “confirmed their support for the TCF outcomes”. Yet a review of the industry through the lens of the World Wide Web gives us an indication of how the market is publicly responding to TCF so far. Most large insurance companies have explicitly stated their commitment to TCF through their websites or annual reports. This is not the case with banks, however. Only two of the big four explicitly embrace it online, while most other banking institutions don’t voice their opinion online. Also, corporate intermediaries have not expressed any intentions concerning TCF on their websites. It appears that at least part of the broker market is not enamoured with the introduction of TCF. Some financial advisers are explicitly vociferous in their blogging against the value of TCF. A number of brokers are now tired of new regulations, particularly in the context of the regulatory exams. There are several advantages to TCF Consumers get to benefit. They will be pleased to experience the outcomes that TCF seeks to encourage, and so gain greater confidence that financial institutions really do have their best interests at heart. Increasing trust boosts business efficiencies. Given that the financial services sector affects millions of people in South Africa, millions stand to benefit from a better, safer, fairer, more transparent and ideally easier to understand sector.

Financial services firms stand to benefit, too. The bad apples fouling the industry will be exposed, and those with admirable TCF measures will be seen to be performing well (through obligatory public disclosure), and gain competitive advantage though positive public perceptions. Simple language will be a great plus. Financial services firms will need to ensure that all their verbal and written communications is in plain language and that none of their communications, including visual cues are misleading in any way. Consumers’ interests will be safeguarded and companies will probably benefit in cases where increased product and process understanding results in reduced queries and complaints from their customers. Adopting TCF The place to start is with the board or the executive team. If you don’t have the expertise in house, get an external TCF expert to dialogue the issue with your executive directors to unpack what it means in practical terms for your organisation. Look out for the FSB’s self-assessment questionnaire (due August or September 2011). If completed thoroughly and honestly, it will provide a starting point snapshot of where the firm is at concerning TCF and identify any gaps that need to be worked on. Some financial services firms are of the

(a) Give careful thought, at the highest level, to how TCF should translate into operations, business processes and culture. (b) Identify suitable measures and methods of reporting to assess TCF status and progress. One of the greatest challenges that was encountered by UK firms adjusting to TCF regulations was the task of identifying, reporting on and acting on appropriate management information to provide supporting evidence that the six TCF outcomes are indeed being achieved. South African financial services companies should consider getting advice on this. (c) In making TCF part of the company strategy, senior, middle and junior management teams will need to understand their role in the implementation of TCF. Tailored training courses are available for this purpose. (d) Review business practices and processes. This requires a critical appraisal of how the company delivers on the six TCF outcomes when it comes to product development, advertising, marketing, sales, advice, administration, queries and complaint handling, and ongoing customer communication. Sometimes an independent perspective in this regard is useful. Gaps may be identified, requiring system changes or product enhancements or workshops to equip relevant employees to practice TCF in their day-to-day functions. (e) Review related HR practices and processes. In certain situations, performance incentives run counter to TCF objectives and the way people are selected for promotion does not engender TCF-type behaviour. To obtain more information on how to embrace TCF principles, go to the FSB website or consult an expert to ensure successful implementation of TCF. Your business needs to be successful not only in meeting FSB requirements, but also in enhancing customer relationships, customer retention and sustainable profitability.

Samantha Burns, MD of Customer-Mind, has 15 years’ experience in the financial services industry and practical expertise in implementing TCF (www.customermind.co.za).

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Municipal insurance IN THE SPOTLIGHT

While privately owned companies and service providers may be swift in taking adequate measures to protect their assets, municipalities have been under close scrutiny, especially during South Africa’s strike season, with tension running high in all spheres of the economy. “This is a difficult time for a municipality as it is often its infrastructure that takes the brunt of people’s frustration because it is an easy target that makes a big impact,” said Colly Mata, Executive: Commercial and Local Authorities Sales for Lion of Africa Insurance.

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one are the days when elections struck fear into the heart of public and private property owners. However, in light of recent events, vandalism is not a thing of the past. In the last six months, more than 6 000 Metrorail trains have been delayed as a result of damage and theft of rail equipment. In addition to the severe impact of these attacks on productivity and the South African workforce, the cost of repairs have run in excess of R5 million.

Furthermore, Mata noted that vandalism usually follows recurring patterns, and as a result municipalities should take the necessary steps to ensure that bigger financial repercussions are avoided. Since 1979, malicious damage cover has developed into a complex, but necessary, subset of the insurance industry and Mata encourages municipalities to revisit the risks surrounding their various infrastructures and whether they could be the targets of vandalism. With public budgets and spending continually under the microscope, Mata said that municipalities can prevent major financial loss as a result of

vandalism by making sure they have appropriate malicious damage cover. In most instances, malicious damage insurance forms part of a standard asset policy. However, this cover is usually optional and must be specified. He warned that the limit of this cover needs to be very carefully assessed. “This is the damage that is most important to insure as it could cause major disruptions to the public if the municipality is unable to repair it quickly,” Mata said. The very real effect of vandalism on the plight of the public is tangible, even when resources are available to manage repairs. Mata added that in order for a municipality to substantiate an accurate malicious damage limit for a region, a full assessment of the risks particular to the infrastructure most at risk must be conducted. This includes identifying how and when the public use these structures and how these assets are protected. Finally, the municipality needs to estimate what kind of damage it could cover and what damage would fall beyond its financial means to repair. Public property and the infrastructure that the public relies on are the largest targets for exactly those reasons and cannot be left unprotected at any cost.

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Paul Hancock General Manager at Mutual & Federal

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n its November 2010 Solvency Assessment and Management (SAM) Roadmap, the Financial Services Board urged South African insurers to start preparation and implementation of SAM to ensure that all conditions and tenets of the programme can be met within the next three years. SAM, based on Europe’s Solvency II capital adequacy, risk governance and risk disclosure regime has, much like any new and complex compliance and regulatory system, seen South African insurance companies taking a multitude of different approaches. Seeking advice from strategic partners and the FSB, different methodologies have emerged to ensure that the three pillars of SAM – capital adequacy, systems of governance and reporting requirements – are addressed. Paul Hancock, general manager for risk

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at Mutual & Federal said: “The SAM regime, to be implemented in South Africa by 2014, will ensure that risk-based capital management is a major focus for all insurers. The better an organisation understands and controls risk, the more efficient its utilisation of capital.” Old Mutual has taken the opportunity to entrench its own, new risk control selfassessment methodology and has embraced OpenPages, the leading provider of integrated risk management solutions and software. OpenPages ORM (operational risk management) is a software package which automates the process of identifying, measuring and monitoring operational risk, integrating all risk data into a comprehensive risk analysis, taking risk and control self-assessments, loss events and key risk indicators into account. The system was implemented in April 2010 and has been positively received during its first year of operation by the company’s stakeholders

as risk committees begin to see the output of OpenPages in their focus areas. “Robust risk management leads to more informed business decisions, which translates into improved financial performance and the containment of downside risk,” said Hancock. “Our approach to risk is all about understanding the dynamics of risk and its impact on the business. Solvency II and its local equivalent, SAM, have combined the areas of capital and risk management and forced insurers to focus on risk-based capital.” As the industry aims to protect policyholders and beneficiaries in the unique South African environment, with industry giants such as Mutual & Federal looking to lead the way in exploring and implementing SAM and tools like OpenPages, incorporating the appropriate measures should prove easier for smaller insurers going forward.


May you live

in interesting times

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he well-known Chinese proverb and curse, ‘May you live in interesting times,’ has certainly proven true in 2011. With new legislation, continued tumult in the international stock markets and unparalleled natural disasters, this year has proven trying for insurers, consumers and investors alike. In the May issue of RISKSA, we reported on the impact of the crisis in Japan and how it was expected to affect global reinsurance, trickling down eventually to insurers, brokers and, ultimately, the average consumer, in the shape of vast premium hikes. The debate on this issue continues. With insurance premiums in the United States and Japan rising sharply and many reinsurers in turmoil, it appears that, at least thus far, South Africa has escaped the brunt of the effects of this year’s calamities. A recent study released in July indicated that 2011 has been the highest

catastrophe loss year ever, breaking records for already reaching economic losses of US$265 billion. Insured losses weigh in at around US$60 million, nearly five times higher than the average since 2001, where there were huge losses experienced as a result of the Twin Tower plane crashes. The staggering 2011 events have caused reinsurance rates in Japan to go up by as much as 70 per cent, with increases of 20 to 40 per cent seen in the United States. Nevertheless, Wilhelm von La Chevallerie, actuarial and risk services director at CIB Insurance Administrators, believes that South African businesses are unlikely to experience significant premium hikes, with the impact of global catastrophes being outweighed by a number of other factors. “South Africa offers reinsurers a ‘diversification opportunity’. This is because the country is unlikely to experience claims similar to those being triggered by catastrophic events that have been witnessed in other parts of the

world,” Von La Chevallerie explained. Another factor impacting on South Africa’s global invisibility is that claims from natural disasters are significantly lower in our economy, which should continue to positively influence the market, keeping premiums steady for the foreseeable future provided that nothing drastic happens to upset this balance. “Reinsurance is an international game, which means that most reinsurers have felt the combined impact of the earthquakes in New Zealand, Japan and the subsequent tsunami, floods in Australia and China and tornadoes in the US,” said Von La Chevallerie. Although only time will tell how the rest of the year will pan out for reinsurers globally, confidence is high that the direct effects on the South African insurance industry will be limited, a chance for our insurers and consumers to be happy to be bystanders rather than active participants in global trends.

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Local is lekker ‌

or is it?

Joel Rothman unpacks some of the complexities involved when evaluating foreign versus local insurance management systems.

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he mindset of ‘foreign saints can do miracles’ often holds true when it comes to choosing enterprise software systems within the insurance industry. Companies looking for a new system that are able to set aside multi-million Rand budgets often only give a cursory glance at the local offerings, tending to perceive the international systems as being more appropriate to their needs from the outset. If you’re an insurance company in this position, the business needs to provider match may result in you choosing an international company; however, I highly recommend that you include leading local companies in the initial selection process and keep the following perception ‘skewing’ factors in mind when doing your evaluation. Marketing magic Marketing is a science and local system providers are generally not as savvy as their international counterparts – there is very little gloss and veneer and the marketing material is mostly functional. Contrast this to the bottomless pit of marketing paraphernalia available from most international system providers. Most can produce at least one Gartner report where they appear in the top right quadrant; have a case study that could very well have been your business; and produce an impressive array of stats regarding the cost savings and money making ability of the offering. The FUD factor Fear, uncertainty and doubt. This is an easy trump card for the international system providers to play because they can point to their experience, scale and scope knowing that local providers can hardly ever compete on this basis. ‘Nobody ever got fired for choosing IBM’ was a popular expression in corporate IT about a decade ago. This was not because IBM was the best, but because it was perceived as the safe option. The Mile High Club Many of the international system providers are willing to take serious prospects on international trips to visit clients in the United Kingdom, Europe and beyond. Even trips to exotic destinations such as the Caribbean have ended up on the South African system seekers itinerary. There is nothing wrong with getting an international perspective; however, perceived generosity and lavish hospitality naturally garners the human need for reciprocity and can have a subtle (or not

BB so subtle) influence on the selection team’s thought processes. Techno tick boxes The technical team are quickly satisfied when they spot words and diagrams in line with the latest tech-trends and techno jargon – do SOA, BPM, web services, cloud computing, social media sound familiar? International system providers love to ride these trends. Only a few years ago you had to use words like multi-tiered architecture, object-oriented design and WYSIWYG (what you see is what you get). In the next few years many new techno terms will end up on the IT team’s must-have list. These words may link to sound theory, but don’t prioritise technical theory over business functionality – well, ... not until the average academic makes more money than the average business person.

“The technical team are quickly satisfied when they spot words and diagrams in line with the latest techtrends and techno jargon – do SOA, BPM, web services, cloud computing, social media sound familiar?” Brag rights Mine cost R40 million. We spent R100 million. Our project is R300 million. The bigger the number, the bigger the perceived superiority quotient. When getting these numbers approved at board level, the board is generally more suspicious of numbers that do not align with the company’s overall market standing. You’re a multi-billion Rand company so you cannot be seen to be installing a Mickey Mouse system that costs a third of the international providers’ pricing or, even more questionable, half the system spend of your nearest competitor. An international system along with its international pricing is often perceived to have this superiority status and given that a large scale system change quickly becomes

public knowledge in the industry, going international may just seem and sound more fitting. The hidden costs Having regularly run projects for clients outside the South African borders, I am well aware of the additional costs that are sometimes left out of the project capital costing, but have a very real cost impact nonetheless. These ancillary costs often include the visiting project team’s accommodation, travel, meals, phone calls and other living costs which, when dealing with an imported team, can run up significant extra costs in a short space of time, especially when (the nearly inevitable) project overruns occur. Also keep in mind that an enterprise project team would need a semi-permanent office environment at your premises for a period that could easily span from one to three years. It’s all about risk Do I honestly believe that a local system provider could compete on an equal footing with the international players? The answer is: possibly. Let me explain. There are local players with solid system offerings that are truly geared to the South African and even African insurance requirements. Doing a formal gap analysis on the functional aspects of the system may indicate a very good business fit but the board level decision to purchase an enterprise system has very little to do with the functional fit, it’s all about risk management and that would include risks such as provider balance sheet, provider capacity, system scalability, enterprise project skills and experience among others. Am I advocating choosing a local system above that of an international offering? No, the above factors are just that: factors, among many others, that need to be taken into account in a conscious, open manner when choosing your system. If local players can sufficiently address these risk factors, possibly through strategic partnerships or collaborative implementation, they may end up with a very real chance at becoming ‘the chosen one’. Joel Rothman has been extensively involved in both the business and technical aspects relating to large scale enterprise systems for the last 16 years across numerous industries and has a particular passion for making technology work for business. He works for leading insurance system provider, Genasys Technologies.

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Forge ahead despite concession on regulatory exam deadline Herman Botha | Executive General Manager: GIC (General Intermediary Channel)

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etropolitan welcomes the decision by the Financial Services Board (FSB) to extend the Level 1 regulatory examination deadline to 30 June 2012, with a rewrite deadline of 30 September 2012. Despite the concession on the deadline, many in the industry are being encouraged to continue pushing ahead with the training and support programmes for intermediaries in preparation for the exam. Metropolitan has put together a proactive assistance programme (including training, extra workshops, scheduling of exam dates, etc) for its intermediary force to assist in preparation for the regulatory exams. The FSB mentioned that at this early stage there was evidence that the more successful candidates had benefited from attending structured training courses provided by industry institutions. Despite the extension of the deadline, intermediaries are encouraged to forge ahead and aim to qualify by the end of 2011. Our trainers believe that the pass rate will, like any examination, be largely dependent on the amount of time put into preparation. We believe that this equates to between three to four hours of studying a day. And therein lies the problem and challenge

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for the FSB. South Africa’s regulatory framework has two broad objectives: 1. Protecting customers from mis-selling and other untoward practices. 2. Broadening access to financial services to a huge part of the population that was largely ignored previously. Both objectives make perfect sense and will ultimately lead to a more sustainable industry.

“Our trainers believe that the pass rate will, like any examination, be largely dependent on the amount of time put into preparation. We believe that this equates to between three to four hours of studying a day.” The FSB cannot deny that face-to-face selling is a time-consuming yet important process, particularly in the low-income market. Preparation time required for the regulatory exams has a direct impact on an intermediary’s propensity to earn an income. It also affects their time spent out in the field with customers and could potentially hamper customers’ ability to access financial services.

In the UK, similar legislation led to about a 30 per cent decrease in insurance intermediaries. However, the way in which legislation has been introduced in South Africa could force intermediaries to focus on certain products and segments of the market at the expense of others and making it very difficult for the industry to commit to longterm strategies and investments. While the industry has been innovative in an attempt to manage the risk of losing intermediaries, it is feared that many will leave the industry. Not only will this leave a skills and experience gap, it will also hamper the intermediary force’s ability to deliver financial advice and education to the mass market. In previous columns, I’ve referred to the research conducted with TNS which revealed that more than half of our intermediaries know of others planning to leave the industry and many citing increased regulation as the cause. As a company, we fully support government’s efforts to professionalise the industry. However, if the results of the regulatory exams indicate that there are problems, addressing these issues should be a collaborative effort between the FSB and the industry players.


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ow have some independent financial advisers achieved success in their different markets? We review how three advisers operate and identify some of the practices that have helped them accomplish their goals. Success starts with a plan Successful advisers adhere to a detailed business plan and regularly update it to enhance business sustainability. Ray Bechoo, director of Major Money Management, said, “You need to believe in your plan for it to work.” Rodney Kotton, owner of Cherrod and Associates in Johannesburg, realised that a one-man show is becoming less viable due to the cost of compliance. He has revised his business plan and is now seeking to expand. Pretoria-based adviser Kobus Ackerman* recognises the risk of having a small base of corporate clients. He has focused his business plan to double his book, ‘move fast in the slow lane’ and improve his BEE rating. The right product offering The product offering should match the needs of customers in the selected market. For instance, focusing mainly on high net worth business people, Bechoo provides a comprehensive service. “People need to manage their risk in both their business and personal capacity, so we provide an holistic risk management service and fulfil the role of accountant, legal adviser, tax adviser and financial planner,” said Bechoo. “We are not product pushers and are highly selective in what we offer clients.”

Ackerman specialises in payment guarantees, offering a quality solution. “Being one of only a few advisers to focus on this niche currently works in my favour.” Working for clients Understanding customers and focusing on forming stronger customer relationships to maximise value are further keys to success. With some 80 clients, Bechoo can deliver maximum service to each. Based on a business decision, he does not take on more than 10 new clients annually to ensure he can maintain service levels. Bechoo meets with each client about 10 to 15 times a year. Client interaction is often conducted on a social basis. To add value, he creates opportunities for his clients to network with each other. Kotton’s clients are his number one priority. “I look after them and they look after me,” he said.

emphasises the importance of having structures in place and working smarter. Partners for support In today’s challenging environment, it is wise to partner with an organisation that has the expertise and capacity to support an advisory business. Bechoo, Kotton and Ackerman are Masthead members. Bechoo, a founding member, makes full use of our compliance services, while Ackerman has received assistance in practice management. Kotton said, “Success is strongly related to who you know, while what you know comes a close second. Masthead assists me in both these aspects.” If you would like Masthead to support your business, please contact your regional Masthead consultant for details or visit www.masthead.co.za * name changed at adviser’s request to remain anonymous

Ackerman’s clients prescribe what they want and how often he can meet with them. Annual meetings are not ideal for building relationships, he maintains. However, he fulfils requests in line with his clients’ expectations. Processes To manage time, meet regulatory requirements and maximise interactions with clients, you should have proven processes in place. Bechoo relies on CRM tools to assist in delivering good service and will soon enable clients to access their information online. Kotton ‘runs a tight ship’ and

Kotton is a long-term specialist who shops around to find the best possible product and rate. “I refer clients with short-term needs or who require tax services, wills and trusts to other specialists,” he said.

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The mandated and non-mandated INSURER INTERMEDIARY

Patrick Bracher Director | Norton Rose South Africa | August 2011

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confusing aspect of the binder regulations, which have recently been published for comment in what must be almost the final form, is the distinction between a mandated and a non-mandated intermediary. Briefly stated, the mandated intermediary represents the policyholder and can move policies from one insurer to another on the basis of a prior written mandate; and the non-mandated intermediary is the broker who may act for the insurer as well as the policyholder. The status of the intermediary (mandated or non-mandated) determines a number of things including remuneration and the relationships with other intermediaries.

Unfortunately it cannot work. What the proposals do not take into account is the fact that intermediaries may be mandated intermediaries on behalf of some of their clients and nonmandated intermediaries on behalf of others. The binder regulations cannot take away from the client their choice of broker nor take away the client’s choice whether to mandate the intermediary to move the business or to withhold that mandate. You could have the bizarre situation where two clients are joint insureds on a single policy, one of whom grants a mandate to the broker and the other does not. The regulations cannot force either to change their mandate or to change their broker. In order to be workable, therefore, the regulations will have to be redrafted to take this conceptual problem into account. It means a radical rethink in relation to the scheme of things. It will have to bring the question of mandates down to policy level rather than broker level. There can be no such thing as a mandated intermediary who is not allowed to take on the role of a non-mandated intermediary for some of its clients.

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BB The scheme of section 48A of the Shortterm Insurance Act read with the draft regulations creates various links between insurer and policyholder. There are intermediaries performing services as intermediaries as is traditionally done under the Short-term Insurance Act. This includes marketing policies, collecting premiums, processing claims (not settling claims), issuing and servicing policies. In addition, there are binder functions (entering into policies using a ‘pen’, fixing policy wordings, benefits and limits, and settling claims). There will also be underwriting managers and administrators (the guidelines regarding administrators are still to be issued). It is not always easy to draw a distinction between the various functions. What does it mean (in the wording of the latest draft regulations) to perform “any act that results in the acceptance of a claim” or in “the determination of liability” or in “the rejection or refusal to pay a claim”? What is wrong with simply accepting claims, determining liability and rejecting claims? That will avoid ambiguity and will avoid regulations that conflict with the act. The lot of the underwriting manager is not improved. The regulations expect an underwriting manager to act for only one insurer with regard to any class of business unless the insurers consent to the underwriting manager acting for more than one of them. This will require co-operation between insurers to allow underwriting managers to use their expertise. An underwriting manager

who acts as an underwriting manager for attorneys professional indemnity insurance will not be entitled to act as an underwriting manager for directors’ and officers’ insurance on behalf of another underwriter who specialises in that business unless both insurers agree in writing. This is because both those types of business are liability insurance. It is not uncommon for underwriting managers to represent more than one underwriter and their fortunes should not be entirely in the hands of the insurers who might withdraw consent. Perhaps it will work its way out in practice. Presumably an underwriter will not appoint an underwriting manager unless the underwriter is satisfied with the role that the underwriting manager plays in the market generally. The notes to the regulations make it clear that the administrator still has a place. If an administrator performs binder services, however, they will have to enter into a binder agreement. According to the act itself, the binder agreement must only deal with binder functions. That means that you could have two or three agreements with one intermediary. For instance, the intermediary might act as a mandated intermediary, a non-mandated intermediary and performs binder functions as well as services as intermediary and administration services. The requirement that there must be at least two separate agreements is not fully understood as there is no real reason why this should be the case. The answer will be

to include two or more agreements in one document. The latest version of the regulations has reintroduced the concept previously in section 48(3), namely that an underwriting manager may not deal directly with the public to sell insurance. That was traditionally a requirement because there were brokers masquerading as underwriting managers not because they had special expertise, but because they wanted extra remuneration. There does not seem to be any logical reason why an underwriter manager as now defined should not deal directly with the public to sell insurance. The underwriting manager represents the insurer. If the insurer can sell policies direct to the public, why shouldn’t its agent, the underwriting manager? It will however avoid confusion in the minds of the insuring public. When the regulations are in force, insurers and their intermediaries will have 12 months to bring their agreements into line with the new provisions. Careful thought will have to be given to how the requirements are to be included in what may have to be two or three agreements for one intermediary.

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INseta internships programmes

RESPONDS TO INSURANCE SECTOR EMPLOYMENT NEEDS

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n 2009, an article posted in The Insurance Junction stated that “statistics show that the South African insurance industry rates third in the overall number of industries in terms of skills shortage”. The Sector Skills Plan, released in the same year, revealed that despite higher graduation rates in recent years, the quality and appropriate qualifications of graduates entering the industry remains poor. The general consensus is that often graduates do not perform to expectation, or are unable to meet skill requirements.

In response to this lack of skilled professionals in the sector, INSETA has taken a proactive step by developing a far-reaching internship programme aimed at supporting work-based experience and helping the sector to grow its own skills. INSETA provides grants to businesses to

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enable unemployed graduates to gain one year’s workplace experience, or an opportunity to practice the work skills that they have studied and will practice in the future, in their chosen occupations. These are structured work-based programmes designed by employers in conjunction with INSETA, aimed at giving unemployed graduates and those who completed national diplomas, work experience and industry specific skill in companies in the insurance sector. “Graduates leave tertiary institutions with technical training but no experience, and therefore struggle to find employment. These internships help them gain experience and a real opportunity for employment. Further to this, the insurance industry gains the skilled professionals that, especially as it becomes more formalised, it is in such desperate need of,” said Sharon Snell, COO of INSETA.

Insurance brokers and financial service providers Indwe Risk is one of the companies that has run the internship programme, and says that it has proven immensely successful in the five years that it has been part of it. “It is one of our most successful developmental programmes and gives us the opportunity to grow our own talent. To date we have only lost two graduates due to resignations and have managed to employ 95 per cent of the graduates,” said Vivienne Delaney, senior manager of internships/training and development at Indwe Risk. While employment following completion of the internship is not an obligation for either the graduate or the company involved, Snell said that more often than not it is the case. “This year, 17 of the 19 original interns in Indwe’s programme have gone on to employment within the organisation; the remaining two were head-hunted earlier in the programme.”


One of the key factors in the success of the programme is the pre-selection scanning of graduates that ensures only the right people are chosen. All participants must sit an aptitude test to confirm compatibility with the insurance industry. This maximises the efficiency of the programmes, ensuring that the experience and training gained during the internship year is directed at graduates who are more likely to stay within the insurance industry. Participating companies say that this helps enormously in that the graduates are not poached as soon as they gain some experience, thereby leaving the insurance sector without a future generation of skills to replenish it. “Even if they don’t end up at the same company they interned with, the industryspecific skills training means that the insurance sector gains a solid foundation of skilled experienced professionals. We aren’t

looking for fly-by-nights, the completion of the internship is the start of the journey with us in the industry, and benefits us all. We give them an opportunity to accelerate their career, and at the same time provide the country with a desperately needed, skilled workforce,” said Snell. Delaney said that the internship process can be a daunting one, but the rewards for those patient and ambitious enough to see it through are immense, “In the last couple of years we’ve noticed that the interns have realised they need to learn to crawl before they walk. As an added incentive to stay, after the first year with us, Indwe offers these employees study loans in order to sit the FAIS compliance exams. We also run mentorships for the interns, as we’ve realised

the positive effect this has - we’re growing new talent, and laying the foundation for amazing careers in financial services.” The success of the programme also leads by example said Delaney. “It’s shown other companies that developing and maintaining a successful learnership and internship programme is a highly rewarding task, with long-term benefits. Furthermore, the quota requirement of the programme provides the companies taking part with increased BEE status, helping to encourage diversity within the industry.”

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Best practices f o r i m p l e m e n t i n g a n e m p loy e e t e s t i n g p r o g r a m m e Managing Director: EMPS (PTY) LTD | (011) 678-0807 kirstenh@emps.co.za | Visit www.emps.co.za

1. C hoosing the right tests: Job requirements analysis Implementing poorly designed assessments can do much more harm than good and in order to realise the benefits of employee testing, it is important to use professionally developed and properly validated employment tests. Tests are an effective screening tool only if they measure the knowledge, skills and abilities that will be required for a particular job. In other words, to be a valid predictor of performance, a test must measure job-related competencies and abilities. 2. E stablishing validity of tests: Confirm job relatedness of tests Once a company has performed a job requirements analysis and determined which test or tests should be used to help select candidates for a given position, the organisation should seek to confirm the appropriateness of its test selection by establishing further validity for its testing programme. So, the question that is asked is: is there a demonstrable relationship between test results and job performance? 2.1. Content validity: The extent to which a test measures capabilities or skills required by the job. 2.2. Criterion-related validity: The relationship between test scores and a desired business metric such as average sales per hour. There are many types of validity evidence. Those which provide professionally developed tests can provide evidence of validity. Content validity refers to the extent to which a test measures capabilities or skills that are required for a certain job. Validity

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transportability evidence refers to evidence which a testing provider has accumulated using a given test for various jobs at different companies. For example, if a test is used by many companies to help select customer service representatives; therefore, the predictive validity of these cases could be relevant to other customers who wish to screen for similar positions. 3. Best practices for implementing tests Test administration: In order that a pre-employment testing programme is effective and fair, it needs to be consistently applied. Companies should strive to ensure that tests are administered to candidates under uniform conditions in a supervised setting to ensure test integrity. Computer-based testing is best administered on a dedicated workstation for use by job candidates. Ideally the workstation should be situated in a location free from distraction, so all candidates can take the tests in a quiet, stress-free environment. This is especially important for timed tests such as aptitude and skills tests. 4. U se of test scores It is recommended that test scores be only one element of a comprehensive candidate evaluation process. Although properly implemented, employment testing has been shown to be one of the most highly predictive selection procedures available to companies. Test results should be evaluated within the context of all the selection criteria used by an organisation. Any evaluative measure used for employee selection (e.g., references, CVs or interviews) should be designed in such a way as to conform to relevant professional standards. When used in conjunction with these other measures, pre-employment tests will yield invaluable data about a candidate’s ability to perform well on the job.


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Valuing a practice or client book Esmé Davies | Head of Celestis Practice Management

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ast week, I received a call from an adviser wanting to know how much I think he can get for his practice. That’s all he asked. No mention of the type of business, whether he was selling the business or client book or what the annual income or profit was.

The question tells a story and many of us don’t know where to begin. In a recent Celestis survey, 85 per cent of the potential sellers expressed a serious need for assistance with business valuations. Making sure that you get a fair selling price should be top of mind – right up there with ensuring that your clients are well looked after. And before you go to market, you need to have a very good idea of what your practice is worth. You need to make three critical decisions. Will you be selling the business or just the client book? Will you be prepared to stay on after the sale to facilitate a smooth client transition? How do you expect to be paid? Your answers will influence the choice of business valuation model and, ultimately, the price. On to the valuation methodology, of which there are numerous. I will address two of these: the most common approach and a model we favour in the case of the disposal of a client book. The industry rule of thumb valuation method is known as a multiple of recurring revenue (MRR) model. Expressed simply, recurring revenue times multiplier equals valuation. Easy and convenient to use, it is criticised for being unscientific and unsubstantiated. (We recommend that it be used only to provide the buyer and seller with a very basic starting point.) The multiple applied to the recurring income stream ranges from 1 to 4, often applied without any objective justification of the figure selected. The model also ignores any expenses incurred in generating the income, which we regard as

a serious oversight. Which of the two businesses tabled below would you consider buying?

Practice A

Practice B

Recurring revenue

R1 000 000

R1 000 000

Expenses

R1 200 000

R500 000

Net profit

(R200 000) Loss

R500 000 Profit

Multiple

2

2

R2 000 000

R2 000 000

Value

An alternative model, particularly when considering the sale of a client book, is the discounted cash flow (DCF) method. This model uses the potential future income stream net of relevant expenses and then applies a discount factor to translate the income into present value. (Note that relevant and not all expenses should be considered.) Arguably, some subjectivity is involved in determining the discount rate, which relates to how risky the transaction is and therefore the return that the potential investor or buyer will require. In our experience, the discount rate varies between 18 per cent and 30 per cent. As a buyer or seller wanting to determine the value of a practice, we recommend that you obtain an independent assessment that will substantiate the value arrived at. The valuation must serve as a basis for negotiation. And remember that you will get what you pay for. A valuation costing R10 000 that affects the price by R100 000 pays for itself 10 times over. Finally, our research tells us that this is currently a sellers’ market and for every serious seller out there, there could be as many as seven serious buyers. This, too, will influence price.


BRAND ALLIANCES – CREATING PARTNERSHIPS “Our strengths lie in differences, not similarities.” – Stephen Covey, author and motivational speaker

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he game of business matchmaking is a dangerous one. It is often said that a partnership is the one ship that may sink. A partnership is a type of business entity in which partners (owners) share with each other the profits and losses of the business undertaking in which all have invested. They share the risks. The Oxford Dictionary definition is “either of a pair in marriage, dancing or a game”. The principles of a business partnership, a brand alliance, a joint venture, a sponsored sports personality and sponsor, a business supporting a charity or the relationship between an employer and employee are all similar. They should focus on realistic expectations, clearly defined, clear and concise communication, a return on investment, shared objectives, a spirit of co-operation and commitment to the other party. A business partnership should be clarified in writing, however informal the alliance may be. It should illustrate a clear brand relationship with business objectives and a sustainable strategy. Going into a partnership is easy, getting out of it is not. A business partnership is definitely a little like a marriage, but more difficult from which to extract yourself. Always avoid emotional decisions, and ensure that the partners have complementary skills and different talents. So often we see two salespeople starting a business together, with both of them wanting to service the clients but neither wanting to manage the administration of the business. Partnerships are never perfect, so you have to be convinced of your

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partner’s value – you should feel that they are offering the same commitment as you, with an attitude of fairly dividing labour and responsibilities, although you fulfil different roles. You need to have the same vision, value system and mutual respect. Know that you will never agree on everything. Ensure that the three T’s of a partnership are in place before you consider starting one: 1. Trust – you have to trust one another implicitly. 2. Transparency – you have to be open and honest, and the one hand of the partnership needs to know the movements of the other. 3. Third party – if something does go wrong and there is conflict, ensure that you have a third party or mediator who could debate issues fairly with both of you And remember the five C’s – co-operation, compromise, communication, commitment and connection. Importantly, consider the impact on your brand should a partnership dissolve. It is always essential to retain the value of your personal brand. Equality rather than being a shadow of another brand is preferable. Do not allow someone else to own your brand. If you are a sponsored athlete, and have an agent, it is still your responsibility to remain in control. If you are fortunate to be in a good, healthy professional partnership, show your appreciation of one another and take the time to remind your partner of his or her value. Care about those who boost your brand, those who are your silent ambassadors. Anyone who gives you references or referrals should be appreciated. Rather than giving commission, which may be expected, acknowledge the value of a simple thank-you. Treat everyone as a significant

individual and they will add significant value to your brand. How do you get rid of a client, or extract yourself out of a partnership? Extraction can be a painful procedure. If a staff member is counter-productive in the profit-making process, ensure that you do everything in your power to improve the person, and their situation, before you have to offer them an exit strategy. Face up to the fact that poor management may be a key factor. With a partnership, go into it knowing how, if needs be, you will be able to sever it amicably and professionally, and at what cost. Never close doors – spend your time and expertise closing deals instead. “Tell me who you go with and I will tell you who you are.” – Columbian proverb Jenny Handley is a brand strategist and owner of a successful PR and brand management company that she founded 16 years ago. She has worked on a variety of diverse brands from high quality products to high profile people. Her Personality Portfolio is a management system for top professionals. She started Jenny Handley Performance with the launch of the book Raise your Game™, co-authored with marketing and sports personality, Gavin Cowley. Jenny has addressed a wide variety of international audiences that range from businesses, schools and sports teams to lecturing at business schools. She offers unique individual brand management consultations for top executives and leaders and entrepreneurs, based on her book Raise your Profile. For Jenny, business is a team sport, and she is passionate about multi-level brand management and people development, which forms the backbone of her sought-after corporate Raise your Performance courses and talks. Jenny has her own weekly career column in the Cape Times. Visit www.jennyhandley.co.za for details.


Industry Overhaul Technology, gender equality and the future of motor insurance In April this year, RISKSA explored the expected effects of the European Court of Justice ruling that insurance premiums can no longer be calculated on the basis of gender. As these changes could be adopted in South Africa in the future, most insurers have taken to re-evaluating their strategies and are looking at new and innovative ways to retain their policyholders and win new customers.

Simon MacDonald Sales manager, SSP African Operations

Simon MacDonald, sales manager for SSP African Operations, supports the often mooted pay-how-you-drive, equality-pricing solution as, in the long run, insurers will need to consider data other than demographic data to underwrite.

style and habits. This shift in focus has been made possible largely by the accessibility of more cost-effective telemetry data collection devices and systems (also discussed in the April issue of RISKSA), which “can lower underwriting expenses, reduce losses, increase premiums where premiums need to be increased, and improve the premium/risk relationship”, according to MacDonald. Some doubt initially existed as to the long-term negative effects of the European Court of Justice ruling; however, with more insurers swiftly introducing new telemetry-based products, as insurance and the technology industries work together, the integration and overhauling of staid methods appears to be progressing smoothly.

While traditional methods of underwriting have always relied on averages and statistics, we have already seen new product offerings entering the South African short-term insurance market aimed at producing fairer premiums based on individual driver behaviour.

pay-howyou-drive

With products such as Hollard Pay As You Drive, Outsurance Safe_Driver@Out, MiWay DriveStyle and the newest addition, Discovery Vitality Drive, encouraging safe driving habits, travelling by day and travelling less, drivers finally have the option to be given a profile and a premium tailor-made to their driving

For female drivers especially, this approach could be a good way to assess their driving skills based on how they drive, thereby eliminating the gender factor that is now considered unacceptable. “Using telematics or pay-how-youdrive technology, an insurer can provide driving profiles in real-

time to a dashboard for each policyholder’s driving type and style and develop predictive tiers or risk grouping linked to the likelihood of a driver incurring a loss,” said MacDonald. Encouraging safer driving and eliminating the old statistical models (whereby good drivers always ended up paying for other drivers’ mistakes), while promoting gender equality in a traditionally ‘unfair’ industry, motor insurance in South Africa has unexpectedly embraced this new era made possible by technology, and we watch with anticipation as more and more insurers shake off the old in favour of the new.


A CHANGING LANDSCAPE

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hile reports in the first quarter of this year showed increased confidence in the South African economy, the latest CIB Broker Confidence Index has revealed that the overall confidence in the industry has decreased from 68 per cent to 65 per cent in the second quarter of 2011. The CIB Broker Confidence Index looks at a number of factors, including the outlook for the local economy and business conditions in the insurance industry. The continued debate over knockon effects of global disasters on the reinsurance industry has also impacted on the drop in broker confidence in the local economy and business prospects in the South African insurance industry over the last few months.

Jonjon Smit, sales director of CIB Insurance Administrators (CIB), said that brokers have consistently indicated that new legislation and regulation poses one of the biggest challenges for the next 12 months. Although the deadline for completion of the first level of the Financial Services Board’s Regulatory Exams has moved to June 2012, surveys have shown that a staggering 25 per cent of South Africa’s brokers are still unprepared for the exams. With numerous courses and workshops on offer from the Insurance SETA, the Insurance Institute of South Africa and CIB itself, brokers are urged to write their exams as soon as possible, to allow time to rewrite the exams if necessary. The FSB has further accommodated brokers by enabling the exams to be written in Afrikaans. As brokers are expected to demonstrate comprehensive knowledge on a subject, the exams are not to be taken lightly, and the lack of broker confidence to a large extent stems from a feeling that it would be difficult to solicit new business and service existing clients when competing against accredited brokers who have passed the FSB Regulatory Exams. “While there is no doubt that these additional qualification requirements will benefit the industry in the long term, we may see some short-term challenges as certain brokers opt out of the industry or look at mergers, rather than complying,” Smit said. It is hoped that the Regulatory Exams will increase confidence in the South African insurance industry, bringing accredited brokers on par with global standards. The changing landscape could reverse the downward trend and start to show positive results again in the Broker Confidence Index in 2012.

Jonjon Smit | Sales Director of CIB Insurance Administrators


– THE WORKING MOM’S DILEMMA

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espite the advances in gender equality in Western societies during the last century, the fact remains that the diverse roles of women in society bring a host of unique financial challenges. Working mothers in particular are faced with different priorities which fundamentally change their relationship to money. Less money Although the gap in earnings between men and women is no longer as pronounced, the stigma that a working mother doesn’t take her career seriously still persists. Surveys have shown that companies are concerned that they may wish to take off time to have another child or expect more flexible working conditions as a result of the responsibilities to their children. When they are offered employment, working mothers are often more interested in their maternity leave policy and whether a company has childcare facilities than the financial opportunities. As a result, in choosing

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between a flexible environment and a good salary, a working mother will often be prepared to sacrifice the latter for the former. Longer life Statistics have shown that although women live longer than men, they are significantly worse off in retirement. In addition to earning less and taking leave to take care of their children, women are less likely to save and therefore contribute less to their retirement funding than men. They are also more likely to withdraw from retirement savings to fund periods of prolonged absence from the workplace. Call me Cinderella Although women carry tremendous responsibility, having to earn an income and be the caregiver for their families, many women still suffer from an unconscious need to be taken care of – what American psychologist Colette Dowling termed the Cinderella Complex. Women still largely rely on their partners to provide for their

retirement and financial security. Get smart To avoid being left high and dry in old age or in the event of divorce, it is critical that women learn to empower themselves. Erica Stuart of STANLIB suggested the following: • If you have experience and you took some time off for your child, know what you are worth and don’t back down in salary negotiations. • If you know you want to have children, plan for it. Make maximum provision for your retirement in your 20s to compensate for the time when you will be contributing less. • Have a separate bank account and distribute financial obligations fairly and make sure that you have risk cover in place in the event of your or your partner’s death. • Finally, if you do take an extended leave of absence, stay up-to-date with the industry and develop your skills. That way, when you do return to work, it will be as though you never left.


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Gearing up with Insurance Bootcamp’s Motor Seminar

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ne of the most contentious aspects of insurance must be motor insurance. For decades, the profit and loss margins have resulted in either drastic rate increases or, in some cases, rate cuts.

The increased levels of crime as well as the evolution of the motor industry have seen radical changes in the approach to the management of risk in the motor insurance sector. It is seldom that you will find insurers rating purely on value. Nowadays, scientific rating processes, as well as the viewing of a client’s financial profile, are prevalent in determining equitable premiums. This makes for a rapidly changing motor insurance market that requires

ongoing engagement to keep abreast of new developments. At the same time, fundamentals of the motor policy remain vital and providing clients with excellent service, especially in light of recent legislative changes, must be top priority. Driving the issue home Following the very successful format of the last Insurance Bootcamp seminar on liabilities, we are once again lining up a panel of experts to discuss the fundamentals and challenges that face the motor insurance industry. On Wednesday, 14 September 2011, in partnership with SASRIA, we will give brokers an opportunity to gain valuable insight into their role in motor insurance. In addition to SASRIA’s Mokgadi Sebola, a number of other experts will be providing us with their knowledge and experience

in the motor industry, including: Christelle Fourie of MUA Insurance Acceptances, Peter Donald of Paladin Underwriting Managers and Carl Greaves of Carl Greaves Insurance Brokers. All four of our panellists bring a wealth of knowledge and insight to the seminar. If you have missed out on this occasion, look out for Insurance Bootcamp announcements on RISKSA’s WIRED newsletter and on RISKSA’s website: www.risksa.com. The topic for our next seminar is crime and accident classes. It is imperative to book well in advance as these seminars are very well attended. Contact Linda Gouverneur on linda@fia. org.za or call the FIA office on (012) 665 0085 for more information.

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news Aon wins appeal

Aon South Africa’s acquisition of Glenrand MIB in April created one of the largest insurance broking and risk management companies in South Africa and Africa. In August, the Competition Tribunal ruled in favour of Aon’s appeal against the restrictions imposed by the Competition Commission on potential retrenchments of staff following the acquisition. The Competition Tribunal accepted Aon’s proposal that there would be no retrenchments of employees earning below R15 000 and that it would cap the number of retrenchments of those earning between R15 000 and R30 000 at 24, for a two-year period. “The ruling by the Competition Tribunal is a clear indication that the Competition Commission’s restrictions placed on Aon, almost four months ago, were unreasonable,” commented Aon South Africa’s chief executive officer, Anton Roux. “While we are pleased with the ruling; it is extremely unfortunate that this matter could not be settled with the Competition Commission earlier so that we could provide clarity to our employees and clients. “We are still committed to redeploying employees within the business wherever possible and to minimising any potential job losses. We have already significantly reduced the number of potential job losses from the 220 initially proposed following the acquisition, down to 66. We are acutely aware of the current economic environment and impact of job losses and remain committed to minimising the impact of the merger on our employees,” he added.

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Fedhealth supports young leaders in sport Fedhealth recently supported the Interdisciplinary Centre of Excellence for Sports Science and Development (ICESSD) Young Leaders in Sport Seminar and Workshop held at the University of the Western Cape.

The ICESSD is involved in teaching and training the next generation of sport leaders. The seminar and workshop aimed to not only entertain and provide networking opportunities for the young leaders, but to educate them on social issues and empower them with life skills. At the end of the two-day programme a soccer tournament was held and prizes handed over to the winning teams. “Fedhealth has a vested interest in sport as it encourages a healthy lifestyle. It is our responsibility to educate these future sport leaders on the benefits of living a healthy life so they can be role models for others,” said Katy Caldis, principal officer and chief executive officer of Fedhealth, citing sport and physical exercise as vital tools for keeping children healthy into adulthood and stemming the tide of the worldwide obesity epidemic. Fedhealth provided soccer balls and beacons for the soccer tournament and sponsored soccer balls as prizes for the winning teams. Caldis described the young athletes as inspiring, with the potential to be sports leaders not only in South Africa, but around the world. “We will continue to encourage them and back them all the way,” she concluded.

Mutual & Federal staff celebrated at Insurance Conference Mutual & Federal female staff members were acknowledged for their achievements at the 2011 Insurance Conference at Sun City. The dinner ceremony, hosted by Sasria, marked the end of the conference and recognised members in the insurance industry who recently completed their short-term insurance accreditation and were elected as professional members of the Insurance Institute of South Africa (IISA). Mutual & Federal employees who achieved a level six Associateship (AIISA) were Lalita Archary, Mercy Poole, Ronel Crafford and Maureen Laycock. Those who achieved a level seven Fellowship (FIISA) were Amanda Byleveld, Lorraine Lucas and Susan Joynson. Brand, customer and transformation executive general manager for Mutual & Federal, Vuyo Lee, expressed pride on behalf of Mutual & Federal to have had seven staff members, all female, acknowledged at this prestigious and anticipated event. “These accomplishments are notoriously difficult to achieve, and are bestowed on only a few individuals,” she noted.


BB Trustco closes Centurion office

Mutual & Federal Port Elizabeth joins the fight against crime

Trustco South Africa closed its leader office on 31 August 2011. Trustco acquired Lleader Underwriting Managers, located in Centurion, during the course of 2010 and integrated the business into the Trustco stable.

More than 50 Mutual & Federal employees recently joined forces with the Humewood Police Department in Port Elizabeth in a crime prevention initiative. Their mission was to distribute flyers; their objective was to educate the public about what they could do to make PE a better place.

According to managing director of Trustco South Africa, Jans Wessels, it became apparent that the new business had duplicating functions and eliminating this dual process would place Trustco in a better position to offer its clients a more streamlined and efficient service. The underwriting and new policy issuing functions have since been moved to the Trustco head office in Houghton.

Staff members also joined the police on routine patrols of notorious crime hotspots, including the beachfront, Govan Mbeki Street in the city centre, St George’s Park and several shopping centres. Crime prevention is one of Mutual & Federal’s prime focus areas for corporate social investment and the company encourages the public to be vigilant at all times. “This initiative was started in the spirit of preventing crime in the communities in which we live and work,” said Louise Westerman, claims manager at Mutual & Federal Port Elizabeth. “As a short-term insurer, we believe that it is our responsibility to remind the public how to protect themselves in their homes and in public places.”

The Centurion staff was offered the option of a transfer to the head office located in Houghton. However, due to the travelling distance between the Centurion and Houghton offices, many staff members turned the offer down. Key personnel such as Barry du Plessis, who was the managing director at Lleader and now executive director at Trustco South Africa, the senior underwriting manager for personal lines and senior underwriting manager for commercial, all accepted the move to the head office. Wessels explained that the consolidation process has resulted in the successful integration of Trustco products and services onto one system. For Trustco clients it will mean a more efficient and prompt service being facilitated on one system and out of one office, with one contact centre.

RISKSA Support Star of the Year

Etana’s Dimitra wins Support Star of the Year Award Dimitra de Morais, personal assistant to Carel Nolte, head of people and brand, Etana Insurance, beat contestants from MUA, The Investment Group, and Old Mutual to win the coveted title of RISKSA Support Star of the Year, which the magazine launched in 2011. Four entrants were shortlisted by guest judge Salomi Steenkamp, administrator for the Financial Intermediaries Association of Southern Africa’s Western Cape division. RISKSA posted the shortlist on its website (www.risksa.com) and initiated a 24-hour flash poll to determine the winner. The poll garnered a record 1 440 voters. De Morais (pictured) won narrowly with 486 votes, while Michaela Hogan, personal assistant to Christelle Fourie, managing director of MUA Insurance Acceptances, came a close second with 480 votes. Third place was awarded to Roxanne Denman, personal assistant to Karen Toerien, short-term insurance manager of The Investment Group, after 266 participants voted for her. Carmen Cara, personal assistant to Mogam Pillay, finance director at Old Mutual STA, came in fourth position with 208 votes. Steenkamp said it was difficult deciding on who should be on the shortlist after interviewing candidates: “After reading these four finalists’ entries and getting their answers to the additional questions, they seemed equally eligible to win first prize. Unfortunately we can have only one winner,” she said. “I would like to stress the fact that these were four very strong finalists and it is a pity that we couldn’t have four winners. Their bosses are extremely privileged and hopefully appreciate them as they all made it clear that no job is too big or too difficult to handle in their daily role as PA.” Andy Mark, publisher of RISKSA magazine, said that due to the overall response RISKSA would again host the Support Star of the Year Award in 2012. “I’d like to thank all the secretaries and PAs who entered this year and all the people who voted for them and showed their support. As the leading insurance publication, RISKSA is keen to not only focus on experts in the insurance industry, but commend those who are tirelessly working behind the scenes and keep everything ticking over smoothly. I agree with Steenkamp, all four should be highly commended, but unfortunately there can be only one winner.” RISKSA will be interviewing the winner and runners-up for the October 2011 edition and will post the feature on www.risksa.com.

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Bonitas curatorship cleans house In May this year, Bonitas Medical Fund and the Council of Medical Schemes finally settled a two-year dispute with a curatorship order in place to regularise Bonitas’ governance. Bonitas, South Africa’s second-largest open medical scheme, with more than 650 000 members, was placed under curatorship after probes and forensic investigations revealed mismanagement of the scheme’s affairs and abuse of its assets by former principal officer, Bafana Nkosi. A number of the reported indiscretions leading to the curatorship were related to property transactions and, in August, I-Net Bridge reported that Bonitas will be disposing of a number of properties in Gauteng and KwaZulu-Natal which will go under Auction Alliance’s hammer. Properties include an apartment and small shopping centre in Empangeni, KwaZuluNatal and a 7 960-square metre development site in Bryanston as well as a fully let office block in Polokwane. Allegations levelled against Nkosi and the members of the board of trustees included investment in properties, for which the scheme paid R20 million more than planned and irregular, exclusive verbal contracts with suppliers. Although Bonitas attempted to contest the Council of Medical Schemes’ application for curatorship of the scheme, evidence from substantial forensic audits finally turned the tables on Bonitas. With Bonitas’ 2010 audited financial results showing year-on-year surpluses increase by more than R500 million with a solvency ratio of 36.5 per cent (far more than the legislated minimum of 25 per cent), and with thorough reports of corporate transgressions, the curatorship was almost a foregone conclusion. In a letter to members, curator Joseph Maluleke dispelled rumours that could further negatively impact the public’s image of Bonitas: “Recent speculation doing the rounds in the public domain about Bonitas being in liquidation is careless, irresponsible and devoid of any truth. I assure you all that this is not the case and personally extend an invitation to anyone concerned about these rumours to address all queries to my office so that correct information can be provided.” With a curator playing open cards and cleaning house, South Africa’s largest scheme and its members appear to be in safe hands going forward.

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Absa buys Mozambican insurer Absa has purchased 100 per cent of the share capital in Mozambique’s Global Alliance Seguros. According to chief executive of Absa Financial Services, Willie Lategan, Global Alliance generated premium income of over US$ 25 million and the investment formed part of Absa’s strategy to expand financial services in African markets where it or its parent company, Barclays, had a presence. This represents the group’s first purchase of an insurance company outside of South Africa, less than six months after starting a greenfield life insurance business in Botswana, and it has been reported that the company plans another acquisition or greenfield project later this year to further its African expansion plans. “We started with a life insurance greenfield (project) in Botswana in March this year and that was the first step of our strategy. The acquisition of Global Alliance is the second,” Lategan said. Other major South African insurers have announced plans to follow suit, with Old Mutual and Santam considering new acquisitions and aiming to expand into East and West Africa.


BB Matrix captures the Conference Matrix Recovery Services, the recovery service of MiX Telematics, managed a digital photo booth at this year’s Insurance Conference. This interactive stand allowed delegates to have their photographs taken, electronically framed with a Matrix branded border, and then e-mailed to them, thanking them for visiting the stand. Commenting on Matrix’s exhibition stand, Brendan Horan, general sales and marketing manager for MiX Telematics, explained that in order to differentiate themselves in a competitive industry, they decided it was important to present their unique offering in a unique way. “We are thrilled with the response we received through our stand and we believe that we successfully demonstrated our offering in a way that was both relevant and reinforced our brand,” commented Horan.

Top insurance brands for 2011 Mutual & Federal Agri supports agricultural education Continuing with its support of agricultural education in South Africa, Mutual & Federal Agri once again sponsored the Oakdale Agricultural High/Boland Landbou Interschool Rugby Day on 20 August 2011 – a highlight in the schools’ sports calendars, with 5 000 spectators this year. This is the Rugby Day’s 24th year, and while Boland has historically been the stronger competitor, 2011 was definitely Oakdale’s year. The school won 14 out of a total of 17 games, including the 1st team match, in which they beat Boland 34-3. According to the principals of Oakdale Agricultural High and Boland Landbou, Mutual & Federal has committed to several initiatives at both schools, from revamping of facilities to its longstanding sponsorship of this sports event. Both principals praised the support of Mutual & Federal, describing the company as a partner in education. Both agricultural boarding schools are located on farms in the Western Cape and offer full agricultural education in addition to a complete academic syllabus. Students are trained and educated in all aspects of agriculture such as sheep and cattle farming, planting and ploughing. Andries Wiese, group manager of Mutual & Federal Agri, highlighted the importance of supporting future generations of farmers. “One of the ways in which we offer this support is through the sponsorship of the Interschools’ Rugby Day,” he explained.

On Thursday, 4 August 2011, Avusa Media and TNS Research Surveys announced South Africa’s most iconic brands in the 13th annual Sunday Times Top Brands Awards, held at Helderfontein Estate in Johannesburg. Under the business category, Discovery walked away with the award for top brand in the medical aid section. In the long-term insurance section, also listed under business, Discovery Life came out on top, followed by Old Mutual in second place and Momentum Life (including Metropolitan) in third place. Short-term insurance saw Zurich coming in at third place, Outsurance in second place and Santam walking away with top honours.

Free online education programme for retirement fund trustees The Financial Services Board (FSB) has launched a free online education programme, known as the Trustee Toolkit (TTk), in response to the identified need for education and development of retirement fund trustees. On successful completion of the programme, trustees will be in a position to perform their duties more efficiently and effectively. The Trustee Toolkit programme consists of three modules, composed of tutorials, case studies, reference materials, assignments and a formative assessment. On successful completion of each the modules and the summative assessment, the trustee will receive a certificate of completion. The custodian of the toolkit is the consumer education department of the FSB. Anyone interested in participating can register and use the toolkit programme. For more information on the trustee toolkit programme, e-mail trusteetoolkit@fsb.co.za or visit www.trusteetoolkit.co.za.

“The staff at Mutual & Federal Agri looks forward to this game every year, as it is the kind of event that brings the Western Cape farming community together.”

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new appointments Aon Hewitt SA gets new chief

New appointments at Aon SA

Jaco Kok has been promoted to chief executive officer of Aon Hewitt South Africa – the consulting, benefits administration and HR outsourcing division of Aon South Africa. Kok, a qualified actuary, has returned from the United Kingdom, where he joined Hewitt Bacon and Woodrow, now Aon Hewitt, in 2002. In addition to his role in South Africa, Kok has a wider responsibility for the Aon Hewitt business in Africa.

Santam appoints IT head Gavin Kandier is the new head of IT operations at Santam. His appointment dovetails with the company’s recent appointment of a new head of web channel, Lunga Siyo, who is responsible for launching the company’s e-commerce channel. Kandier joins Santam from Standard Corporate and Investment Bank where he was the IT manager for global markets. In this role, he introduced three new electronic forex market trading platforms to the operations in South Africa during a time where no other bank in the country had entered the electronic forex (eFX) market to that extent. He has also worked for the Anglo American Corporation as an IT support manager.

Liberty Corporate appoints chief operating officer

Liberty Corporate, a division of Liberty Holdings, has announced the appointment of Deon Swart as its new chief operating officer. A chartered accountant, Swart joins Liberty after spending almost 10 years in Old Mutual’s corporate business, where he was general manager of operations. Prior to this Swart worked for Deloitte and Touche in risk consulting, having worked in various financial institutions in Washington DC, New York and London. Left to right: Gordon Whitcher has been appointed chief operations officer. Leo Morwe has been appointed the executive head of human resources. Adam Rakgalakane has been appointed chief commercial officer. Disebo Monama has been appointed the executive director of transformation.

Santam develops e-commerce channel with new web channel head Santam has appointed Lunga Siyo as head of web channel to drive the launch of Santam’s e-commerce channel that will allow current and potential policyholders to assess and choose suitable products across the personal lines service offering. An MBA graduate, Siyo joins Santam from MTN where he was a channel development senior manager responsible for maintaining and increasing the company’s web channel profitability. He also launched and headed up the sales agency of the SABC and was retail business planning manager for Beyond Petroleum (BP).

Swart joins the Liberty Corporate exco team and will steer the group’s planned growth and innovation in the umbrella fund market. “We believe there is considerable opportunity to grow our already dominant footprint in the SMME market as well as expanding into the larger corporate market with innovative products in the retirement and investment space. Deon’s appointment significantly strengthens our senior management team in order to achieve this,” commented Seelan Gobalsamy, chief executive officer of Liberty Corporate.

New risk officer at Lion of Africa Mpho Sesoko has been appointed to Lion of Africa Insurance as risk officer. Currently reading towards an MBA from Henley Business School, Sesoko comes from Hewlett-Packard where he was a service partner operational manager.

Centriq Insurance hires actuarial analyst Memory Zimba has joined the Centriq team as actuarial analyst. She was formerly at Liberty Corporate as an actuarial analyst-student in its newly formed intelligent insurance department, which gave her insight into the workings of short-term insurance.

New financial director for Mutual & Federal Mutual & Federal has appointed a new financial director. Dheven Dharmalingam, who takes over from Deborah Loxton, began his career in finance in 1988 at Arthur Andersen/KPMG, where he worked his way up from an article clerk to an audit partner by 2002. In 2004, Dharmalingam joined Super Group as their group financial director, taking up the additional role of general manager of the financial services business unit in 2005 – his first exposure to the short-term insurance industry. After five years, Dharmalingam set up his own private equity and advisory services company, First Republic. The projects he took on for clients ranged from venture capital-raising, to tender strategy and business case feasibility.

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International News Round-up CHINA

models still require better calibration to reflect local construction practices and loss experience ... The Atlas is the first step in tackling some of these challenges. By leveraging the data and research presented in this Atlas, we will be able to develop optimum solutions for our clients.”

Over the past 20 years, economic losses from natural hazards and disasters in China have amounted to nearly 200 billion RMB. The Atlas looks at how hazard, vulnerability and exposure integrate to help implement more effective prevention measures, and accounts for all major natural perils including earthquakes, floods, droughts, landslides, rain and snow storms, hail, frost, forest fires and grassland fires. Dominic Christian, co-CEO of Aon Benfield, said: “The Atlas of Natural Disaster Risk in China is an important resource for both domestic and global reinsurers that are intending to play a meaningful role in China.” The updated Atlas includes: • The most recent and high-resolution data from the region. • Loss estimates combining vulnerability and exposure – a better reflection of the impact of natural hazards on the economic development of China. • A greater focus on agriculture-related risks to reflect the central government’s investment in agriculture insurance. According to Helen Ye, executive director and head of catastrophe reinsurance production for Aon Benfield Asia, “The pace of catastrophe model development in China has been very encouraging, but all Chinese

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Lloyd’s celebrates a 100 years of diverse risk August marked the hundredth anniversary of the 1911 Lloyd’s Act, legislation which led Lloyd’s from marine to pursue other forms of risks. This act made the range of business that Lloyd’s does today – from property to aviation, casualty to energy – possible.

Aon Benfield sponsors Chinese research project Aon Benfield, the global reinsurance intermediary and capital adviser of Aon Corporation, is the exclusive insurance industry sponsor of the third edition of the Atlas of Natural Disaster Risk in China, a research project funded by the Chinese Government.

back to the UK from Spain. • £11 000 to treat a holidaymaker who suffered a broken arm after a fall in Spain.

UNITED KINGDOM Travel insurers pay out millions to stricken UK travellers According to the Association of British Insurers (ABI), travel insurance companies pay out on average 5.3 million Pounds a week to those who fall ill or have accidents while outside the United Kingdom. ABI has found that over the past six years, medical expense claims have leapt by over 270 per cent with travel insurers paying a record of £275 million just in the last year to meet the cost of emergency medical treatments for UK travellers abroad. The industry processed over 330 000 claims for overseas medical treatment and the costs of medical treatment account for 55 per cent of the total cost of all claims paid by travel insurers (compared to 33 per cent six years ago). The ABI stated that “stomach upsets, ear infections, allergies and heart problems are the most common illnesses requiring medical treatment while abroad”, but some of the claims dealt with included: • £86 000 for a holidaymaker who suffered a massive heart attack and needed to be flown back to the UK via air ambulance. • £54 000 to treat a holidaymaker who was diagnosed with bipolar disorder while holidaying in the USA and then needed to be flown back to the UK with a doctor as escort. • £20 000 to cover the cost of treating a man who had a heart infection and bleeding on the brain, including treatment at two hospitals and an air ambulance

Its roots began in Edward Lloyd’s 17thcentury coffee house. Here merchants gathered to concentrate on marine risk but weren’t averse to discussing a range of issues from fire insurance, death by gin drinking and even, it is reputed, female chastity [source: Peter L Bernstein’s Against the Gods: the remarkable story of risk] and the industrial revolution. It is here that Lloyd’s luminary and legend, Cuthbert Heath set about reinventing reinsurance. As the first Lloyd’s man to underwrite jewellers’ block, smallpox and burglary, Heath was at the forefront of expanding the classes of business. Practically synonymous with the shipping industry for nearly two centuries until the publication of the 1911 Lloyd’s Act, marine insurance accounts for only approximately seven per cent of Lloyd’s business globally today.

UAE Gulf insurance industry set to boom Alpen Capital LLC has released a report highlighting the tremendous potential for growth in the insurance industry in the United Arab Emirates and the Gulf region as a result of currently low insurance penetration levels, positive demographic trends and


substantial infrastructure development throughout the region. According to this report, the industry is set to grow by 20 per cent annually for the next five years from US$ 18 billion in premiums in 2011 to US$37 billion by 2015. With predominantly small, youthful and affluent populations, the markets in the Gulf region are expected to expand exponentially with the United Arab Emirates and Saudi Arabia taking a 75 per cent market share by 2015. Although insurance penetration and density in the UAE is at the highest levels in the gulf region, an increase in native and expatriate populations is expected to improve on the current trend. Key factors driving the expansion of the industry have been a more open attitude to foreign competitors, and massive, government-funded infrastructure projects which are underway again after being put on hold due to the 2008 global economic crisis.

which could be relieved or prevented by regular exercise. More than half of the respondents indicated that they did less than two hours of exercise per week, with nearly 18 per cent admitting to doing no physical activity at all. Respondents in Brazil and Saudi Arabia claimed to do the least exercise, while those in China and the United States were those most committed to physical activity.

as Hurricane Katrina in 2005 (estimated at US$40 – 55 billion), the United States is still firmly in its storm season for 2011, it is hoped that the country will manage to escape further large-scale storm damage and losses this year giving the industry an opportunity to recover.

Of particular note was the poor health and general wellbeing reported by the Indian population. The rapid development of the Indian economy has lead many of the people in its most productive age group to neglect their health and wellbeing due to the strain of daily life. The report further highlight that 25 per cent of Indians had not been for any medical consultations to assess their health risks. As a result of these findings, Max Bupa has now committed itself to developing programmes to address these issues.

UNITED STATES INDIA

US$ 745 million claims in the wake of EF-5 tornado

Startling survey from Max Bupa New research released by Max Bupa, an India-based private health insurance joint venture between Max India Ltd and Bupa, has revealed interesting insights regarding attitudes towards a number of medical concerns around the world. The Bupa Health Pulse 2011 international survey studied over 13 000 people from Australia, Brazil, China, Hong Kong, India, Mexico, New Zealand, Saudi Arabia, Spain, Thailand, the United Kingdom and United States of America, with quotas set to be nationally representative by gender, age and region across these markets. The principle finding was the fact that many of the people surveyed, regardless of their country of origin, do not get enough regular exercise, even when they are aware or suffering from long-term medical conditions

The powerful (EF-5) tornado that swept through the town of Joplin, Missouri, on 22 May 2011, killing more than 120 people, left vast damages in its wake. Thousands of claims have been processed by insurance companies serving the Joplin area, totalling in excess of US$ 745 million. Total claim payments are expected to rise to up to US$2 billion in coming months as many personal and commercial claims are still unresolved. “The insurance industry’s role in Joplin’s recovery continues to be commendable, paying claims toward what will be the largest insurance event in Missouri history,” said John M Huff, director of the Department of Insurance. While nowhere near the catastrophic losses incurred in the aftermath of storms such

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The office playroom

Rose McClement | Interior Design Expert – Design Monarchy rose.m@designmonarchy.co.za www.thedesigntabloid.com www.designmonarchy.co.za

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ave you ever considered which room in your office is actually the heart of your business? Believe me: here at Design Monarchy we have that discussion often. Many an opinion has been voiced, with each person making a strong case for their room of choice. My feeling is that one of the most meaningful areas could well be the recreational space, otherwise known as the rec room. This may leave you wondering why it is not the accountant’s office where the money issues are addressed, or the CEO’s office where the engine burns strong, or even the boardroom where the communications are central. This is my point exactly. It is the lesser cousin, yet the role it plays is far too often diminished. Purpose The main purpose of the rec room is that of providing a space designated and dedicated to the staff as a chill room to be able to connect on a different level. Thereafter coming back to their workstations, refreshed and revived, with creative and productive levels raised and ready to roll again. It is a place where they can let their hair down, be playful, banter, socialise, relax. Have a mini-break with no pressure or expectations. This makes it a good team-building zone. Just get the guys together around Fooze Ball, a dart board, table tennis or snooker (if the space allows) and you will see how quickly they get to know each others strengths and weakness. For those less inclined to get into those activities, there are other games which should be on hand – cards (we used to play UNO) board games and if the boss is really

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“The main purpose of the rec room is that of providing a space designated and dedicated to the staff as a chill room to be able to connect on a different level. This makes it a good team-building zone.”


generous – a television set to catch up with the lunchtime soapies. Decor Go to town and let your imagination loose. This is your one opportunity in the office to create a playful space. All too often in the bigger corporate companies, you will find the staff canteen or cafeteria (for want of a less offensive term) looking no less than another restaurant or outdoors eateries like those along the Camps Bay beachfront. This is a great place to escape your desk and have a reasonably priced meal, but I could step out of the office for that experience, too.

Warm tones of yellow, green (not dark), amber, maybe a tone of red or even purple. If needs be, stay close to your corporate colours, but funk and fun it up a bit. The idea is to paint one or two walls in the above tones, then throw in a wall that has either funky and fun wallpaper or a wall decal. Typography is so trendy; you could find a phrase or string of words to pop onto the wall. 2. Be sure to print and frame images of staff events to be placed around the room.

Then call the handyman to come along and give those furniture items a few licks of paint in trendy vibrant colours such a Chinese red, turquoise, blue, yellow or green. This creates that vintage look which is so grounding and very trendy – something like being in a Mexican bar or restaurant. 5. If space allows, shop around for an inexpensive bar, which adds a different, relaxed dimension to the rec room. 6. Don’t forget about all those games tables!

No, I believe that your rec room should almost be the fantasy of what you would like to have at home.

3. Modern furniture works best so select café chairs in a polyprop finish with matching tables. You get such a wide variety of these chairs, in varying colours, which should be well within budget prices. If there is a corner for a rustige sofa for staff to plop into, then great.

1. Paint the walls cheerful, vibrant and happy colours, colours conducive to relaxation.

4. For another style for chairs and tables, go out to source old retro tables and chairs.

Inspired to create a rec room of note? Don’t let the lack of space hold you back from opening up a dynamic playful space for your staff. It is far better to have just a small rec area than to expect your staff to eat at their desks or sit in a dark, dank room facing a grey wall as they clutch their dry sandwiches – even the factories with their improvised canteens do better than that.

Rose McClement has worked in the interiors trade since 1980. She trained at one of Cape Town’s prestigious interior decorating outlets at the time, Milton’s Interiors. Here she learnt to ply her trade in all facets of interior decorating, gaining extensive knowledge of textures and finishes and the essential keen eye for detail. In 1990, she began work in the retail sector, managing various décor outlets including her own. Rose was then commissioned for the interior design and decoration of a string of 5-star and boutique hotels in Ireland. Her portfolio includes upmarket residential developments, offices and retail outlets. Rose provides clients with a turnkey service to create perfect interiors, including design and decorating, procurement and installation.

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lunch with Managing Director of Execuline Motor Underwriting Managers

wandie’s place, soweto Having hosted the likes of Richard Branson and the All Blacks, Wandie’s Place, situated in bustling Soweto, was the choice for this month’s @Lunch. Authentic South African food was enjoyed by RISKSA’s marketing director, Michael Kaufmann, managing director of Global Choices, Wimpie van der Merwe and Alan Eustice, managing director of Execuline.

“I went for an interview as a wine taster after the army. I never got the job. The next interview was at M&F for a claims clerk position.”

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LS “Do not assume that people will necessarily treat you the same way you treat them.” “I’m not that fast, sleek or powerful; I guess I’m more like a Toyota Corolla. Solid, loyal, dependable and frugal.”

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f you had to compare yourself to a car, which marque and model would you be and why? Hmmm, I’m not that fast, sleek or powerful; I guess I’m more like a Toyota Corolla. Solid, loyal, dependable and frugal.

What is your favourite activity to do with your kids? Spending time with my girls is always a bonus regardless of the activity. We all really enjoy camping together. How would they describe you? The best dad in the world; how else? What is your first thought upon waking? Man, this body don’t move like it used to.

Name three things that you believe would improve the industry. • Having a representative body with teeth and companies that would do things together for the greater good. • Stricter control of administrators. • If we could show suppliers to the industry that they will ultimately kill the goose that lays the golden egg should they continue the way they do; vehicle repairers, glass manufacturers, tow operators and the like. What is your party trick? Lately that would be getting home and avoiding the cops. It seems I have a bumper sticker saying ‘pull me over’.

What makes you feel powerful? Not much really, I don’t see myself as powerful.

What would people be surprised to learn about you? Well that would depend on the people and where they know me from. I suppose people I worked with 20 years ago would be surprised that I’m now a quiet dad, happiest when I’m in tranquil surroundings with my close friends and children. People that know me from the past few years may be surprised to learn that I used to be fun and outgoing.

Describe in three words how you feel while riding your BMW 800 GS. Free, alive and invigorated.

What is your message to our readers? Keep buying RISKSA, they need the money.

As a child, what did you want to be ‘when you were big’? Rich, but I settled for insurance.

Brought to you by

And your last, just before dropping off to sleep? I hope I wake up. What always cheers you up? Being with my children or enjoying a beer with my mates.

What book, film and restaurant do you most often recommend to people? Deneys Reitz’s Commando, not a big movie goer and Jappa in Rivonia. What is your ultimate indulgence? I suppose it would have to be my racing right now. I’m fortunate enough to be able to race once or twice a month in the national Formula Vee Championship and the Historic Tour. What’s the most important lesson you’ve ever learned. Do not assume that people will necessarily treat you the same way you treat them. How did you get into insurance? I went for an interview as a wine taster after the army. I never got the job. The next interview was at M&F for a claims clerk position. The rest as they say…

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Rugby World Cup 2011 predictions

RWC 2011 who will be the stars, which team will win and where you will be watching?

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ISKSA approached several commentators within South Africa’s insurance industry to get an idea of what they think will happen in the Rugby World Cup 2011. We received some very interesting comments.

Commentators were asked the following: • Where will you be watching the RWC and who are you supporting? • Which team (do you think) will win and why? • Who will be the star(s) of the RWC 2011 and why? Here are just some of their responses. For more, please check out our website: www.risksa.com. Donald Kau, Santam head of corporate affairs Being a newcomer to Cape Town, I’ll be visiting as many different places to catch the RWC as possible, to experience the various vibes at the venues. I am a Springboks supporter.

Shane Accom, chief executive officer of VIP Insurance and Risk Management Consultants We will be watching at friends’ places. We will be rotating where we watch the game. I support the Springboks; however, I think the All Blacks will win. They have been working on this since last year and have been testing out players for a long time. They are more or less settled about who is going to the World Cup, whereas South Africa is only just trying to find its feet. Then there is the home advantage too, it’s very difficult to beat NZ on home ground. History shows this. I think Sonny Bill Williams of New Zealand will be a star player. I think he is very dynamic with the speed and agility. He has all the right ingredients.

New Zealand has a great chance to win in their backyard. It will be hard to beat them if they get through the quarter finals with the home support they will get should they progress.

Angelique Ruzicka, editorial director, RISKSA

James O’Connor and Dan Carter will shine for New Zealand, as will Quade Cooper for Australia and our own Bismark du Plessis and Beast Mtawarira and Heinrich Brüssow. Dan Carter is stellar every time he plays and Quade Cooper is a real rugby star for the fans. Beast and Heinrich Brüssow are game winners for South Africa and tireless; they are inspirational in their play.

Sadly, I will be watching at home in Cape Town. It will probably involve keeping tabs on the games online for the ones that run during office hours (sorry Andy). Otherwise I will be watching at my home or visiting family and friends to watch it at theirs. I think New Zealand will choke despite the fact that they have the skill and the talent to take the trophy. I support South Africa all the way, but I have a sneaky feeling Australia may win it. France will be the dark horse to watch.

Jacques de Bie, business communications consultant, Collegehill I will be in Auckland and Wellington for a couple of the games, with my family – supporting the Boks. The All Blacks will win. Too horrible to contemplate them not winning on home soil! Crucifixions and racks spring to mind. Sonny Bill Williams brings ‘league’ offloading skills to the union game. Half backs: Du Preez/Lambie, Genia/Cooper and Cowan/Carter.

Tim Timmerman, chairman of the Financial Intermediaries Association of Southern Africa, Tygerberg I will be watching the game at my cousin’s house in Table View; we have a whole bunch of people who get together. I will definitely be supporting the Boks. Sadly the All Black’s home ground advantage and the fact that they are one of the best teams in the world will ensure that they win. Two of the stars will

definitely be Patrick Lambie and Sonny Bill Williams. Pat has got a brilliant rugby career ahead of him and he’s got exceptional talent. And Sonny is like cricket’s Sachin Tendulkar – a little maestro. Adam Samie, chief executive officer, Lion of Africa Insurance I will be supporting the Springboks and watching the World Cup from the comfort of my armchair. I think it will be one of the European sides that will win and I suspect that it could be England or France. I think some of the Springboks will do really well. I am expecting the Springboks to at least make the semis. Certainly the South African team or the New Zealanders will be there [in the final] but I think the Europeans will shock us. Andries Wiese, group manager for agriculture, Mutual & Federal I’ll be travelling all over the country at that time and so will watch games in Johannesburg, Pretoria, Cape Town, Port Elizabeth and Bloemfontein. Of course I’ll be supporting the Boks, as everybody in SA should be. I think we will have New ZealandSouth Africa final, and it is going to be very closely matched. My heart wants to say a Springbok win but my head says that New Zealand will take it by two or three points. They have the home-ground advantage that the Springboks had in 1995 at Ellis Park. A young man who is going to make a name for himself is Heinrich Brüssow, and I think this is Morné Steyn’s opportunity to kick himself into the history books, which he will probably do.

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BY Gugulethu

fever

The cou Mkhabela ntdown has beg festivitie un. It ’s s (if the that tim y haven e of the renown ’t been year wh ed for e p lanning it en com h er endin or two th it throu panies g on a g at peop hout th start pla h ig e year a h le nning th n w ote at th function ill want lready). eir yeare end o to forge and ens Office C end f a long t. Gugu uring th hristma year or lethu M at it ’s m s partie there is khabela emorab s are an emb le for th looks a arrassin ealtors o t a few e right g incide tips on reasons ften talk o . nt rganisin about h the loca ow impo g the be tion of a rtant st home is would-b good tim and enc e -buyers ourage e. It can to think about w be at a long an place or here the nearby h d y h ou can a y rd otel, a fu w a nt to live organisin e ven boo A n outdo C . If you h g the en ri k at a p should p st m ors a s party is are o d-of-yea pular re ut the sa a a r b st b fu m o aurant. o u e n ut havin t ction yo amount h right ven a v in g g dinner, u fun and of effort ue. There so a sitnot only house in in findin are a nu save mo down din g the a conse mber of ney you rv ner at th a ti o ve atmo the best ptions a may cho e boss’s office. B sphere is nd to idea. Th ose to h ut this o n’t nece e aim is ave the colleagu ption is ss to p arily a u rt n y at the es and h not alwa wind, m ingle wit ave fun. ys ideal h or excitin Most pe g. ople pre Leigh-An fer gettin ne Talbo g out of t, a senio the offic C onferenc e to hav r co -ord es, a ve ea inator a nue solu t Joburg much be tions pro tter to w vider, sa ork with id it ’s event pro fessiona ls as

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they are able to get more competitive rates than if the client had approached venues and suppliers directly. This is due to relationships they have with the venues and the volume of business they place with them. “When choosing a venue we will always work within the location that the client prefers. We have a database of over 1 200 venues and suppliers across the country. We deal only with reputable venues that are fully catered; places that we know will give the best service and ensure that the function will be a success.” According to Talbot, once the location is established, the following details would be required in order to source accurate quotations on behalf of the client: budget, full client details, the number of guests, beverage arrangements, entertainment requirements and décor. Pass the Courvoisier Some say a party isn’t a party without food and unlimited alcohol. However, as we all know, providing too much liquor can lead to a myriad social catastrophes thanks to lowered inhibitions. By limiting the amount of alcohol available to two or three drinks per person and by providing non-alcoholic alternatives, the ambience will remain relaxed without any booze-fuelled dramas and disasters. If you are providing your own catering it’s a good idea to be prepared with a couple of liquid staples: red or white wine; hard liquor such as whisky, rum, vodka and Irish cream; hot beverages like tea and coffee and cola; tonic water, ginger ale, fruit juice (tomato juice); milk for mixing; and bottled sparkling or still water. “If you want to keep your bar cost down (and your staff relatively restrained), don’t offer shooters, have fun low-alcohol cocktails instead,” advised Sarah Proudfoot, an event co-ordinator at Dish Food and Social in Cape Town. Food glorious food Most people love party food and it is especially important to give your colleagues something to nibble on when alcohol is involved. It’s quite challenging to cater for every preference, but try to cater for those who have particular dietary requirements. “Find a caterer who is [able to make] vegetarian, halaal or kosher food. [There will be no need to outsource for religious requirements, so no-one gets a separate meal that makes them stand out,” said Proudfoot. If you find your staff members tend not to mingle at the office, there are a few tricks you can adopt at the office party to encourage socialising without making it obvious. For instance, sit down dinners are

great, but can limit your interaction. Offer guests a buffet or substantial canapés to keep people moving and talking. The food and drink available to your guests should remind them that it is the festive season. You may want to consider hiring professional caterers and, if you can afford it, book a private bartender or server for the evening. Get some tasty breads and a variety of cheeses such as camembert, brie and smoked Gouda. Chocolates or nuts and fruit trays are also pleasant at parties. They will look great beside your cheese tray. All dressed up Proudfoot said it’s best to avoid costume parties where people are likely to come in their underwear. “Burlesque or Moulin Rouge may sound fabulous, but bras are likely to be flung across the room at some point. We’ve found that the parties where people have the most fun are less about theme, and more about location. Beaches, outdoors, wine estates. Mzoli’s in Gugulethu, Vaudeville and Madame Zingara’s feature high on the list,” she said. Justine Peel, an event specialist from Movers and Shakers in Johannesburg, which specialises in team-building and motivation, said it’s important to ascertain what you want to achieve. “Is it to award and motivate your staff or is it just to unwind and have a big fat jol to mark the end of a long year of hard work? Themes are quite fun and popular with a lot of companies but it’s best to get a professional to organise it for you, just give them a brief and they will organise it to avoid anything going wrong.” Peel advises not to send out e-mails asking for suggestions on what to do or what theme to go for. “You’ll end up with random things such as quad biking, sky diving, going to the zoo and so forth. An element of surprise is the key to ensure that staff members arrive. If they know what the theme is it may not be what they suggested or what they like and they can decide to not show up.” Boogie on down A party isn’t a party without music so hiring an excellent DJ or a live band is a must. The next best way to have fun at an event is to play games. Arrange games in which a large number of people can participate such as charades or a murder mystery. Entertainment is usually a hit, especially if people are invited to get involved. To encourage everyone to join in, tell your employees that there will be prizes up for grabs. Take care to keep the entertainment safe and appropriate; don’t go for games

such as Truth or Dare or Spin the Bottle. Forget-me-not Large companies usually employ event co-ordinators who specialise in organising parties, so few forget much. If that doesn’t fit into the budget, it’s best to make a comprehensive list. Incredible as it is to believe, sometimes the basics are forgotten. “Smaller companies sometimes forget that the best ingredient for a staff party is recognition and appreciation. It’s all very well giving your staff a great party, but if you thank them for being fabulous, name some wonderful things that have been accomplished, you’ll have a truly lovely time,” said Proudfoot. “We catered a fabulous staff party at Vaudeville for a big company that was a raging success. The managers got involved in an act of the show and there is nothing that employees love more than watching managers make fools of themselves,” she added. Last, but not least, a small gift as a souvenir, is a great way to end off the evening. What insurance companies had to say about Christmas parties: “At Auto & General, we have a slightly different take on things, instead of having a Christmas function we have a kick-off to the New Year function in January – the reasoning is that most staff/brokers go to so many functions during December it just becomes too much. We traditionally have a theme party with most of our guests (about 250 of them) making a huge effort to dress up,” said Juan Manual, general manager at Auto & General. Carel Nolte, head of people and brand at Etana, said; “We have a companywide celebration when it makes sense. This year on 18 November all Etanans will come together in a secret location. Branches (all 18) do regional events as appropriate for their team. But at Etana, we try and find moments throughout the year to give. Every day is Christmas in terms of giving, receiving and enjoying at the same time. What Etanans love the most is giving the very best specialist business service to our brokers. What we like receiving the most are compliments and a hug.” As a word of caution, be careful about what alcoholic beverages you serve your guests at the party as it could cost you in the long term. Back in 2009, UK insurance company Aviva said that businesses were losing £216 million in sick days. The Morning After report showed that 2.31 million UK workers called in sick after drinking too much.

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events Mutual & Federal supports 11th annual Kierieklapper Arts Festival

Chameleon were among the highlights of another successful festival for a good cause.

Mutual & Federal Agri 2011 Kierieklapper Kunstefees (KKKF) took place in Mokopane from 4 – 6 August. This festival is held in support of the elderly community in the province and all money raised goes to the Service Centre for the Aged, which provides over 16 000 meals annually to the elderly. The centre also assists the elderly with their medical needs and provides other services to enhance their quality of life. “We have been involved as a sponsor of the festival since its inception, helping to empower the community which needs considerable support to help look after its older citizens,” said Andries Wiese, group manager for Mutual & Federal Agri. The Kierieklapper Kunstefees was conceptualised 11 years ago when subsidies in the Limpopo area started to shrink and funding from other sources became a necessity. Since then, the event, named for a tree endemic to the region, has grown to become one of the top arts festivals in the country. Elaborating on the reasons for Mutual & Federal Agri becoming involved in the festival, Wiese explained, “A large part of the economy of this town rests on agriculture. When farmers retire, they need to be taken care of. We saw this arts festival as an opportunity for Mutual & Federal to give back to this agricultural community which has supported us for so many years.” A multitude of stalls, showcasing food, art and other products, proudly crafted by the hands of the Mokopane community, were on display for the more than 20 000 festival visitors over the three days, alongside a funfair and games for children and the young at heart, drama, a line-up of celebrity and other music acts and a fun run. A beer garden, food and wine pairings and informative workshops and performances by well-known South African musicians like Nianell, Bobby van Jaarsveld and Chris

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Lion of Africa Insurance wins Most Interactive Stand at 2011 Insurance Conference The 2011 Insurance Conference was hosted at Sun City from 24 July – 27 July, with more than 700 delegates attending. Lion of Africa Insurance was awarded the prize for the most interactive exhibition stand. The awardwinning stand featured two live lion cubs and encouraged delegates to participate in exciting competitions in which they supported local charities and stood the chance of winning an Apple iPod.

Etana: Raising cancer awareness British actress and model, Liz Hurley, was in Johannesburg recently promoting breast cancer awareness. As Estée Lauder’s representative, she attended the glitzy Estée Lauder Pink Illumination Ball and also put in an appearance at the Melrose Arch Edgars. Here she encountered two Etana guys with pink ribbons. “We bought glamour presents for one of our Etanans who was recently diagnosed with breast cancer – our way of saying ‘you’re not alone - keep up the fight’,” explained Kurt Solomon (seen here with Liz). Liz promised to autograph gifts purchased, so they were men on a mission. Etana’s commitment to raising cancer awareness is epitomised in the daREDevil run which takes place in Johannesburg in November, the main focus of which is raising awareness of testicular and prostate cancer.

Front row (from left to right): Colly Mata, Adam Samie and Zainab Seubritz. Second row (from left to right): Shelton Siwedza, Charlene Fortune, Adéle Joubert and Llewellyn Titus. Back row (from left to right): Nkosinathi Kone and Jonathan Holden.


PROFIDA brand awareness initiatives pay off The PROFIDA team’s efforts to raise the profile of its brand by adopting a high visibility approach at relevant conferences and exhibitions has started paying dividends with the group taking home an award for its stand at the recent 2011 convention of the Financial Planning Institute (FPI) at the Sandton Convention Centre. PROFIDA, a provider of financial services and insurance software solutions to the life and non-life insurance industries, had invested in a new custom-designed exhibition stand that won the Silver Award in the category for design and people. Daniel Putra, managing director of PROFIDA, commented on their strategy: “For the past 10 years, we have focused on establishing our software solutions and building relationships in the financial services industry. We are now ready to extend our exhibition profile with a view to raising brand awareness.” Putra added that exhibitions facilitate direct personal interaction, allowing PROFIDA to communicate directly with its target audience who is able to experience software products in a tangible way, with a stand with an open and friendly look and feel.

Assupol Life extends Mandela Day Assupol Life has, for several years, been an avid supporter of community building and upliftment projects, and currently works with the Nellmapius Soup Kitchen and Crèche and the Kingdom Life Children’s Centre in Atteridgeville. This year, the long-term insurer took the opportunity to use the Mandela Day initiative as an opportunity to provide further support to its CSI partnerships. “We began supporting Mandela Day in 2010 through the Nellmapius Soup Kitchen and Crèche. It was such a success that we committed to support this initiative on an ongoing basis because we believe strongly in making a positive impact in the communities in which we operate,” said Assupol Life CEO, Bridget Mokwena. Working on the philosophy that each individual has the ability to change the world through small actions, this year Assupol Life extended its Mandela Day commitment over two days (18 and 19 July 2011) to allow for the company’s volunteers to participate without compromising productivity, doing much-needed renovations and restorations to the two homes.

Palace followed on 2 August; another on 4 August at the Hilton Hotel in Cape Town, and the tour came to a close at the Hilton Hotel in Durban on Friday, 5 August. These events saw FMI introduce new enhancements to their signature product, Business Person Elect (BPE), to just fewer than 350 financial advisers countrywide. FMI introduced its enhancements to the public with a bang. This successful launch included high class venues, a professional presentation and market leading, completely innovative products. FMI announced the introduction of a capital disability benefit, essentially the missing piece in its previous product offering, ensuring holistic disability cover. A significant rates decrease around the TIP (Temporary Income Protector) product was revealed. A revised risk assessment model was also introduced, with a revolutionary approach that rewards business owners and classifies them in a non-traditional way. The FMI team also launched a new quotes package alongside its new website. A very popular feature at each of the four events was guest speaker, Dr Roelof Botha, who received the Sake-24/Absa award for Economist of the Year in 2005 and has authored more than 100 articles, books and research publications. “We have received a lot of positive feedback from financial advisers based on the four events held. They all seemed excited to take our enhancements to the market, especially the prospect of significantly decreased rates for business owners,” commented Brad Toerien, CEO at FMI, and master of ceremonies for the road show events. “At FMI, we pride ourselves on our ability to treat every client as an individual with unique insurance needs, and by challenging convention we believe that we are achieving this.”

PROFIDA also addressed environmental concerns by implementing an innovative idea to be able to reuse stand materials. “This can be tricky as built-up and built-down processes sometimes scratch the graphics display in particular. The solution was to print graphics on a washable textile which can be easily reused for exhibitions, road shows and office displays,” Putra said.

FMI Road Show The FMI road show kicked off at Montecasino’s La Toscana Venue in Johannesburg on 1 August 2011. An event held at Emperors

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Insurance Conference Golf day

RISKSA Magazine and Gary Player Major Championship Series Wine congratulate all the winners from the Insurance Conference Golf Competition 2011. Hats off to Etana Insurance for hosting this terrific event.

Well done to Marius du Toit who finished closest to the pin and walked away with a Gary Player Wine prize valued at R37 700, which included: • A limited edition magnum signed by Gary Player of Augusta 1961, of the Gary Player Major Championship Series Wine. • Gary Player’s newly-released book, Don’t choke. • Two VIP passes to attend the Gary Player Invitational 2011 Golf Competition at Zimbali Lodge and Country Club Golf course , including two tickets to the black tie gala dinner. • A print of the Limited Edition Muirfield 1959 label artwork, signed by the South African artist, Athol Moult. To view photographs of the golf day, visit RISKSA’s Facebook page.

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Well done to Marius du Toit who finished closest to the pin and walked away with a Gary Player Wine Prize valued at R37 700


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Feel like a King

P

erfectly positioned on the worldfamous Cape Atlantic Seaboard of Cape Town, the New Kings Hotel boasts unparalleled views of Lion’s Head and Signal Hill on one side and the Atlantic Ocean on the other. Located in Sea Point, this sophisticated boutique property offers guests 42 spacious designer rooms, to cater for both the corporate and leisure traveller and afford guests the very best

Room facilities • Cocktail bar and patio • Breakfast room • Private boardroom and conference room • Spa and wellness centre • Hair salon • Business centre • Undercover parking • Coffee shops • Woolworths food hall • Internet café

in interior design and comfort. The choice of accommodation includes both superior and deluxe bedrooms plus three impressive King suites. Close to the popular beaches of Clifton and Camps Bay, the impressive Victoria and Alfred Waterfront and the central business district of Cape Town city, it offers guests an ideal stay over when in Cape Town on business and the

perfect base from which to explore the many attractions of Cape Town, the Cape Peninsula and the famed Cape Wine Route. New Kings is a perfect venue for exclusive conferences and board meetings. The King suites are ideal for boardroom meetings for up to 12 delegates. The conference room can seat up to 100 in cinema-style seating, 34 schoolroom seating and 28 U-shape seating.

Room facilities include: • 42” LCD TVs • Wi-Fi connectivity • iPod docking station with an integrated audio system • Air-conditioning • Bar fridge • Tea- and coffee-making facilities • A safe • Hairdryer

To make a booking, call +27-21-430 5580 or e-mail info@newkingshotel.co.za. For more information, go to www.newkingshotel.co.za.

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the broker’s wife

High school musical industry didn’t Whoever said the insurance put a sock in it (or uld sho fun e know how to hav the high schoolAt preferably a high school tie). insurance and kers bro ty, par ker themed Trac groovy to got and n dow bigwigs let their hair glasses, (almost) d rsize ove rting spo t bea the . Lots of fun was knee-high socks and pigtails I’ve been told and er’ had in the ‘naughty corn on the bullies rally libe d use e wer ols pist water on like this, I don’t and babettes. If they carry attracting young think they will have a problem stry. indu the talent into

Girls just want to have fun r Cindy Lauper – it looks like ove ve Mo us gals how it’s 1st for Women is showing Women put up for 1st k wee ry Eve e. don their Facebook on ’ Find a ‘Fun Female d giggle. One goo a girls the give to page s a showcase ude incl ts of their latest pos tic’ bumper -tas ‘fem ed call they t wha of look at the a e hav to t stickers. It’s bes some of the but f rsel you t pos ok ebo Fac a smile on sticker’s slogans certainly put are great man ‘Wo : ude incl y The . my face ’; ‘We’re one g win follo leaders – You’re ng’; and my orki netw re we’ – ng sipi not gos haved women personal favourite, ‘Well-be seldom make history’.

What was she thinking? get around. They The RISKSA boys really do nita du Plessis who, Jua with e pos to got recently the Most Popular ed nam was w, as you may kno t Tempo Awards noo Female Artist at the Huisge row. However, a in r yea nth seve the 2011 for n’t a hit with was er sing t the Engel van My Har allic dress on the met a e wor she – e ryon eve arked looked like night, which one person rem ling – I’d fire dar ly ous microwave paper. Seri nto. pro st styli your ‘Scarface’ from Etana got a I am told that Kurt Solomon r trying to keep bit battered and bruised afte Insurance the at s boy SA RISK up with the a fight with into get ’t didn Conference. No, he ped and fell down trip r dea r poo the but , them battered on his the escalator and got a bit like to repeat he’d t forehead. Not an inciden . gine I’d ima

Neigh, don’t do it again bad dress sense, I Speaking of golf days and a bit of a hard time know I may give the ladies rticularly couture). (pa hes clot to es when it com men, too. Now the g quin But I am all for criti fashionable of things t mos the n’t are ts pan golf outfits being sported but there were some scary Golf Competition nce at the Insurance Confere as Pieter van ed rais e wer ws bro Eye r. this yea bal Choices Glo of , pie) Wim der Merwe (aka ked on the green Group of Companies, wal ed number. Mmm ... with his ‘lovely’ zebra-strip thinking. was he t not quite sure wha

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Green with envy to Marius du Toit, Congratulations must go out Services Board for l ncia Fina the chief actuary of Gary Player Prize red winning the RISKSA- sponso Conference ce ran Insu the at ) 700 (worth R37 included a e priz The 1. 201 Golf Competition e; Gary Player’s Win ht Knig k Blac of num mag Choke; and two VIP newly released book Don’t er Invitational Play y passes to attend the Gar tickets to the two g udin incl , tion peti Com Golf the mix was a into wn Thro er. dinn black tie gala ed by South sign ork, print of the wine label artw ortunately, there Unf ult. Mo l Atho t artis African ned to the RISKSA was one person who complai e was too much priz team about the fact that the green with ply sim was he k thin I nt. for the eve it! envy that he didn’t win



RISKSA September 2011