JUNE 2014

AFRICA
Reinsurance is booming

TACKLING
TECHNOLOGY
Survival of the savviest

Industry intelligence to nancial professionals www.cover.co.za WILDLIFE WOES

Game breeding insurance

LOSS ADJUSTERS
How will they survive?

FINANCIAL ADVICE
Where will your focus be?

OFC_landscape.indd 1 2014/06/19 3:19 PM

 Fast turnaround for commercial underwriting decisions is just one important benefit for brokers doing business with Renasa.

Well also give you a module for any independent system that makes brokers highly competitive with the

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10:02AM
AM Sprin
 direct insurers. And nobody gives better personal service around claims. Interested?
Contact Renasa today on 0860 RENASA or visit www.renasa.co.za

Renasa DPS template.indd 2 2014/06/19 6:00 PM

 25 YEARS OF INDUSTRY INTELLIGENCE

CONTENTS
COVER JUNE 2014

22

JUNE 2014
AFRICA
Reinsurance is booming

TACKLING
TECHNOLOGY
Survival of the savviest

Industry intelligence to nancial professionals www.cover.co.za WILDLIFE WOES

Game breeding insurance SHORT-TERM
LOSS ADJUSTERS
How will they survive?

How well labeled are your products? 40

The trust between a client and intermediary 42
Emerald doesnt mind the risk 44
Benefits of insurance survey reports 46

FINANCIAL ADVICE
Where will your focus be?

FINANCIAL PLANNING
OFC_landscape.indd 1 2014/06/19 3:19 PM

ON THE COVER
Innovation, design, technology 70
Facebooks shotgun approach 74
Losing your key person 75
Performance fees 76
THE BUSINESS OF FINANCIAL PLANNING 8
The pressure from compliance and remuneration
changes are still pushing role players in the distribution
environment to re-evaluate their position and grow
channels that works best for them. How do you navigate
this journey while keeping your business going? WORKING WITH WHEELS
AFRICAN REINSURANCE IS BOOMING! 22 Controlling the cost of repair 50
One of the major challenges with reinsurance is No quick fix to managing fleets 52
translating its value into language easily understood by
shareholders and insurance executives. COVER asked
reinsurance experts to show our readers the possibilities.

WILDLIFE WOES 34 HEALTHCARE

Africa is characterised by her unique sunsets and
roaming game. Some South Africans have capitalised A healthcare network 78
on this beauty by entering into a niche market game Cutting costs 79
breeding. COVER went on a hunt to find South
Africas elite game insurers, to find out the complexities
of insuring this new and exciting market.

THE FRESH FACE OF LOSS ADJUSTING 58

The surge in claims through flood damage has
RISK MANAGEMENT
emphasised the local insurance industrys need for loss
adjusters. But recent economic crises and increased Strikes and Risk Management 87
regulation of the industry have placed considerable
strain on the loss adjuster. How will they survive?

SURVIVAL OF THE SAVVIEST 90

Technology has become the hub around which the LEGAL
financial industry spins. Without the state of the art,
competitive technology, no player in the industry will be FSB not a criminal court 85
successful. COVER asked the industry their thoughts on Businesses and CPA 86
technological advances, and how to stay ahead of the
game.

The views expressed in this magazine do not necessarily represent those of its
owners, publishers or editorial staff. Editorial contributions sent to COVER are
Subscription rate: R470 per annum in South Africa. subject to editorial change to suit the style of the magazine. All manuscripts,
Other rates on application. photographs and other similar matter are accepted on the understanding that no
loss or damage is borne by the publisher, the editor or their personnel.
2 COVER JUNE 2014

June 14.indd 2 2014/06/23 4:44 PM

 Tired of Drawing Straws ?

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Untitled-5 1 2014/06/19 5:33 PM

 34 78

EDITOR
GOVERNANCE Tony van Niekerk
tony@cover.co.za

Mediation increasingly preferred over litigation 80 EDITORIAL

Pragmatic hedge fund supervision 81 Annetjie van Wynegaard
SAM: need to know 83 annetjie@cover.co.za

Taryn Kerr
taryn@cover.co.za

ADVERTISING & MARKETING

Hermione Ballinger
hermione@cover.co.za
TECHNOLOGY
EDITORIAL, ADVERTISING & MARKETING
POPI as a defence against cyber crime 88 Thenjiwe Roda
Catch of the day: personal information 89 thenjiwe@cover.co.za

ADMIN & SUBS

Brent Munnik
brent@cover.co.za

LAYOUT & GRAPHIC DESIGN

Wesley Chipps
wesley@cover.co.za
AFRICA RISING
Publisher
Let the real Africa stand up 63 COVER Publications
New investment opportunities in Tanzania 64 Street address
Bancassurance for Africa 66 80 Devilliers Way,
Sub-Saharan Africa the bread basket 68 Glencairn, Cape Town

Postal address
P O Box 2030
Sun Valley, 7985

Telephone (083) 567-0757

REGULAR Fax (086) 642 6263
E-mail: info@cover.co.za
Website: www.cover.co.za
Editorial 6
Coffee with COVER 48 Images: 123rf.com; istockphoto.com
The Book Nook 56 & shutterstock.com
Events 97
Editorial Board
Market Cover 100 Peter Atkinson, Seamus Casserly,
Product Development 102 Mike Duncan, Ronald Gordon, Mark Haken,
People on the Move 104 Jonty Kirkman, Baravand Madhav,
Rod Pearson, Colin Travers.

Advisory Committee
Carel Nolte, Viviene Pearson, Kalim Rajab

The Editorial Board serves in a voluntary and

independent advisory/technical capacity. Members do
not in any way represent their employer companies.

See our Facebook page

(www.facebook.com/COVERPublications)
and follow us on Twitter @covertony & @coverchat

() 2014
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or
by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publishers. Any
unauthorised reproduction of this work will constitute a copyright infringement, rendering liability both under civil and criminal law.
4
ISN 1013-1507 COVER JUNE 2014

June 14.indd 4 2014/06/23 4:51 PM

 VOLCANO 30373
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OUR BROKER,
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30373 MF_ 1Broker Integrated_Cover Mag.indd 1

Untitled-5 2014/03/20
2014/06/19 11:50 AM
5:33 PM
 Editorial

Your business in
financial planning
Last month we featured a
variety of views on the Retail
Distribution Review (RDR), with
most commentators, although
cautious in their views, of the
opinion that there is a place
for commission in the financial
services environment. The
questions, among others, they
ventured answers for were:
Where do you draw the line
between commission and
fees, and who may charge
commission and who may
charge fees?

Following on their interesting views we

posed the big one to a few others:

How do I navigate this journey while

keeping my business going? On
page eight of this issue you can read INSURANCE DISTRIBUTION and explore opportunities in growing
comments from Chartered Wealth, On the subject of Africa rising; if you the insurance market. Visit www.
Momentum, Absa, Fedgroup Life and are interested in innovative insurance bancassurance.co.za for all the details
Brightrock, among others. The thread distribution models, partnership of this must-attend event.
running through these comments structures and insurance products
seems to be about focus; choosing you never thought would be viable, INDUSTRY EXCELLENCE
your market, your product provider and make a plan to attend the 4th CELEBRATED
your model and then focussing on it. Annual Insurance Distribution and I was privileged enough to celebrate
What are you focussing on? Bancassurance Conference. This event the FIA Awards with the industry
brings together senior members of at a stunning evening in Sandton.
PARACHUTING AFRICA Congratulations to all the winners
the insurance industry across Africa,
If you have any doubt about Africa as well as the FIA for an exceptional
representing 16 different countries,
rising and question whether there evening.
to discuss the latest developments
really is a rainbow at the bottom of the
pyramid, the positive outlook of our
reinsurers should at least make you sit
up and take notice. On page 22 we
open the doors to African Reinsurance
in one of the most interesting articles
on the subject I have read in years.
Reinsurance is the security needed
before development and the strength
following it. Venturing into Africa in
search of growth for your insurance
business is closely related to the
reinsurance partner you have chosen
and the reinsurers are all set to take
advantage of Africas emergence.

6 COVER JUNE 2014

June 14.indd 6 2014/06/19 5:28 PM

Untitled-5 1 2014/06/19 5:33 PM
 Financial Planning

The business of
Financial Planning
The business of nancial planning has changed dramatically over the past two
decades. It started slowly with the policy salesperson being the main player
in the distribution channel. From there we got nancial planners, nancial
advisors, independent advisors, tied agents, general agents, and franchises
and so on. All aimed at ensuring we reach the client in the most effective way.
The pressure from compliance and remuneration changes are still pushing role
players in the distribution environment to re-evaluate their position and grow
channels that work best for them. COVER asked stakeholders: what process
should they follow to determine their future in the nancial planning industry?

8 COVER JUNE 2014

June 14.indd 8 2014/06/19 5:28 PM

 A decade of Financial
Planning: An overview
Looking back over the past
10 years, there is little doubt
that the financial planning
profession has undergone
significant transformation. Not
only have we had to become
highly versed in new legislative
requirements like the Financial
Intermediary Act, Financial
Intelligence Centre Act and
Conflict of Interest, but more
recently we have become
integral to discussions around
the Retail Distribution Review
and Protection of Personal
Information Act, just to name a
few.
them prosper by enabling them to to return for the client and that the
To add to these additional compliance achieve their financial ambitions in the clients expectation is managed, we
and legislative considerations, we right way. will be treating customers fairly.
have also seen a sharp increase in
commoditised products and advice The product house is responsible Lastly the responsibility of distribution
through direct channels. Collectively, for developing products that are is to create an environment where the
this impacts on all stakeholders in the innovative, cost effective and to advisor has access to the right profile
industry including product houses, manage the risk pool in a sustainable clients, is supported with systems,
distribution channels, advisors and manner to deliver on expectations of compliant processes and accredited
customers. clients and advisors of the solutions. products. Crucially, advisors must be
fairly remunerated in a productive and
Arguably the only constant over As an industry are we then responding sustainable manner.
the past decade is the fact that our to legislative change or are we building
clients remain under-insured. We see sustainable customer focused business
this anecdotally from engaging with models? Personally I hope that it is
clients as well as recent research by the latter option as I believe that
True South Actuaries and Consultants highly principled business decisions will
published in March 2013. This was stand the test of time. Let us test this
further confirmed by an independent assumption by way of two examples:
study commissioned by the Association
for Savings and Investments South If value is added through the eyes of
Africa published in November last the client by being a trusted, caring
year. advisor the client will be willing to
pay a reasonable fee for the advice
Honing in specifically on wealth rendered, the solution offered and for
creation, we know that the average the service delivery to ensure that the
South African citizen is not saving financial plan delivers on the clients
enough for a care free retirement. This expectation and ambitions over time.
confirms to us there is a dire need for Fees are disclosed, value is added
financial education and financial advice. and there is no conflict of interest.

As professional advisors we are trusted From a wealth creation perspective, if HENDRIK CRAFFORD,
with our clients finances and we are the total value chain ensures that the Strategic Theme Manager at Absa
privileged to be in a position to help total expense ratio is fair in relation Insurance and Financial Advisors

COVER JUNE 2014 9

June 14.indd 9 2014/06/19 5:28 PM

 Financial Planning

Savings and Education Plan

courtesy of Nedbank

PREPARE FOR THE UNEXPECTED

Losing your job, even for a short time, or having major car
problems can have a devastating impact on your finances
if you do not have the funds to see you through situations
like these. Saving money regularly is the best way of
ensuring that you do not incur unnecessary debt when an
unexpected event occurs.

PREPARE FOR THE EXPECTED

Whether you plan to buy a new car or a house, go on
holiday or send your child to university, we can help you
make your dreams happen. All you need to do is save a
specific amount regularly over a specific period and you will
be closer to your dream of getting that new car.

SAVE FOR YOUR CHILDS EDUCATION

It is also very important to consider your childs future when
thinking of savings. With the annual costs of education
rising at an average rate of 10%, which is higher than
inflation, and likely to continue this way, education may
become a considerable financial burden. Imagine this
situation 10 years from now. How much do you think you
will need per year to cover university fees? Will your dream
of sending your child to university become a reality or
remain impossible? Will you and your child start running
around looking for financial aid and student loans to finance
tertiary fees?

THE TRUTH ABOUT FINANCIAL AID

In South Africa more than 30% of the learners who pass
matric cannot afford to go to tertiary institutions because
their parents cannot afford to pay their fees. In addition,
almost half of those who attend tertiary institutions have to
get student loans to pay their fees. This year the National
Student Financial Aid Scheme (NSFAS) assisted more than
430 000 students at all 25 public universities and 50
public FET colleges to pay their fees. Not all the qualifying
students were able to get financial aid.

THE TRUTH ABOUT STUDENT LOANS

If you qualify, you will be able to get a loan from a financial
institution. Any loan comes at a price, called interest (which
is the cost of borrowing). While it is possible to get a lower
interest rate for a student loan, the bottom line is that the
loan is a debt that has to be repaid. On the other hand,
if you start saving for your childs education, you will get
growth on your investment.
Since the future is unpredictable and you cannot be
certain that your child will get financial aid when they
need it most, you have to plan for the future today. Firstly,
because as a good parent, the last thing you want is to
have your child drop out of tertiary education as a result of
financial problems. Secondly, you do not want your child
to be saddled with debt after he or she finishes his or her
qualification. This is not a good start to a great future.
TWO PLANS
At Nedbank Insurance we offer two plans to cater for
your needs you can save for your financial goal with
the Nedbank Insurance Savings Plan or for your childs
education with the Nedbank Insurance Education Plan. So
whether you are saving for your childs education or for a
deposit on a new car, you will be earning interest on your
money instead of paying interest. And that is the ideal
position to be in.

Nedgroup_June.indd 1 2014/06/19 5:36 PM

 THE NEDBANK INSURANCE SAVINGS PLAN
This plan allows you to save by paying a single or
monthly premium. The plan has a minimum term of
five years, but you can also leave your money invested
until you need it, or continue paying premiums after
the five year term for as long as you would like to.
Losing your job, even for
a short time, or having
major car problems
can have a devastating
impact on your finances,
You are guaranteed a return of premiums paid at the end
of the five-year term and every five years after that.
The plan offers a premium holiday of up to four months
at the end of each period of 12 months, provided you have
paid 12 consecutive premiums. A premium holiday allows
you to skip up to four premiums during periods of financial
difficulty. You are allowed to take more than one premium
holiday during the term of the policy, as long as you have
paid 12 consecutive premiums in between.
Nedgroup_June.indd 2
THE NEDBANK INSURANCE EDUCATION PLAN
This plan allows you to save for your childs
education by paying a monthly premium for a
specific term, which can be 10, 15 or 20 years.
The Education Plan comes with the packaged Waiver
of Premium benefit (death) to ensure that your saving
goal will be achieved even if you should pass away.
This plan offers a guarantee that all the premiums
you pay will be returned, less the cost of the
risk benefit (Waiver of Premium), after five
years and every five years after that.
You can be the owner of this plan or make your child the
owner so that he or she can take over full responsibility
for the plan at a later date. Your child will not only
benefit by getting funds for tertiary education, but
will also learn the value of saving at an early age.
This plan has a premium holiday similar
to that of the Savings Plan.
The Waiver of Premium benefit is available with
no underwriting; however, we impose a 12 month
waiting period for death by natural causes.
You only get closer to your dreams when you take action.
Start saving today.
Visit nedgrouplife.co.za or
your nearest Nedbank branch.
2014/06/19 5:36 PM
 Financial Planning
Paid to be pro-active
The distribution of products and
services within the financial
services industry has undergone
significant changes over the past
two decades.
Initially, companies incentivised brokers
to sell their products in return for
upfront commissions. This commission
model is still the most dominant model
in use and tends to be better suited to
a more single needs and affordability
sales and remuneration approach. Most
franchised advisors and tied agents still
adopt this remuneration model.
However, there are many advisors
(mostly independents) for whom the
term commission has almost become
a dirty word. Rather, they operate on a
fee-only basis which tends to be better
suited to a more holistic, relational and
long-term approach.
Some advisors make use of a hybrid
model, incorporating both fees and
commissions.
The focus should not be on fees versus
commissions, but rather on ensuring
clients get the best advice and service
and that the advisor is paid in a
manner that is open, honest and fair.
New advisors entering the industry and
setting up businesses should be clear
about what they are trying to achieve
before deciding on a remuneration
model. Existing practice managers
need to be aware that further changes
12
June 14.indd 12
are coming. The FSB plans to release
its Retail Distribution Review (RDR) in
mid-year which will influence the way
advisors run their businesses and the
commissions or fees they can earn.
KEEPING ADVICE CLIENT-CENTRIC
As a Certified Financial Planner
I am pleased that our industry
continues to make strides towards
professionalisation. I agree that
treasury should be ensuring that the
best interests of the public are served
with remuneration models that are fair
to all parties.
However, I can think of other industries
where I would like to see treasury
perhaps getting more involved when
it comes to sales advice and fair
remuneration models. How much
THERE ARE MANY
ADVISORS (MOSTLY
INDEPENDENTS)
FOR WHOM
THE TERM
COMMISSION HAS
ALMOST BECOME
A DIRTY WORD.
value have I seen lost by clients
who have made poor motor vehicle
purchase decisions? Every day these
depreciating assets are sold on credit,
most often with high interest rates,
long repayment terms and balloon
payments that all have severe cost
implications over the long-term. Here
the car salesman is incentivised by
the credit providers (banks) to sell as
much credit as possible, for the longest
terms possible at the highest interest
rate possible, which all equates to the
largest commission possible.
DOES THIS SOUND FAMILIAR?
IS THIS TREATING CUSTOMERS
FAIRLY?
Fee-based financial planners are often
asked to justify their ongoing annual
fee (usually 1% plus vat per annum).
This fee is levied on assets under
advice and is usually paid monthly
by an investment platform to the
advisors practice. This fee facilitates
the ongoing running of the business
overheads and salaries of staff. It is the
life-blood of the fee business model
and allows the advisor a stable income
stream that has potential to grow as
clients investment portfolios increase
over time. Most fee-based advisors
have review meetings with their clients
at least once a year and journey with
them through life, thereby becoming
a close confidante and sounding board
for all decisions financially related to
the family.
Consider the role of an accountant or a
lawyer. An accountant performs a task
for a client, and is remunerated for her
services thereafter. The client may not
see or hear from the accountant until
after the following tax year. The lawyer
may address issues like appointing an
executor or awarding bequests. The
lawyer does not contact the client
when legislation changes that will
affect estate duty, for example, occur.
The financial advisor is paid to be pro-
active, to keep abreast of changes in
legislation in terms of tax reform and
updates, pension fund amendments
and healthcare developments, and to
make the necessary changes so that
the client benefits from his knowledge
and expertise.
Suddenly the financial planners role
and ongoing fee are looking more and
more reasonable.
DONOVAN ADAMS,
CFP at Chartered Wealth
COVER JUNE 2014
2014/06/19 5:28 PM
 The Business of Financial Planning
in a consumer-driven world
Since 2008, global regulators
have introduced a number of
regulatory reforms. Dodd-Frank
(USA), Future of Financial Advice
(Australia), Retail Distribution
Review (RDR) and Treating
Customers Fairly (TCF) (both UK)
are a few of these reforms. The
protection of consumers is at the
heart of all of them.
Some of the changes bring new
challenges, for example, the availability
of advice to all consumers, when
some of them cannot afford to pay for
advice. In South Africa, TCF is already
being implemented and the FSB will
likely release further information on
RDR in May 2014.
However, financial planning businesses
may not be ready for these changes.
CoreData Research suggests that over
60% of financial planners in South
Africa are planning for the upcoming
regulatory changes. Of these, less than
a fifth have business models ready to
COVER JUNE 2014
June 14.indd 13
deal with these developments. The rest
may find themselves on the back foot
when any change comes into force
(CoreData, 2014).
Being an independent financial
planner places the compliance onus
on the advisor. This could be one of
the reasons why both the number
of planners and amount of new
business volumes are shifting to the
agent world. This trend is likely to
continue with the introduction of more
regulation.
Face-to-face planning is only one
channel and planners need to be
continuously aware of how clients
choose to engage in their own financial
planning. According to Target Group
Index data consumers are three times
more likely to consider purchasing
long-term insurance through an
intermediary than from a call centre or
online.
The adoption of direct channels is
most evident in the personal short-
term sector, with millennials finding
it more appealing to use the internet
in their decision-making.With more
complicated offerings in life-business,
the planner will continue to play a
significant role. Although technology is
changing the way customers engage
personal interaction is still highly
regarded.
Technology can provide assistance
in regulation changes and choice
of consumer channel. This is
already evident in client relationship
management with apps, web-based
administration platforms, etc. Planners
find innovative ways to allow clients to
jump between channels. For example,
search for information online, complete
a high-level needs analysis online, and
speak to an advisor for detailed advice.
All of this is possible in a digital world;
it can also improve efficiency and
quality of interaction with clients.
Financial planners globally have
adapted to these changes and
discovered new areas where they can
add value to their clients lives. They
continue to value relationships, but
incorporate technology to adapt to
consumers needs. They change their
role to add more advice and life-
coaching value. Financial planners need
to ask themselves continuously how
they can adapt to a changing world to
remain relevant.
BERNARD STEYN,
Market Analyst, Momentum
13
2014/06/19 5:28 PM
 Financial Planning
A definite need for
financial advisors
Financial planners and advisors
play an essential advisory role in
the industry. As intermediaries
between financial institutions
and consumers, financial advisors
need to align a clients financial
needs with the right products
or solutions, of which there are
many.
As such, a financial advisor can be
considered a knowledgeable and
specialised professional, much like a
lawyer or doctor: most people wouldnt
try to tackle a legal issue or treat a
medical condition without seeking
professional advice. The same should
apply to a consumers financial needs,
which means there is a definite need
for this role in the industry.
However, this means that a financial
planner requires the right qualifications,
and the commensurate skills and
experience to meet these needs and
fulfil this advisory role.
14
June 14.indd 14
dont place all their eggs in one
basket. The right balance in terms of
product mix, fee structures and costs
are essential to ensure their business
model is sustainable, while the
financial needs of their clients are also
effectively met.
Additionally, specialising in a
particular client base will allow for
the establishment of long-term
relationships, a necessary foundation
for success. The days of insurance
salesmen are over, as financial needs
change with time and therefore need
to be re-evaluated in a proactive
manner to ensure these needs are
catered to. As such, focusing and
specialising on one target market
can ensure longevity, particularly in
light of pressure from compliance and
remuneration changes.
There is no doubt that its difficult
to be successful in financial services
as the industry is more complicated
than ever. However, the experts who
are able to match the correct product
This requirement extends past the
to the needs of a person will enjoy a
mere basic qualifications required to
sustainable and successful business in
enter the market planners who wish
this industry.
to remain relevant need to meet basic
continued education requirements.
Those who want to be competitive
and successful by offering clients
the most up-to-date and accurate
financial advice will need additional
qualifications.
Understanding the depth and diversity
in offerings is essential for planners
today, yet the sheer complexity of
the market, and the products on
offer, makes it close to impossible for
advisors to understand every providers
products. For this reason it is best for
a planner to select a target market
and the type of client they would
like to work with, and then form an
association with two or three financial
institutions in various fields to provide
the best spread of products and
services to those clients.
This allows the planner to understand
the products available to a particular WALTER VAN DER MERWE,
market, and also ensures that planners CEO of FedGroup Life
COVER JUNE 2014
2014/06/19 5:28 PM
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Untitled-5 1 2014/06/19 5:36 PM

 Financial Planning

Increasing employee benefits

in a competitive market
A unique insurance offering is an It is crucial to create rewards packages
obvious choice. Employees live, that comprise of voluntary benefits
travel and work in a South African that can be mixed and matched to
environment where 65% of vehicles suit the unique needs of the different
are not insured and where vehicle generations within the workforce.
accidents are the leading cause of Engaging with your workforce is not an
deaths. Up to 70% of motor claims optional extra anymore but an absolute
are accident related, while a business necessity.
vehicle is twice as likely to be involved
It all boils down to employee
in an accident. The average cost of
engagement and how well a company
repairing a vehicle involved in an
is able to communicate an employees
accident is R17 000, which is money
total remuneration. It is not simply
that most South Africans simply do not
about how much cash an employee
have.
takes home at the end of the month,
The bottom line is that a satisfied, but about the benefits that they have
financially secure member of staff access to and the added value that it
with sound insurance in place is a provides.
productive member of staff and that A number of companies are however
is ultimately what a properly scoped not very good at communicating the
group insurance scheme should employee benefits that are available to
deliver. their workforce.
That is however easier said than done A successful employee engagement
when you are dealing with a diverse programme is underscored by an
workplace, where one product cannot employers ability to communicate a
possibly meet the needs of four clear message that acknowledges the
generations: role that employees play in the success
of the organisation. One of the ways to
Baby boomers (born between do that is to provide employees with
1946 and 1964) were raised on benefits that speak to their unique
rebellion and see work as their needs.
duty and they will stay with a
company as long as they feel
We live in a world where we they are making a difference;
are faced with severe skills Generation X (born between 1965
shortages. It is a cut throat and 1980) are dual career parents
industry where the most that also boast a record divorce rate
and are looking for opportunities to
attractive job opportunity is
move both laterally and vertically;
king, and staff retention is
the name of the game. An Generation Y (born between 1981
and 1990) have always had the
employers ability to compete as internet and have high expectations,
an innovative human resources with one in two generation Y
leader hinges on the success of employees generally wanting to
a thorough engagement strategy work somewhere else; and
that is capable of speaking to a Generation iY (Born between
diverse workplace. 1991 and 2002) whose lives are
dominated by the iPhone, the iPod,
To stay ahead of the HR curve is a fine iTunes. Theyve been identified as
balancing act between an employers the Digital Generation, Mosaics,
available budget and the benefits that Techies, Millennials and Screenagers LYDIA RITCHIE,
it is able to provide as a platform to and they are heavily biased Marketing Specialist: Employee Group
engage with its employees. towards action and interaction. Schemes at Aon South Africa

16 COVER JUNE 2014

June 14.indd 16 2014/06/19 5:28 PM

 Focus on children
Ensuring for a childs financial
wellbeing can be split into two
components day-to-day living
expenses and education costs.
From a savings point of view, its
accepted industry wisdom that
education should be prioritised.
However, both components
need to be protected to provide
for a family should its financial
wellbeing be affected by the
death, disability or serious illness
of an income-earning parent.
SAVINGS
The sooner parents start saving
for their childrens education, the
better. That said, saving for their own
retirement should not be neglected
either. Parents must secure risk
protection for their future expenses
relating to caring for their children. Its
a tough balance to strike and thats
where you as a financial advisor can
play an important role.
When it comes to investment products,
advisors are spoilt for choice. Banks
and insurance companies provide
COVER JUNE 2014
June 14.indd 17
RYNO
Killing himself with
savings options from a standard
range of investment or savings 30 a day.
products like unit trusts or money
market accounts.
INSURANCE PRODUCTS
Its also important to make sure a
childs day-to-day living costs and
education needs will be covered
in the event of a parents death,
temporary or permanent illness
or injury. Many consumers do not
have adequate life insurance cover
in place to cover either of these
needs.
TERTIARY EDUCATION COSTS
TEND TO BE MUCH HIGHER THAN
SECONDARY SCHOOL COSTS.
If a life cover policy makes
provision for a childs education,
bear in mind that these costs tend
to rise at an average of around
3% more than consumer inflation
every year. Policyholders need
to know whether they signed
up for indemnity cover or stated
benefit cover, which provides more
flexibility. BrightRocks cover for
childcare needs is a stated benefit
paid directly to the policyholder
not the institution of education.
Policyholders have flexibility
regarding the cover increase they
can select, with BrightRock offering
a range of increases of up to 4%
more than consumer inflation every
year.
Tertiary education costs tend to
be much higher than secondary
school costs. The growth of life
insurance protection for education
costs should include this; otherwise
a clients insurance may prove
inadequate in claim.
BrightRocks tertiary step-up option
automatically increases cover when
a child is expected to enter tertiary
education to cater for this future
increase in insurance need.
17
2014/06/19 5:28 PM
 Financial Planning
Policyholders can customise their
cover when they take it out, and have
flexibility at claim stage, thanks to the
option of converting their lump-sum
cover to recurring pay-outs.
There are child dread disease benefits
available in the market to provide
cover for additional expense needs in
the event of a child suffering from a
serious illness or injury.
BrightRock offers parents the ability to
receive a pay-out under their cover for
additional expense needs, should their
child become seriously ill or injured.
Parents must specify their childcare
needs cover and ensure that their
children are legally recognised as their
children through birth, legal adoption
or legal guardianship.
Focus on your business
to stay in business
18
June 14.indd 18
We cover children for the same
conditions their parents are covered for
(over 300 conditions), and 10 child-
specific conditions. In designing this
cover, we have ensured that the cover
for child additional expense needs is
particularly focused on the first few
years of childrens lives, because we
know the incidence of severe illness
claims is highest in the first few years
after birth.
This is especially relevant to congenital
birth defects and issues at birth one
of the reasons why we offer cover for
the first three months of the childs life
as long as the parents had cover for
additional expense needs for the nine
months leading up to the childs birth.
SCHALK MALAN,
Director, BrightRock Life Insurance
Independent financial advisors
(IFAs) list commission, regulation
and administration as the biggest
concerns they need to address
to secure their future in the
financial services industry.
On the eve of the release of the FSBs
Retail Distribution Review discussion
document, most IFAs who recommend
life risk and disability product solutions
still rely on commission as their
main source of revenue. Any ban
or significant reduction in up-front
risk commission would have a major
impact on most IFAs in this space,
requiring a big change in their funding
and business models. However, the
seriousness of the impact could be
mitigated if sufficient time is given to
implement any regulatory change.
It is therefore critical for IFAs to
view their business from an owners
perspective and make decisions about
their future business: what they want,
goals and objectives.They should be
clear about their offering and develop
a value proposition so strong that
COVER JUNE 2014
2014/06/19 5:28 PM

AS REGULATION BECOMES
INCREASINGLY COMPLEX, THE DAYS
OF DIY COMPLIANCE HAVE ENDED.
customers recognise the value and
are happy to pay for this service. Most
importantly, the value proposition to
customers is not the financial product.
By back planning, IFAs should look at
how to overcome current challenges to
reach their goals. This requires a proper
business plan. It is also vital to know
the cost of doing business. After all, it
is not viable to spend R2 000 to earn
R1 000!
As regulation becomes increasingly
complex, the days of DIY compliance
have ended. By getting the right
ANY BAN OR SIGNIFICANT
REDUCTION IN UP-FRONT RISK
COMMISSION WOULD HAVE A
MAJOR IMPACT ON MOST IFAS
IAN MIDDLETON,
Managing Director of Masthead
COVER JUNE 2014
June 14.indd 19
RYNO
Pays a packet for
risk insurance as a smoker.
expertise to manage the
regulatory side of the business
and set up compliance structures,
IFAs will save time and reduce the
risk of non-compliance. This in
turn reduces risk in the business
and improves the value of the
business.
With additional regulation
comes more administration. By
investing in people and placing
them in administrative positions,
IFAs can free themselves up for
more profitable activities. But
committing to this depends on
business owners mindsets if they
see people as an investment, they
will do this. If they see people as
an expense, they will not. Equally
important is the decision to invest
in technology and re-engineer
the business with processes for
efficient administration.
In the new environment, IFAs
face increasing competition, both
from advisors looking to the same
markets, and direct operators
with hefty marketing budgets.
Consumers are also more informed
about financial products; they
are aware of their rights and the
channels available to them should
they have a complaint. This
compels IFAs to deliver quality
advice and service.
To help IFAs manage the
ongoing challenges, Masthead
has integrated its compliance
and practice management
services into a complete business
solution. Our interaction with the
regulators enables us to identify
challenges and tailor our offering.
Furthermore, experience with
international clients enables us
to bring global learnings to local
clients.
19
2014/06/19 5:29 PM
 Financial Planning
Not thinking about
retirement? Better start now!
Boxing champion George
Foreman once said: Its not at
what age I want to retire, but
at what income. Retirement is
something we associate with old
age or start making provisions
for usually too late. To maintain
the same pre-retirement
standard of living we will have to
derive an income stream that is
not too far away from what we
are used to.
Studies conducted by the Centre for
Retirement Research at Boston College
(US) tell us that the number of people
at risk of being unable to maintain
their standard of living has increased
dramatically. For people who were born
in the period 1946 to 1954, this risk
stands at 35%, while the risk for those
born during the period 1955 to 1964
is 44%. For those born after 1965, the
risk is 49%.This implies that one out
two persons of the current generation
runs the risk of having to cut down on
their level of comfort because of lower
revenues during their retirement phase.
People rely heavily on social security
benefits at retirement. Governments
globally have been downsizing the
benefits associated to welfare state
programmes due to budgetary
constraints.
Healthier lifestyles and scientific
advances have increased life
expectancy throughout the years; the
average global life expectancy has
jumped from 53,7 in 1960 compared to
70,6 in 2012.
Inflation another challenge for
pensioners eats up buying power
over time. Developed countries have
an average annual inflation rate of
2%, while in emerging economies,
the average stands in the range of
5% to 7%.There is a gradual but
steady erosion of purchasing power,
not to mention the rising costs of
healthcare, ranging from hospital
20
June 14.indd 20
PEOPLE RELY
HEAVILY ON SOCIAL
SECURITY BENEFITS
AT RETIREMENT.
and private clinics for treatment and
health maintenance to medication and
drugs, and auxiliary assistance such as
wheelchairs, etc. Recent studies have
shown that this cost has doubled over
the last 25 years.
Another issue is the shift away from
defined benefit pension scheme
towards defined contribution. With
defined benefit pension plan,
employees are in a position to know
the income they will expect at
THE AVERAGE GLOBAL Swadicq Nuthay
LIFE EXPECTANCY HAS
Position:
JUMPED FROM 53,7 IN 1960
COMPARED TO 70,6 IN 2012.
retirement, which is a percentage of
the last salary for example. On the
other hand, with a defined contribution
scheme, the expected income that
an employee can expect to receive
will depend on both the level of
contribution in the fund during their
working phase and the investment
return generated by the scheme.
IN VIEW OF THE ABOVE, WHAT DO
THE EXPERTS RECOMMEND?
The traditional theory of lifestyle
investing tells us that each individual
experiences various lifestyle stages,
with different investment needs. First
is the accumulation phase, when
the individual is able to invest in
relatively higher risk assets and follow
an aggressive investment strategy,
designed to achieve maximum longer
term growth. Second comes the
consolidation phase, whereby the
individual has more resources to devote
to investment, but may want to take
a less risky approach. The third phase
is the spending phase during which
the individual is no longer working
and is living on the income and capital
accumulated in the first two phases.
So, in line with the above theory
of lifestyle, investments change
accordingly, ranging from an
aggressive strategy (whereby a
major part of your portfolio is vested
into equities with more risk and
higher return expectation) when an
individual is relatively young, to a
more conservative one (whereby the
portfolio is mostly geared towards
lower risk fixed-income instruments).
After retirement, investments in
ventures with low risk and stable
returns should be favoured.
Investing wisely is a must. Investment
professionals are well-equipped to
manage investments and are in a
better position to look for investment
opportunities and adapt quickly to
Chief Executive AfrAsia Capital Management
market positions.
Swad
and c
With
Swad
Mana
He h
consu
mana
opera
Swad
the U
SWADICQ NUTHAY,
Chief Executive of AfrAsia
in int
Capital Management
Swad
mem
COVER JUNE 2014
Swad
Macr
2014/06/19 5:29 PM
 The secret to Sanlams
BlueStar platform
The successful response by
financial services companies to
challenges facing the industry
and its financial intermediaries
should, among other things,
be evaluated against its ability
to attract and retain quality
intermediaries in a desirable
business model.
This not only requires a deep
understanding of the challenges and
of the critical success requirements of
financial planners, but also an ability
to innovate successfully.
The environment in which financial
intermediaries do business today is
characterised by the following key
considerations:
The demand by clients for a one-
stop shop for all their financial
planning needs, combined with
clients expectation to deal with
specialists without losing a trusted
personalised relationship;
The onerous compliance
requirements placed on
financial planners in an intense
regulatory environment;
Remuneration pressures in a
changing regulatory context; and
A prolific product environment
where complexity further encourages
specialisation in the interests of
an optimal advice offering.
It is Sanlams foresight in relation to
the impact of these challenges that
led the company to launch its BlueStar
financial advice model more than five
years ago.
We saw the opportunity in offering
financial intermediaries a model to
accommodate the diverse financial
needs of their clients, but we also
realised that this presented a way
in which to counter the challenges
of an ageing advisor force and
to encourage cross-selling in the
interests of clients.
COVER JUNE 2014
June 14.indd 21
SAVE THE
RYNO
JACO COETZEE,
General Manager: Sanlam Ryno needs to quit
Financial Advisors (SFA)
the killer. With a
The key element of Sanlams BlueStar commitment to do so,
platform is a small business with
one back office and three or four Altrisk will give him
intermediaries who share clients while a reduced premium
specialising in certain elements of
financial advice such as short-term from day one.
insurance, retirement, life assurance,
risk, estate planning and investment
planning.
Plus well help him quit.
The model has shifted the relationship
from one between the client and
the individual intermediary to one
between the client and the business.
If your clients smoke talk
Clients still receive personalised to them about Altrisks
service, but it is not dependent on one
Proactive Smoker it
individual. This ensures the continuity
and longevity in relationships.
could save their life and
BlueStar practices are not restricted
to sell only Sanlam products, but the their pocket.
financial advice given is backed by
Sanlam which provides security to
both the clients and the intermediary. For more
A thorough 24-month training information
programme is a pre-requisite for all
speak to your
potential BlueStar intermediaries to
ensure that theyre equipped with the
necessary business skills to run their Altrisk broker
own financial advice business, and
Sanlam also offers them legal and
consultant or go
administrative support to assist in the to www.altrisk.co.za
success of their ventures.
Theres nothing like a success story
to back up a good argument: 40% of
Sanlams financial intermediaries now Were your type
operate from this supported business
platform, and over the past year,
of risk insurer.
BlueStar businesses have grown more
than 20%, representing almost 50%
of the total revenue generated by
Sanlams sales force.
Our aim is for 70% to 80% of Sanlam
intermediaries to operate eventually
from these businesses. Within a
year or two, we believe that all new
intermediaries will be brought in as
associates to those within existing
BlueStar businesses and learn
the trade under the guidance of
experienced mentors.
21
Altrisk is a division of Hollard Life Assurance, an authorised
financial services provider (FSP 17697).
2014/06/19 5:29 PM
 Reinsurance in Africa
full of possibilities
The insurance industry in Africa is changing fast. Most of Africa leapfrogged traditional landline
technology to high penetration mobile communications. At the same time the unbanked, or, as some
mistakenly thought, the un-bankable, are side-stepping traditional banks into the mobile money
environment. Reinsurance has an important role to play in ensuring a stable and protable insurance
industry, providing experience, expertise and capital for local and international insurers to enter and
grow the market. COVER asked the reinsurance experts to open up this sector to our readers, and to
show us the possibilities, but also the work that needs to be done.
22 COVER JUNE 2014

June 14.indd 22 2014/06/19 5:29 PM

 Reinsurance
Evaluating the effectiveness
of your reinsurance strategy
Reinsurance constitutes a capital
substitute for insurers who use
reinsurance security to fund their
businesses.
By using reinsurance, insurers borrow
the reinsurers balance sheet at a
predetermined price, called reinsurance
premium, in return for access to
underwriting capacity and a promise
to recover future admissible claims,
among other benefits. The totality
of an insurers reinsurance structure
provides it with the muscle to assume
risks beyond its own net retention
capacity and enabling it to compete
meaningfully in the market place.
One of the major challenges with
reinsurance is translating its value
into language easily understood
by shareholders and insurance
executives. It is much easier to
determine and explain Return on
Capital Employed (ROCE) to any
investor or business executive.
When it comes to reinsurance there
are a number of qualitative issues
which inform an insurers decision to
purchase reinsurance, for example,
COVER JUNE 2014
June 14.indd 23
reciprocity and access to technical
skills. Risk appetite also comes into
play. Whereas risk-averse insurers
are prepared to purchase sleep-easy
cover, the opposite risk takers commit
a bigger share to their net retention in
return for cost saving on reinsurance
premiums. How then does one prove
that their reinsurance is adding value to
shareholders? How do you justify your
reinsurance structure and the related
cost?
HOW DO YOU JUSTIFY YOUR
REINSURANCE STRUCTURE SIMBARASHE MUKONZO
AND THE RELATED COST? FIISA, AIRMSA Head of
Technical Emeritus Re SA
Reinsurance can be used to achieve
numerous objectives; hence the
need to come up with a system to
measure performance against the
desired outcomes. Failure to set
measurable objectives often results
in a situation where reinsurance
executives or managers are profiled
to place facultative reinsurance and
attend treaty renewal meetings where
23
2014/06/19 5:29 PM
 Reinsurance
they just basically renew as expiring
without much value addition to the
process.
As part of a broader reinsurance
strategy insurers should have clear
objectives which enable the reinsurance
manager to focus on the critical aspects
of the function in the value chain and
hence maximising shareholders value.
Performance can be monitored and
reviewed regularly, preferably quarterly,
and annually. This process will enable
the insurer to negotiate an optimal
reinsurance structure at better terms on
the next reinsurance treaty renewal.
Strategic objectives can be translated
into objectives as per examples below:
To ensure that the total cost of
reinsurance spend does not exceed
x% of net earned premium;
To ensure that the company
does not cede more that x%
of gross premium written;
Reinsurance getting the
shocks out of the system
As we all know, large parts
of Africa are going through
enormous economic change
and nearly all of it positive. In
order to continue the growth
weve seen, business and
governments need to be able
to take risks. Insurance takes
the volatility out of risk taking,
facilitating growth.
This value of re/insurance argument
may not be new, and to some it may
seem very theoretical, but it is as
important today as it ever was. It is an
important point which I think we, as an
industry, cannot make often enough.
This shock-absorber function works at
different levels. At the moment, our
industry is getting noticed for the work
we do at the grass roots level with
micro insurance, with distributing on
mobile phone networks, with devising
innovative parametric triggers for
24
June 14.indd 24
To ensure that the companys technical expertise, will find it easier
net exposure any one loss
does not exceed Rx;
To ensure that the companys
net retained loss any one
event does not exceed Rx;
To ensure that the gross
premium ceded to any one
reinsurer does not exceed x%
on any one treaty programme of
facultative risk placement; and
To ensure that the companys
aggregate exposure to one
reinsurer does not exceed Rx
million any one calendar year.
A performance management system,
for example the balanced scorecard,
can be a useful tool in monitoring,
measuring and evaluating performance
against set objectives. Insurance
companies that have reliable systems,
relevant risk profiles, significant
loss history records, and in-house
weather insurance. This is the sexy
part of the re/insurance story at the
moment this is where we are seeing
real innovation.
At the other end of the spectrum, the
commercial side of the business is well-
known. Insurers and their reinsurance
partners provide financial security
when infrastructure is damaged, when
workers are injured, or when legal
cases arise.
As a reinsurer, we enable the enablers
by smoothing out the profitability of
our insurance clients, helping make
their business sustainable and attractive
to investors. In years with large losses,
reinsurers are the shock absorber. Our
ability to diversify the risk globally
means we can offer the capacity to
keep insurers operating locally.
The reinsurance industry also
helps governments manage their
climate risks. When disasters strike,
governments are the insurers of last
resort especially in regions where
insurance penetration is very low.
to determine the relevant performance
measurement parameters.
In the absence of a suitable basis
to set parameters, benchmarking
against competitors with similar
profiles can be helpful. The insurer
can set minimum and maximum
parameter ranges against the best-
in-category company. This kind
of benchmarking empowers your
reinsurance negotiating team to push
for more simply because company X
also achieved it.
The strategic directive for a reinsurance
executive should be clear. This implies
making sure that the reinsurance
structure works in favour of the insurer
in terms of protecting its net exposure
at the least possible cost, while
ensuring that your reinsurance partners
achieve healthy profit margins in order
for them to continue providing you
access to their balance sheet.
FRANK ONEILL,
Managing Director Africa
and Middle East, Swiss Re
This is all well and good if governments
can afford to put up the funds when
disasters strike. However, reinsurers are
leading the way in helping governments
plan ahead for climate-related losses.
In other words to financing the problem
before it arrives.
Reinsurers and their insurance partners
can also allow government policy to
come to life.
For example, weve seen companies
like Swiss Re enable renewable energy
development by bringing insurance
solutions to cover shortfalls from large
scale hydro, solar and wind projects
in these cases literally insuring income
if the rain doesnt fall or the sun
doesnt shine.
COVER JUNE 2014
2014/06/19 5:29 PM
 Q&A with two African
reinsurance leaders
COVER asked two leaders in the
African Reinsurance industry,
Daryl de Vos, Managing
Director of African Reinsurance
Corporation, and Victor Tongai
Mushaya, Head of Treaty ROA
at Aon Benfield Africa, for
their opinions on the African
Reinsurance landscape. De Vos
(DV) and Mushaya (VM) had the
following to say:

WITH THE INCREASED CAPITAL

GLOBALLY AVAILABLE TO
REINSURERS, WHAT IMPACT WILL
WE SEE ON RATES?
DV: I think generally excess
capacity automatically creates more
competition, and in our industry
competition normally means pressure
on rates, which we have experienced
in South Africa for a while now. As
more companies expand into the rest
of Africa we think that this pressure
on rates will intensify. We have also
experienced wider wordings being
offered into markets that are fairly
unsophisticated, and as a result the
market is offered cover that has not
been appropriately priced for.
VM: Rates have continued to slide
globally and the profitable accounts in
African markets have also benefitted
accordingly.
IS COMPETITION IN THE LOCAL
AND AFRICAN CONTINENTAL
MARKET HEALTHY FOR THE
INDUSTRY OR PUTTING TOO MUCH
PRESSURE ON RATES?
DV: Competition is always good as
it offers everyone more choice, but
unfortunately in our industry more
competition and choice means more
pressure on rates, and in the long

COVER JUNE 2014 25

June 14.indd 25 2014/06/19 5:29 PM

 Reinsurance
run this could be bad for the market.
Claims cost increase in line with
inflation and fluctuation of currencies
as most African currencies is linked
to the US dollar, and over time a
mismatch occurs between the cost of
claims settlement and the rates being
charged for the business.
PERHAPS THE GOVERNMENT HAS
AN IMPORTANT ROLE TO PLAY IN
CONJUNCTION WITH THE REINSURERS.
VM: Competition has seen great
improvements in other aspects like
efficient service, reinsurer attention
and alignment to client needs and
new products, capacity and special
acceptances, client training and skill
transfer. There is pressure on rates,
but reinsurers generally still maintain
minimum technical benchmarks. In
short the competition has been healthy
and beneficial.
HOW ARE THE TRULY AFRICAN
REINSURERS DOING AGAINST
INTERNATIONAL COMPETITION?
DV: We think that locally registered
reinsurers often operate at a distinct
disadvantage to the non-registered
reinsurer, because they can be more
flexible when it comes to pricing. They
26
June 14.indd 26
dont have the same regulatory and
cost restraints as a locally registered
reinsurer. On the positive side I think
they bring a different level of expertise
to the local market, especially in
the area of analytics and quality
of data, and this should uplift the
professionalism in the market.
formal sectors, and more specifically
VM: African reinsurers have fared very
well, and have used their advantage of
local market presence and knowledge.
African reinsurers have improved
their skills resource bases, capital and
capacity levels, and service offerings in
keeping with market expectations.
IS THIS COMPETITION GOOD
FOR THE LOCAL REINSURANCE
INDUSTRY?
DV: Overall competition has to be good
for the market, especially if it uplifts
the standards and professionalism, but
we need to be mindful of the pricing
aspect, as this can over time affect the
market negatively.
VM: Competition is good. Buyers
of reinsurance generally appreciate
their moral duty to support the local
reinsurance industry, so there is a good
balance. Regulators in various markets
have intervened accordingly to support
local reinsurance markets.
AFRICA IS SAID TO HAVE A 2%
INSURANCE PENETRATION ACROSS
THE CONTINENT. WHAT ROLE CAN
REINSURERS PLAY TO INCREASE
THAT?
DV: I think it may be difficult for non-
life reinsurers to have a major impact
increasing this level of penetration,
because traditionally it is the role of
the reinsurer to provide capacity and
expertise in the area of reinsurance
solutions, whereas the primary insurers
have an important role to play by
designing products and solutions for
the market. As reinsurers we might
have a role to play when it comes
to micro-insurance, specifically for
agriculture, but I think we are being
restrained by the lack of funding in this
area. Perhaps the government has an
important role to play in conjunction
with the reinsurers. As the banking
sector develops in emerging markets
we will see the insurance sector
following suit. This should allow certain
insurance products to get to market via
this channel, and it will also allow an
insurer access to premium collection,
which is a big problem on the rest of
the continent.
VM: Insurance and reinsurance in
Africa are primarily focused on the
the established commercial businesses.
Insurance penetration will probably
markedly increase as more investment
ventures and employees enter the
formal economy fold. Governments and
entrepreneurs in general play a critical
role in expanding the formal economy,
which would improve insurance
penetration. Reinsurers are generally
not geared to be catalysts for growth in
insurance penetration, but strategically
some of the reinsurers have promoted
micro-insurance ventures and other
technology driven insurance distribution
channels that could in future increase
insurance penetration. The direct
insurer plays a more direct role in
increasing insurance penetration and
boosting confidence in the industry.
Most of the African economies are cash
economies and this also limits growth
in the industry as prioritisation of needs
does not include insurance.
HAVE WE SEEN AN INCREASED
COVER JUNE 2014
2014/06/19 5:29 PM

INVOLVEMENT BY REINSURERS IN
THE MICRO-INSURANCE SPACE, OR
DO COMMERCIAL AND INDUSTRIAL
RISKS STILL DOMINATE?
DV: Reinsurers have tried to develop
micro-insurance products particularly
for agriculture, but this has not been
that successful, because of the lack of
funding when it comes to getting the
products to market. Most reinsurers
still focus on the traditional business
commercial, corporate, motor and
more recently they have started writing
more oil and energy, and to a lesser
extend renewable energy. Personal
lines business is almost non-existent on
the continent.
COVER JUNE 2014
June 14.indd 27
VM: Micro-insurance does not appear
to be commercially viable yet without
financial support from governments or
donors. Some reinsurers have provided
technical and skills support to some of
the projects, and partnership capacity
where necessary.
WHERE DO YOU SEE GROWTH IN
INSURANCE AND REINSURANCE
BUSINESS IN SOUTH AFRICA AND
ON THE CONTINENT?
assets, middle income insurance
DV: In South Africa we believe that the
primary insurance market is reaching
saturation point as our economy
has not grown in real terms there
is too much capacity and therefore
competition in the market.
From a reinsurance perspective we are
concerned with the level of premium
that leaves the market, as a lot of this
business can be reinsured locally. Most
local reinsurers write a big proportional
book of business and they follow the
fortune of the primary market, so if
you do not see growth in this sector of
the market it would have an impact on
the reinsurance sector.
We think there are more opportunities
for growth on the continent as most
markets are still under developed
compared to South Africa. The
countries that are rich in resources,
especially oil, should offer more
growth opportunities as the banking
sector and the rising middle class
emerge. But they must make sure
that the wealth that is generated by
these resources is invested back into
the economy, by way of infrastructural
development.
Locally registered reinsurers have
benefitted from domestication
of certain classes of insurance
and reinsurance, as is witnessed
particularly in markets like Nigeria and
Kenya.
VM: It will be across all the sectors as
African economies continue to grow:
construction projects, commissioned
demand will increase, trade, tourism,
and much more.
27
2014/06/19 5:29 PM
 Reinsurance
Opportunity rising in Africa
The new life insurance markets
emerging throughout the
African continent present
several unknowns, as well as an
unusual array of circumstances.
Several emerging economy
countries with large and growing
populations also contain rising
middle classes and significant
GDP growth rates, and are
moving swiftly towards
becoming developed economies.
The markets in these countries could
potentially provide the greatest risk-
reward trade-offs of any life insurance
markets in the world. This bodes well
for global insurers seeking to establish
a presence in these markets, local
insurers wishing to expand market
share, and reinsurers seeking to
enhance the growth and development
of these markets.
Africa, however, is not without risk.
Increasing competition, regulatory
constraints and the greater market
volatility means insurers and reinsurers
in these markets have very different
hurdles to overcome compared to
28
June 14.indd 28
mature markets. New and emerging
markets also generate higher earnings
volatility for insurers than mature
markets, especially in the early years
of market development, requiring
companies to hold more capital in
order to satisfy solvency requirements.
This necessity can hamper growth, as it
reduces the amount of capital that can
be deployed to strengthen and enhance
market presence.
THE MARKETS IN THESE COUNTRIES
COULD POTENTIALLY PROVIDE THE
GREATEST RISK-REWARD TRADE-
OFFS OF ANY LIFE INSURANCE
MARKETS IN THE WORLD.
By removing a portion of risk,
reinsurance can help life insurers
in Africa stabilise results, enhance
capital efficiency, reduce volatility and
solvency concerns and enable insurers
to focus on business growth.
Global life reinsurers can also offer
local and global life insurers in Africa
extensive knowledge and expertise.
Many have moved incrementally
through each level of market
development in other emerging and
developing markets as well as mature
markets. Reinsurers that understand
the risks involved in entering new
markets can leverage their strategic
experience to help insurers in Africa
improve penetration of more traditional
forms of life insurance in local
populations and provide global best
practices in many operational areas.
In addition, global reinsurers can assist
insurers in innovating for Africas fast-
expanding mobile communications
channel today, the distribution
channel of choice for many financial
services companies doing business in
Africa and their customers helping
to leverage mobiles distribution
capabilities. Reinsurers can also enable
enhancement of the more traditional
areas of pricing, underwriting and
claims.
Most important, however, is that for
Africa, an approach is needed that
recognises the unique aspects of each
of the continents many insurance
markets, taking into account products
and distribution as well as evolving
demographics and regulation. Life
reinsurers with a track record for
innovation can greatly assist insurers
focusing on Africa and in doing so play
a pivotal role in shaping and enhancing
Africas future life insurance markets.
JARED GODWIN,
Business Development Actuary,
Africa, RGA South Africa
COVER JUNE 2014
2014/06/19 5:29 PM
 Risk credibility

Capital credibility

Street credibility

Face any challenge with a partner who

knows the way around.

Word on the street is we know risks. In complex times, it is important to partner with a
reliable expert who has all risks in view. As a global reinsurer, we work together with you
to create solutions that fit your needs. Helping you master any challenge.

Find out how at www.munichre.com

NOT IF, BUT HOW

Munich_RE_Campaign_RZ_05.indd
Untitled-5 1 1 08.08.12 09:16
2014/06/19 5:40 PM
 Reinsurance
Reinsurance Africa:
A catalyst for growth
Africas insurance and reinsurance
markets continue to attract close
scrutiny and rising interest from
financial market participants
around the world.
These include the mature markets of
the United States and Europe, which
have historically had a presence
on the continent, as well as newer
entrants from emerging BRICS (Brazil,
Russia, India, China and South Africa)
countries. In addition, robust regional
cross-border activity, with Africa-based
insurance groups buying other regional
insurance companies, has created a
vibrant landscape.
A number of African economies are
growing by more than 5%, much
faster than the mature markets, with
drivers such as energy, construction
and mining projects. According to the
World Bank, Africa economically was
the worlds fastest growing continent
in 2013, and GDP is expected to
rise by an average of more than 6%
annually between 2013 and 2023.
Despite this, many insurance markets
in Africa are small by international
standards. Insurance penetration, while
growing, is low at less than 1% overall,
and insurers have faced challenges
30
June 14.indd 30
that include political risks, greater
competition and increases in minimum
capital levels.
A NUMBER OF AFRICAN
ECONOMIES ARE GROWING BY
MORE THAN 5%, MUCH FASTER
THAN THE MATURE MARKETS
Insurers operating in Africa rely
heavily on reinsurance (in particular
for large corporate risks), and as in
other emerging markets, often act
as fronting vehicles, retaining less
than 5% of each risk in some cases.
This can be seen as a reflection of
an insurers limited underwriting
capacities and the expertise needed
to maintain high retention levels.
Considering the scale of these large
corporate risks (especially with regard
to oil and energy projects in the
region), reinsurers are able to support
local insurers through the provision
of additional technical expertise and
sophisticated underwriting skills.
To ensure that Africas insurance
markets are geared up for sustained
growth, A.M. Best believes that
reinsurers must also:
Fill the gap left by the decreasing
involvement of governments
through state-owned, national
reinsurers and the continued
phasing out of compulsory
cession arrangements, and;
Share risk, expertise and profits
through pooling arrangements
prior to any cessions to the
international market.
Local reinsurers, in particular, must
be mindful of the attitude of the
international reinsurance market in
view of their dependence on this
market for retrocession protection, and
be proactive in dealing with any market
liquidity or regulatory issues that might
create negative sentiment towards local
and regional markets.
A particular challenge for overseas
reinsurers is that they must be seen
to be developing Africas insurance
markets and not simply interested in
reaping the benefits of short-term
participation. For African reinsurers,
there is a need to achieve both critical
mass and stronger credit profiles
to enable them to be effective
participants in a region that while
creating much excitement and
significant opportunities, has also
created increased levels of competition.
DENIESE IMOUKHUEDE,
Associate Director,
Analytics, A.M. Best
COVER JUNE 2014
2014/06/19 5:29 PM
Untitled-5 1 2014/06/19 5:40 PM
 Reinsurance
Reinsurance in the
life and non-life space
Hannover Re Africa Group has
been assisting their clients in the
insurance industry on the continent
for over a decade now, in both the
life and non-life space. Mwelisi
Mkwananzi (top), Gideon Ochar
(middle) and Maxwell Chilikhuma
(bottom) of Hannover Re
shared their insights on the role
of reinsurance in the growth of
insurance in Africa in this article.
THE INSURANCE OPPORTUNITIES
IN AFRICA ARE TYPICALLY
CHARACTERISED BY:
relatively undeveloped markets
offering a few simple insurance lines;
low penetration rates (especially
in the case of life insurance);
high industry growth rates (albeit
off relatively small bases, especially
in the case of life insurance);
32
June 14.indd 32
relatively high and stable
margins; and
high GDP growth rates;
The upside potential for insurance in
Africa is enormous, albeit to varying
extents within different countries.
Markets characterised by high levels
of competition have arisen, prompting
market players to find new growth
opportunities via alternative distribution
channels, finding new target markets
or improving product coverage and
pricing.
The role of reinsurance as catalyst
for growing this opportunity ranges
from the provision of conventional
reinsurance offerings to the
development of novel solutions
tailored to the African market(s).
Reinsurers need to think like
the end consumer and abandon
misconceptions that have underscored
some of the false starts witnessed on
the continent.
Mwelisi and Gideon are from the life and
health side of Hannover Res operations.
Treating Africa as one big country, rather
than a complex interaction of cultural,
political and regulatory dynamics, is a
recipe for failure. The lure of applying
a copy and paste approach, where
successes from one territory are blindly
applied to another, is difficult to resist,
but inevitably delivers underwhelming
results.
Success and growth in insurance in
Africa will be strongly influenced by
the application of core marketing
principles with market orientation as
a key driver. This will require a good
understanding of and responsiveness to
the purchasing behaviour of different
target markets, and formulating
strategies to drive demand based on
this understanding.
Reinsurers are required to develop
skills transfer strategies continuously
to equip insurers to manage the
complexities of risk management,
compliance and good governance.
Access to quality data will be vital
in analysing and monitoring trends
reinsurers will play a major part in this.
On the non-life side, Maxwell
Chilikhuma, the Senior Manager
responsible for sub-Saharan Africa
(excluding South Africa), advises
that non-life insurance premiums are
substantially larger than life and health
premiums in markets outside South
Africa.
Motor business is the largest non-
life class of business, because motor
third party insurance is compulsory
in most countries, leading to higher
penetration. Maxwell highlights that
in countries like Angola and Nigeria
developments in the energy industry
will see an increase in the demand for
insurance solutions in the energy and
general engineering industries.
With the recent discovery and
development of the oil and energy
industry in Ghana there has been
a need to provide insurance and
reinsurance coverage for those
industries. Similarly, the diamond
industries in Angola and Botswana
require tailored insurance solutions.
With the economic resilience of the
African continent and the potential of
further economic growth, the need for
insurance and reinsurance products
will grow further. We have seen the
need to provide solutions ranging from
agriculture to credit and bond business.
In conclusion, growing both insurance
markets on the continent will not be
without challenges. At Hannover Re,
we recognise this and have adopted a
partnership approach in driving growth
initiatives in the African insurance
industry in both the life and non-life
markets.
This varies from developing tools to
facilitate non-medical underwriting at
the point-of-sale in the life space to
developing and delivering extensive
training programmes geared at
the African insurance professional.
Hannover Re is staking its claim to
being an effective catalyst in the
process of turning Africas insurance
potential into reality.
COVER JUNE 2014
2014/06/19 5:29 PM
 Emeritus Reinsurance Company
SA Limited embraces a Pan African
business model as we join the competitive
South African insurance industry.

Tel: +27 11 783 8517 / +27 11 783 6549

Fax: +27 11 783 5440
info@emeritusre.co.za
www.emeritusre.co.za Enterprising Reliable Solutions
Enterprising Reliable Solutions

Untitled-5 1 2014/06/19 5:41 PM

 Wildlife woes
How we are insuring SAs irreplaceable commodities
When you think of Africa, what thoughts invade your mind? The warm sun beating
on your face, as you wade through the long dry grass? A massive waterhole acting
as a mirror to the rest of the exquisite surroundings, its quiet only disturbed by the
odd splash of a sh? Do you envision wild animals grazing by the edge of the water,
while a crocodile stalks his next meal?

Africa is characterised by her unique sunsets and roaming game. Some South
Africans have capitalised on this beauty by entering into a niche market game
breeding. COVERs Taryn Kerr went on a hunt to nd South Africas elite game
insurers, to nd out the complexities of insuring this new and exciting market.

34 COVER JUNE 2014

June 14.indd 34 2014/06/19 5:29 PM

 JHB 45778
Together we can
grab Worry by
the scruff of its neck,
poke it in the eye
and give it
a good old wedgie.
Oh, and we can also sell insurance together.

Were super proud of the lasting partnerships were building with

each and every one of you, our brokers. When we work with
people like you, forehead veins dont throb, swear words arent hurled,
and everyones lives become a lot less worrisome.

personal commercial corporate investments Hollard Short-term, Hollard Life and Hollard Investments are Authorised Financial Services Providers.

Untitled-5 1 2014/06/19 5:41 PM

 Wildlife
Insurance, genetics
and the game industry
Kuda has positioned itself as
a major player in the Game
Insurance market to complement
its already successful Bloodstock
and Sports Horse products.
The 2014 Game season is now in
full swing and although expected, it
is comforting to see previous price
trends being confirmed and some new
very exciting developments already
happening. The demand for top
quality breeding animals is driving
prices higher with Njalas being the one
species that has seen record prices at
every auction. All indications are that
these trends will continue for some
years to come albeit that the pace of
growth might slow down a touch, says
Wehann Smith, CEO of Kuda.
THE HUNT FOR TOP QUALITY
GENETICS MAKES PLAYING
IN THE GAME INDUSTRY AN
EXPENSIVE BUSINESS AND,
AS WITH ALL EXPENSIVE
ASSETS, YOU SHOULD INSURE.
Game farmers historically did not insure
their animals. Animals were bred for
hunting purposes and typically the
best genetics were killed first as they
produced the best trophies. Everything
has changed in the last 10 years. The
36
June 14.indd 36
hunt for prime genetics is the only
single driver of all the exceptional
prices which have been seen recently
and with that has come an increase in
the use of insurance to protect these
valuable assets.
Insuring your prised animal is, and
never will be to replace that specific
animal, but it will put you in a much
better financial position to be able to
hunt for something with similar genes.
Replacing an animal of this kind in a
herd, with an animal of similar qualities
is a non-negotiable as the genetics
and breeding program depends on
continuously bringing in new and better
genetics.
THE INVESTMENT RETURNS
IN THE GAME INDUSTRY
MAKES IT PRIME GENETICS
IN THE INVESTMENT WORLD
BUT THESE PAPER PROFITS
NEED TO BE PROTECTED.
Prime genetics are in very short supply
currently and will be in short supply for
some years to come. The only sensible
conclusion to be drawn from this fact
is that supply and demand will keep on
driving up the prices of good quality
animals.
The number of new entrants in the
game industry is staggering, the
breeding of game is fast replacing
rugby as the main topic around our
South Africans famous braai fires
and insuring your investment against
unforeseen losses becomes a necessity.
The investment returns in the game
industry makes it Prime Genetics in
the investment world but these paper
profits need to be protected.
There are numerous risk factors which
can influence you realising the return
on your investment, but fortunately
these factors are all Insurable Risks,
WEHANN SMITH
CEO, Kuda Insurance
& SHARON PATERSON
CEO Infiniti Insurance
says Sharon Paterson, CEO of Infiniti
Insurance, the insurer underwriting the
Kuda book of business.
Wehann Smith expands by saying that
it would be foolhardy to invest your
efforts tending to your animals with
the greatest of care, only to take the
risk of not safeguarding your animals to
ensure they reach the final investment
realisation phase. This phase is the
last step in banking your profits and
its the most important step in turning
paper profits into real returns.
There are a number of factors that
can contribute to game mortality, but
for the purpose of this article we will
look at only those which the insurance
industry has identified as Insurable
Risks.
Most animals that are being moved,
either for re-location purposes on the
farm, or when sold - are routinely
tranquilised. The risks involved in
this process are numerous, but can
be complicated or mitigated by the
experience of the helicopter pilot,
the Vet, the ground team and the
weather to name but a few factors.
No matter how well prepared or
experienced the teams are, there
is always a risk of mortality.
COVER JUNE 2014
2014/06/19 5:29 PM

After capture the animals have to
be transported either to the buyers
farm - or if the animals are to be
auctioned, to the Auction Holding
Pens. The risks involved in the
transportation process are numerous
one such risk could be poor
ventilation of the transporters trucks.
In all cases of handling game
there is by default a measure of
stress to the animal. The animals
concerned are wild by nature and
being handled can result in stress
causing death. In some instances
they die from stress-related causes
shortly after their release.
Theft of game is slowly but surely
starting to raise its ugly head. The
prices for animals makes it very
lucrative for thieves but fortunately
the introduction of DNA sampling
and building of DNA databases will
eventually curb this problem.
These factors have been identified by
insurers as Insurable Risks, and hence
neither the buyer nor seller need take
the risk of total loss as this can be
insured against.
IMPORTANT ASPECTS WHEN
CHOOSING AN INSURER
It is common knowledge in the game
industry that certain species of game
are more resilient to the process of
COVER JUNE 2014
June 14.indd 37
capture, translocation and being held in
holding pens. It is therefore important
to choose an Insurer that understands
the risks associated with the different
game species and factors that can add
to or mitigate these risks.
It is also important to choose an
insurer that understands that each
individual or group of individuals
have different risk profiles. Having an
insurer that determines your individual
risk profile, which is then reflected in
the premium charged, is a win-win
situation - and one grounded to a very
large extent in a partnership with your
insurer. You need to choose an insurer
with a partnership philosophy.
It is important to note that when an
insurer agrees to grant you cover for
a certain risk that it is transferring the
risk from you in return for a premium
paid. Because they have taken over the
risk from you, the insurer has the right
to set requirements as to the preferred
vet, game capturer and transporter
to be used. These should be seen as
risk mitigating factors as the ultimate
goal of the insured and the Insurer is
to deliver the animals alive and free of
harm at their final destination.
CAPACITY
When it comes to capacity make sure
to choose a Prime Genetics insurer.
IT IS COMMON KNOWLEDGE
IN THE GAME INDUSTRY THAT
CERTAIN SPECIES OF GAME
ARE MORE RESILIENT TO
THE PROCESS OF CAPTURE,
TRANSLOCATION AND BEING
HELD IN HOLDING PENS.
With the high prices that good quality
animals are reaching at auctions,
one of the most important factors
in choosing an insurer is capacity.
Make sure that your Insurer has the
underwriting capacity to insure your
existing high-valued animals, and be
sure that you check the underwriting
capacity of your Insurer before going to
an auction to buy a multimillion rand
animal.
WHAT DO THE UNDERWRITERS
SAY?
Kuda are spot on in their assessments
of this highly specialised field. The
game industry is not to be entered
into lightly. Its essential for an in
Insurer to do their homework before
considering underwriting any new
class of business and part of this
process is to roll up your sleeves
and understand the environment
so that you can assess areas of
risk. In addition you have to have
implicit trust in the expertise of your
underwriter. We are really excited to
enter this new and fast growing area
of business which is so much part of
the South African culture with our
partners, Kuda, says Sharon Paterson
of Infiniti Insurance Limited.
An investment was only good if you
were able to realise it at the end.
37
2014/06/23 6:00 PM
 Wildlife

The game breeding game

Game breeding has become a
new investment opportunity,
with many millions being spent
on securing exquisite blood
lines. Over the past six years,
AnimalSure Administrators (Pty)
Ltd has become a market leader
in game & livestock insurance.
In their six years of existance,
they have built up a credible
and proven track record to date.
Donald Munro, MD AnimalSure,
spoke to COVER about the
insurance of this niche and
complex market.

The value of individual animals has

increased significantly over the last
couple of years. For example six
years ago, the average buffalo was
sold for approximately R150 000, at an
auction. Currently the average buffalo
is being sold for over R2,5 million, with
one buffalo fetching an astonishing
R46 million. The last two big auctions
that were insured by AnimalSure, had
a turnover of more than R300 million
and overall, the wildlife industry had
an estimated turn over of R8 billion last
year.

It is clear that it is crucial for farmers

to mitigate their risk and partner with
an established insurer who is able to
manage the risk. A new investor or
established farmer cannot afford to
lose an animal, as it not only has an
impact on the immediate financial
loss, but also the delay in the breeding
programme. Imagine the loss to a
game farm when a trophy animal dies
before a scheduled hunt, or a major
attraction animal is poached on a
game viewing reserve.
A game owner thus needs to protect its
investment, and a tailor-made package
is often more apt than a standard
cover. AnimalSure are one such
company that provides and designs
a variety of insurance packages in
order to partner up with the industry,
in protecting their investments. We
offer cover from the actual capture
to annual All Risk Mortality cover,
which includes death as a result of
illness, disease, injury, poaching, fire &
lightning.
Each species has its own strengths and
weaknesses and ability to adapt to a
new environment. The underwriter
therefore needs to have an in-depth
understanding of each species, their
value and importantly, how they
must be managed. AnimalSure also
pre-assesses each of its larger risks,
by making use of our team of top
ecologist and vets to ensure that the
all necessary risk management tools
are in place, in order to minimise the
total exposure.
The main challenge lies in finding the
ever growing requirement for more
capacity on individual animals. The role
of reinsurers therefore becomes more
important in understanding the market
in order for them to participate in the
risk. Many players have entered and
exited this market, showing the crucial
need for an established company to be
on the forefront of redefining the game
insurance industry.
AnimalSure is the only company that
still operates under its original name
and values, and has, to date, paid out
over a R100 million in claims.

38 COVER JUNE 2014

June 14.indd 38 2014/06/19 5:29 PM

Untitled-5 1 2014/06/19 5:41 PM
 Short-term

The customer is at the

centre of every decision
This month AIGs Eric Dom continues his six-part series on liability as he unpacks product
safety legislation and standards around the world and in South Africa when he asks, How
well labelled are your products? Santams monthly survey reveals that policyholders value
the services of intermediaries, and Emerald sends their corporate property and associated
engineering risks specialists into the rest of Africa, where a one-size-ts-all approach wont
do, and careful attention to detail and precision is a necessity.

Product Liability:
How well labelled are your products?
Preventing product liability claims
can be a simple matter of providing
pertinent information to the user. In
other words, just how well labelled
EVEN PRODUCTS WHICH ARE
DESIGNED AND MANUFACTURED TO
THE HIGHEST SAFETY STANDARDS
CAN STILL BE FOUND TO BE UNSAFE

are your products?

In dealing with the potential risk of

product liability, manufacturers and
distributors must ensure that the
products they make or introduce into
the market are safe for their intended
uses. However, even products which
are designed and manufactured to the
highest safety standards can still be
found to be unsafe if they are supplied
with inadequate labelling which omits
essential safety information.
Product safety legislation and
standards around the world state that
manufacturers should inform users of
product safety risks and what must be
done to stay safe.
While it may seem simple on the
face of it, in reality implementing
guidance in the design and production
of a reasonably safe product is a
complex process. As discussed in the
preceding article which examined
Product Safety Risk Assessment, there
is no such thing as absolute safety.
This directly complicates the task of
providing adequate safety information
on the product label. Furthermore,
the physical space available on many
products is restricted, while other
ERIC DOM,
considerations (such as aesthetic) also Underwriting Manager Liabilities, Global
come into play. Casualty, AIG South Africa Limited

40 COVER JUNE 2014

June 14.indd 40 2014/06/19 5:30 PM


However, many claims against
manufacturers result when those
manufacturers have simply followed
general custom when introducing
new products, and not developed
specific warnings and other information
for those products. In other cases,
manufacturers have failed to
understand the importance of risk
communication and their warnings
have been found to be inadequate.
For example, a biscuit manufacturer
produces different types of biscuits
successfully for several years and has
a big market share. The manufacturer
has not changed their labelling over
this period of time. Recently, the
company introduced another product
which had nuts in it; the labels failed
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COVER JUNE 2014
June 14.indd 41
to warn consumers, which resulted
in some experiencing severe allergic
reactions.
This brings us back to the Product
Safety Risk Assessment. This process
is absolutely fundamental to the
development of effective product
warnings which are presented on the
labelling. Without the information
provided by this exercise, a
manufacturer cannot accurately assess
all reasonable risks and, following
from that knowledge, ascertain what
warnings are required.
In developing suitable warnings
and other risk communications, a
manufacturer has no simple look-up
chart that will tell them everything
they must do. Instead, the safety
of individual products needs to be
assessed, and labels created carrying
applicable warnings which are
readily understandable by the target
audience.
Courts increasingly use human factors
specialists as expert witnesses to
testify on how warnings have failed.
In what is an increasingly litigious
environment, it may be advisable for
manufacturers to seek out and use
such experts before a product liability
claim occurs.
In any event, it remains a fundamental
necessity for manufacturers to
evaluate products thoroughly and
provide appropriate warnings.
Those that fail to do so, or cannot
produce scientifically supportable
evidence of suitable rigour in the
product development process, leave
themselves at risk.
This article is the third edition of a six
part series on liability by Eric Dom,
AIG South Africa Limited. In the next
article, we go into some detail on the
topic of product warnings.
AIGs web-based Product Liability
Service is a training system which helps
manage product liability risks. Courses
cover a variety of topics including
management, safety warnings, risk
communication, legislation and
standards, to promote good risk
management. The service is supported
by tools including a model corporate
product safety policy statement, a self
assessment audit and a risk assessment
tool.
41
2014/06/19 5:30 PM
 Short-term
Consumers trust and
value their intermediary
Each month Santam unpacks an interesting insurance
topic with research derived from exclusive Santam client
surveys. This month the short-term insurer focuses on
consumers opinions about their intermediaries.
THE INTERMEDIARY A TRUSTED
PARTNER AND VALUED ADVISOR
According to a monthly consumer
insight survey conducted by Santam,
policyholders are satisfied with the
overall service they receive from their
intermediaries and they also trust and
value the advice that is provided to
them.
The survey revealed that the vast
majority of respondents (97%)
expressed satisfaction with the way
they are treated by their intermediary.
This demonstrates the strength of the
intermediary model in the short-term
insurance business and the value it
holds for the insured. Our policyholders
are in a good position to assess the
performance of intermediaries as they
interact with them on a daily basis.
The 2014 South African Customer
Satisfaction Index (SAcsi) identified
Santam as the industry leader this year
by scoring 2,2% above the short-term
insurance industry average.
Close to 98% of respondents in
the Santam survey confirmed that
their intermediary has appropriate
experience and always provides
accurate information.
97% expressed
satisfaction with
the way they are
treated by their
intermediary.
42
June 14.indd 42
Our policyholders value the face-to-
face service and advice provided by
intermediaries. As indicated by the
survey results, policyholders have trust
in their intermediarys competence and
they believe they have the necessary
skills to assist them in choosing tailored
and cost effective insurance. This
relationship is crucial between the
two parties, as policyholders depend
on their intermediarys knowledge
and expertise to guide them and help
manage their risks accordingly.
CLAIMS EXPERIENCE KEY TO
INTERMEDIARYS PERFORMANCE
Claims settlement the core of
insurance policies bonds insurers and
their policyholders. Respondents were
happy with the way their claims are
handled by their intermediary. Even
those who have had claims repudiated
were adamant that their intermediary
wasnt at fault.
Paying out claims is the essence of
insurance and it is an area where
policyholders need their intermediaries
and insurers the most.
Intermediaries represent and assist their
clients to ensure a fair and successful
settlement. The intermediarys
knowledge of policy wording and their
good business relationship with insurers
makes it easy for both parties to work
together to assist their mutual client
as far as possible in settling a claim.
Santam paid out 99% of all claims
made last year.
The instrumental role of intermediaries
in the claims settlement process is
even more evident when a catastrophe
strikes. In the aftermath of the
devastating St Francis Bay fire, in the
seaside village some 90 kilometres
EDWARD GIBBENS,
Santams Executive Head of
Commercial and Personal Insurance
south of Port Elizabeth that ruined
close to 80 houses two years ago,
insurance claims amounted in the
region of R40 million and Santam
settled all of its claims. The settlement
was down to the work of intermediaries
who were on the ground at the time
and not only offered emotional support
to the victims, but also accompanied
them in the claims process and ensured
a fair and rapid settlement.
KEEPING POLICYHOLDERS
UPDATED
Although generally satisfied with their
intermediaries, more than half of the
survey respondents indicated that they
require a more proactive approach
from their intermediary in terms of
new products, policy changes and
requirements.
Consumers want to be kept informed
at all times. They are becoming more
aware and conscious of changes taking
place in the short-term insurance
industry and how these can affect
them. Consumers demand a proactive
communication approach from their
intermediary on regulations like TCF
(Treating Customer Fairly) and new
products that can enhance their short-
term insurance experience.
Both intermediaries and insurers need
to re-evaluate their approach and
how they sell their insurance products
constantly as the needs of consumers
are changing, and it is crucial to adapt
accordingly. Santam has invested in
improving communication channels
with its intermediaries in order to reach
more policyholders and attend to their
requirements faster.
COVER JUNE 2014
2014/06/19 5:30 PM
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Untitled-5 1 2014/06/19 5:43 PM

 Short-term
Emerald a serious
African player for risks
As a niche company within the
Santam Group, Emerald Risk
Transfer focuses on analysing and
underwriting purely corporate
property and associated
engineering risks throughout
Africa and the Indian Ocean
Islands.
All our staff members, from
underwriting to risk engineering and
claims, are specialists in dealing with
corporate business and the unique
hazards and risks that these businesses
face from a loss exposure perspective.
These specialists within Emerald have
all been exposed to various types of
risks across the continent, from retail
groups to mining and manufacturing,
and to processing and the hospitality
industry.
Africa is a unique continent and first-
hand experience and on the ground
exposure to our clients business
is imperative to understanding the
specific hazards and risks that each
of our clients face in the day-to-day
running of their business. We believe
that you cant underwrite a risk from
behind a desk; one needs to get ones
44
June 14.indd 44
hands dirty and communicate with the Emerald has access to R1,5 billion
client face-to-face. The brokers who treaty capacity for risks domiciled in
intermediate these clients risks are South Africa and Namibia, and US$
also specialists in corporate business 100 million for sub-Saharan Africa and
insurance, and together with Emerald, Indian Ocean risks. This puts Emerald
we are able to offer the client a in a position to be a serious African
product that is designed around their player for risks in these territories.
specific business risks. This is further complemented by our
access to engineering capacity of
Homogenous products have their place R750million for SA and Namibia and
in the insurance industry, however US$100 million for the rest of Africa;
corporate businesses all face different with additional group capacity available
individual challenges in their risk above these figures.
management programmes and having
an insurance product that is designed
around their needs is part of what we
at Emerald see as a critical area of any
businesss strategic continuity plan.
Financial security and an insurers
ability to pay claims should be part of
the clients decision making process
when putting together an insurance
programme, and Santams international
Standard & Poors rating of A-, is part of
our offering to clients peace of mind
when our product is purchased.
Santam is expanding into Africa and
Asia, and Emerald is there with them,
offering our expertise and experience,
to be part of existing and future clients CHRIS POTTER,
Portfolio Executive,
risks management programmes. Emerald Risk Transfer
COVER JUNE 2014
2014/06/19 5:30 PM
Untitled-5 1 2014/06/19 5:43 PM
 Short-term

Benefits of insurance
survey reports BY STEYN PIETERSE

The intention of this article is

to provide an overview of what
an insurance survey report
entails. It may assist brokers
and underwriting staff of short-
term insurance companies to
have a better understanding of
the extent of risks evaluation,
and why insurers are sometimes
reluctant to quote on a risk, or
to decide to adjust premiums
upwards, due to possible higher
risk exposure. The ultimate
goal is to have a functional risk
appraisal and a risk mitigation
management process in place.

In the insurance industry, insurance
survey reports are necessary to provide
insurers and reinsurers with an opinion
on the specific risk or category of
risks that are carried on behalf of the
insured.
To do such a survey report, the content
requires that the following points (not
necessarily in order of importance)
should be reported on:
Confirm the physical location
of the relevant property;
Evaluate the structural design and
strength of the relevant property
and its ability to withstand exposure
against the weather conditions
prevalent to the specific area in
which the property is located;
Determine the extent of maintenance
and upkeep done to keep the
building in good condition and to
ensure it remains suitable to fulfil the
purpose it was originally erected for;

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June 14.indd 46 2014/06/19 5:30 PM

 Assess to what extent the construction complies
with national building regulations insofar as
it is applicable to the design and intended
use of the specific building to be insured;

Confirm, evaluate and check the fire equipment

and the equipments annual maintenance
schedules as per the fire regulations specified
in the national building regulations;

Review security measures (live and static)

that are applicable to the property and the
surrounding areas. These aspects could have a
major influence on the response time should a fire
occur and emergency assistance be required;

Compare the insured partys indicated monetary

value of the property as shown on the policy
schedule, with the surveyors estimated
replacement value. This figure will roughly
indicate whether the property is over or under
insured, which could give rise to the risk of
applying the average clause under the policy;

Enquire and investigate previous claims

made on the relevant property thus
ensuring the bona fides of the client;

Evaluate the adjacent buildings or vacant stands and

street exposure with regards to risks of unlawful
entry and vehicle accidents occurring, which
could damage perimeter walls or buildings; and

Consider the risk of a possible public

liability claim, due to negligence or
otherwise, on the part of the insured.

The evaluation of the visible fire equipment is of high

importance to insurers and reinsurers who consider
compliance by the insured to the fire regulations of
the national building regulations a high priority.

The most important reason for an insurance survey

report is to provide the insurer and reinsurer with an
expert opinion on the maximum probable loss (MPL)
or estimated maximum loss (EML) exposure measure,
in rating certain classes of risk.

On completion of the insurance survey report, it will

be an informative report on whether the subject
risk or risks are of a high, medium or low exposure.
This opinion will eventually provide the insurer and
reinsurer with a basis to assess the specific risk
or risks categories, resulting in a fair and realistic
premium for the Insured.

Steyn Pieterse is a professional valuer, a short-term

insurance surveyor, and a retired director of Natsure
Ltd a short-term insurer, where he was responsible
for all survey reports and the property portfolio.

COVER JUNE 2014 47

June 14.indd 47 2014/06/19 5:30 PM


Fulcrum: fuelling an industry
T
aryn from COVER sat
down with Vaughan
Jones, CEO of the
Fulcrum Group, to chat about
their specialist nancier chairman, Ian Bain and myself and later on
business, and how they play
a pivotal role in making the
insurance markets wheels
turn smoother.
48
Coffee_JUNE.indd 1
Coffee with
COVER
Please provide me with a brief us. It was a nice t for us, as a one of a kind
company, with around R4,5 billion premium
overview of Fulcrums history?
collections a year by then.
The name, The Fulcrum Group, has been
We knew that we had to be able to
around for two years or so. The business
really started from a discussion between our
demonstrate to the broker and insurance
market that we could be responsible
custodians of the cash that we were
our partners Lombard Insurance Group. As managing on their behalf, and secondly, we
a rst step, we bought a premium nance knew we needed to bring expertise on board
or specialist lending business out of the that would allow us to optimize the yield
Glenrand stable. on the cash that we were managing. We
brought onboard a specialist treasury and
Ian Bain was quite instrumental in originally
asset manager, Danie Berrange, to start up
setting up that business about ten years
Fulcrum Treasury. By the time we got to the
before. We bought the business after he
beginning of 2012, we had three businesses
caught wind that it was on the market and
(nance, treasury asset management and
thought that Lombard Insurance would be a
good home for it.
Thereafter we acquired a premium nance
business from Nedbank and had a sizeable
premium nance book quite soon, funding
premiums of around R1 million a year. The
part of the puzzle that was always missing
was a collections side to the business, which "Ian Bain was quite
we bought out of the Zurich Group. That
gave us the ability to offer the brokers a instrumental in
sweeter product that they were asking of
originally setting up
that business about
ten years before. "
Vaughan Jones,
CEO of the
Fulcrum Group
2014/06/24 9:51 AM
 collections) and we needed to come up with
a name that identied what we did. Fulcrum
was born out of the link that it has to being a
pivotal player in the insurance market.
With your broad view of back
ofce activity within the broker
market, how have you seen brokers
respond to the major changes in
technology and regulation to back
ofce functions? What are the main
challenges in order to cope?
The landscape and focus in general has
changed dramatically. With the regulatory
requirements and legislation that has come
to pass, brokers are expected to have a lot
more infrastructure sitting behind them.
The traditional small to medium enterprise
brokers margins have been eroded on the
back of that and, I guess, what we are trying
to do is get to a point where we can take
much of that back ofce infrastructure and
allow the brokers to benet off the economies
of scale of our collections platform,
administrating around R8,5 billion a year. We
"By the time we got
to the beginning
of 2012, we had
three businesses
(finance, treasury,
asset management
and collections)"
"People are taking
cash holdings far
more seriously
these days, and oten
enlist the expertise
of the specialists. "
Coffee_JUNE.indd 2
also have some buying power with the banks
in terms of reducing the transaction costs
and, from a compliance sense, our expertise
allows some of the onerous compliance
requirements to be looked after by Fulcrum.
Margins have been under pressure,
and we have seen a few big loss
events over the past few years. How
are you experiencing cash ows
within the short-term industry?
On the collections side, in terms of
premiums that we are collecting, growth
has been fairly stagnant due to the soft
environment out there. In terms of the
claims experience, this has affected the
underwriting margins, while on the treasury
side, opportunities have been opened up for
us, being an asset management specialist
purely for the insurance market. We now offer
the market the outsource treasury solution,
including administration, for your insurers
that perhaps are not at the level where
they can have strong in-house treasury or
asset management. People are taking cash
holdings far more seriously these days, and
often enlist the expertise of the specialists.
Where do you see the most activity
in Fulcrum Finance?
The biggest part of our business, going
into the next ve years, will be our specialist
lending business, where we have three
products, namely broker acquisition nance,
solvency relief products and general working
capital products.
Our broker acquisition nance product offers
everything from corporate nance advisory
to brokers who are looking at acquiring other
books of business, and advice to those who
want to know if there is a value in certain
books. This section of our business is rather
large, with around R250 million worth of loans
advanced. We see this growing strongly.
Solvency and relief products are focused in
the insurance and UMA space, which has
been born out of the requirements of the
SAM legislation, with capital requirements
becoming more and more onerous. We have
come up with innovative facilities to allow
them to put cash back on their balance sheet,
reducing capital strain. Our vanilla product,
general working capital, looks to offer brokers
working capital facilities to smooth cash ows.
We see growth occurring in areas such as
acquisition nance and solvency relief within
the greater specialist lending business but
watch this space!
What are the main drivers behind
the growth of Fulcrums collections?
The mainstay of our growth, and a very
deliberate strategy, has been good
relationships and therefore it was important
to get very good people onboard. We have
a fantastic head of sales in Izelle van der
Merwe, who has incredible relationships
with the market. We have also taken a very
customer-centric approach to our clients,
putting personality on the other end of the
phone, with people that you can really talk
to. The branding and marketing at Fulcrum is
not simply about doing pretty stuff, but about
understanding the market and understanding
and respecting how brokerages work.
I am of the view that we are not smarter
than anyone else in the market, but what we
do well is understanding what the clients
needs are. A lot of our products have been
born out of listening to what the industry
needs, and coming up with plans around
that. I think we have come a long way in
sorting out some of the operational issues
within a growing business, and we were
delighted to bring someone like Carel Nolte
onboard to focus on how we position the
brand. We have the best man in the market
to drive our brand credibility, which has
become a large focus for us.
49
2014/06/19 11:42 PM
 Working with
WHEELS
Controlling the cost of repair
Managing and supplying the
South African automotive
repair network can be a
challenging assignment. What
should insurers consider before
becoming too heavily involved?
It is commonly applied practice in the
insurance industry to prescribe a list
of suppliers policyholders are required
to use in the event of making a claim.
Few insurers, both within the direct
and traditional environments, permit
their clients to simply opt for a panel
beater or glass repair provider that
is convenient or competitive. These
suppliers must abide by certain checks
and balances in order to be accepted
by the insurer.
Although some might suggest this
practice harms the consumer by
limiting choice and freedom, it is
intended to achieve the opposite.
By working with automotive repair
suppliers that meet a particular
standard of workmanship and
service, insurers are protecting their
policyholders. Here, reliability and
standardisation are the watchwords.
The end goal is a quality repair that will
not fail in the long term due to poor
practice or substandard materials.
Naturally, this approach has a knock on
affect for the insurer. In an increasingly
competitive market it is of paramount
50
June 14.indd 50
importance that these organisations Consolidation, stock management,
minimise cost per claim. Permitting procurement and administration can
consumers to select the aftermarket apply strain to the bottom line.
repair supplier of their choosing would
significantly increase the risk of failure, It is impossible to argue with the
often resulting in yet another claim at assertion that the South African
insurance industry is highly
a later date.
competitive. Recent changes to
This practice would ultimately drive up regulations and an influx of direct
premiums on a national level, resulting insurers have forced traditional insurers
in a higher cost to insure vehicles to investigate new ways of reducing
and assets. Standardising and vetting the cost of claim. In the process, these
suppliers makes good business sense groups have moved to control and
for insurers, but it also protects the supply the repair market. While this
consumers pocket. might be a shrewd tactical move it
is vital to partner with providers that
There is, however, an element understand this market.
associated with this practice that is
impacting insurance providers in an
unexpected manner.
Renewed regulation recently introduced
by the Financial Services Board has
seen many of South Africas larger
providers taking on portions of the
repair supply chain in order to manage
overheads. The majority of traditional
insurers now require panel beaters to
use supplies that originate from their
own extended business networks.
This has resulted in these organisations
taking on significant overheads to
manage the associated processes.
Businesses that were once solely
focused on underwriting their
customers are now heavily involved JUAN HENNING,
in an area that is unfamiliar to their Assistant Executive: Key Accounts
particular level of expertise the & New Business Development for
supply chain. Insurance at Innovation Group
COVER JUNE 2014
2014/06/19 5:30 PM
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Untitled-5 1 2014/06/19 5:44 PM

 Working with
WHEELS
In for the long haul
When it comes to managing
fleets, there are no quick fix
solutions to cutting costs, said
Steven Sutherland, Sales
Director for RSA and Africa at
MiX Telematics.
The industry is currently facing an
increase in road traffic instances,
high fatality figures are placing a
question mark against driver safety and
advanced technology is needed in order
to monitor and manage this reality
better. Technology with its associated
service delivery models should equip
fleet operators with the necessary tools
to manage their assets properly and
should survive their immediate needs
and provide long term benefits and
recurring value.
Sutherland said you get exactly what
you pay for in this industry, an entry
level price for an entry level service.
Fleet management is about more
than just tracking a vehicles position.
Premium fleet management, he said,
monitors both the vehicles as well
as the drivers performance, and the
pricing should include maintenance and
consultation.
52
June 14.indd 52
A transporters core business is
transportation, and he doesnt
necessarily have the investment
in people to run an efficient fleet
management department. Any business
owner with vehicle assets needs fleet
management protection. Sutherland said
a worrying challenge in the industry
is the skills gap you cannot just
offer a box and software, it has to be
a partnership. He said it is important
that fleet managers do their homework
to find a fleet management service
provider who takes responsibility for
the collection and processing of the
telematics data and who is accountable
for the accuracy and consistency of the
resulting data. If you cant monitor
something, you cant manage it, and
youll run your fleets ragged.
Its critical to reduce the amount of
unnecessary kilometres spent on the
road a win-win for the environment
and for your businesss bottom line.
A good fleet management system helps
measure if the driver is on route, on
time, and not extending stops. It helps
to incentivise good driver behaviour, to
make the driver part of the solution.
Premium fleet management provides
the means to be able to measure and
improve driver performance and can
support incentive programmes and
competitions. The driver is not just
a body for compliance, but receives
access to the information and can
monitor himself in the process.
Sutherland said driver training is
extremely important in reducing
maintenance costs and vehicle
replacement. We monitor driver
behaviour and alert on violations
that would incur costs. The
information is presented as a graph
to show strengths, and areas where
improvements are needed.
Mobility is an important business tool,
said Sutherland. You can manage an
entire fleet from your phone. Smart
technology is enabling management
beyond the cab. Fleet drivers are also
sales people, delivery people, etc,
and mobile resource management
technology puts the control in their
hands. They can do business from their
phones, keep track of transactions,
and share information in real time all
paperless.
Price is a big risk in the industry,
said Sutherland, especially in a highly
competitive market. MiX Telematics
has been doing business in Africa since
2002, and Sutherland came on board
in 2006. Africa is a rapidly growing
market, and everyone wants a share
of the continent. To enter a market,
you offer a better price, but to offer
quality services you need to travel,
and you need qualified people. This
is why the cheapest option is almost
never the best option when it comes
to protecting your companys vehicle
investment.
COVER JUNE 2014
2014/06/23 4:43 PM
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Untitled-5 1 2014/06/19 5:44 PM

 UMA Corner

MUA enhances products

MUA Insurance Acceptances,
has launched a new private
watercraft product, in addition
to other value-added product
enhancements, as the company
effectively begins its relationship
with new risk carrier, Auto &
General Insurance Company.

Warwick Scott-Rodger, Head
of Brokers at MUA Insurance
Acceptances, says while MUA has
offered watercraft cover in the past;
it was not underwritten by MUA itself.
We have worked tirelessly to ensure
our new watercraft product provides
watertight cover for our clients specific
needs.
keys, medical expenses and a reward
for information in the event of a
disappearance.
However, the new watercraft product
is not the only new benefit for existing
and new clients. MUA has made some
adjustments to its personal liability
cover, with potentially being a market
first to include Trustees & Members
Liability (including Errors & Omissions)
cover of R3 million. This will cover
the insured against personal legal
liability arising while holding a position
for no reward, on a body corporate,
homeowners association, non-profit
organisation, charity or educational
body.
Another product enhancement for
the personal liability product is the
automatic inclusion of Business
Premises Liability cover of R3 million.
This will provide slip and trip legal
liability cover while the insured is
conducting business at a home office
situated at the insured premises. This
has often been a gap in most personal
insurance policies of those who work
from home.
Last, but not least, MUA is excited to
announce its new Drive Home Safe
value-added benefit. This is a service
where a professional chauffeuring
company will pick the member and
their car up and take them home
safely. Users are entitled to two trips
per month with a total of 12 trips in
an annual period and it is available
within a 50km radius of city centres in
Johannesburg, Pretoria, Durban, East
London, Port Elizabeth, George and
Cape Town. This service is optional at
an additional monthly premium of R30
and is operated by our MUA Assist line.

The new product provides

comprehensive cover for watercraft up
to a maximum of eight meters which
are used for private purposes. If the
watercraft is less than four years old at
the time of claim, MUA will cover the
insured for a new or similar watercraft,
subject to the sum insured stated in
the policy. If the watercraft is older
than four years, MUA will settle at
market value.

Clients also receive automatic liability

cover for R5 million which covers
third party legal liability arising out of
piloting, carrying of passengers and
towing of water-skiers. Water-skiers
themselves will also benefit from
this cover. Other benefits include
cover for repatriation costs, locks and

54 COVER JUNE 2014

June 14.indd 54 2014/06/23 4:43 PM

 Because your world can quickly turn upside down...

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Untitled-5 1 2014/06/19 5:45 PM

 The Book Nook
The great
degeneration
of the West
By Annetjie van Wynegaard
I would read Niall Fergusons
The Great Degeneration again.
In 150 pages of succinct prose,
the British historian reviews
the institutions once considered
the four pillars of Western
civilisation, and argues that the
degeneration of these institutions
are inextricably linked to the
economic decline of developed
countries.
In his bold opening paragraph,
Ferguson asserts that despite the
high spirits of the summer of 1989,
when Western liberal democracy was
praised for its economic growth and
prowess, fast forward to 2013, and
we see the West stagnating, and not
just in economic terms. At the same
time countries like China are growing
faster than ever before. A popular
explanation for the economic slowdown
is deleveraging a process by which
to reduce debt and repair balance
sheets. But, Ferguson looks beyond
deleveraging at four institutions his
Black Boxes opening them up one
by one. These long sealed institutions
are democracy, capitalism, the rule of
law, and civil society.
What Ferguson is saying, in a nutshell,
is that developed countries should
have (and could have) seen the decline
coming.
56
June 14.indd 56
He quotes from Adam Smiths The
wealth of nations, in which Smith
describes the stationary state a
formerly wealthy country that had
ceased to grow. At that time Smith
was writing about the Chinese form
of state capitalism, and characteristics
of these stagnant states included: low
wages for the majority of the people,
a corrupt and monopolistic elite, and
defective laws and institutions. Smiths reform in the rotten systems of ...
advice to cure the static nature of legislature, in the regulatory agencies,
nations was more free trade, more in the legal system must come from
encouragement for small business, less the associations of civil society.
bureaucracy, and less crony capitalism. Reform, he writes, must come from
Ferguson believes that if Smith could us: the citizens. But, he has seen a
see the state of economic decline marked decline in civil engagement,
today, he would be amazed at the for which he blames social media. He
reversal of fortune. questions the role that social media
played in the Arab Springs by saying
Ferguson argues that this decline in
that Libyans didnt just unfriend
Western economic growth could have
Colonel Gaddafi.
been prevented, but was caused by
negligence, complacency, and an over- One thing Id criticise about the book is
reliance on and false confidence in the Fergusons tendency to refer to Africa
aforementioned institutions. as a homogenous entity, rather than
the complex continent with diverse
Ferguson sees democracy and
nations politically, culturally and
raises the issue that excessive
economically that it is.
public debts are a symptom in the
breakdown of the social contract Released in South Africa by Penguin
between generations. The current Group in March 2014, Samuel Brittan
generations liberal spending and debt from Financial Times described this
accumulations are disadvantaging the book as, A refreshing perspective
next generation. In the capitalism on the economic decline of advanced
box he asks, Who regulates the countries and the origins of the crisis.
regulators? He sees over-regulation,
instead of deregulation, as the cause
for the financial crisis. He writes that
the rule of law has morphed into
Want to write about or
the rule of lawyers and criticises
recommend an industry
convoluted laws and red tape for the
related book for review?
increased difficulty in setting up new Drop me a mail at
businesses. annetjie@cover.co.za or
tweet @Coverchat
Instead, he looks for the answer to
the problem in the formation of civil
society, citing a beach cleanup project
near his home where all the neighbours
got involved. Ferguson writes that
COVER JUNE 2014
2014/06/19 5:30 PM
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 Loss Adjusting

Loss adjusting:
Reinventing itself
A loss adjuster is a person in insurance who is qualied to inspect the losses incurred to insured property
through, for example, re, theft, vandalism, accidents, natural disasters, and so forth. COVER asked
expert loss adjusters for their views on the growth and future of the industry, how brokers perceive loss
adjusters, and what value the insurance and reinsurance industries see in the loss adjusting industry.

SAs youth hold the key to

unlocking empowerment
With the recent change of the
Black Empowerment codes, many
local and international companies
are struggling with transformation
and empowerment. What does
empowerment mean beyond
the boardrooms and how can
transformation genuinely address
the governments agenda and
the broader socio-economic
requirements in South Africa?
Mpho Mahanyele, CEO of
Chedza Holdings, talks about
how the adjusting industry in
South Africa is now adjusting its
own losses in order to encourage
more youth to enter the
profession.
At the top of the governments
National Development Plan (NDP) are
job creation, cutting costs and ensuring
South Africa moves forward as a
globally competitive destination.
Transformation is the key to unlocking
this potential and the people
responsible for turning the key are the
empowered youth of South Africa.
Real empowerment extends beyond
affirmative procurement. It speaks
to skills transfers, mentorships, the
funding of start-ups, encouraging
entrepreneurs and good education. The
biggest challenge is the gap between
the more mature, experienced worker,
and the newer entrants into the
industry.
Any empowerment transactions which
hope to have a long term impact
on their respective industries, and
South Africa at large, have to make
diversification of the workforce a top
priority.
Being 100% South African-owned
makes it easier to understand,
appreciate and contribute to the
governments developmental agenda,
while being more relevant in making a
meaningful contribution in the socio-
economic sphere.

58 COVER JUNE 2014

June 14.indd 58 2014/06/19 5:30 PM

 The local insurance industry is not
alone in its challenge of a lack of
empowered youth. In many industries,
including loss adjusting, some young
black candidates are reluctant to spend
years working their way up the ladder
when they can get other jobs that pay
better within a shorter space of time.
With the high number of degreed youth
being unemployed, degrees in science
and engineering, for example, can be
adapted to suit a career in the loss
adjusting industry.
Young entrants into the loss adjusting
industry need to see themselves as
entrepreneurs. They must commit to
spending time to learn from experts
and grow their leadership skills.
According to the Institute of Loss
Adjusters of Southern Africa (ILASA),
most loss adjusters traditionally begin
their careers in the claims department
of an insurance company.
Seamless service
in times of crisis
The shape of loss adjusting
in South Africa will continue
to be defined by the needs
of our clients and we will re-
invent our services to meet
the ever changing demands
of commerce, industry and
business. Our response is both
local and global, with emphasis
throughout Africa and the Indian
Ocean islands.
The recent surge in flood claims
referred to us has demonstrated the
local insurance industry still desires
the availability of a national network
of experienced claims professionals to
assist customers and insurers. However,
this network of available specialists
can only be sustained for periods of
increased claim volumes, if supported
by risk carriers on a day-to-day basis.
Consequently, closer business relationships
continue to develop between risk
carriers and Cunningham Lindsey, with a
COVER JUNE 2014
June 14.indd 59
Only once they have acquired
appropriate skills and qualifications and
earned a reputation as being an expert
practitioner do they take the final step
to becoming an adjuster.
There are different leagues of loss
adjusting. One can develop ones own
brand through client exposure, projects
and the cases you are involved in. The
types of claims range from personal
accident to loss of goods in transit,
theft, fire, and flood and storm damage.
To fast-track experts in any industry a
development programme is necessary.
Through the learnership programme at
Crawford & Company SA we are hoping
to accelerate interest in the field of
loss adjusting and provide youth with
adequate educational and economic
opportunities to develop their skills.
Empowered entrants require proper
induction, mentoring and a peer-to-
peer engagement arena. Time spent
commitment to day-to-day support even
when insurers claim volumes are less.
Cunningham Lindsey Direct is
committed to supporting its loyal
customers during times of peak
demand. It could be that instructions
from casual clients may not be able to
be accommodated in times of crisis.
Increasing complexity in all aspects of
business and society requires specialist
knowledge and attention to claims.
Increasingly, Cunningham Lindsey
is employing experienced graduates
in fields like engineering, quantity
surveying, finance and law, to ensure
that we have appropriately skilled
specialists to handle technical issues.
This is particularly so when risk carriers
are faced with major and complex
claims. Should such speciality not exist
within our South African operation we
are able to draw the required expertise
from within our international Group.
However complex and whatever the
issue, someone in our Group will
have the experience to provide a cost
effective resolution to the challenge.
learning from industry experts allows
leadership skills to grow and develop.
In this way, when a long-serving adjuster
retires, there will be a younger person
to fill the vacancy. This will result in a
win-win situation not only will we be
addressing future skills shortages in the
loss adjusting industry, but we will also
be ensuring that true transformation is
taking place in the workplace.
Crawford & Company SA is ready to be
a game changer in the loss adjusting
industry. We realise that the business
imperative for the countrys economic
growth and development is for wider
participation of black people in all
facets of employment. The insurance
industry is no exception.
At the end of the day, transformation
is about turning South Africa into a
globally competitive country. Education,
training and jobs fit what our country
needs and will make sure empowerment
truly becomes win-win for all.
IAIN WALSH,
CEO of Cunningham Lindsey
International loss adjusters, like
insurers and brokers, have experienced
global consolidation over the last
decade. There are now fewer players
with access to the broadest possible
resources. Many of the insurers that
we assist and partner with are global
players and expect us to provide the
specific expertise, geographical spread
and global systems to handle significant
claims events.
An example of this recently, is
Cunningham Lindsey South Africas
recent extensive involvement in the
New Zealand earthquake disaster,
when we provided a dozen or so
professionals for up to three years. This
demonstrated our global capability,
ensuring our customers of correct
expertise anywhere in the world at any
time. This valued global experience is
available from our Group to insurers as
they increasingly invest their resources
in the huge infrastructure projects
throughout Africa.
Closer partnerships, increasing
expertise and global response demand
that Cunningham Lindsey continues to
evolve as a partner for risk carriers, as
they aim to provide seamless service to
claimants in times of crisis.
59
2014/06/19 5:30 PM
 Loss Adjusting
Change is the key to
success and survival
The recent economic crisis
and increased regulation of
the industry have placed
considerable strain on the loss
adjuster. This has caused a
metamorphosis necessary to
ensure that they survive the next
cycle and survive they will.
As insurers have tried to curtail claim
costs by attempting to deal with claims
in-house, the historic number of claims
previously outsourced has declined.
This has meant that the smaller, less
complex claim the bread and butter
of many loss adjusting companies has
by and large disappeared.
In other instances, where a loss
adjuster would normally be required
to become involved, insurers have
sought to restrict their involvement
to a specific task like determination
of quantum, thereby reducing the
potential number of hours usually billed
by the adjuster on the claim.
The result is that growth has been
stifled.
60
June 14.indd 60
That there is a lack of a sufficient
number of suitably qualified loss
adjusters countrywide is in no doubt,
and this shortage was highlighted
during the latter part of last year and
beginning of this year when severe
storms struck parts of the country.
THAT THERE IS A LACK OF A
SUFFICIENT NUMBER OF SUITABLY
QUALIFIED LOSS ADJUSTERS
COUNTRYWIDE IS IN NO DOUBT
A spike occurred in the number of claims
being outsourced and instantaneously,
the loss adjusters services were sought
to deal with those claims which would
normally have been dealt with by
insurers in-house. They could not cope
with the increased volume.
This was good news for turnover but
sadly, service levels suffered and not
only does this affect the loss adjuster,
but the industry as a whole.
More qualified persons must be lured
into the profession, but their longevity
will depend on the influx of work
which the next cycle will bring.
The drive by insurers to expand into
Africa presents new and exciting
opportunities and, loss adjusters keen
to earn foreign currency and escape
some of the cut throat rates currently
being thrust upon them, are able to
capitalise on increased hours and
rates, and create a stimulus for future
development.
Loss adjusters possess a unique set
of skills which can easily be adapted
to suit different circumstances. Those
who want to diversify are presented
with a host of other specialist tasks,
like compliance audits, which have
become an everyday part of the
industry as a consequence of the new
regulations. Compliance audits have
become a recent income stream of
certain adjusting companies.
Change is inevitable and the key to
success, development and survival.
ALAN BLEM,
Managing Member of
Associated Loss Adjusters
COVER JUNE 2014
2014/06/19 5:30 PM
 Our Corporate and
Business Insurance sets
the standard when
it comes to:
Property
Commercial
Vehicle and Asset Finance
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2014/06/19 10:00 AM
5:46 PM
 Africa Rising

Let the real Africa rise

Theres no doubt that Africa is rising, growing at a rapid pace, and the need for
investment grows with it. However, as Professor Ben Turok warned during the
Evaluation Cooperation Groups Spring 2014 meeting at the African Development Bank
in Centurion, when we look at the broader impact of policies on the African continent,
taking into context the different socio-economic and political factors of each country,
it is important that we look at the real Africa and get our priorities right. In this issue,
COVER did a feature on reinsurance in Africa, and a common theme that came to the
fore was that Africa consists of many different, unique countries, and to treat Africa as
one homogenous place will be to the detriment of the investor, insurer, and reinsurer.

62 COVER JUNE 2014

June 14.indd 62 2014/06/19 5:30 PM

 Evaluate the real
Africa flaws and all
The Evaluation Cooperation
Groups Spring 2014 meeting
was hosted by the African
Development Bank in Centurion
from 29 to 30 April 2014. The
ECG was established in 1996
by the leaders of multilateral
development banks (MDBs) to
conduct and promote evaluation
harmonisation across MDBs.
The African Development Bank (ADB)
is one of about 12 members of the ECG
and Rakesh Nangia, director of the
Operations Evaluation Department of
the ADB, is the ECG Chair for 2014.
The ECG uses two tools to promote
effective evaluation among MDBs:
good practice standards and
benchmarking studies to assess how
ECG members apply good practice
standards.
The ECG evaluates the operations of
country strategy and programmes,
policy-based lending, the private
sector, the public sector, peer
reviews, and technical assistance and
cooperation.
Nangia said in his opening speech:
Its 20 years almost to the day that
South Africa celebrates our first free
elections. South Africa has one of
the oldest and richest ministries of
COVER JUNE 2014
June 14.indd 63
monetary evaluations. South Africa
has led the way in so many different
ways. Nangia quoted Desmond Tutu:
South Africa is a rainbow nation at
the end of every rainbow is a pot of
gold. Our nations gold, he said, are
people like Nelson Mandela, Desmond
Tutu, and Ben Turok.
Professor Ben Turok, former ANC
Member of Parliament and the keynote
speaker, said that evaluators need to
consider the social and political context
of a country in their findings. We
should not assume that all is well and
then restrict ourselves to evaluating
impact narrowly, he said. We need to
look at the priorities of a country.
Turok said when he was involved
in the OECD evaluation conference
in Ghana he was surrounded by
technical systems analysts who paid
little attention to the implementation
process. We should reflect on policy
making do we have the right
priorities? And in the implementation
process are we doing the right
things?
South Africa is a rich country with
all its resources, he said, but are we
allocating resources in the best possible
way?
Turok said his remarks only pertain
to the evaluation and monitoring of
developing countries and in South
Africa, we need an improvement
plan.
ANNETJIE VAN WYNEGAARD
Turok made the plea for researchers
and evaluators to focus on the
real economy in South Africa
commodities, manufacturing, and
infrastructure. We have mineral
wealth, but our manufacturing is
small, he said, with the result that
our natural resources are processed
by more developed countries. This
external exploitation of South
Africas wealth is repeated across the
continent.
Do not neglect the real economy,
he asked of the evaluators. He made
the distinction between employment
statistics and participation ratio.
Whereas employment statistics will tell
you how many people are employed
(even if someone has a job he goes
to once a week at minimum wage)
the participation ratio is an indicator
of how many people are engaged
in the economy so the quality of
employment, the value it has to the
individual and the economy.
I live in a cosy, white suburb in
Cape Town...two kilometres away is a
township near a swamp, where shacks
are built in the mud...it makes for an
appalling situation. People work and
survive there.
Turok said sociologists use the term
relative depravation the feeling
of envy towards your neighbour to
describe the suffering observed here.
Nonsense, said Turok, people are
suffering because they are suffering.
People dont protest and fling faeces
because of some sociological idea, he
said.
The problems in South Africa are very
real, not just statistical problems, he
said. Turok urged evaluators to study
the real situation in South Africa. Its a
new South Africa; lets make it a better
one, with your help.
63
2014/06/19 5:30 PM
 Africa Rising
Tanzania opens her
doors to investors
REPORT BY IMARA INVESTING IN AFRICA
Tanzanias private sector is able
to play a crucial role in enabling
the manufacturing sector to
grow competitively, as long as
there is an environment to allow
the smooth flow of domestic
and foreign investment, said
Executive Director of the
Research on Poverty Alleviation
(REPOA), Prof Samuel Wangwe.
The manufacturing sector will only be
competitive when an environment is
created for the private sector to come
and play its key role as an engine of
the economy, he said recently at a
two-day retreat for officials of the
Ministry of Industry and Trade and its
agencies.
The Minister of State in the Prime
Ministers Officer (Investment and
Empowerment), Dr Mary Nagu, said
that the government was committed
to ensure that the private sector is
empowered to play the leading role in
propelling economic growth. Nagu said,
We must work together to sustain the
64
June 14.indd 64
progress achieved so far, with the view
to leveraging the domestic private sector
involvement in economic activity.
It is from this perspective that the
Minister for Industry and Trade, Dr
Abdallah Kigoda, said at the same
event, Creating the right conditions for
private enterprise may require strategic
reforms to long-standing regulatory
practices and may challenge the
economic, political and social status
quo of an economy.
Sometimes we may blame poor
performance of the manufacturing
sector without considering hurdles
like insufficient budgets, multiplicity
of taxes, high cost of doing business
largely from erratic power, water
problems, shilling depreciation and
unfair competition exerted by imported
goods, he continued. For example, he
said, the manufacturing sector grew
by 8,2% in 2012 compared to 7,8% in
the preceding year. Its contribution to
GDP increased to 9,85% in 2012/13
compared to 9,7% in 2011.
Similarly the World Bank Sector
Leader for Finance and Private Sector
Development, Mr Andrea DallOlio, told
a news conference during the CEO
roundtable on 10 March 2014 that
Tanzanias private sector may reap
enormous benefits from oil and gas
production if it creates various products
that could be supplied in the whole
chain. He urged the private sector to
enter into joint ventures with foreign
firms where they cannot do it alone in
order to reap maximum returns from
the investment in the sector.
Tanzanias government has opened
doors for local and foreign investor
participation in the transport sector.
The Deputy Minister for Transport,
Dr Charles Tizeba, said that local
and foreign investors were being
encouraged to operate in the lucrative
rail sub sector.
The policy allows running private
trains and allows private operators to
buy own locomotives and wagons for
passengers and cargo trains. They will
only pay for using the railway, he
told participants of a Lake Investment
Forum that was held in Mwanza on
14 February. He said private operators
were also invited to run the Mwanza
port and other ports in Lake Victoria,
as well as the Isaka dry port in
Shinyanga. The doors are open and
we encourage you to take up the
challenge, he told about 1,000 local
and foreign investors and stakeholders
in trade and investments in the East
African region that at the forum. He
also said the government had opened
doors for private investors to invest
in the aviation industry as there
was potential for growth given the
expanding economy.
The moves by the Tanzanian
government to increase their promotion
of the participation of the private
sector in the economy is a welcome
development and we believe that it
will go a long way to ensure that the
economic growth rate is sustainable
over the medium to long term.
COVER JUNE 2014
2014/06/19 5:30 PM
 Power for your
Insurance system

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Untitled-5 1 2014/06/19 5:46 PM

 African Insurance
Distribution &
th
4 Bancassurance
Conference

11 to 13 August 2014
Westin Hotel, Cape Town

Insurance Distribution
and the Data Revolution
Most insurers have now realised that
there is a data revolution going on in the
industry. Most companies are sitting on
vast, unexplored and under-utilised data
related to client demographics, financial
behaviour, telematics, machine-to-
machine communications and the, yet to
be tamed, social media platforms.
Now in its 4th year, COVERs African Insurance
Distribution Conference, will explore this data
revolution, mainly brought about by technology
and its insatiable capacity to collect data. We will
again see senior executives from 16 different
countries get together to discuss all facets of
insurance distribution and to network with a
view to finding new business opportunities.
Expect only the most trusted and well-known
expert presenters to share ideas and stimulate
debate that will see delegates leave with a fresh
understanding of the revolution happening in
their midst. To list but a few:
Johan Van Zyl - Chief Executive Officer,
Sanlam Group
Chris Hart Chief Strategist, Investment
Solutions
Ranjit Bedi - Director and Head of Insurance
Barclays Africa
Bruce Sahd Founder, CaseJohnson
Charmaine Scott - Standard Bank, Head
Bancassurance Africa
George Addison - MD, StarLife (Ghana)
Olusola Ajayi - Retail Business Lead, AIICO
(Nigeria)
Afua Boahemaa Donkor - Executive Director,
Star Microinsurance (Ghana)
Chris Hart, Chief Strategist - Investment
Solutions (SA
For further information
please email: tony@cover.co.za

We look forward to hosting you at the most important

African insurance distribution event of the year

Bancassurance 14.indd 1 2014/06/23 6:03 PM

 Right move. Right moment.
The conference will be taking place at the Westin Cape Town, for further
information on accommodation please visit: www.bancassurance.co.za
Having the right solution at that critical moment doesnt
just happen. It takes vision, commitment and experience.

At RGA, our focus is on delivering expert solutions to

Thanks to our sponsors who

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Bancassurance 14.indd 2 2014/06/19 5:47 PM


Africa Rising
Sub-Saharan Africa:
bread basket for a growing population
Farmers in Sub-Saharan Africa
are heavily exposed to weather-
related events like flood or
drought. If they are hit by a
natural catastrophe they often
abandon their land. Insurance
can help to keep farmers in
business and contribute to a
more resilient society.
Swiss Re has produced a special
publication on the challenges faced
by farmers in Sub-Saharan Africa,
and on the role that insurers can
play to support agriculture in this
region. COVER has received special
permission to print extracts from
the publication, Sub-Saharan
Africa: bread basket for a growing
population. The full publication can be
downloaded from the following URL:
http://www.swissre.com/rethinking/
food_security/Resilient_agriculture_
in_Sub-Saharan_Africa.html
The stories were written by Lovemore
Forichi, Joana Meyer, and Reto J.
Schneider. Images supplied by Swiss
Re.
WEATHER FOR FARMERS IT
MAKES ALL THE DIFFERENCE
In the Sub-Saharan region, 95% of
the farmed land is rain-fed. So an
excess of rain or lack thereof can be
devastating. Empty waterholes and
scorched fields are a common sight in
Sub-Saharan Africa.
From 1980 to 2008, the number of
droughts recorded reached 1,802. Of
all disasters recorded, the 10 largest in
terms of people affected were drought
related.
Excessive rain can have a similar
impact. Harvests and soil can be swept
into rivers and oceans more frequently
as a result. According to the Global
Facility for Disaster Reduction and
Recovery, West Africa has witnessed a
dramatic increase in flood events, with
more than 2,2 million people affected
in 2010.
68
June 14.indd 68
of the world can sustain various types
of livestock and a wide variety of crops.
Staple foods like cassava, corn and
sorghum are cultivated here as well as
specialties like coffee, cocoa and
flowers.
Today, this vast area feeds more than
one billion Africans and employs 65% of
the Sub-Saharan labour force. But as the
population grows the United Nations
expects nearly 2.4 billion by 20501
the demand for staple foods and live-
stock will increase. This is a major
challenge to the farming sector.
Worldwide Agriculture Insurance
Premium 2012*
Grand total: 24 000 (Mio. USD)
Unknown
120
21200
Too much or too little rain makes
plants and animals more susceptible
to diseases. The spread of fungi, pests
1 http://esa.un.org/wpp/unpp/panel_population.htmtime is a key aspect. Flood exposed
and contagious diseases can have
a devastating effect on livestock. A
night of frost, a lightning bolt starting
a wildfire or hail can threaten famers
livelihoods on a large scale. Due to
climate change, extreme weather
events will increase and they may
occur in changing frequencies, also
in areas where none happened in the
past.
RISK MANAGEMENT FOR
RESILIENT AGRICULTURE
Weathering the effects of storm,
flood and drought requires a whole
set of risk management measures.
droughts, especially as roughly 80% of
them are smallholder and family-based
farmers, running an open roof
business. The other 20% are larger
agricultural companies and
cooperatives.
If a harvest is destroyed, the farmers lose
their income. This often means that
farming is abandoned altogether, since
the resources to continue are no longer
there. Insurance helps to keep farmers in
business when disaster strikes. Tailor-
made products are available for any type
of farming be it smallholder farmers or
large professional enterprises.
Proactive planning is the starting point.
Planting the right crops at the right
areas can be protected to a certain
extent. In areas which may experience
more droughts, soil improvement can
heighten resilience. Other
Swiss Re areasAfrica
Focus Report may 1
need preparation to fight the spread
of new diseases. These activities will
become ever more important, since
climate change may change weather
patterns.
Hence risk mitigation has to adapt to
new cycles of drought or excess rain.
Risk management can reduce the
financial burden to a point. Insurance
can help with the rest.
COVER JUNE 2014
2014/06/19 5:31 PM
 Summary Weather for farmers it makes a
Weather for farmers it makes all the difference
Events: Sub-Saharan Africa by type theyitshelp
With to replace
increasing a lost harvest
population, Africa is Furthermore,
Events:people can start
Sub-Saharan to save
Africa by type In the Sub-Sa
19902013 and give
facing a food protection
and economic for the resulting money19902013
challenge. or to invest in their future. farmed land is
business
Today, riskisfor
farming thefarmers andinother
main factor many rain or lack of
Events: Sub-Saharan Africa by type partners
In
economies in
andthe
the Sub-Saharanits value chain95%
region,
importance likegrow
will traders
of the As the
Too much or
example of too littlemarkets
mature rain makes
show,plants empty waterh
7 Number of
19902013 or processors.
farmed
further landupcoming
in the is rain-fed. So an excess
decades. The of insurance
and animals
can helpmore susceptible
farmers to stay in to are a common
insured events
rain or
World lackhas
Bank of it can be
stated thatdevastating.
growth But business.
diseases. Thewith
Insurers spread
theirofin-depth
fungi, pests and Africa.
194 Number of These types is of policies consider 29 Cyclones
uninsured events inempty waterholes
agriculture twice and scorched
as effective in fields know-how of climate
contagious change
diseases canand lossa
have
business
reducing risks such
poverty sight as future crop
as non-agricultural prevention can help to educate
3 Droughts
and A night
are a common in Sub-Saharan devastating effect on livestock. From 1980 to
prices.This
activities. requires experienced loss enable farmers to preparebolt
145 Floods
for starting
disaster. a wild-
29 Cyclones Africa. of frost, a lightning droughts reco
Top 10 countries by number of events adjustors. 24 Other perils
3 Droughts fire or hail can threaten famers disasters reco
19902013 So there are huge
145 Floods
The heavy
From 1980
Smallholder
reliance on agriculture
tofarmers,
2008, the
whonumber
in of
live from livelihoods onbenefits
a largeto be had
scale. terms of peop
Sub-Saharan Africa means that business both byNumber of events
increasing the by decade
number of
24 Other perils droughts
what theyrecorded
grow onreached
their land 180 . Of all
benefit
2 related. Exces
must be better protected against the farmersSub-Saharan
with insurance Africa 19902013
coverage and by impact. Harve
from index
disasters products.
recorded, theThey pay outin
ten largest Due to climate change, extreme weather
100 the very wide protection gap.
perils it is exposed to. Taking out the narrowing into rivers and
when of
terms weather
peoplestations
affectedorwere satellites
drought- events will increase and they may occur
Number of events by decade volatility in farmers income helps to as a result. Ac
register Excessive
related. that abnormalrain weather
can have will
a similar in changing
80 frequencies, also in areas
Sub-Saharan Africa 19902013 make societies more resilient when Still, insurance is not the sole means to
lead to a crop loss in soil
thatcanregion. They where Facility for Dis
100
impact. Harvests and
disasters strike. Children can stay in be swept achieve60 a resilienthappened
none in the past.
society. Partnerships
28 South Africa 20 Zimbabwe workrivers
into without
and loss
oceansadjustors
more because
frequently Recovery, We
school and communities are not totally between the insurance industry, local
payments
as a result. are triggered
According by pre-defined dramatic incre
80 26 Mozambique 17 Ethiopia reliant on emergency aid.to the Global companies, 40 governments and
24 Madagascar benchmarks.
Facility for Disaster Reduction and more than 2.2
agriculture are also required to generate
2010 alone3.
60 ARecovery, West
well-nourished
An example Africa
be has
population
would if aiswitnessed
also less a the the kind
weather 20 of solutions that fit local

If40
a harvest is lost, farmers receive a
dramatic
prone
station increase
to infectious
registers in flood
diseases,
that events,
which
rainfall in with needs and contribute to resilient
is below 0
pay-out which enables them to sustain
turn puts
more less
than
a certain pressure
2.2 milliononlimit
predefined the at
people public point ininagriculture. 19901999 20002009 20102013
affected
a
health
time.infrastructure.
2010 alone3. Overall, the
their
20 family. It allows them to buy new
economy is much healthier and the Cyclones Floods
seeds and products needed to prepare
for0the next season. Today, a wide SwissofRes
effects long history
migration in agricultural
are minimized. Other perils Droughts
19901999
variety 20002009
of products 20102013
for different types reinsurance, together with our global
of farming is available in the African footprint, enables us to bring global
Cyclones Floods know-how to local markets. Strong Read more from this colourful
market.
Other perils Droughts and informative report at: http://
partnerships between insurers and
media.swissre.com/documents/
For commercial operations there are governments also play a role to SubSaharan_Africa_Agro.pdf
indemnity based covers. If triggered, improve food security globally.

Floods
Return Period
100 years
500 years
Floods
Windstorm
Return Period
Local 50 years peak gust speed
100 years
6070 m/s
500 years 5060 m/s
4050 m/s
Windstorm 3040 m/s
Local 50 years peak gust speed
6070 m/s Wildfires (600 MW (20002011)
5060 m/s 1
4050 m/s 12
3040 m/s 25
510
Wildfires (600 MW (20002011) 1025
1 2550
12 50100
25 100200
510 200500
1025
2550 2 Source UNISDR
50100 3 www.gfdrr.org
100200
200500
8 Swiss Re Focus Report Africa
2 Swiss Re Focus Report Africa
2 Source UNISDR www.preventionweb.net/english/countries/statistics/index_region.php?rid=
3 www.gfdrr.org/node/851
COVER JUNE 2014 69

2 Swiss Re Focus Report Africa

June 14.indd 69 2014/06/19 5:31 PM
 Financial Planning

Darling were the young

ones and young ones
shouldnt be afraid
Cliff Richards sure wasnt singing about entrepreneurship, but the fearlessness of youth
is a characteristic observed in the entrepreneurial spirit of South Africas young business
people. In April COVER attended the [THE INSIDERS] hosted by Glacier by Sanlam and
TIME magazine and the central message was that South Africans need to nurture this spirit
in our young ones. COVER spoke to two young entrepreneurs who have shown their peers
that age is but a number when you have an idea and a vision.

Innovation, design, technology

In 2009 Kholofelo Moyaba
(21) was awarded a Fellowship
from the Allan Gray Orbis
Foundation. I appreciate that
the Foundation exists to identify,
support and develop talented
young South Africans whom
have the potential to become
entrepreneurial leaders and
make a valuable difference to
the social and economic fabric of
South Africa, said Kholofelo.
After high school he studied Electrical
and Computer engineering at the
University of Cape Town (UCT), where
he continued his love for technology
and graphic design. I am passionate
about technology, even more about
electronics something about giving life
to objects resonates with me, he said.
During his second year in 2011 he
started Kholofelo Moyaba Designs
where he developed logos, posters,
business cards, and also mobile apps.
Kholofelo said he started playing
around with graphic design and 3D
modelling at varsity.
Kholofelo met Justin Coetzee, the
Founder of the Metro Rail application,
GoMetro, in 2012, who then asked
him to develop the Android application
for the GoMetro mobile website
to give commuters easy access
to information surrounding public
transport in four of South Africas
major provinces. The GoMetro Android
application went live towards to the
end of 2013, and today they have over
1 000 users. Kholofelo said the app
has been used over 80 000 times.
Whereas the app can only be used by a
smartphone, the GoMetro website can
be accessed any mobile device with
internet access so the website has
over 450 000 users and over 30 000
daily visit, said Kholofelo.
HIS ADVICE TO OTHER BUDDING
ENTREPRENEURS IS THIS:
Surround yourself with people
who challenge you;

70 COVER JUNE 2014

June 14.indd 70 2014/06/19 5:31 PM

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 Financial Planning
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June 14.indd 72
Be comfortable with risks, uncertainty and failure;
Always look for solutions instead of making excuses; and
Be tenacious develop an attitude of not letting go.
At the same time, Kholofelo is wary of taking advice for
its own sake. The more you listen to what people say,
the more you need to form your own opinion. Kholofelo
believes that ideas are of disservice to the world if they
do not add value to peoples lives.
At the moment he is an Innovation Specialist at the
South African Reserve Bank.
RETHINK EDUCATION
Like Kholofelo, Doug Hoernle (23) received an Allan Gray
Fellowship. Dougs first encounter with the Allan Gray Orbis
Foundation and entrepreneurship was at a presentation
at Saint Stithians Boys College. He enrolled at the
University of Cape Town where he completed his Honours
in Business Science Finance. Doug founded Rethink
Education in 2012 in Cape Town. Rethink Education is
an education centred technology company focused on
the South African high school market. Doug also created
Rethink Educations Interactive Online Learning Platform,
which provides engaging online curriculum aligned content
to high school learners in a chat-style interface. Rethink
Education helps lower income schools in South Africa via
a free version of its platform on Mxit, a popular mobile
social network. Since its release in late 2013, there
has been over 150 000 downloads and over 700 000
chapters accessed by users.
Doug spent hours with grade 11 students to figure out,
what engages students online? He found that students
spend time on social platforms, like to chat, and prefer
their information in bite sized chunks. This inspired
him to rewrite maths and science content into smaller
packages for young people. The programme can monitor
students progress online, and teachers can log in to see
how many hours students are working.
Doug has a team of contributors with Masters degrees
and PhDs in maths and science.
When Doug isnt rethinking education in South Africa,
hes experimenting with setting up his craft distillery
making craft South African gin. At university Doug took
over the UCT wine society and built it up as one of the
biggest societies in the university. He became the link
between the students and the wineries.
Dougs biggest advice to young people is, You have to
start networking. The Allan Gray Orbis Foundation gave
me the opportunity to have discussions with people.
He said South Africa has huge opportunities for young
people to grab, and they can start at the coal face by
taking any opportunity they can. Students like to think,
he said. Dont just sit and think, start doing something.
Dougs long term goal is to make a significant impact
on the youth in South Africa and to start a number of
successful initiatives. I want to use my story of these
different start-up ventures to change our youths mind-
set about what can be accomplished in life if we allow
ourselves to dream, he said.
COVER JUNE 2014
2014/06/19 5:31 PM
Untitled-5 1
Give us a call on k at
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Cover 297x210mm.indd 1 2014/05/06 11:43 AM
 Financial Planning
Facebooks shotgun approach
to capital allocation
With technology companies
much in the news recently,
RECMs Paul Whitburn
says valuing companies such
as Facebook involves more
questions than the asset
manager is comfortable with.
While Facebooks share price
continues to run, RECM prefers
to invest in companies that have
proven their ability to generate
long-term sustainable cashflow,
particularly when these shares
are out of favour and are a cheap
as a result.
Facebooks persistent appetite for
acquisitions was clearly not sated by
the $19 billion acquisition of WhatsApp
in February, with the company
spending a further $2 billion on virtual
reality company Oculus late in March.
They seem to be taking a shotgun
approach to capital allocation. Its
something Microsoft did for ages
theyll do a hundred different things
across multiple technologies in the
hope that one of them comes off.
My gut feel is that Facebooks recent
acquisition of WhatsApp was more
of a defensive move than a strategy
to monetise the $19 billion purchase
74
June 14.indd 74
price. I think theyre looking to shut
down anything that could break into
their market. We saw Facebook do it
with Instagram, maybe they worried
that WhatsApp could morph into
a social media space. I dont think
the WhatsApp transaction is a game
changer for Facebook, but it does help
them to maintain their advantage for a
little while longer.
Were always wary of hype. There are
many good technology companies out
there and weve owned several of them
for our clients, including Microsoft, Dell,
Hewlett Packard and Intel. These are
excellent businesses that are dominant
in their areas, but they were hugely
hyped in the late 1990s and early
2000s and seriously overvalued so we
couldnt invest in them. It took nearly
a decade for them to get to prices
sufficiently below their intrinsic value to
justify investing in them.
MY GUT FEEL IS THAT FACEBOOKS
RECENT ACQUISITION OF WHATSAPP
WAS MORE OF A DEFENSIVE MOVE
THAN A STRATEGY TO MONETISE
THE $19 BILLION PURCHASE PRICE.
It is not that easy to pin down an
objective fair value for a company like
Facebook. Its difficult to say just how
big Facebooks potential market is.
Internet advertising is still a fairly new
phenomenon so theres no telling what
it will become. Weve seen internet
businesses disrupt established sectors
Craigslist wiped out billions of dollars
of classified advertising revenue for
newspapers in the US.
The question is how sustainable any
advantage is likely to be in a relatively
new industry. We look for companies
that have a competitive advantage
over their peers what Warren Buffett
calls an economic moat. We believe
Facebook has that through the network
effects of their 500 million users. With
social networking businesses, first
mover advantage is massive and tends
to stay in place for a while. But its
difficult to pick the ultimate winners.
Theres always someone in a dorm
room somewhere dreaming up the next
big thing and if they develop a good
product it can compete very quickly,
we saw how quickly MySpace became
irrelevant. Its much harder to disrupt
established businesses that have built
up customers, products and brands
over decades.
RECM has very little faith in forecasts.
We just dont like to base investment
decisions on forecasts. We dont feel
were any better at guessing the future
than anyone else (nor any worse, for
that matter) but it doesnt make sense
to make investments on that basis.
We prefer to focus on established
businesses with a proven history of
strong cashflows over a long period.
Cashflow is a great demonstration
that a business can monetise its
products and generate good returns
for shareholders. Thats not something
youre going to get from high growth
companies in new industries.
Wed rather wait until they inevitably
fall out of favour and we can pick
them up at a price below their intrinsic
value. That builds in a good margin of
safety. We dont believe its possible
for anyone to consistently predict
uncertain events, so we prefer to
protect our clients from risk of capital
loss by buying businesses for far less
than they are worth.
COVER JUNE 2014
2014/06/19 5:31 PM
 The impact of losing
your key person
The most important asset of
any business is its people
especially the key people largely
responsible for its success. Not
having appropriate insurance
against the loss of such key
persons could have a devastating
impact and may even lead to the
closure of the business. Deon
Theunis, Sanlam Business
Markets Head of Distribution
Support, expands on this issue.
A key person in a business is someone
whose absence as a result of death
or permanent disability could affect
the ongoing operations of the business.
It could be someone with a specialist or
expert skill that is vital to the success
of a business in a specific industry. It
could also be someone whose presence
increases the creditworthiness of a
business, or whose absence could
shrink a customer base or even delay
critical projects. This may be the
business owner, but could also be other
employees.
COVER JUNE 2014
June 14.indd 75
The potential loss of a key person in a
business constitutes a serious financial
risk. These people are the drivers
behind the success of your business.
They know the product, processes
and customers, sometimes better
than you do. The ongoing profitability,
sustainability and resulting capital value
of your business are largely reliant
on their input and output, and their
absence could have a material effect
on the future of the business.
THE FINANCIAL RISK TO THE
BUSINESS COULD MANIFEST IN
DIFFERENT WAYS:
It could suffer a direct loss because
of a reduction in business earnings
Loyal clients could become
disillusioned and, as a result,
start shopping around
Suppliers could introduce stricter
payment terms because the key
person is no longer there
The process of finding a replacement
could be delayed, because of
the high costs associated with
the recruitment process
Employees could wonder
whether their jobs are secure,
and could even be head-
hunted by your competition.
Key person insurance is a simple and
cost-effective solution that can be
implemented to mitigate these risks.
The business owns and pays the
premiums of a policy on the life of
the key person. It is a pure risk policy
with no savings element. Should the
key person die or become permanently
disabled, the life insurer pays the
proceeds of the policy to the business,
which can be used to recruit and/or
train a suitable replacement.
Key person insurance can be structured
in a tax efficient manner most
appropriate for the particular business.
If a business elects not to deduct
premiums from tax, the proceeds will
be tax-free. If premiums are deducted
from tax, the eventual proceeds will be
taxable.
An example of the positive effect
key person insurance could have on
a business would be the following
case. We know of a case where the
winemaker of a boutique winery
was insured as a key person, as
his specialist skills rendered him
indispensable to the business. The
winemaker died unexpectedly a
few years after implementing the
cover, and the proceeds of the policy
paid out to the winery were used
to recruit a renowned winemaker.
The interruption resulting from the
previous winemakers death thus had
a minimal financial impact on the
business.
Key person insurance gives a business
owner peace of mind. It is highly
recommended, however, that you
obtain expert advice from a qualified
financial adviser before taking out this
or any other business insurance cover.
All businesses have unique financial
needs, and a financial adviser can
assist in prioritising these needs as
part of an overall financial planning
process.
75
2014/06/19 5:31 PM
 Financial Planning
Performance fees:
The Devil is in the detail
Although the financial services
sector is backed by a sound
regulatory and legal framework,
not enough is being done to
ensure full transparency in terms
of investment management
fees. Momentums Frank
Richards believes that it is
almost impossible for decision
makers and members to make
informed investment decisions,
as it is very difficult to compare
the different types of investment
fees and the levels of fees that
are being charged.
In addition, although some service
providers claim that their fees are
fully disclosed, they only disclose the
level of the fees and not the details
of the calculation methodology. With
performance fees, the devil is in the
detail and it is vitally important that
members have access to this kind of
information to consider appropriate
investment vehicles.
Most investment managers charge
investors an investment management
fees. This fee is normally easy
to compare and well disclosed in
marketing material and fund fact
76
June 14.indd 76
sheets. It is generally a flat fee, or
calculated on a sliding scale, accrued
daily and charged monthly in arrears.
EXAMPLE:
Investment management fee = 1%
of assets under investment. 1% x
R1,000,000 (assets under investment)
= R 10,000 investment management
fee per annum.
On the other hand, even though
investment management fees are
common in South Africa, performance
fees are not always readily available
and well disclosed in the industry
which could be due to their
complicated calculation methodologies.
WHEN NEGOTIATING INVESTMENT
MANAGEMENT FEES WITH
INVESTMENT MANAGERS, THERE
ARE BASICALLY TWO OPTIONS TO
CONSIDER:
A high investment management fee,
with low or no performance fee, or
A low investment management
fee with a possible higher
performance fee.
When comparing investment portfolios
and investment fees it is important to
understand the different types of fees,
how they are being calculated and
what the maximum possible fees are
that could be charged. This is especially
important where performance fees are
being levied.
POINTERS TO CONSIDER WHEN
COMPARING INVESTMENT
PERFORMANCE FEES:
Asset classes: it is generally accepted
in the industry that performance
fees are more appropriate for the
so called growth asset classes such
as equities.. Depending on the
nature of the investment mandate,
it does make sense to charge
performance fees on the more
aggressive asset classes where you
do want to reward the investment
manager for superior performance
relative to a challenging benchmark.
With the more conservative asset
classes where you do not always
want investment managers to
take on too much additional
risk in an attempt to generate
outperformance, it is t important
to ask the investment manager
whether they charge performance
fees on the more conservative asset
classes such as money markets,
bonds and inflation linked bonds
Benchmark: performance fees should
only be payable where managers
have outperformed appropriate
and challenging benchmarks.
It is important to only reward
investment managers by paying
them performance fees where they
have demonstrated skills and the
PERFORMANCE FEES
ARE NOT ALWAYS
READILY AVAILABLE
AND WELL DISCLOSED
IN THE INDUSTRY
ability to consistently add value
relative to a relevant benchmark.
For example, an aggressive balanced
portfolio should not be benchmarked
against a cash plus or an inflation
plus benchmark. It makes more
sense to use a composite benchmark
that reflects the strategic asset
allocation of the portfolio and the
various returns of the underlying
indices, which the asset classes
are being benchmarked against.
Hurdle rate: managers have
to outperform the benchmark
and an appropriate hurdle rate
before performance fees are paid.
This means that the investment
manager will have to outperform
the challenging benchmark by an
additional margin prior to them
earning any performance fees. If for
example the hurdle rate is 1% for
the local equity managers and the
benchmark return is 10% for the
COVER JUNE 2014
2014/06/23 4:49 PM
 period under review, the manager for short-term outperformance. only receive 1% and the member will
will only earn a performance fee for The principle is to reward consist get the difference, which is 5% of the
returns generated in excess of 11%. outperformance over a longer term. outperformance.

Reasonable participation rate:
Investment managers should only
share in part of the outperformance
and this is referred to as the
participation rate. For example, if
the participation rate is 20%, the
investment manager will only get
20% of the outperformance of the
benchmark plus the hurdle rate.
In this example, the members will
receive 80% of the outperformance.
If we use the example above
where the benchmark return is
10% and the hurdle rate is 1%, the
investment manager will earn a
performance fee of 0.8% for actual
investment performance of 15%.
Note that the member will receive
most of the outperformance, which
is 3.2% of the 4% (i.e. 15% less
(10% +1%)) outperformance.
Time period: performance fees
should be calculated over longer
time periods and investment
managers should not be rewarded
Capped at appropriate level:
performance fees should be
capped at appropriate levels.
This is to ensure that investment
managers do not take undue risk in
portfolios in an attempt to generate
outperformance. For example,
if you cap the performance fee
at 1%, an investment manager
will only participate in the first
5% of outperformance and all
the outperformance above this
level will be allocated fully to the
members. There is therefore no
incentive for the manager to try
and outperform by more than 5%.
EXAMPLE:
If the benchmark return and hurdle
rate is 11% and the actual investment
return is 17%, the outperformance of
6% is split between the manager (20%
that equates to 1.2%) and the client
(80% that equates to 4.8%).Given
that the performance fee is capped
at 1%, the investment manager will
It is very important to consider all the
different types of fees and the level of
these fees before advising your client
on the most appropriate investment
portfolio or range of portfolios. In
the spirit of treating our clients fairly,
investment managers should support
government and the move to enhanced
transparency and the disclosure of
fees.
Performance fees, that are often not
included in portfolio reviews, can make
up a substantial portion of the total
investment management fee that may
be payable and should therefore be
considered to ensure that investment
management fees are not unnecessary
high. The ideal situation is to have a
low investment management fee plus a
performance fee that is conservatively
constructed, fully disclosed and
that only rewards the manager for
outperformance.

INSURANCE VACANCIES
Location: Sandton, Pretoria, Western Cape, KZN, Eastern Cape, Benoni
BUSINESS DEVELOPMENT CONSULTANTS - Reporting Line: Business Development Manager
Job purpose
A Reputable Insurance Company is looking for Business Development Consultants with a minimum of two years sales
experience to generate new business and develop client and corporate relationships.

Key attributes for the position include

FAIS compliant | Regulatory examination for representatives (RE) | Minimum of two years experience in Insurance sales
(Short Term and/or Long Term).

Personal attributes
Good analytical ability | proven sales track record | deadline-driven | self-driven | good interpersonal and problem solving
skills | good organisational ability and time management | ability to work independently and generate own leads | good
presentation skills and the ability to interact with clients.

Competitive remuneration package

Application accompanied by your CV should be submitted to HR department at:

Samantha Lakhraj
Lakhrajs@aforbes.co.za An authorized financial services provider.
Only shortlisted candidates will be contacted License number 30414.

AF HP June 14.indd 1 2014/05/21 3:46 PM

COVER JUNE 2014 77

June 14.indd 77 2014/06/19 5:31 PM

 Healthcare

A network of healthcare
Healthcare providers are
migrating from large,
independent stand-alone
organisations into complex new
ecosystems. Today Provider
Organisations, affiliated physician
groups, labs and others are
involved in both the provisioning
of care, and the collection of
vast amounts of information
from patients. Health Information
Exchanges (HIEs) are evolving
Allowing Patient and Provider
Access to the Network
As contradictory as it sounds,
healthcare providers are now looking
for ways to increase the access
doctors, vendors, and patients have
to applications and the Internet. With
new guarantees for patients regarding
access to information and a focus on
lowering costs through new initiatives
like telemedicine, the entire healthcare
centre is driving towards a more
collaborative environment where all
parties have access to the information
they need.

and are a more affordable means
to transfer clinical information
and other data.
Healthcare as we know it is changing
quickly. Healthcare providers will soon
be required to provide communication
and collaboration platforms that
allow seamless integration among the
various stakeholders. These changes
in information flows, along with an
explosion of digital content that needs
to be stored and shared, are driving the
need for a secure, flexible and scalable
IT platform through which Providers,
Payers and Health sciences can
support collaboration and information
exchange.
The transition towards more patient-
centric care and decentralised
monitoring means providers, patients
and payers need to access information
that originates outside the hospital
setting. The trends toward personalised
medicine, prevention, and wellness
means stakeholders need to connect
information from various points within
the healthcare value chain including
providers, laboratories, payers, and
patients. The more this private
information is opened to outside
entities, the greater the chance that
these systems can be compromised
either intentionally or accidently.
UPCOMING TRENDS IN A
HEALTHCARE INDUSTRIES
NETWORK
The major challenges to a healthcare
providers network arises from the
different business functions increasingly
taking place in their network.
The most obvious security concern
with this approach is ensuring that
sensitive information like protected
health information (PHI) and payment
information is kept separate and
secured from general Internet
and network traffic. This requires
encryption and wireless management
technology coupled with traffic
shaping technology to ensure that
the appropriate treatment information
is accessible and is always the top
priority.
Increased Use of Clinical Informatics
to Improve Workflow
Along with the increased collection
and flow of data, healthcare
organisations are constantly striving to
improve workflow, both physical and
information. Improved workflows equal
lowered costs, happy and productive
caregivers and an environment that
allows improved patient safety and
quality care. The key challenge from
a security perspective is ensuring that
only the required pieces of data are
transferred and nothing more.
Increasingly Stringent Compliance
Mandates
As a result of the increasingly sensitive
data handled by the healthcare
industry, regulatory requirements have
been implemented to help increase
the security of healthcare providers
and associates as well as the data they
protect. HIPAA and HITECH set up
standards around protecting PHI.
Healthcare organisations also find
themselves responsible for complying
with the Payment Card Industry Data
Security Standard (PCI DSS). PCI
PERRY HUTTON,
Regional Director at Africa at Fortinet
DSS provides broad requirements
for securing personal non-public
information used on digital technology
in retail systems.
TOWARDS A SECURE HEALTH
ARCHITECTURE
All the challenges mentioned above
require disparate functionality.
Healthcare service providers need to
evaluate their security needs at each of
the following levels:
Management Level
Given the widely distributed nature of
modern healthcare establishments, the
ability to quickly modify and manage
security appliances is essential.
Aggregation Level
The aggregation level is the destination
for all data. Typically this is the hospital
datacentre. Core security functions
such as firewalling, application control
and VPN termination take place at this
level.
Business Associate Level
The individual clinic, lab, doctors
office, or any business associate
requires security and connectivity for
a wide variety of functions including
WiFi, voice, and traditional network
connectivity. With the addition of
consumer connectivity, each associate

78 COVER JUNE 2014

June 14.indd 78 2014/06/23 6:03 PM

 much also be able to provide security
functions such as antimalware and
application control.
Access Level
As healthcare organisations extend
access to providers using tablets and to
patients using mobile devices, ensuring
secure access is critical.
The key to cutting costs in the
managed care conundrum
According to the latest Council
for Medical Schemes (CMS)
annual report, a massive R13,1
billion was spent on non-
healthcare expenditure in the
medical schemes industry last
year. However, a small team
of South African software
developers believes they have
the solution to solve these
industry ills.
Since the year 2000, non-healthcare
expenditure has increased by 217,9%,
far exceeding the Consumer Price Index
(CPI). This has consequently driven up
premiums for healthcare consumers,
causing many South Africans to
question why they are paying so
much more for their medical scheme
membership each year.
A large portion of these non-
healthcare costs can be attributed
to an upswing in administration
expenditure, explains Wilma
Liebenberg, CEO of Knowledge
Objects Solutions (KOS), a South
African-based company that specialises
in effective global risk management
and higher automation solutions within
the healthcare funding industry.
According to Liebenberg and her
team at KOS, the solution to the
growing challenge of keeping non-
healthcare costs down within the
industry is simple: lower non-
healthcare expenditure by decreasing
administration costs. There is a lot
of redundancy and inefficiencies that
COVER JUNE 2014
June 14.indd 79
The entire healthcare industry is
undergoing a dramatic shift designed
to enhance the level of care provided
to patients. The sensitivity of patient
information has created the need
for end-to-end security solutions
throughout the entire healthcare
network from doctors offices all the
way to the hospital data centre.
have arisen in the current system of
healthcare administration in terms
of the time, costs and personnel
necessary to process applications,
claims and grant authorisations, she
says.
Implementing 21st century solutions
that provide fully automated,
customised software for the healthcare
funding industry will address the
glaring inefficiencies in the traditional
model of managed healthcare, asserts
Liebenberg.
KOS is the first company of its kind
in South Africa that provides its clients
with highly sophisticated software to
make operations more efficient within
the healthcare administration industry.
It does this by effectively removing the
middleman from the administration
side of the equation and drastically
bringing down the administration
burden on medical schemes, says
Liebenberg.
Healthcare providers can no longer
afford to take security lightly. Only
with security as the foundation can
healthcare organisations build IT
services and applications that meet
the requirements of the business and
healthcare mandate
KOS provides clients with advanced
artificial intelligence capabilities using
clinical and business intellectual
property that automates complex rule-
based decisions common to funders
of healthcare. This means that non-
technical people can write rules in
English which the system then translates
into code and then makes a yes or no
decision. Not only does this expedite
the process of submitting claims and
obtaining pre-authorisations, but it also
helps root out fraud in the industry,
notes Liebenberg.
KOS is fast emerging as a major leader
in the automation of administrative
processes in South Africa and has
already expanded into the Pacific and
Middle Eastern markets. In 2008
we sold our pharmaceutical benefit
management (PBM) functionality to
the largest open medical scheme in
South Africa under a restraint of trade
for three years, during which time we
have redeveloped and restructured the
software so that it is customised for
the local market.
One healthcare funder that has
benefited from the services offered
by KOS is Resolution Health Medical
Scheme (Resolution Health), which
went live with the system at the
beginning of this year. According
to Mark Arnold, Principal Officer of
Resolution Health, providing more
healthcare cover for every rand
contributed by members is one of the
main goals of the Scheme. Ideally, we
want every premium paid by a member
to go towards their specific healthcare
needs and not towards pushing
paperwork, he concludes.
79
2014/06/19 5:31 PM
 Governance
Mediation increasingly
preferred over litigation
Mediation will be introduced
as a preferred alternative to
litigation in South African
Magistrates Courts from August
1 this year, when amendments
to the rules regulating the
conduct of proceedings of
South African Magistrates
Courts come into effect. The
revised rules under the Rules
Board for Courts of Law Act,
which include the addition of
a chapter regulating court-
annexed mediation, were
gazetted last month.
Yvonne Wakefield, Founder of Caveat
Legal, says the introduction of court-
annexed mediation into the South
African legal system will hopefully lead
to quicker and more cost effective
dispute resolution in matters that
fall under the jurisdiction of the
Magistrates Courts.
In terms of the new rules a Magistrate
or the parties themselves may refer
a dispute for mediation prior to the
commencement of litigation or where
litigation has already started, but
before judgment has been passed and
provided all parties agree. The new
rules set out the procedures that must
be followed once a dispute has been
referred to mediation.
The amended rules make mention
of two very powerful reasons for
encouraging mediation over litigation:
Mediation helps preserve relationships
between litigants or potential litigants,
which may become strained or
destroyed by the adversarial nature of
litigation;
Mediation facilitates an expeditious
and cost-effective resolution of a
dispute between litigants or potential
litigants.
For these reasons mediation is also
increasingly becoming a preferred
80
June 14.indd 80
option in complex commercial disputes,
workplace disputes and those involving
family trusts.
Notwithstanding the broadened
jurisdiction of Magistrates Courts
as from 1 June this year (regional
Magistrates Courts will be able to hear
matters involving amounts of up to
R400 000) most commercial disputes
far exceed the jurisdiction limits and
are usually resolved in the High Court
with litigation costs running into
hundreds of thousands, even millions
of rands.
Given the current economic climate
companies are increasingly considering
mediation over litigation.
THE INTRODUCTION OF COURT-
ANNEXED MEDIATION INTO THE SOUTH
AFRICAN LEGAL SYSTEM WILL HOPEFULLY
LEAD TO QUICKER AND MORE COST
EFFECTIVE DISPUTE RESOLUTION
The Centre for Effective Dispute
Resolution, a global conflict
management and resolution
consultancy, defines mediation
as a flexible process conducted
confidentially in which a neutral person
actively assists parties in working
towards a negotiated agreement of a
dispute or difference, with the parties
in ultimate control of the decision to
settle and the terms of the resolution.
The Caveat Legal Commercial
Mediation team has found that
mediation is most likely to succeed in
dispute situations where a valuable
and ongoing business relationship is
potentially at stake.
Parties to a dispute generally opt for
mediation for three reasons: they want
to maintain their business association
with each other, they want resolution
as quickly as possible, and they want
to prevent exorbitant legal fees. Since
mediation is not about an adjudicator
choosing between a winner and a
loser, but rather about the parties
resolving a dispute for the benefit of
both of them, relationships are far
more likely to survive a mediation
process than litigation.
A study released earlier this month
by global law firm Eversheds shows a
significant increase in the number of
large commercial disputes worldwide.
The study, titled Companies in Conflict:
How Commercial Disputes are Won,
was undertaken by Eversheds, together
with academics at Kings College
London and the University of Surrey.
It reveals that the key motivations for
pursuing a commercial dispute are to
recover financial loss and to manage
reputation.
Mediation is an effective tool that
allows businesses to recover financial
losses without incurring legal costs
that could outweigh the recovery,
while at the same time managing their
reputations by controlling which details
about the dispute are made public.
One of the benefits of mediation is
the fact that the process is conducted
confidentially and in private, which is
critically important in managing the
reputation of the parties involved.
Unlike court proceedings in which all
documents are on public record, what
is discussed during a mediation process
remains private and confidential
between the disputing parties.
Another benefit is that the process is
entirely without prejudice, meaning
that if settlement by mediation is not
successful, the representations made
during the mediation proceedings
cannot be used by either party in
subsequent litigation.
Examples of where mediation can be
used effectively to resolve disputes
and differences of a commercial nature
include the following:
General commercial disputes with
suppliers, customers, clients,
partners or competitors;
COVER JUNE 2014
2014/06/19 5:31 PM
 Cases where litigation fatigue
has set in following protracted
and unresolved litigation;
Disputes and disagreements
in family businesses;
The need to clarify, improve,
evolve, restructure, end or dissolve
a business or business relationship,
Pragmatic hedge
fund supervision
A near reality
Regulatory supervision of the
R45-odd billion South African
hedge fund industry which,
depending on the strategy
followed, returned approx.
4,7% to 27% to investors
during 2013 recently took
a step closer to finalisation
with the release by National
Treasury and the Financial
Services Board of draft
regulations for public comment.
These follow the issue of a proposed
regulatory framework for hedge funds
during September 2012 and subsequent
comments received on the proposals
from interested parties.
The draft regulations, which stem
from South Africas G20 obligations,
aim to protect hedge fund investors,
manage systemic risk and promote
the integrity of and transparency in
the hedge fund industry. They also
focus on the regulation of hedge
fund products. Currently hedge fund
managers are regulated under the
Financial Advisory and Intermediary
Services Act (FAIS).
The authorities have taken what can
be considered a pragmatic and flexible
approach in achieving their objectives
by allowing for two types of hedge
funds, both of which will fall under
the ambit of the Collective Investment
COVER JUNE 2014
June 14.indd 81
affiliation or partnership;
Aiding a business transaction
or negotiation that has hit a
stumbling block to move forward;
Resolving interpersonal conflict or
performance related issues between
employees, executives, business
partners, shareholders or directors;
Schemes Controls Act (CISCA),
the same legislation that regulates
collective investment scheme portfolios
in South Africa.
The first type, the Qualified Investor
Hedge Fund (QIHF), is aimed at so
called qualified investors who are
either experienced in investment
matters or who have appointed
experienced FAIS registered advisors to
assist them and who have a minimum
hedge fund investment budget of R1
million. Institutional investors are also
included in this category.
QIHFs can only be marketed to
qualified investors and will not be
available to the general public.
Inheritance related disputes;
Disputes affecting body corporates
and homeowner associations.
Points out that trained mediators
can act in their primary function (as
mediators) or as representatives or
negotiators acting for a client in a
mediation process.
GEORGE CAVALEROS,
CFA, Partner
Deloitte & Touche
The second type, the Retail Investor
Hedge Fund (RIHF), is aimed at
the retail market and is available
to all potential investors, especially
individuals who are interested in hedge
fund exposure.
While the draft regulations provide for
certain general rules and principles that
are applicable to all hedge funds, for
example, the principle that an investor
cannot lose more than the invested
capital, the specific provisions relating
to RIHFs are more onerous and provide
for more regulatory safeguards than
those affecting QIHFs. In the case of
leverage for instance, QIHF managers
have the flexibility to determine their
own leverage levels, subject to certain
81
2014/06/19 5:31 PM
 Governance

How will the retail industry, which

has a lot to gain from a cash inflow
perspective, respond to the regulations
RIHFS ARE SUBJECT TO
and how far will it go in pursuit of
INVESTMENT EXPOSURE retail clients? Are the retail industry
LIMITS, WHILE QIHFS ARE NOT distribution channels sufficiently skilled
RESTRICTED IN THE SAME WAY. and effective to enable fair marketing
of RIHFs? Will the industry be able to
attract sufficient new cash flows to
create RIHFs that are sustainable in the
long term?

disclosures, while gross exposure by
RIHFs is limited to 200% of the funds
net asset value. Regarding permitted
investments, RIHFs are subject to
investment exposure limits, while
QIHFs are not restricted in the same
way.
This regulatory differential follows the
regulators view that qualified investors
are generally more investment savvy
than their average retail counterparts,
allowing them to better appreciate
hedge fund mechanics and the risk
return profiles of investments in the
hedge fund universe.
Hopefully these regulations will assist in
changing the perception held by many
potential investors that hedge funds
are toxic or high risk investments
that should be avoided as they could
be value destructive. It is true that
investors have lost money in the
hedge fund space. Some losses have
been due to hedge fund investment
manager errors and operational risk
management failures, but many were
probably a function of speculative
investing and the selection of funds
whose profiles were at odds with
investors investment strategy and risk
tolerance.
The reality is that hedge funds, due to
their characteristics, have a useful role
to play in a well-constructed portfolio.
These include their low correlation to
other investments resulting in portfolio
THE REALITY IS THAT HEDGE
FUNDS, DUE TO THEIR
CHARACTERISTICS, HAVE A
USEFUL ROLE TO PLAY IN A WELL-
CONSTRUCTED PORTFOLIO.
diversification, the stabilisation of
returns and the reduction in volatility.
On the negative side, their fees are
generally high.
It is expected that the tax regime for
both types of hedge funds will be
similar to that applicable to unit trusts
and their investors. Distributions made
THE PROPOSED
REGULATIONS DO
HOWEVER RAISE MANY
POTENTIAL QUESTIONS.
by hedge funds will be taxed in the
hands of the investors depending on
their tax status. Capital Gains Tax will
also accrue to investors who meet the
necessary requirements.
The proposed regulations do however
raise many potential questions. Will
the cost of supervision, investor
protection, transparency, and reporting
have the effect of increasing costs,
thereby reducing returns? Will the steps
introduced to reduce risk, for example,
exposure limits for RIHFs, limit the
hedge fund managers ability to
generate the most appropriate returns?
The proposed transition period of
one year from the promulgation of
the regulations to enable managers,
administrators and hedge fund
investment managers to comply
with the regulatory requirements
will prove challenging and costly. In
many instances, risk management and
compliance functions and tools will
have to be enhanced and formalised,
data sources tested to assess whether
they are capable of complying with
the reporting requirements, contracts
and mandates checked for suitability
and regulatory registration in terms of
CISCA finalised.
Some participants will have to evaluate
whether existing systems and retail
platforms require any modification.
The upside of all this alignment to
the regulations is the continued
strengthening of the industrys
infrastructure to become more efficient
and better able to respond to investor
demands.
The upside of all this alignment to
the regulations is the continued
strengthening of the industrys
infrastructure to become more efficient
and better able to respond to investor
demands.
One can argue that the expected
regulatory burden may be distraction.
Actually, retail investors will have
much needed access to hedge funds
with different strategies capable of
delivering uncorrelated risk-adjusted
returns. They also create opportunities
for hedge fund investment managers,
to profitably respond to the expected
increased investor appetite for hedge
funds and to develop new strategies to
meet new needs. These are clear short
to medium term benefits.
What is not clear at this stage is the
long term impact and implications of
these regulations on investors and the
hedge fund industry.

82 COVER JUNE 2014

June 14.indd 82 2014/06/19 5:31 PM

 SAM: Things you need
to know to be on track
Insurance regulation as we know
it will change some say for the
better, others are not so sure
when the Solvency Assessment
and Management (SAM)
framework comes into force on 1
January 2016.
This date was confirmed by the
Financial Services Board (FSB) in their
2013 update. Their 2014 SAM update is
expected shortly and no change in this
date is expected. However, it is worth
noting that there is a lot of work for
the regulator in drafting and finalising
SAM and getting it through parliament
in these timeframes.
Equally, the industry has a
significant amount of work ahead
to implement SAM. The FSBs light
and comprehensive parallel runs
starting in mid-2014 and over
2015 respectively provide a good
COVER JUNE 2014
June 14.indd 83
roadmap for firms to align their
implementation plans to meet the
2016 implementation date.
In particular, the 2015 comprehensive
parallel run essentially means that
firms should treat SAM as live from
1 January 2015 all of the reporting
requirements (including the ORSA)
are required by the FSB although
it is anticipated that some of the
governance requirements for SAM
will not be enforced at least to
the extent they are different from
the Insurance Laws Amendment Bill
(ILAB).
The FSB initiated an economic impact
study on the potential impact of SAM
in mid-2013. This project is reaching its
final stages and the FSB is expected to
publish the key findings in 2014. There
will also be a presentation of some
of the key messages at the Actuarial
Societys Life Assurance Seminar
(5 and 9 of May in Cape Town and
Johannesburg respectively).
KEY ACTIVITIES FOR 2014
AND 2015
THE 3RD QUANTITATIVE IMPACT
STUDY (QIS3):
It is a compulsory exercise
for all insurers
Currently underway and submission
is due on 30 April 2014
LIGHT PARALLEL RUNS:
Will be performed quarterly
starting from 30 June 2014
This will effectively mean
firms will re-do QIS3 for
each quarter thereafter
DEVELOPMENT OF ORSA
Ahead of the full parallel run
in 2015, firms are expected to
develop their Pillar 2 capabilities
And in particular their approach to
ORSA with many firms performing
a dry run in 2014 ahead of
the compulsory submission
to the regulator in 2015
The ORSA is an area that the FSB
has targeted in the latest Pillar 2
Readiness survey due 30 April 2014.
DEVELOPMENT OF PILLAR 3
REPORTING CAPABILITIES
While the full set of QRTs has not
been finalised, a large portion of
these templates have been produced
Firms will be expected to
do full reporting in the 2015
comprehensive parallel run
Many firms will aim to automate the
production of the QRTs to help meet
the tight reporting deadlines for SAM
Further details on each of these
activities are noted under each of the
sections below
PILLAR 1
While the overall structure of the Pillar
1 requirements is largely finalised,
the detailed requirements are being
developed. The two key developments
in respect of Pillar 1 are QIS3 and the
changes to the IMAP that the FSB
announced in December 2013.
83
2014/06/19 5:31 PM
 Governance
QIS 3
QIS3 is currently underway and is
compulsory for open firms, being firms
which are currently underwriting new
business, with the results being due
by 30 April 2014. The submissions
required include:
Solo submissions covering the
full Pillar 1 balance sheet
Group consolidated results which also
cover the full Pillar 1 balance sheet
A qualitative questionnaire covering
a wide range of questions on all
aspects of the Pillar 1 balance sheet
as well as general areas such as
preparedness for SAM and the level of
difficulty involved in preparing QIS3
There are a number of key changes
between QIS2 and QIS3, and even
between the draft QIS3 and the final
technical specification, including:
Risk free rate: insurers may now use
the swap rate to discount the cash
flows of liabilities that are backed by
assets invested in swap based assets
Gross and net of management
actions: the requirement to produce
the results of stresses both gross
and net of management actions
has been removed and replaced
with a requirement to disclose
the solvency position of the with
profit funds based on draft QRTs
Liquidity assessment: additional
information has been
requested to help define a
good liquidity risk indicator
Treatment of own shares: QIS3
allows insurers the option to apply
the delta NAV (i.e. the change
in NAV) approach to their own
shares as these are held by and the
risks are borne by policyholders
Groups clarification on alternatives
to be calculated: QIS3 requires the
deduction and aggregation using
current capital requirements, and the
alternative deduction and aggregation
to be calculated. The accounting
consolidation approach is optional
INTERNAL MODEL APPLICATION
PROCESS (IMAP)
A number of firms are applying for
internal model approval to use a
customised capital model instead of
the Standard Formula SCR. The FSB
noted in its December 2013 newsletter
84
June 14.indd 84
that it has changed its approach based
on lessons learned during the process
to date. Details of the changes are yet
to be published on the FSBs website
but we understand that the detailed
self-assessment template has been
changed and that the process will be
aligned to a theme based approach.
The key themes that will be reviewed
include governance, market risk, credit
risk, validation and the use test.
The IMAP remains, by necessity, an
intensive process and firms should
not underestimate both the technical
rigour that should be applied to the
development and use of an internal
model and the documentation
requirements to support the use of the
model. These aspects form the basis
of the application for approval and
will be used by the FSB to understand
the model on paper (further technical
reviews may also be conducted).
PILLAR 2
In June 2013, the FSB published its
report on the Pillar 2 readiness survey
it conducted in mid-2012. The survey
identified the ORSA as the key area of
concern for the FSB where only 16%
of the industry responded that their
ORSA was acceptable or better
33% of the industry responded that
their ORSA was weak. The industrys
lack of understanding of the ORSA was
highlighted with many firms requesting
further guidance the FSBs report
on the results of this survey contains
further commentary and guidance
regarding the ORSA.
The FSB is currently conducting a follow
up survey which is due to be completed
by insurers and returned to the FSB on
30 April 2014. The focus of this survey
is on the approach to the ORSA and
progress made to date. The FSB will also
conduct interviews with specific firms.
The survey is intended to identify firms
that are at risk of not meeting the Pillar
2 requirements and the results will be
published in the third quarter of 2014.
Currently, many firms are focusing on
their ORSA development ahead of the
comprehensive parallel run in 2015
which requires firms to run their ORSA
process and submit an ORSA report to
the FSB.
Firms will also be looking ahead to the
ILAB requirements which will mean
that some changes to governance
structures and processes will be
required ahead of the SAM changes.
PILLAR 3
There is currently a lot of activity within
the FSB structures in this area. The
suite of quantitative reporting templates
(QRTs) is still under development. The
FSB is also considering public comment
received during 2013 relating to the
assets (investments), and technical
provisions templates for life and non-life
business.
It does not appear as if the goal of
having the full suite of QRTs released
for public comment by the end of
March 2014 will be reached. The most
significant challenge currently is defining
and finalising the segmentation classes,
both for life and non-life business.
This, together with other practical
difficulties that insurers are facing (for
example, the requirement for collective
investment schemes assets to be
disclosed on a look-through basis)
is creating significant implementation
challenges for insurers that need to start
working on their reporting solutions.
The qualitative (narrative) reporting
requirements are also currently being
drafted through various working groups
consisting of industry representatives.
The qualitative reporting requirements
are expected to be met through a
similar format as the current regulatory
returns questions which are to be
answered on a yes/no basis with
explanations and comments provided in
certain areas. The feedback from the
pillar II readiness survey and follow-up
exercise will also be used as guidance.
We believe that many companies
have a lot to do to meet the reporting
requirements. The main areas of work
are likely to focus on:
ORSA development ahead of the
comprehensive parallel run in
2015. Firms will also be looking
ahead to the ILAB requirements
which will mean that some
changes to governance structures
and processes will be required
ahead of the SAM changes;
Whether the required
data is available;
How quickly the data
can be reported;
Whether the systems and processes
for reporting data have been
sufficiently tested and subjected
to appropriate dry-runs.
COVER JUNE 2014
2014/06/19 5:31 PM
 Legal
The FSB is not a
criminal court
Brian Martin, Executive
Director Legal and Compliance
at Renasa Insurance Company
Ltd, writes, an FSB enforcement
committee is an administrative
body, not a criminal court.
A person appearing before
an enforcement committee
is not considered an accused
and is therefore not entitled
to the rights conferred by the
constitution on an accused.
In an important decision, the North
Gauteng High Court, in review
proceedings brought against a finding
of an enforcement committee (EC) of
the Financial Services Board (FSB) has
held that a person appearing before an
EC is not considered an accused person
and is therefore not entitled to the
rights conferred by the constitution on
accused persons.
The case of Maslamony Theegarajan
Pather and AH-Vest Ltd v the Financial
Services Board (FSB) and others had
COVER JUNE 2014
June 14.indd 85
its origin in a finding during 2009 by
an EC that Pather and AH-Vest had
made false, deceptive and misleading
statements in contravention of Sec
76(1) of the Securities Services Act.
The EC imposed an administrative
penalty of R1, 5 million on both
respondents. The respondents
thereafter brought a review application
in the High Court in which they
challenged the constitutionality of EC
proceedings and argued that as the
finding of an EC is similar to the finding
of a criminal court, the standard of
proof required in such proceedings was
beyond reasonable doubt and not a
balance of probabilities.
THE APPLICATION WAS DISMISSED
BY THE HIGH COURT WITH COSTS,
THE COURT FINDING THAT:
1. The Act provides for civil, criminal
and administrative proceedings. Certain
contraventions of the Act attract both
criminal and administrative liability
that is not mutually exclusive, which is
constitutionally permissible.
2. An EC of the FSB is an
administrative body that must conform
to Sec 33 of the constitution in relation
to the provision of just administrative
action. It is bound by the provisions
of the Promotion of Justice Act
(PAJA) and is not required to be an
independent forum.
3. Since the proceedings of an EC
are administrative in nature, a matter
before an EC must be proved on a
balance of probabilities, being the
civil burden of proof and not beyond
reasonable doubt.
4. A respondent appearing before an
EC is not an accused person and is
therefore not entitled to the rights
conferred by the constitution on
accused persons appearing before a
criminal court.
This judgement would logically imply
that these principles would apply
equally to all types of administrative
decisions made by the FSB or the
Registrar. It also seems to be based on
common sense. However, the matter
remains open as the respondents have
brought an application for leave to
appeal against the judgment and it is
possible that the matter may yet come
before the Supreme Court of Appeal
(SCA) or even the Constitutional
Court, which may come to a different
conclusion.
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2014/06/19 5:31 PM
 Legal
Businesses: Use CPA lifeline
of industry specific codes
TRUDIE BROEKMANN,
Commercial Attorney, specialising in the
CPA and consulting with Caveat Legal
The Consumer Protection Act
(CPA) offers consumers rights
of redress. For many suppliers,
however, this is often where the
nightmare begins.
Many businesses and service providers
are simply not geared to deal with CPA
customer complaints and resolving
them in line with the provisions of the
Act.
Not only does this leave the customer
frustrated and angry, but suppliers
of services and goods are equally
disheartened.
Suppliers frequently complain that the
Act does not work for their industry
as it doesnt accommodate their
particular circumstances, customs
and constraints. As a result some of
the provisions of the CPA have an
inequitable effect on suppliers who are
nevertheless required to accommodate
customers seeking redress.
The CPAs overarching goal is ensuring
that all industries, excluding those
granted exemption, treat customers
fairly as intended by legislation.
Because it spans so many industries
and relationships the CPA is one of the
most wide-ranging pieces of legislation.
However, for this reason the Act comes
with a powerful tool aimed at helping
different industries align the complaints
process and required outcomes to the
unique characteristics of their industry.
Section 82 of the Act empowers
industries to put in place a code of
conduct, which, once accredited by
the Minister of Trade and Industry,
becomes binding on suppliers in
that industry. Once a code has been
accredited, it has the same status as
the CPA, but industry members can
dictate what it says.
86
June 14.indd 86
MANY BUSINESSES AND
SERVICE PROVIDERS ARE SIMPLY
NOT GEARED TO DEAL WITH
CPA CUSTOMER COMPLAINTS
Industry codes cannot undermine
the rights of consumers as set out
in the Act, but they can guide a
specific industry in ensuring that
they are complying with the CPA and
that complaints handling has been
streamlined.
Such a code can include the creation
of an industry ombudsman. Once an
ombudsman is in place for an industry,
each supplier in the industry, and the
National Consumer Commission, are
required to refer all unresolved consumer
complaints to the ombudsman.
The consumer goods and services
industry, for example, published its
code of conduct last year. Although
not yet accredited, an ombudsman has
already taken up office and is dealing
with consumer complaints.
The consumer goods and services
industry code regulates the interaction
between suppliers conducting business
within the industry and the consumer
without endangering the vitality and
growth of business. It also provides
for an alternative dispute resolution
mechanism should there be a dispute
between members of the industry and
the consumers.
Every industry in South Africa is well
advised to engage with their industry
body and draft similar codes that
address their specific needs.
Industries that could benefit from
implementing a code are financial
services, local government, education,
travel, food and beverage suppliers, the
pharmaceutical industry, medical and
related professions, medical aids, and
estate agents.
AN INDUSTRY CODE COMES WITH
THE FOLLOWING KEY BENEFITS
FOR MEMBERS OF THAT INDUSTRY:
An industry code is there to
streamline the mechanisms for
dealing with consumer complaints.
Having a code and ombudsman
can mean that industry members
can refer complex customer
complaints that seem impossible
to resolve to an ombudsman who
is empowered to deal with the
complaint in a legally compliant,
authoritative and consistent manner.
An industry code allows an
industry to customise the
provisions of the Act to ensure
that they make better sense in the
context of a specific industry.
An industry code indicates to
consumers that a specific industry
strives to comply with the law and
is sensitive to consumer rights.
Industry bodies should use the services
of a qualified legal expert when
drafting their code since the code will
be subjected to stringent government,
legal and public scrutiny before it will
be accredited.
COVER JUNE 2014
2014/06/23 6:12 PM
 Risk Management
SA business
affected by strikes
The gravity of managing risks
The on-going riots and labour
disruptions in the platinum
industry is causing South African
businesses to continually feel
the impacts of strikes, which
is damaging economic growth,
and in turn negatively impacting
local businesses within the
mining sector, as well as those
inadvertently involved.
According to Annelie Smith, Corporate
Executive at Risk Benefit Solutions
(RBS), the risks related to strikes and
riots across all sectors are steadily
growing as the number of strikes in
South Africa continues to increase.
Business owners need to ensure that
they are covered for the various risks
that strikes and riots may bring about
for their business, such as damage to
property and loss of income due to
interruptions caused by labour unrest.
Compared to a few years ago, when
strikes were erratic, these incidents
are steadily becoming more constant
within the country.
The 2012 Annual Industrial Action
Report by the Department of Labour,
released late last year, revealed
that strike activities increased by
approximately 48% during 2012.
A total of 99 strike incidents were
recorded in 2012, and of these, 45
were unprotected.
One such way for businesses to protect
themselves from strike-related risks
is by making use of cover provided
by Sasria, a state-owned short-term
insurance company which has a
mandate to provide specialised risk
cover for physical damage caused
by riots, strikes, terrorism, civil
commotion and public disorder to
corporate / commercial and individual
policyholders.
COVER JUNE 2014
June 14.indd 87
Many businesses have short-term
insurance solutions in place protecting
them against catastrophic perils like
fires, storms, earthquakes and other
risks, however, damage to property
caused both by politically-and non-
politically motivated acts of destruction
is excluded from these policies. Many
businesses may not know that this
standard exclusion is a global practice
and applies to all insurance policies.
THE REPORT REVEALED
A 91% INCREASE IN
CLAIMS FREQUENCY,
DRIVEN PRIMARILY BY
LABOUR STRIKES
Reiterating the increasing need for
strike-related risk cover is Sasrias
Integrated Report 2013, which revealed
an increasing trend in claims frequency.
The report revealed a 91% increase in
claims frequency, driven primarily by
labour strikes, as well as an increase in
claims severity of 135% for the period
ending 31 March 2013.
The trigger for Sasria to cover an
instance is based on the direct damage
to a business property, as a result of
a strike or riot. For example, should
a business premises be set alight by
rioters, Sasria would cover the damage
to the property, as well as the on-
going costs requiring payment during
the period, such as rates & taxes, loans
and high purchase agreements for
example. However, should a strike take
place near the property, resulting in the
business shutting down its operations
temporarily, and sending staff home
as a result of intimidation, there is no
direct damage to the property and
therefore the instance will not be
covered by either the property or the
Sasria policies, despite the business
suffering a financial loss as a result of
the business being interrupted.
The type of cover offered by Sasria
is specialised, and it is therefore
important that business owners consult
an insurance broker to fully understand
the possible risks that a company
may potentially be exposed to. Due
to a common misconception of what
Sasria covers, many claims have in
the past been rejected and left clients
infuriated.
While Sasria provides cover in receipt
of the damages to an extent, it does
not provide full gross profit cover.
Sasria does however offer various
solutions to take into account the
varying requirements business may
have wherein companies can purchase
a combination of standing charges or
uninsured working expenses together
with net profit cover only.
THE TYPE OF COVER
OFFERED BY SASRIA
IS SPECIALISED
Seeking expert guidance will ensure
that businesses have sufficient cover
in place for the possible losses caused
as a result of a strike. For instances,
alternative top-up solutions can be
obtained from various international
global insurers. These solutions are
easily available and should also be
explored by businesses.
The rising occurrences of riots and
strikes highlight the growing need for
local business to protect themselves
financially from the possible risks
associated with strikes. Given the
challenges in the marketplace due to
industrial action, workplace disruption
and protests, strikes and riots need
to become a permanent part of a
business risk management plan.
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2014/06/19 5:31 PM
 Cyber Crime
Using POPI as a defence
against cyber crime
If South African companies
comply with at least the
minimum standards in
the Protection of Personal
Information Act, 2013 (POPI),
South Africa will become more
focussed on cyber security
and less appealing for cyber
criminals. Compliance will assist
companies to avoid paying
millions in fines imposed by
the Information Regulator if
data breaches result from being
hacked.
In March 2014, the Information
Commissioners Office (ICO) in the
NERUSHKA DEOSARAN,
UK fined an abortion clinic 200,000
Associate Attorney,
(about R3,57 million) following a data
Norton Rose Fulbright
breach where a hacker threatened to
publish the names of 10,000 people
who had visited the clinics website
for advice. The clinic had not realised
that its website stored visitors details,
including contact details, but the ICO
said that ignorance is no excuse. Data
controllers must take active steps to
ensure that the personal data for which
they are responsible is kept safe. The
personal information collected was not
stored securely and vulnerability in the
websites code allowed the hacker to
access the information.
DATA CONTROLLERS MUST
TAKE ACTIVE STEPS TO
ENSURE THAT THE PERSONAL
DATA FOR WHICH THEY ARE
RESPONSIBLE IS KEPT SAFE.
KERRI CRAWFORD, Sony was fined 250,000 (about
Associate Attorney, R4,24 million) by the ICO in 2011 after
Norton Rose Fulbright a PlayStation cyber attack resulted in
a leak of customers personal details,
including payment card and log-in
details. The ICO considered it one of
the most serious data breaches it had
88
June 14.indd 88
ever seen and said that if a company
is responsible for high volumes of
personal information, then keeping it
secure must be a priority. In this case
the existing security measures were not
good enough. Following the breach,
Sony rebuilt its network platform to
ensure that personal information is
secured.
These are just two of many stories
worldwide in which companies were
fined following cyber attacks. In the
UK, the maximum fine for a data
breach is 500,000 (R8,84 million).
The maximum fine in South Africa
under POPI will be R10 million.
South Africa is reported to have
experienced the third highest rate of
phishing attacks in the world and it
is estimated that South Africa loses
R1 billion a year due to cyber crime
related activities. Approximately 70%
of South Africans have fallen victim to
cyber crime and similar risky behaviour
compared to the global average of
50%. The FBI lists South Africa as the
sixth most active country in which
cyber crime takes place.
POPI prescribes minimum data security
measures and standards. A responsible
party must take appropriate, reasonable
technical and organisational measures
to prevent loss, damage, unauthorised
destruction or unlawful access to
personal information. This includes
continuously updating safeguards in
response to new risks and deficiencies
in previous safeguards. The ICO has
referred to the International Standards
Organisation standard ISO27001 as a
best practice standard. If implemented
correctly, it would almost certainly
meet the requirements of UK data
protection laws.
As South Africa does not yet have
an Information Regulator or guidance
on best practice security standards,
it would be prudent of South African
companies to follow best practice
guidance in jurisdictions like the UK,
whose laws contain similar wording in
relation to data security.
COVER JUNE 2014
2014/06/19 5:31 PM
 Catch of the day
personal information?
Phishing, baiting, and spear
phishing are key tools in a cyber
criminals social engineering
toolkit. The Symantecs Internet
Security Threat Report 2014
states that South Africa attracts
more phishing emails than any
of the other 10 geographies
surveyed with one in every 688
emails sent in the month of
February being fraudulent.
Social engineering attacks, including
phishing attacks, have matured from
early emails littered with poor spelling
and grammatical errors, to well-crafted
convincing communications via email,
SMS, phone calls and social media.
Social engineering is the art of
manipulating individuals into disclosing
confidential information. The nature
of information varies, but is typically
focused on passwords and confidential
information that can be used to
perpetrate fraud or sold to interested
parties. Social engineering tactics are
quicker and easier than finding ways to
hack into systems.
Phishing is a scamming method
whereby attackers send
communications to individuals which
appear to come from legitimate
sources. These messages entice you
to open attachments which contain
malware, or click on a link to a fake
website, where the malware could be
installed. Or the message asks you
to authenticate or confirm personal
information. Attackers use the
information to launch additional attacks
to harvest as much data as possible.
Spear phishing attacks are much more
targeted and involve information
specifically relating to the victim,
making these messages even more
believable. Smishing is the term coined
for phishing attacks conducted via
SMS.
COVER JUNE 2014
June 14.indd 89
The insurance industry possesses a
wealth of client information, making
it a prime target for social engineers.
You cant rely solely on anti-virus
and anti-malware solutions, as these
criminals continually find creative
methods of circumventing traditional
protective measures.
Imagine the damage if an attacker
decides to target the broker community
and crafts a phishing email purporting
to come from a reputable and relevant
company, like the FSB. The email
contains appropriate logos, legitimate
text relating to recent events and a
link to obtain additional information.
The link opens a webpage which looks NATALIE VAN DE COOLWIJK,
MD of CyGeist
SOCIAL ENGINEERING IS
Awareness and vigilance are critical
THE ART OF MANIPULATING
in preventing you from falling victim
INDIVIDUALS INTO DISCLOSING to increasingly elaborate social
CONFIDENTIAL INFORMATION. engineering scams. Top five tips for
protecting yourself against such attacks
are:
exactly like the legitimate website,
but is a fake page that belongs to Avoid clicking on links in an
the attacker. The broker enters their email and rather browse directly
to the site in question;
login credentials on the fake site and
these are captured by the attacker,
Secure all devices by installing
before redirecting the broker to the
the appropriate anti-virus
legitimate website with an error code
for a failed authentication attempt. software and firewalls, and
ensure that these together with
The broker tries again and successfully
authenticates, assuming they typed the device operating systems are
updated on a regular basis;
an incorrect key on the first attempt
and unaware that their credentials Dont reply to messages asking
have been compromised. Considering for personal information, or just
that the majority of people use the open unexpected attachments,
same password across multiple sites, even if these come from a
compromised credentials could open company or person you know;
many doors.
Be cautious of downloads,
Depending on the initial information especially if from an unknown
compromised, the attacker could: sender or unexpected; and
initiate a SIM swap and gain access
to the brokers bank account, gain Think first and act later. If you
access to the brokers email account, are unsure, do some research,
and initiate phishing attacks from dont let the urgency in a
the brokers mailbox to contacts, or phishing message or promises of
conduct further targeted attacks to untold riches influence you.
gain information which could be sold
on the underground market or used to CyGeist is a cyber-focused UMA which
defraud broker and clients. underwrites on behalf of Guardrisk.
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2014/06/19 5:31 PM
 Survival of the savviest

Technology has become the hub around which the nancial industry spins. Without the
state of the art, competitive technology, no player in the industry will be successful.
Industry players are looking to technological innovations to facilitate client intimacy
and compliance, while seeking business efciency for cost optimizing reasons. COVER
asks the industry how technology providers are reacting to the vast opportunities
through technology, and how they are impacted by the growth in the African market.

Reacting to technology
The rate of uptake on the various
technologies is interesting to
see. Technology has enabled
a new breed of consumer,
who often is more technology
conscience than many of the IT
departments within the insurers.
Steve Symes, CEO of Genasys
Technologies, talks about the problem
facing IT departments, and how is not
so much understanding the technology,
but rather understanding how to
manage the speed, reach and potential
impact of the different technologies on
their consumer base.
SOCIAL MEDIA
Traditionally, the brand of an insurer
is managed by their marketing
department who; issue press releases,
manage advertising campaigns,
coordinate sponsorships and facilitate
all other channels of accessing clients
and potential clients.
The landscape of advertising has
changed with some companies
using social media to broadcast their
messages, not as boring adverts but
instead mixed in with an eclectic
set of messages that entertain and
involve the recipient, to the extent
where the consumer not only absorbs
these messages, but passes them onto
their network i.e. become viral. This
personalised endorsement makes the
message become more relevant and
believable to the wider audience.
Just as easily, negative perceptions
can be broadcast quickly and cheaply.
A lot is being said about Treating
Customers Fairly (TCF) with codes of
conduct, legislation and other directives
being thrown around. Some aspects of
Social Media have made this more or

90 COVER JUNE 2014

June 14.indd 90 2014/06/19 5:31 PM

 Technology
less redundant. Within a few seconds
of being treated badly by a company,
complaints can be published on a
number of platforms such as; Web
sites, Facebook, and Twitter within the
reach of thousands of consumers.
Insurance companies should be actively
monitoring Social Media to track
activity with their brand, as the brand
management is no longer purely in
their hands. Few things can damage
a companys reputation more than
unanswered complaints that have gone
viral.
MOBILE TECHNOLOGY
Much hype is being made of Mobile
Apps and the benefits of having these
apps for consumers. Is this just hype,
or are there real tangible benefits for
an Insurance Company to provide this
to their client base? Many brokers,
insurers and 3rd parties are giving
these away for free. What has the take
up been, how often are they used, why
would the customer want to use this? I
would argue that it depends largely on
what the app does and how it does it.
BYOD
Systems security has become a major
headache for Insurance Companies.
Many staff connect their personal
phones and tablets up to the network
for email access and others use cloud
services like Dropbox to distribute
documents to a defined user group.
How much control does the company
have over its own data? What potential
liability does it have if sensitive
personal information is made available,
especially with the POPI Act becoming
a reality?
COVER JUNE 2014
June 14.indd 91
EXTENDING THE ENTERPRISE
The advent of Web Services, Service
Busses and standardised messaging
doctrines like ACORD enable businesses
to extend their services beyond the
confines of the organisation. Businesses
can enable their external partners
to interact directly with their core
applications in a safe and controlled
manner like never before. New
business practices can be modelled
on provision of service rather than
technical constraints. Emergency
assistance can be outsourced because
the provider can confirm cover
immediately from within their own
systems. Assessments and surveys can
be done virtually anywhere and fed
directly into the back end systems for
settlement.
FEW THINGS CAN DAMAGE A
COMPANYS REPUTATION MORE
THAN UNANSWERED COMPLAINTS
THAT HAVE GONE VIRAL.
TELEMATICS
Pay how you drive - driving behaviour
and patterns are being used as
pricing variables. This is no longer
a technology issue, but more of a
dilemma on how to get buy in from
the consumer who is concerned about
big brother watching over him.
INFRASTRUCTURE AS A SERVICE
(IAAS)
Infrastructure as a Service (IaaS) is not
really a technology trend but rather a
move by many insurers and UMAs to
change their spending patterns from
a Capital basis to Operational basis.
Essentially outsourcing their equipment
hire, and infrastructure service
provision to experts, who can provide
effective cost savings by combining
multiple businesses into a single data
centre.
Each client is housed within a number
of virtual server environments,
providing both scalable and redundant
virtual hardware environments.
Capacity can be grown or reduced
over time and peak periods can be
accommodated by assigning additional
resources almost on the fly. The
servers are maintained in safe fire
resistant data centres and offer
excellent disaster recovery options.
BUILD VERSUS BUY
Traditionally many insurers engaged
their own development teams and
built their own systems which were
designed specifically for their needs.
Unfortunately, as history tells us
time moves on, business changes,
legislation changes, technology
changes and often these bespoke
systems have changed from enabling
their business to crippling their
business.
More recently, insurers have realised
that the cost of maintenance of
their own bespoke solutions is
growing and there is a trend towards
packaged solutions where many of the
technology and legislation changes
are managed by the vendor and costs
shared between multiple clients.
STRIDE
Collaboration between insurers and
their outsourced partners has become
a business imperative, both from a
legal and an operational basis. STRIDE
is the short term insurance industry
solution to this and will facilitate
this interaction if it is supported by
Insurers, Brokers and the 3rd party
system providers.
HOW ARE TECHNOLOGY
PROVIDERS REACTING TO THE
GROWTH IN THE AFRICAN
MARKET?
Africa is not an easy place to do
business in, travel is challenging and
expensive and budgets are limited.
However, it is a largely untapped
market and many insurers and other
businesses are seeing it as a potential
growth area for their services. There
are a number of large infrastructure
projects being executed in order
to open up the African continent,
which is attracting investment and
expertise from outside Africa creating
a large expat community which needs
financial services. These projects and
communities are largely serviced by the
multinational brokers.
Another area for insurance growth
is tightly coupled with the banking
sector and / or telecommunications
growth. These companies provide
the means to effectively distribute
the product and collect payments.
The banking and telecommunications
systems are not designed for insurance
management and as such there is a
pressing need for integration between
these line of business systems and
Insurance systems.
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2014/06/19 5:31 PM
 Technology
Technology is quietly revolutionising
insurance distribution
Technology is changing the way
insurers and consumers interact,
says Swiss Res latest sigma
study, Digital distribution in
insurance: a quiet revolution.
Based on extensive analysis of
research material for different
countries, the study shows that
the internet and mobile devices
are empowering consumers.
Today, people can search, review
and purchase insurance policies
without relying solely on the services
of intermediaries. At the same time,
developments in Big Data are facilitating
access to a rich source of data about
customers, which insurers can use to
enhance sales and marketing strategies.
Digital transformation overall can help
insurers become more consumer-centric.
A QUIET REVOLUTION
A quiet revolution is underway,
explains Kurt Karl, Swiss Res chief
economist. In many countries the
share of premiums accounted for
by online sales is still small, but it is
rising. The statistics on e-commerce
insurance mask the profound impact
new technologies are having on the
distribution process, Karl continues.
Surveys indicate that consumers
increasingly research online and that the
internet has become a trusted source
of advice for insurance. Aggregator or
price comparison websites (PCWs),
as well as social media, are playing a
growing role in the pre-sales process.
Ginger Turner, co-author of the study,
notes that with mobile and telematics
technology, consumers can now interact
with their insurance provider anytime
and anywhere.
Moreover, relatively simple insurance
products are being sold online more
readily. This is most obvious in
personal motor and property insurance,
especially in developed markets.
SwissReDirect marketing of term life
insurance and some insurance for small
businesses (e.g. professional liability
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June 14.indd 92
cover) is also becoming prevalent.
Swiss Re analysis shows that even
in emerging Asia, where most sales
occur via intermediaries, insurers have
developed advanced capabilities for
direct online platforms. Meanwhile,
the buying journey for insurance is
becoming fragmented across multiple
touch-points (see Figure 1).
Not all insurance sectors are at
the same stage of this digital
transformation, and not all will proceed
along the same adjustment path and
at the same pace. But the direction
is clear: eventually, customers will be
able to arrange most of their insurance
needs through remote digital channels.
The example of the UK motor market,
where e-commerce sales have come
to dominate in just a few years, shows
how quickly consumer buying habits can
change. Likewise, in emerging markets,
innovative mobile platforms are rapidly
expanding access to insurance.
INTERMEDIARIES REMAIN
RELEVANT
Importantly, digital transformation does
not spell the end of intermediaries.
Technology has spawned new types
of intermediaries such as PCWs. Many
consumers will continue to value the
personal interaction and expert advice
of agents and brokers, especially for
complex commercial and life and health
risks. The challenge for intermediaries
and insurers is to adapt their business
models to meet the varying needs and
preferences of customers.
THE RISE OF BIG DATA
Digital distribution is also facilitating
access to a rich source of data about
customers and fostering advances in
predictive analytics, collectively labelled
Big Data. This information offers
deeper understanding of customers
wants, needs and behaviours, which
insurers can use for more targeted
product design, pricing and sales.
THE IMPORTANCE OF CUSTOMER-
CENTRIC INNOVATION
Technology-led shifts in distribution
increase transparency; empower
customers and lower barriers to entry
in some markets, which can lead to
further commoditisation of insurance
products. Insurers who innovate and
build trusted brands will succeed in the
more price-competitive world.
However, successful innovation
requires a culture that fosters
experimentation and accepts failure
during the design process. The key
is to harness the insights from data
analytics to improve risk selection
and pricing, and to use technology
to increase customer centricity in
insurance products and services.
COVER JUNE 2014
2014/06/19 5:31 PM
 Entrance of eCommerce
Globally speaking, eCommerce is a
big deal these days, with total online
retail sales set to top $600 billion in
2014 a drastic turnaround from just
15 years ago, when people doubted
that Amazon.com - arguably the
largest global eCommerce business
today would be able to build a
sustainable and profitable business.
CEOs of Groupon South Africa,
Wayne Gosling and Daniel Guasco,
speak about this phenomenon.
The focus on growth in eCommerce is
by no means limited to countries like
the US though, and parts of Africa have
seen huge expansion, with a number of
key factors all coming in to play over the
last few years. Substantial investment
into eCommerce is being driven by a
number of global technology companies
and funds such as Naspers, Kinovic, Tiger
Global and Rocket Internet, with a focus
on investing in the infrastructure required
to build an eCommerce business, which
can compete with traditional retailers.
IT infrastructure versus
retirement industry challenges
The South African retirement
industry is grappling with the
need to accommodate reforms
and deliver on new demands to
strengthen retirement savings at a
lower operating cost. Optimised IT
infrastructure offers some of the
solutions.
Brian Anderson, an Executive of
SunGard South Africa says that the main
challenges facing the industry are cost
containment, regulatory changes and
growth imperatives. Pending retirement
reforms would also demand new levels
of efficiency, agility and compliance.
The key to delivering on new mandates
and future legislative changes lies in
addressing the way pension funds are
administered. On account of changes,
this industry is now faced with an
opportunity to embrace technology,
in order to streamline operations,
improve efficiencies and lower costs.
COVER JUNE 2014
June 14.indd 93
Traditional retailers are even starting to
consider eCommerce the first logical
step for gaining access to less developed
countries. This is because an online
portal, which has supporting logistical
infrastructure, is far quicker and more
cost-effective to create than a traditional
mall.
Finally, the ability to facilitate online
The propensity towards online-purchase
in any market is primarily driven by three
factors: connectivity, logistics, and the
ability to facilitate a purchase.
Connectivity is largely the function of
government spending, with investment
in fibre to create an Internet backbone
being critical to eCommerce success.
Countries like Kenya, South Africa,
Morocco and Egypt have made a real
effort in this regard, and connectivity
attempts have been gaining speed
thanks to the proliferation of mobile
devices and networks across the
continent.
Logistics is probably the biggest unsolved
concern in the African market, as the
The retirement sector may be currently
slowed by the use of outdated tools
and systems, duplication of processes
and extensive manual interventions.
The outcome of inefficient systems
are processes that are slow, labour-
intensive and costly. With the sector
actively seeking to deliver greater
returns to retirement fund beneficiaries,
the answer is to revolutionise
operations through automation, and
ensure greater cost efficiencies through
outsourced or managed services.
Improved infrastructure and processes
will also enable agility and time to
market with new products, deliver
significant improvements in compliance
and risk mitigation, and eliminate
duplication in processes. In the face
of a changing environment, pension
funds also need to invest in robust
platforms that support new operational
requirements, including analytics,
business intelligence and mobility.
market operates on a primarily B2B
basis, with no real solution for delivering
to houses. Add to this the population
spread and large percentages of
consumers residing in outlying or rural
areas, and logistics can swiftly become a
costly exercise.
purchasing is driven by the expansion of
banking across the continent, and the
continued growth of virtual wallets like
MPESA, facilitating the flow of currency
in eCommerce purchases.
Despite the substantial size of the
opportunity, and the growth of more
than 50% being seen in many markets,
one should not forget that relative to
traditional retail eCommerce is still
small making up barely 1% of the total
retail, even in a more mature market like
South Africa.
There is no doubt that there is an
exciting future for eCommerce in many
African markets, should we find ways to
solve these three challenges.
By modernising their infrastructures,
pension fund administrators would
be better placed to contain costs and
improve efficiencies, so enabling greater
returns. The benefits of advanced
computing are not limited to major
enterprises. With rental, Software as a
Service and Application Service Provision
(ASP) models now available, smaller
pension funds are also able to harness
world-class technologies to streamline
their operations and contain costs.
SunGard Financial Systems provides
mission-critical software and IT services
to institutions in virtually every segment
of the financial services industry.
These solutions address the processing
requirements of a broad range of users
within financial services, including asset
managers, compliance officers, insurers,
risk managers and plan administrators.
SunGard also provides professional
services that focus on application
implementation and integration of
these solutions and on custom software
development.
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 Events

Firedart becomes
a teenager
BY ANNETJIE VAN WYNEGAARD

Coelho in underwriting on 20 May 2002. Director Ian

van Loggerenberg joined in February 2003. Four more
employees have been with Firedart for more than 10 years
June McLinden, Liz Erasmus, Marlene Coelho and Simone
Veldman.

When I was not yet a twinkle in my mothers eye

(1975) Mike Tandy, Managing Director of Firedart
Engineering Underwriting Managers, worked as an
engineer on ships around Asia and Europe, setting
shore once in South Korea where I, 35 years later, Firedart has won the Compass Underwriting awards seven
taught English for two years. times, most recently in 2013.

In December 2011 Lireas Holdings bought shares in Firedart.

Mike said that, being a UMA, having the back-up from Lireas
is amazing, and gives him peace of mind.

Isaac Chindotana from Lireas said, Firedart is a great partner

and we wish them many more years and success in the
future.

Douglas Haig, also from Lireas, said, Their underwriting

discipline and ability to adapt to different markets and
respond positively to challenges allowed them to be
successful for 13 years.

All the food milkshakes, cake, hamburgers was prepared

by the Firedart staff.

Later, on 1 May 2001, Tandy decided to go on another

adventure, when he started Firedart, and was the sole
underwriter, claims manager, and survey conductor in the
office (to name but a few of the duties he did by himself
for the first year). Mike used to pack up his entire computer
system on a Friday to work at home monitor, hard drive,
the lot!

On 30 April 2014 Firedart turned 13, and in the spirit of

youth and prosperity, Mike and his team held a birthday
party fit for a teenager with milkshakes, hamburgers, and
slaptjips to boot.

Between bites Mike told me the history of Firedart, which

underwrites all classes of engineering business for Compass
Insurance Company (Ltd). His first employee was Marlene

COVER JUNE 2014 97

June 14.indd 97 2014/06/19 5:31 PM

 Events
Topco hosts 13th Oliver
Empowerment Awards
On 27 April South Africa celebrated 20 years of
democracy. To honour our rich heritage, Topco
Media hosted their 13th Oliver Empowerment
Awards on Friday 25 April at the Emperors
Palace in Johannesburg. The awards recognised
transformation and empowerment across all
sectors of society.
The Financial Services and Insurance sectors were well
represented. Sizwe Nxasane, CEO of the FirstRand Group,
received the Future Black Leader Award.
Adam Samie, CEO of Lion of Africa, was a finalist in the
category, Top Black Male Leader of the Year. Samie has
been in the industry for 40 years.
Shirley Machaba, Executive Chairperson of the Governing
Board of PwC, was a finalist in the category, Top Black
Female Leader of the Year. Machaba started her career
in the Auditor Generals Office in 1999 and has been an
active role model for women in business.
Ralf Fletcher, CEO of Topco Media, said: The quality of
applications this year was remarkable. We had some big
multinationals up against some of our South African JSE
98
June 14.indd 98
companies, so those being nominated were really our head
and shoulders in business, he said.
Nominees had to demonstrate an average annual revenue
of more than R35 million, hold a valid, SANAS approved
B-BBEE Certificate and prove the successful implementation
of effective B-BBEE policies and measurement mechanisms.
The Lifetime Achievement Awards were given to the three
remaining Rivonia Trialists: Andrew Mlangeni, Dennis
Goldberg and Ahmed Kathrada.
The event also celebrated the launch of South Africa 20
Years of Success: Business & Government publication, a
commemorative book produced by Topco Media with the
support of the Department of Arts and Culture, which was a
gold sponsor of the awards.
The Oliver Empowerment Awards category sponsors
included South African Weather Services, Limpopo Economic
Development Agency, South African Civil Aviation Authority,
Sekela Xabiso, Khaas Logistics, National Youth Development
Agency and TUMI.
Lifestyle sponsors included Mangwanani African Spa,
Wedgewood, Bhan Thai Spa and Distell. Intec College
sponsored the prizes for the Lifetime Achievement awards.
COVER JUNE 2014
2014/06/23 5:46 PM
 Blame it on my wild heart

The Insurance Institute of Gauteng has done it

again. On Thursday 8 May the IIG hosted the Born
to be Wild charity auction at the Barnyard Theatre
in Cresta.

The evening was sponsored by GIB Assurex Global, Mutual

& Federal, Santam, Zurich, Altech Netstar, Global Choices,
Hollard, Sasria, and Swiss Re. The proceeds of the evening
went to the Wet Nose Animal Rescue Centre, Oasis Haven,
Frederic Place and the Timbavati Foundation. These charities
represent animals, children, the aged and conservation and
therefore the IIG and its members are supporting all needs.

Before the bidding started four sponsors handed over

cheques to the four charities. GIB presented a cheque to

Oasis Haven; Mutual & Federal to Frederic Place; Santam to

the Wet Nose Animal Centre; and Zurich to the Timbavati
Foundation.

Vaughan Jones from Fulcrum made the largest bid of

the evening of R125,000 on a deluxe Timbavati Rhino
Experience.

MC Rick Alan entertained the crowd as he auctioned items

ranging from collectible wines (in various sizes), a fridge
stocked with champagne, a Bombardier Global 5000 model
aircraft, a Southern Sun Hotel weekend getaway, and a
Ferrari Experience.

At the time of print the IIG estimated that the auction had
raised R600, 000 for charities.

IIG President Justin Naylor said, We are always thrilled with

our members generosity at the auction. Each and every cent
raised at the event is much appreciated by our charities!

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June 14.indd 99 2014/06/23 6:29 PM

 Market Cover

NORTON ROSE FULBRIGHT

ANNOUNCES 46 GLOBAL
PARTNER PROMOTIONS
Global legal practice Norton Rose
Fulbright announced its first global
partner promotions since entering the
US market in June 2013. A total of 46
partner promotions are being made
throughout the 2014 calendar year,
including eight promotions to the South
African equivalent of director.

Female partners account for a

significant percentage of all global
promotions (20 out of 46 promotions,
or 43%).

The promotions are being made across

all eight of the practices global practice
groups; corporate, M&A and securities
(17); dispute resolution and litigation
(10); banking and finance (nine);
intellectual property (four); antitrust
and competition (two); employment
and labour (two); real estate (one) and
tax (one).

Peter Martyr, Global Chief Executive,

Norton Rose Fulbright, commented:

We continue to grow globally and

I am pleased to welcome the new
partners and directors who will play a
key role in meeting the needs of our
clients around the world. These are our
first promotions in the United States
following our US combination last
year. We have also made a number of
promotions in Latin America, which is
consistent with the announcement of
our Rio de Janeiro office in 2014.

SOUTH AFRICA
Louise Campion (banking and finance,
Johannesburg)

Lara Granville (antitrust and

competition, Johannesburg)

Laurie Hammond (banking and finance,

Cape Town)

Tinashe Makoni (banking and finance,

Johannesburg)

Vanessa Palmer (corporate, M&A and

securities, Durban)

Deniro Pillay (dispute resolution and

litigation, Durban)

Tessa Stuart (corporate, M&A and

securities, Durban)

Carina van Vuuren (real estate,

Johannesburg)

100 COVER JUNE 2014

June 14.indd 100 2014/06/19 5:32 PM

 A NEW PRESIDENT FOR
THE IIEC
In April the Insurance Institute of
the Eastern Cape (IIEC) held its
2014 Presidential Inauguration. AIGs
Branch Manager for the Eastern Cape,
Matthew Kethro, has taken over the
reigns as the President of the IIEC from
Carol Schultz. Schultz was president of
the IIEC from 2012 to 2013.

In the photograph Kethro is in the

centre and Schultz is on the right. On
the left is Trevor Daniels, IIEC past
president from 2010 to 2011.

INCOME SPECIALISTS
LAUNCH NEW UMBRELLA
FUND
On Friday 11 April 2014 Marriott Asset Pictured at the workshop are from left:
Management hosted a workshop
explaining their new Umbrella Fund
at the Oyster Box Hotel in Umhlanga
Rocks.

Sharon Govender, Tamryn Kelley, Liz Valentine, Mark Weston-Ford,

Natalie Jansen and Jacquie Faber Mike Lalouette and Chantal Redding

Darryl Spires, John Bustin Zoe Wheatley, Sally Anderson,

and Lourens Coetzee Jacqui Faber and Sharon Govender

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June 14.indd 101 2014/06/19 5:32 PM

 Product Development

INSURANCE ON THE HOUSE

Old Mutual iWYZE is proud
to announce a new first-to-
market No-Claim Reward that
allows you to get 100% of your
Buildings insurance premiums
back in cash after six claim-free
years at no extra cost.
As a homeowner you can qualify for
this new Buildings No-Claim Reward by
simply insuring your primary residence,
its contents and your car with iWYZE.
of this residence, and comprehensive
vehicle insurance for at least one car;
Elect to participate in the
Buildings No-Claim Reward;
Maintain your policy with these
three sections and pay all your
premiums on time to ensure
uninterrupted cover; and
Not claim on the Buildings
insurance for your residence over
a six year (72 month) period.
For fulfilling these requirements, you
will get back 100% of the premiums
you paid towards the Buildings
insurance for your primary residence
over the six-year period.

Its like getting Buildings insurance for

your house, on the house, according
to CE of Old Mutual iWYZE, Willem
Smith. This is not some superficial
benefit promising much but delivering
little in terms of rands and cents. This
simple, easy-to-understand reward
delivers real and substantial value for
our clients. Theres no hidden catch
and no premium loading we are
simply rewarding clients for loyalty and
good risk behaviour.

THE REQUIREMENTS FOR

RECEIVING THIS REWARD ARE
QUITE SIMPLE:
Take Buildings insurance for your
primary residence, household
valuables insurance for the contents

102 COVER JUNE 2014

June 14.indd 102 2014/06/19 5:32 PM


CASH IN YOUR POCKET
Assume your buildings insurance
premium is R350 per month. Over a
period of six years, that will amount to
a potential cash refund of R25 200.
How you spend your iWYZE Buildings
No-Claim Reward is completely up
to you its cash in your pocket to
spend on that flat screen youve always
wanted or to put into your savings
whatever you like.
Making sure your property is well-
maintained will go a long way to
ensuring that you dont have to claim
on your policy and risk losing your No-
Claim Reward. Since the benefit pays
COVER JUNE 2014
June 14.indd 103
out after every six claim-free years,
your efforts may be well-rewarded
with insurance for your house, on the
house.
COMPETITIVE RATES, INDUSTRY-
LEADING REWARDS
Many people believe they are obligated
to take buildings insurance through
their bondholder which is usually
their bank but this is not the case.
Your bondholder can insist on a
certain level of insurance cover, but it
remains entirely up to you to choose
an insurer. iWYZE Buildings insurance
meets the requirements of all banks
and offers highly competitive rates for
homeowners.
With the launch of the iWYZE
Buildings No-Claim Reward, iWYZE
now offers a total of three, separate
No-Claim Rewards for its clients
including a General No-Claim Reward
and a No-Claim Excess Waiver. The
new iWYZE Buildings No-Claim
Reward runs together with the iWYZE
General No-Claim Reward and doesnt
replace it.
IWYZE GENERAL NO-CLAIM
REWARD
The General No-Claim Reward comes
standard with your iWYZE policy and
refunds 10% of your premiums in
cash after three claim-free years on
your policy. Thereafter, the No-Claim
Reward cycle gets shorter, the longer
you go without claiming.
So if you remain claim-free for a
further 24 months you will qualify
for another No-Claim Reward where
you will again receive 10% of your
premiums back in cash. After that, your
reward will be paid out after every 12
claim-free months.
IWYZE NO-CLAIM EXCESS WAIVER
The No-Claim Excess Waiver rewards
your loyalty by giving you an Excess
Waiver on your first claim after three
claim-free years. This amounts to a
discount equal to the entire standard
excess on that claim. This benefit is
granted again after every three claim-
free years.
These benefits are simply our way of
thanking our clients for their loyalty
and for taking good care of their
valuables all at no extra cost.
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2014/06/19 5:32 PM
 RGA Infiniti Coface
MIKE CASALE GAVIN HORN JACQUI JOOSTE
VP: Aura Product Management Broker Relationship Management Interim Country Manager

Prescient Wealth Management Mutual & Federal iWYZE Santam

BRIAN LEE IRVIN ANDREW LE ROUX DAVE KEELING
Business Development Executive: Direct Distribution Head: Associated Marine

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