The broker’s role in navigating the CPA and ensuring financial well-being

“Never has it been more important for companies to speak to their brokers,” John Melville, Santam’s Executive Head of Risk Services

The introduction of the the Consumer Protection Act (CPA) at the end of this month will bring profound changes to the way that businesses operate. South Africa’s leading commercial insurance company, Santam, urges commercial businesses to work with insurance brokers to ensure that they are appropriately covered to meet these changes.

Once the CPA is in effect, consumers will be able to hold companies responsible for a myriad of issues. Santam says it will be critical for companies to look at their risk exposure afresh and in light of the CPA… and make sure they have sufficient insurance cover.

“Never has it been more important for companies to speak to brokers. The CPA is a valuable piece of legislation for South African consumers and it makes sense for companies to match their insurance cover to meet the changes the Act is set to bring,” says John Melville, Executive Head of Risk Services at Santam.

“Santam always wants to make sure that clients enjoy comprehensive and suitable liability cover,” says Melville. “So we’re changing our Public Liability cover to broad form – without any additional costs to our clients. This change is effective from the beginning of April, 2011.”

Broad form cover alone will, however, not secure sufficient cover to businesses involved with any product (whether in the repair, supply, distribution, manufacture, production, import, export or retail of products and commodities). Such clients, he says, should obtain adequate cover under the Products Liability extension. Examples of clients exposed to products liability following the implementation of the CPA would include plumbers, electricians, retailers, importers and farmers, whether they are involved with the manufacture of the products or not.

For Santam, understanding the risks associated with its clients’ business is of utmost importance. “To us, it is critical to understand and manage the governance, environmental and social risk that may impact the profitability of our commercial clients,” says Melville.

The company’s commercial division shares its legislative, commercial and scientific risk modeling expertise and insights with its brokers to help them understand the changes that are coming, and to advise clients appropriately.

“A good broker will guide companies, help them manage and prepare for changes to the environments that affect their business and ultimately, help companies manage risks that affect profitability and sustainability,” says Melville.

“The insurance industry is complex. Companies and their executives don’t necessarily have the time to navigate the wide spectrum of insurance products available, and this is why the broker is so important. He or she knows the client’s business, knows what insurance products are best suited to mitigate the risks that are specific to the client or its industry, and is in tune with an evolving risk climate. All of this, put together, saves time, money and, in many cases, ensures the profitability and success of the business,” says Melville.

Developing a relationship with a trusted broker offers a number of benefits:

Significant product knowledge: Brokers work with a vast number of insurers offering an enormous range of insurance products. It is impossible for business to stay ahead of the insurance options available, and a broker is able to save a company time by advising on the product that will best suit its potential risks. In addition, brokers are constantly assessing the insurance marketplace and they increase their knowledge through the insights and expertise developed by the insurer.

Pricing awareness: Brokers combine their vast product knowledge with a regular assessment of pricing trends in the insurance industry.

Independence: Insurance brokers choose to remain independent, meaning they work with multiple insurers on their client’s behalf. These advisors are in a position to offer their clients numerous options with variations in coverage, service levels, and pricing - all in consideration of the specific needs of each business.

Legislative knowledge: Brokers help companies navigate and prepare for legislative and compliance changes that will affect them.

Regular reviews of coverage: Insurance companies are constantly innovating their products and adjusting rates according to risks. The expertise that a broker brings means that their clients will benefit from frequent reviews of their insurance portfolio.

Affordability: Brokers are paid a commission by the insurance companies that they represent, so a company does not incur any costs in partnering with independent brokers to help manage their risk and safeguard their financial well-being.

Risks are changing: Risks are in constant evolution and it is critical to stay ahead of these risks. Insurance companies like Santam have significant scientific modules, expertise and experience that track and identify the social, environmental and governance risks that can affect companies. This information is passed on to brokers so that they are best able to manage their clients’ risks.