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Lliquidation of saXum Insurance

17 October 2016 Jonathan Faurie
Jonathan Dixon, DEO Insurance at the Financial Services Board

Jonathan Dixon, DEO Insurance at the Financial Services Board

Last week we reported on the current happenings at beleaguered insurer saXum Insurance. They are currently engaged in an impasse with a service provider which is affecting policyholders.

Mixed messages

When FAnews spoke with the insurer at the time, saXum said the situation with the service provider came about because of lack of oversight at an underwriting level.

We then got word that this was not the case and that saXam was in fact experiencing liquidity problems.

We spoke with Jonathan Dixon, DEO Insurance at the Financial Services Board to find out the true story.

"The insurer is currently facing both a liquidity issue and a solvency issue. Currently, the company is insolvent and is working with the FSB to guide them through the liquidation process. We are committed to making sure that the impact on policyholders is reduced to a minimum," says Dixon.

The state of play

So where does this leave policyholders?

The liquidation process has begun and saXum's auditors, Deloitte, are busy looking at the company's assets. This includes any money that is owed to saXum.

"Once this has been determined, policyholders need to register a claim against saXum as concurrent creditors. Whatever assets are available will be used to settle as many claims as possible. Unfortunately this may mean that policyholders who have a claim against saXum may not be paid the full value of their claim," says Dixon.

With regards to Danmar, while Dixon pointed out that he is no position to provide legal advice, he said that his understanding of the situation is that Danmar cannot legally hold back vehicles for an extended period of time.

Regulatory importance

If there was ever a case to be made for the implementation of regulation such as Treating Customers Fairly (TCF) and Solvency Assessment and Management (SAM), this is it.

There are clear issues regarding the fair treatment of customers throughout the lifecycle of a product (short term cover and all it entails).

"There are also issues when it comes to oversight of a binder function. While saXum outsourced a function to an underwriter, it does not absolve them from monitoring the actions of the binder to make sure that they are doing their job properly," says Dixon.

This is perhaps a further indication of the FSB's future stance when it comes to binder agreements whereby companies can only enter into such agreements if they can demonstrably show that it adds value to their business and will add value to customers.

Unchartered waters

This is a unique situation in that, as Dixon points out, there has only been one other liquidation of an insurer in the past eight years, that of Orange Insurance. And even then, that case was not initiated by the FSB. This is the first liquidation case the FSB is initiating and carrying through.

Because of this, there is a lot of confusion about how long this process will take. Dixon cannot give a timeline on the liquidation process, nor when policyholders can expect reciprocity from saXum.

Editor’s thoughts:
This is a clear case of a blatant disregard for TCF principles and all it hopes to achieve. While there may not be many saXums in the industry, Dixon admits that there are still companies who are not TCF compliant. What should be done to these companies? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts jonathan@fanews.co.za.

Comments

Added by Jemima, 10 Jan 2017
I am a third party claimant and I received the poorest service with saxum's insurance representatives.

I believe that once a company is going through financial difficulties it should disclose this to clients and affected parties.

I remember having to take a day off work to go their offices to get information about my claim. What shocks me the most is that they by then knew they were bankrupt yet they still promised to pay the claim and even made me sign a release of payment form.

TCF outcomes require companies to treat customers with absolute honesty yet in the whole Saxum case I am sure that 90% of all claimants were lied to at a certain stage which is extremely unethical.

I strongly believe that this liquidation process is going to be really ugly as Saxum was running a scam insurance business and playing on people's emotions not realizing that behind a policyholder there is a human with a life.

The FSB should really look into small insurance companies such as saxum and monitor their transactions because they hire unqualified staff that lack basic communication skills which leads to double the frustrations when dealing with the company.
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