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SAIA Bulletin February 2021

09 March 2021 The South African Insurance Association (SAIA)

From the Desk of the Chief Executive: Viviene Pearson

On Thursday, 24 February 2021, South Africans waited with bated breath as the Minister of Finance, Mr Tito Mboweni went through the 2020/21 budget speech. While South Africa still faces a real risk of a sovereign debt crisis if it does not arrest the rising trajectory of debt, most people sighed in relief to learn of the National Treasury’s resolve in sticking to its fiscal consolidation path - something Minister Mboweni described as "challenging but achievable" – meaning that SA will run smaller deficits than expected.

The Finance Minister said that the gross government debt is now set to peak at 89% of GDP in 2025/2026, against a previous estimate of 95%, meaning that SA will now need to borrow R361bn less over the next three years than it was expecting. SA’s fiscal position was already unsustainable before the pandemic. The advent of Covid-19 exacerbated the situation by reducing tax revenue, while social spending spiked. Overall, his speech was well-received in the economic and financial markets space, something that was further demonstrated by the rallying of the South African currency to a one-year high.

The Covid-19 pandemic is still affecting economic activity, not only in SA but globally. New infection cases in SA have decreased in the last few weeks prompting the government to further open the economy as well as some land borders to facilitate regional movement and trade. SAIA member companies are continuing to pay Contingency Business Interruption (CBI) insurance claims following legal certainty obtained through various court judgements both in South Africa and in the United Kingdom.

Many members are also investing heavily in transformation programmes designed to offer greater processing speeds, better quality and quicker claim turn-around times, a sharper focus on the policyholder and to lower costs which, in the long run, could potentially result in sustainably lower insurance premiums subject to each policyholder’s risk profile as well as other risk and cost factors.

Climate change is real, from heavy rains to crippling droughts. Most recent are the heavy rains in the Southern African region. This includes South Africa, Mozambique, Zimbabwe, Lesotho and Eswatini. In addition to the heavy rains, the region has suffered droughts in recent years. SAIA and non-life insurance companies have worked tirelessly to find soluble solutions towards making drought insurance affordable for both commercial and emerging farmers, with the government, towards the sustainability of food security in South Africa. This includes the introduction of a new product offering in South Africa currently being piloted, a product offering that has globally been proven most appropriate for emerging farmers, called index insurance.

SAIA’s Vehicle Salvage Database (VSD) continues to be a pain-point for motor body repairers who continue to demand that it is made public. In my January 2021 Bulletin column, I did state that SAIA had noted these concerns. We have started discussing the relevant issues in the SAIA structures again, as well as initiated discussions with relevant stakeholders in government and other parties before we will be able to communicate the SAIA position – whether reaffirmed or not - in the future.

Viviene Pearson
SAIA Chief Executive

Quick Polls

QUESTION

Do you believe this is the toughest period for financial advice in many years?

ANSWER

Yes, it’s hard to navigate the challenges and difficult to adapt. I’m struggling.
No, I have managed to navigate the challenges and have adapted. I’m good.
50/50. I just feel like whether we like it or not, we have to ready ourselves for change… be resilient and scale for the future. It’s not about survival of the fittest anymore but survival of the quickest. We just have to move on with life.
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