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Short-term insurance focus for 2010

22 September 2009 Gareth Stokes
Gareth Stokes, FAnews Online Editor

Gareth Stokes, FAnews Online Editor

The modern financial services environment is consumer oriented and increasingly regulated. Under such conditions industry bodies play an essential role. The short-term insurance industry is represented by the South African Insurance Association (SAIA) which counts 55 short-term insurance companies among its members. At the SAIA Annual Cocktail Party, held 22 July 2009, the organisation outlined its key focus areas for the 2009/2010 year.

Although not the first item on the list, SAIA is intent on working on the image of the country’s short-term insurance industry. They are busy with a new Image and

Reputation Strategy document to add value to member companies and the industry as a whole. A unified approach to image and reputation across the major stakeholders in the insurance space will hopefully result in better penetration in the motor and personal lines space.

Marketing tactics leave a bad taste

“The elements to be included in the new strategy are the promotion of a strong self regulated environment, adding consumers as an important SAIA stakeholder and continuing with stakeholder relationship and public relations strategies and initiatives!” said SAIA. Adding consumers to the SAIA stakeholder list makes perfect sense. It’s a great way to assess progress in ‘winning over’ the public to what usually amounts to grudge purchase. To this end SAIA will also develop a targeted publicity campaign, expand its consumer education initiatives and develop an organised communication campaign to build the SAIA brand.

SAIA will have to work hard to ensure all its members are on the same page. The overwhelmingly negative portrayal of the industry by some stakeholders is cause for concern. FAnews Online recently commented on the constant ‘bashing’ of brokers by the direct insurers as an example of this practice. Although the ‘clever’ marketing campaigns boost business at the direct insurers, they cast the entire insurance industry in a poor light. All insurers should work together to improve product penetration in a country where levels of personal short-term insurance cover are woefully inadequate.

Tackling costs on the motor book

A serious challenge for all stakeholders in the short-term insurance space is the soaring cost of repairs and replacements to insured motor vehicles. SAIA, with Business Against Crime South Africa has committed its members to the fight against motor vehicle crime. This year they extended their initiative from combating vehicle crime to promoting safer driving. “The new focus is on road safety as, on average, of 36 lives are lost on South African roads each day!” SAIA hopes their continued effort in this regard will have a positive impact on the short-term industry and the country as a whole.

South Africa’s motor vehicle profile is changing as new vehicle sales reach the bottom of the current cycle. By international standards the country’s vehicle population is already fairly old. And the situation is going to worsen. Unless something is done to make motor insurance  affordable the number of insured vehicles in the population will tumble further, making it increasingly difficult (expensive) to provide cover for the rest.

Transforming the industry

Apart from the usual operational concerns, South African companies have a range of legacy issues to address too. The insurance industry has a long way to go before it reflects the demographics of the country. That’s why transformation is high on the priority list for the current year. SAIA points out that its members adhere to the requirements of the Financial Sector Charter. This Charter was signed in October 2003 but has yet to be gazetted. In the interim SAIA members are urged to report in line with Department of Trade and Industry (DTI) codes and the Charter.

Another priority for the current year is legislation and regulation. The short-term industry is still working on regulations for the Insurance Laws Amendment Bill, tabled in May 2008.

Editor’s thoughts: The number of uninsured motor vehicles on South Africa’s roads is worrying to say the least. This underinsurance increases the burden on insurers, who pass the pressure on to the consumer by way of increased premium. Should government introduce laws to force motor vehicle owners to take out some form of short-term insurance? Add your comments below, or send them to gareth@fanews.co.za

Comments

Added by Paul, 23 Sep 2009
I tend to agree that TP insurance should be compulsory for all vehicle owners as a bare minimum. If this was the case the pure numbers side of vehicle insurance would be greater leading to a bigger pool of funds to pay claims and effectively reduce the cost of vehicle insurance. At the end of the day this becomes a numbers game and if one goes back to the basic principle of the losses of the few are borne by the many everytone will ultimately benefit even though insurance is seen as a grudge purchase.
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Added by Elna, 22 Sep 2009
Gareth, my answer to your question is an absolute YES! I lived in the UK and America for a number of years and could not purchase a vehicle unless I at least took out T/P insurance, we are far behind in SA. We as responsible insured drivers often have to claim our own damages caused by a T/P, pay ever increasing excesses and then loose our NCB resulting in higher premiums. The third party just have to plead poverty and nothing happens to him/her! This issue has long been on the agenda of the FIA that I belong to, hopefully one day soon Government will step in and force at least T/P cover for all!!
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