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Short-term insurers gear up for future challenges

02 August 2010 Gareth Stokes
Gareth Stokes, FAnews Online Editor

Gareth Stokes, FAnews Online Editor

There were close on 300 insurance industry professionals at last week’s launch of the South Africa Insurance Association (SAIA) Annual Review 2010. The keynote speaker at the ‘lounge suit’ cocktail evening was the chairperson of the SAIA Board, Ronnie Napier. He responded to SAIA chief executive Barry Scott’s: “If Ronnie talks for more than ten minutes you can start heckling him” with a flawless 25-minute address. “There are some extremely weighty and urgent matters on the table, both for the SAIA board, and for management,” said Napier. He needed each of these minutes to do justice to the industry’s current achievements – and to touch on tomorrow’s challenges.

The theme of the SAIA Annual Review 2010 is laying foundations for the future. SAIA has been hard at work doing just that. In recent months the short-term insurance representative body has released and adopted a new SAIA Code of Conduct, begun implementing a new SAIA Motor Strategy to tackle the ongoing sustainability of the largest class of member business, and built on the internationally acclaimed SAIA Consumer Education Strategy. SAIA recently received two international consumer education grants to apply to case studies and ‘good practice’ examples based on the organisations existing education strategies.

Challenges 2010 to 2015

Short-term insurance stakeholders must tackle a number of obstacles over the next five to 10 years. “A year ago we had four key areas to focus on,” observed Napier, “Today we have nine!” One of the major challenges lying in wait for the insurance industry is the implementation of new solvency and management initiative. The Financial Services Board (FSB) is devising a new solvency regime for both short and long-term insurers to align these industries with their international peers. The new system – SAM – will be based on existing Solvency II regulations with specific local adaptations.

“The SAM project is a massive undertaking and will require detailed consideration by the entire industry,” said Napier. These regulations will have a fundamental impact on how insurance stakeholders conduct their respective businesses, and their capital requirements, for decades to come. Despite the 1 January 2014 ‘non-negotiable’ implementation deadline, insurance stakeholders remain woefully underrepresented at committees and sub-committees “We need to up our game considerably and rapidly – otherwise we may discover at the end of the process that certain decisions have been taken that we may not like – and more importantly that they have not been properly debated with the FSB before amendments take place to the Act…”

Getting local consumers up to speed

Education is one of the areas SAIA deserves particularly recognition for. Over the years the organisation (in partnership with a number of regulatory bodies) has committed R53 million to education initiatives. An independent research study has confirmed the programmes ‘value for money’. The consumer education is hitting home in the right sectors of the community, namely those who don’t know what insurance is nor understand the importance of it.

Napier spent some time lamenting the state of South Africa’s road and traffic environment. “Of all the areas SAIA and our members are involved in this is certainly the most important and pressing at the moment,” he said. It’s hoped the new strategy being implemented by Viviene Pearson – now promoted to General Manager at SAIA with motor as one of her key responsibilities – will address some of these concerns in coming years. If not, motor insurance could become unaffordable and unsustainable.

The statistics are shocking. South Africa suffers a mini-Vietnam (measured in US fatalities) every four years! More than 40 people die on our roads each day, for an annual massacre totalling 14 400. A third of these ‘dead’ are pedestrians. Part of the reason for the high ‘count’ is the absolute disregard for traffic law displayed by South African road users. Latest estimates put 500 000 un-licensed vehicles on our roads – with at least 400 000 of the nine million strong car pool considered un-roadworthy. There are a million ‘expired’ personal drivers’ licenses and 230 000 ‘expired’ professional drivers’ permits. How many law abiding drivers does this leave?

An insurmountable loss

The Automobile Association, presenting at a recent IISA breakfast seminar, said existing estimates of the cost to South Africa of road accidents were understated. The true cost to the country – human loss and suffering excluded – is closer to R116 billion each year! South African must deal with this situation as a matter of urgency. “There is no doubt the introduction and proper enforcement of a demerit system will go a great way towards addressing the issue,” says Napier.

There have been disappointments in industry ‘self regulation’ in recent months. The Financial Sector Charter Council, for example, failed to reach consensus on a single outstanding issue with the result the industry doesn’t have a charter gazetted as a sector code. Unless a political solution on ownership (transformation) is reached, the DTI codes applicable to the industry will apply, and many of the unique features in the charter could be consigned to the scrap heap.

Other changes to the insurance business landscape include the insurance bills amendment act and the proposed FSB ‘treating customers fairly’ project. “SAIA – while it has a very dedicated management team – is under resourced to handle all these developments,” opined Napier. He said the board would have to plan to ensure the SAIA can meet its numerous obligations in the best interest of the industry.

Editor’s thoughts: Who said the insurance business was boring! There’s plenty for professionals in the financial services industry to work on in coming years. Were you disappointed by the failure of industry stakeholders to agree on a Financial Sector Charter? Add your comment below, or send it to gareth@fanews.co.za

Comments

Added by James de Gouveia, 02 Aug 2010
I cannot see the demerit system being of much effect regarding the 500,000 unlicensed drivers and the 400,000 unroadworthy vehicles.These criminals will continue to' laugh off " the demerit system as they do to licences and traffic regulations and motor insurance.The authorities should confiscate unlicensed and unroadworthy vehicles and where possible sell the vehicle and invest the monies in Road Accident Fund.This may motivate the powers that be,and probably reduce the criminal element taking a unlicensed and uninsured chance. Also seriously consider balance of third party insurance each year when vihicles are licenced especially for those who become converted regarding the consequences;otherwise they may see their investment go up in smoke for contravening the law.
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