Moonstone Monitor 8 May 2008 : Changes To Legislation

Paul se Perspektief/Paul's perspective

The following notice from the Life Offices Association went by almost unnoticed:
"OUTsurance Life Insurance Company Limited has been admitted as a member of the Association with effect from 5 May 2008."

The short-term arm of this entity did very well in building up a substantial client base by offering reduced rates as a result of cutting out the broker and offering people money back after a period of paying premiums.

The Short-term and Long-term Insurance Acts, prohibit financial incentives in exchange for business. Under the topic "Prohibition on inducements", the Short-term Insurance Act states:

"No person shall provide, or offer to provide, directly or indirectly, any valuable consideration as an inducement to a person to enter into, continue, vary or cancel a short-term policy, other than a reinsurance policy."

Despite this, it would appear that there are grounds on which cash-back payments can be made without transgressing the law, as is witnessed by rewards from loyalty schemes and other incentives. It would appear that the only incentive not allowed is for you to offer the client cash to take out a policy, although we all know this happens  in practice.

The fact of the matter is that OUTsurance is sitting on a huge database of potential clients, and have the substantial backing of the First Rand Group. It will be interesting to see how things develop, but my guess is that their focus will be on risk business, competing with 1LifeDirect. I wonder whether this will affect clients of FNB brokers?

There is of course a lot to say for offering people money to continue paying premiums. They somehow never do the sums to see that the premiums they pay are far more than what they get back.

If this will help the industry to curb cancellations and lapses, then we should also consider following this route, but to my mind, proper advice and service is the better option to help us keep the clients we really want.

Those who leave for cash incentives probably belongs in that market anyway.

Wat my herhinner aan Oom John von Landsburg se storie oor sy kinderdae in Kenia toe hy sien hulle buurman het op 'n veiling tien aambeelde van verskillende groottes gekoop. Toe hy vra wat die oom beoog om daarmee te doen, is die antwoord: " Ou Johnnie, ek weet nog nie, maar dit was nou vir jou 'n bargain!"

Hierdie naweek se rugby beloof weer baie opwinding, naels kou en hoop dat die regte spanne wen (en verloor!)

Staying Abreast of Changing Legislation

“How do I stay abreast of changes in legislation affecting my business?” asked a participant at a recent market research survey that we conducted.

This is of course a very relevant question, given that the FAIS Act places the onus for keeping up with amendments to legal issues on licensed FSP’s.

This became even more of an issue this week when we spent quite some time discussing several newly announced changes to a several Acts listed hereunder with our legal department. We battled to reach consensus on a number of issues which we need to convey to our compliance clients affected by it.

The other issue is of course that we did not hear the town crier walking around announcing the changes – it appeared on the FSB website and was spotted by my alert colleague Paull Lawrence, who kindly forwarded it to me, together with the links to the relevant notices.

Some of the amendments are the following:

Ø      The maximum guarantee amount to be provided for by independent intermediaries who collect premiums on behalf of short-term insurers will be increased from R50 000 to R100 000 over a five year phase-in period.

Ø      In addition, amendments have been made to the prescribed returns which these intermediaries have to submit to the SA Insurance Association. The new form for completion by your auditor is available on the FSB’s website.

Ø      The m aximum sum assured amount in terms of funeral policies have been increased from R10 000 to R18 000, possibly to circumvent the current practice of writing two policies to make up the shortfall.

Ø      The maximum amount of benefits under a short-term policy issued by a Friendly Society is increased from R5 000 to R7 500.

Comments have also been invited on a proposal to increase the period for appeals from 90 days to 180 days where Long-term insurance claims are reduced or declined. A similar change was recently made in terms of the Short-term Act.

It may very well be that none of these affect you, but if this is the way that changes are announced, you need to ask yourself what steps you have in place to ensure that you stay informed of those that do affect you.

While bigger brokerages will rely on either an outsourced or in-house compliance officer to alert them, and explain the implications, the one person units are the ones most exposed to landing in trouble unwittingly.

It is a reality that compliance is no longer something we can attend to when we find time for it – it has to be an integral part of our daily routine.

The Afrikaans Market Potential

The article hereunder was published in Rapport, the biggest Afrikaans Sunday paper in the entire world, as we always joked. The content is very relevant to anyone wishing to explore new markets.

I remember Durban in the eighties when we did a survey to determine the extent of the Afrikaans market and were astounded at the potential. Like everyone else, we simply assumed that there were very few Afrikaans-speaking people. Not so; they merely followed suit and spoke English outside their homes. I can recall a number of conversations in English where I would discover after quite some time that we were both Afrikaans.

Afrikaans advertising - Are marketers missing the point?

Afrikaans-speaking South Africans are an affluent proportion of our population. According to AMPS 2007B, of the 4 million Whites in the country, 59% are Afrikaans and 79% of Coloureds have Afrikaans as their first language. Despite these figures, marketers, media planners and buyers tend to neglect this important sector.

The Afrikaans South African is regarded as having great buying power, strong initiative, independence and decisiveness. AMPS 2007B reveals that 34% of LSM 7-10 and 38% of LSM 8-10 are Afrikaans speaking consumers whilst companies that advertise only in the English media reach just 10% of Afrikaans-speaking consumers in the high-income LSM 8-10 brackets.

Barnard Beukman, Marketing Communications Manager of RCP Media says, “Afrikaans is the third most spoken home language in South Africa today (after IsiZulu and IsiXhosa). English ranks sixth place in terms of home languages. We have also found that Sunday is the best day for reading and for readers to effectively absorb messages. Advertisers get maximum benefit by advertising on this specific day of the week.

"Contrary to popular belief, Sunday is a shopping day. Shoppers spend more and shop accompanied, leading to increased spending, particularly for items that require consultation with other family members, reiterating the need for advertising on that day.

“Our Sunday papers also attract almost as many readers as there are in the week Monday to Friday, with more readers in the upper LSM brackets than Afrikaans daily newspapers,” says Beukman.

RCP Media's Rapport is the highest reaching newspaper of Afrikaans readers and has the fourth biggest circulation of all newspapers in South Africa and over a million readers. In addition, the paper attracts a mix of White (63%) and Coloured (27%) readers.

Sondag , a fresh new entrant to the Sunday market launched in 2007, already has circulation figures of 40 472 (ABC October - December 2007) attracting the lucrative LSM 10 market.

Afrikaans is undeniably one of South Africa's richest traditions - one that advertisers and marketers should not forget to add to relevant media plans.