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IISA starts the year off with a bang

02 March 2017 IISA

As we gain momentum into 2017, a lot of companies are hoping to leave the challenges of 2016 firmly in the rear view as they look forward to new challenges and new opportunities.

However we would be remiss if we didn’t take time to look at the effects that the challenges of 2016 left on the industry that insurers and brokers operate within. The Insurance Institute of South Africa (IISA) recently held its Market Forum, the association’s first major event of the year, where major industry role players discussed their view of the industry.

Africa calling

In an industry where there is little growth of new business, Africa poses an enticing option as the uninsured gap is significant. But are we really prepared for what expanding into Africa really means?

Delphine Maidou, IISA President and COO of Allianz Africa, pointed out that Africa is not really consolidated yet and is very much a continent made up of many independent states which have their own laws and challenges.

“One opportunity that Africa does present is that the continent has a young population. These young people are motivated to improve their lives and that of their families and are prepared to work hard to achieve this. It is no surprise then that five out of the world’s top ten fastest growing economies come from Africa. This is a major opportunity for insurers,” said Maidou.

Playing a numbers game

Current statistics show that the world population currently stands at 7.4 billion people. The United Nations predicts that by 2040, this will increase to over 9 billion.

Dr Azar Jammine, Chief Economist at Econometrix, pointed out that while in the past China and India had the fasted growing populations in the world, Africa has now taken over this mantle. “Africa has the fastest growing population in the world with urbanisation picking up. This means that the economies of these countries will become stronger seeing a possible increase in a growing middle class,” said Jammine.

He pointed to the fact that there is still a serious education problem on the continent where critical skills are still imported from international markets. In South Africa alone, it is believed that one child in every 40 will start school but will not attain a qualification. This is where the insurance industry can play a role in improving critical skills on the continent.

A digital world

One of the biggest trends impacting the financial services industry is technology. In a world of fast connectivity and the ability to gain key insights into your clients daily lives through the mining of Big Data, skills will become an important issue in the industry.

Wayne Abraham, MD of AIG Africa, said that while technology will bring positives into the industry, there will be some negatives.

“A recent survey done on a worldwide audience shows that while employees are willing to wear wearables, they want to opt into the process as opposed to opting out of the process. This will also be done if they are assured that data will be managed in a professional and careful manner, and the employer must inform them what information they are collecting and what they will be using it for,” said Abrahams.

Future now

Pieter Geldenhuys – Futurist and Director of the Institute for Technology, Strategy & Innovation – said that the industry cannot sit and anticipate the mass adaptation of technology, the future is now.

He pointed out that the world’s largest media company does not generate its own content (referring to Facebook), one of the world’s largest real estate companies does not own its own property (referring to Airbnb), and that the world’s largest retailor (Alibaba) does not own any of its stock. This is the world that we live in.

Technology is changing our reality. Velocity is now defined as the fastest way to find an internet connection. The fastest animal on earth is a person with a connected devise, and telematics is helping us drive behaviour and allows insurers to price risk appropriately. There is also a move towards insuring a person rather than assets as clients make more use of Uber and public transport systems.

The water crisis

Nobody needs to be reminded about the recent drought and the effects that it had on the public.

Dr Anthony Turton – Professor at the University of the Free State – pointed out to those gathered at the forum that we are dealing both with aging infrastructure and poor water quality. This presents a major liability to the public, a space where insurers can make an impact.

A trusted partner

We are living in times of increased claims and claim events such as tropical storms, earthquakes and other climate related events. In times like these, insurers turn to reinsurers as trusted business partners to help fund claims.

Natalie van de Coolwijk, CEO Willis Re South Africa, pointed out that reinsurers are following the same model as insurers in that they are beginning to adopt client centric models en masse in an attempt to cater for specific needs in the market.

She further pointed out that the market is not as mobile as it used to be which has forced increased activity in the mergers and acquisitions markets. This has also been driven by global uncertainty where clients want a sense of security in uncertain times.

No soft touches

The day then moved onto the talk about regulation. Caroline da Silva, Deputy Executive Officer of FAIS at the Financial Services Board, pointed out that on a vacation to Austria, she became fascinated by the rise of Donald Trump and his plan to deregulate the US.

“I thought about this and wondered what this would mean for the South African market. We must bear in mind that soft touch regulation lead to the creation of the global financial crisis which in itself lead to job losses,” said Da Silva.

She then painted a picture of the current progress of the Twin Peaks model of regulation. She said that government hopes to implement Twin Peaks from a prudential standpoint by October. This means that the South African Reserve Banks will be the regulator on the financial services industry.

She added that regulation has a big role to play in play in radical economic transformation. This may mean that there will be a significant focus on the lower income market where fintech plays a major role.

Knowledge is power

After a full day of talks, David Harpur – IISA CEO – stressed the importance of education and the need for companies to encourage employees to study towards becoming an associate, fellow or licentiate of the IISA.

“We are also increasing our focus on CPD hours and the need to maintain these. We have taken note of the incident involving a member of the Financial Planning Institute where they were suspended for not maintaining their relevant hours. We have not confirmed our standpoint on this yet,” said Harpur.

He concluded by saying that the IISA is maintaining its close relationship with the South African Qualifications Authority in order to find the best way for the IISA to serve its members.

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