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Rise of the machines

01 April 2015 Elvin de Kock, Zurich South Africa

In the digital age we live in, our lives are being run by computers. We do not keep our money under our mattresses anymore and there is no need to interact with a bank teller. We get screened for diseases when we come home from an international trip, and our television watching habits are stored by your satellite television provider.

This has also had a significant impact on the insurance industry. Certain aspects of your policy is not being underwritten by humans anymore, machines are taking over. This means that a certain amount of information has to be availed to insurers. But are we confident that this information is being cared for in a responsible manner? Insurers and brokers will need to be adequately prepared for the stipulations of the Protection of Personal Information Act (POPI) in order to avoid potentially negative repercussions, from both a financial and reputational perspective.

Invest in technology

A customer’s personal information is intrinsic to effective risk profiling and efficient insurance procedures. Currently, only sections pertaining to the definitions and regulator of POPI – which aims to regulate the processing of information – have been implemented.

Although there is no definite date when POPI will become effective in its entirety, it is imperative that brokers and insurers are adequately prepared and have robust IT systems in place.

Getting personal

The principals of POPI focus on:

• Accountability: for the processing of information.
• Processing limitations: only processing as much information as you need for as long as you need it.
• Quality: ensuring that information is accurate and up to date.
• Participation: allowing customer access
• Further processing: always keeping the original purpose of the information in mind
• Only processing information for a specific purpose.
• Openness: being transparent about what the information will be used for and who will have access to it.
• Security: ensuring that all reasonable steps have been taken to protect the information.

Customer consent

Once the Act comes into effect, insurers will need to adjust certain contract clauses and ensure that all partners and suppliers are compliant with the legislation.

Brokers will be required to inform customers about how their personal information will be managed and obtain consent for it to be utilised, particularly for cross-selling purposes.

If a contract is terminated, customer information can only be kept for the stated regulatory term. It is vital that all business processes and channels where personal information is used be as secure as possible as data breaches need to be reported and could result in financial penalties.

Product innovation

There is no doubt that POPI will have a wide reaching impact on the industry, including opportunities for business growth and product innovation. In an environment where cybercrime cost the global economy up to $400 billion in the last year, and approximately R5.8 billion annually in South Africa, cyber risk cover will become a non-negotiable.

With increased interconnectivity, and reliance on technology more and more, companies are becoming vulnerable to cyber threats. In fact, Cisco estimates that during an average attack, 90% of data can be obtained in approximately nine hours, with companies only realising that systems have been breached months later. Insurers will have to tailor offerings to meet market needs and will not only have to consider financial losses but the impact of reputational damage as well.

It goes without saying that insurers who have been entrusted to keep personal customer information safe will have to assess how secure their own IT infrastructure is, and put necessary security measures in place to ensure that they comply with all the stipulations of POPI.

This, coupled with ongoing broker training sessions around the Act’s implications for the industry, will ensure that companies and intermediaries work together effectively to provide the best solutions and services possible, and above all, protect invaluable customer information.

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