In unity lies strength

For some time, the sentiment in the insurance industry has been that intermediaries need a strong, united voice to truly represent their interests at the highest levels. This vision is becoming a reality with the merger of SAFSIA and the IBC.

For almost 30 years, the South African Financial Services Intermediaries Association (SAFSIA) and the Insurance Brokers Council (IBC) existed side by side. Both organisations represented the interests of intermediaries, and yet they continued to do so separately. But the recent announcement of a merger between the two industry bodies heralds a new era in the insurance industry.

Ben Lavin's vision for the future

As far back as 2004, FAnews unleashed a great debate in the industry by publishing a letter from Ben Lavin, detailing what he believed the industry needed desperately: a single representative body. His suggestions included a single representative body that will represent only the intermediaries, regardless of their chosen field of specialisation, that will keep membership fees low and will fight tooth and nail for its members. He envisaged a single representative body with 18 000 plus members, with serious clout at the highest levels and the resources to appoint full-time lobbyists.

Our readers were enthusiastic about the idea, with comments such as, “It’s time we stand together”, “Ben Lavin for president!”, and “At last someone is beginning to sow a seed of sanity…”

This was certainly not the first mention of a unified representative body. A merger between LUASA and the FPI was announced late in 2003, but never came to pass. Perhaps the SAFSIA and IBC merger will prove to be the first step towards a truly unified intermediary force in South Africa.

A look at the past

SAFSIA’s origins date back more than 50 years, with the formation of the Insurance Brokers Association of Southern Africa (IBA) in 1949. In 1978 the IBA merged with other similar bodies to form The South African Insurance Brokers Association (SAIBA). SAIBA was restructured in 1999 to become SAFSIA.

SAFSIA members are large and small businesses rather than individuals. It is estimated that SAFSIA member companies act as intermediaries for more than 70% of all short-term insurance, more than 30% of life assurance and related investment products and member companies represent more than 80% of the Consultants and Administrators of private retirement funds.

The IBC was established in 1979 as a national umbrella organisation, exclusively for independent brokers, to create a unified voice and a body to act collectively. The IBC and SAFSIA are recognised as the leading intermediary representative bodies in influencing regulation, legislation and other stakeholders in financial services. The IBC has 24 branches and seven divisions nationally.

The IBC also played an international role as a founding member of the Council of International Brokers Associations (CIIBA), an organisation promoting the role of brokers in the development of the global insurance industry.

Two giants team up

Duncan Buchanan, SAFSIA’s national president and chairperson of the board says that one of the objectives of the merger is greater efficiency, “but more importantly, greater representation for our members will be the biggest benefit from the merged associations.”

The two associations will merge entirely and a newly elected Board will be formed. “We have ensured that there will be equal representation in this process,” explains Buchanan. “We do not foresee any major obstacles, as the two bodies are not too dissimilar in terms of organisational structures and a clear way forward has been mapped to enable the new association to function efficiently.”

The next question that begs answering, of course, is who else will be joining the party, and why is LUASA not part of the merge? “The Boards of SAFSIA and IBC identified their common ground, and both these associations have only brokers as members. LUASA’s membership extends beyond brokers only,” explains Jay Ramsunder, CEO of the IBC. “The initial thinking of the proposed new association is to be representative of brokers only. That said, we are open to any ideas that may contribute to a stronger representative body and we are keen to have discussions with other representative bodies.”

What it means to brokers

Firstly, the members of SAFSIA and IBC will automatically become members of the new association. “There will be no SAFSIA or IBC post the merger,” says Buchanan.“However,” adds Ramsunder, “it is envisaged that, at least initially, the new association will have two categories of members, individuals (independent brokers and IBC life brokers) and corporate members (SAFSIA members).

The good news is that the new association will consider the positive impact of the merger with regards to membership fees. “We don’t envisage any immediate change to membership fees and will retain the current corporate and smaller broker member fee structures until we have a better handle on the new cost structures,” says Buchanan. “We anticipate savings on our expenses, for example, we will most certainly enjoy a saving in rental as the two offices will now operate from one location. Such savings should ultimately have a positive effect on membership fees.”

Ramsunder concurs, “It is envisaged that the resulting economies of scale would result in added benefits to members, and maybe a freeze on fee escalations. We are currently engaged in finalising the proposed budget for the new association. Fortunately both companies are financially strong.”

What the brokers say

A few years ago, judging by the responses FAnews received following the Ben Lavin letter, brokers are very supportive of a unified representative body. But how do they feel now? “We are currently hosting a joint road show and intend holding special AGM’s in early November to ratify the merger. It’s critical that our joint membership base supports the merger and all indications to date have been extremely positive,” says Buchanan.

And the product suppliers seem to be behind the merger as well. “The product providers have for some while been hinting that we should go this route. I am convinced we have their fullest support. Lets face it, it’s much easier for them to deal through one association than trying to get consensus from a number of different bodies.”

Special General Meetings of both companies are set for 1 and 2 November 2007. A ‘Shadow Board’ will be formed to finalise the necessary arrangements.

Intermediaries in South Africa can look forward to a more unified and stronger representative body to look after their interests from 1 January 2008.