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Short term insurance industry: main drivers for 2007

01 February 2007 Viviene Pearson, SAIA

What will 2007 bring the short-term insurance industry? This is a question that needs to be considered by every participant in this industry to align strategies with the future drivers of the business.

SAIA identified legislation or regulation, transformation in the guise of the Financial Sector Charter and the BBBEE Codes, and consumerism as main drivers for the foreseeable future. So, it could be said that not much has changed.

Regulation

Companies and organisations operating in the short-term insurance environment have felt the impact of legislation and regulation for quite some time. FAIS, FICA and the National Credit Act brought with them a myriad of new regulations to comply with.

This trend is, however, set to continue with more consumer protection related legislation on the horizon in the form of the Consumer Protection Bill, the Financial Condition Reporting proposed by the Financial Services Board, proposed RAF Act regulations, medical insurance demarcation interpertation, and possible amendments to the Short-term Insurance Act, all looming in the next few years.

Commissions

Probably the most important potential change on the legislation and regulation front would be linked to the commissions, costs and related issues debate that is sure to follow after Treasury's conclusion of these aspects of the life assurance sector, and the result might very well change the way short-term insurance business is done.

FSC

The Financial Sector Charter will influence all role players in the financial services sector until, at least, December 2014. Again, this is not a new issue. From a SAIA point of view, focus areas up to now have included procurement, access and consumer education as well as (increasingly) enterprise development and the transformation of the motor industry.
New focus areas should include targeted investment instrument initiatives, human resource development and the monitoring of the industry's progress.

Consumerism

Similarly, consumerism has increasingly become something to be considered, as reflected by continuous developments in terms of current and potential consumer protection legislation. From an industry point of view, this issue also needs to be addressed in terms of how consumers view the short-term insurance industry.

The image and reputation of the industry, therefore, has become a focus area to be addressed by the industry and SAIA, through image and awareness creation of SAIA and its members and their many activities, but also through consumer education in the broadest of senses i.e. including education aimed at current and potential markets of the industry. The bad image and reputation of the industry is often a result of a lack of understanding of insurance, its nature, its role and its products.

Other issues

Other areas that SAIA believes are important, albeit maybe to a lesser degree, issues for the industry include technology, a skills shortage, competition and risk management and fraud.

All of these drivers are, however, linked. The important three focus areas would all eventually result in added cost which will necessitate better use of technology, better risk management and fraud controls, better adaptation to a competitive environment, and better use of current and future skills as well as the expansion of these skills.

The SAIA has aligned its strategy for 2007 and beyond to these perceived future drivers of the industry.

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