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Evolution of the insurance landscape

01 April 2014 Seef Botha, Zurich SA

Insurers are currently operating in an ever changing regulatory environment with increasing complexity. If the US or Europe are anything to go by, South Africa can expect even more insurance specific legislation as well as tightened regulation.

Binder regulations, the Protection of Personal Information Act (POPI) and expected amendments to the current Long-Term and Short-Term Insurance Acts are all currently on the radar for 2014.

Collaboration and compliance

Partnerships have now become more important than ever before and are key to effective compliance – particularly when it comes to binder regulations.

Brokers have always played an important part in the South African insurance industry. Communication between brokers and product providers is vital in order to supply necessary policyholder information.

Ongoing broker road shows and engagement with brokers are key to achieving this. In this way, product providers are able to design products which suit the specific needs of a client, and thereby offering the market a greater sense of protection.

Drawing on experience

Insurers with global parent or partner companies are in the privileged position to consult more regularly with their global networks for best practice on compliance. The industry is currently waiting on an effective date for POPI to be published in the South African Government Gazette after which the sector has a year to comply with Act’s stipulations.

Insurers that have a global network will be able to draw from the experience of other markets, leading the way for compliance. The European Union’s (EU) current Data Protection Standards are very similar to POPI. Most insurers have already begun this integration process.

Cross-border complexities

Another advantage for global insurers is the knowledge and expertise they have about regulation in other markets. Increased regulation has meant that insurers with customers who operate in other countries need to be especially cognisant of the rules and legislation that govern those particular markets.

The customer may not have full cover for a specific country or it may be that claim pay outs must adhere to complex processes. Insurers will need to ensure that they comply locally as well as globally.

Protection of IT infrastructure

Another aspect of increased regulation is the pressing need to safeguard IT infrastructure and systems, ensuring that customer information is as protected as possible. This is particularly relevant when preparing for the implementation of POPI.

The seventh principle of POPI states that the integrity of information must be secured against loss, damage or unlawful access. In addition, where there are security breaches, the regulator and the data subject must be notified. The recently released Global Risks Report 2014 cited cybercrime or cyber attacks as the fifth most likely risk we will face in the next decade. All insurers will need to be cognisant of this, not only from a product or solution point of view, but also from a compliance perspective.

Finding a balance is crucial

Regulation is ultimately about balance. The industry and regulators will continue to try and find a balance between market needs and insurers’ goals and growth and profitability plans.

Many insurers are currently preparing for the proposed Insurance Laws Amendment Bill, which aims to promote consumer and policyholder protection by enhancing and promoting a fair, safe and stable insurance market. The Bill will align insurance acts, both short and long-term, to the requirements contained in the Companies Act (2008), King III, JSE Rules, and the Financial Services Board’s directive. Focus has also been placed on ensuring that directors, senior managers and heads of control functions at all times meet the requirements of honesty and integrity, competence, qualifications, sustained professional development and experience.

All players in the sector need to continue to combine efforts to find ideal solutions that adequately address all stakeholder interests; whilst still benefitting and serving the unique needs of the customer.

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