Pause, reflect – CELEBRATE – and prepare to engage further

The global economy experienced unprecedented uncertainty through 2011/12. Almost five years since the US sub-prime crisis spilled over into financial markets worldwide countries are struggling to post meaningful economic growth. It is proving more difficult to shrug off the effects of global recession than expected.

To make matters worse international ratings agencies recently downgraded the United States’ government debt rating; the Euro-zone is struggling to design a stimulus package to halt Greece’s financial demise; and the IMF cut its growth forecast for developed economies to a meagre 1.2% for 2012.

The world started the year with little hope for improved economic growth. But instead of recovery, many regions were soon faced with the unpleasant reality of a second round of recession.

Things were equally gloomy on the home front. Here we battled job losses and consumer price inflation trending back above the 6% level. The IMF downgraded South Africa’s growth outlook, citing global economic pressures, while the Reserve Bank revised its GDP forecast for 2012 down to just 2.7%.

Amidst the doom and gloom our financial sector remained resilient. Growing demand for financial products from the country’s so-called "middle class” underpinned insurer results. In 2011 the short-term insurance industry grew its premium income by more than 8% with underwriting margins at their highest levels in five years.

The Association for Savings and Investments SA (ASISA) meanwhile reported that the insurance industry held assets of R1.45 trillion at the end of 2011, a 13% increase from the R1.28 trillion held at the end of 2010.

New challenges will arise as regulation continues to shape the domestic insurance environment. The likely impact of the Solvency Assessment and Management (SAM) regime hit home as the Financial Services Board (FSB) issued its interim measures for the calculation of assets, liabilities and capital adequacy in the short-term industry at the beginning of this year.

The regulator announced that it would introduce additional governance, risk management and internal controls for long-term and short-term insurers in due course. As if this was not enough the much discussed Regulatory Examinations (RE) kept all insurance practitioners on their toes through the first half of 2012.

While the industry regulators make progress towards professionalising our industry and ensuring that customers get the best value for money, the most significant players in the process, the intermediaries, face unique challenges. Top among these is the requirement to pass RE in order to continue giving advice to those who require financial products.

Intermediaries remain the "go to” people for consumers who want to buy insurance products. In an environment where product is complex and plentiful – and where consumer financial literacy is low – the intermediary plays a crucial role. Thousands of South Africans now have access to financial services thanks to their relentless distribution efforts.

Collectively government, the regulators and the industry at large have played a significant role in bringing financial services to the people that need it most. But the work is just beginning.

The industry is still hard at work in a bid to develop products that simultaneously reduce operating costs and improve the level of service to consumers. It is important that insurers do not lose sight of the fact that both intermediary and client are among our most important stakeholders. Without them we have no business.

As 2012 nears an end we celebrate a year that brought this country many opportunities and challenges. There were events to celebrate and catastrophes to mourn. Regardless of the swings and roundabouts insurers, regulators, industry bodies, and government have taken numerous steps to improve the lives which colour South Africa with inspiration and vibrancy.