Insurers and their UMAS - the road ahead
Aside from the growth of direct insurers and economic uncertain times, the war for talent and increased regulation challenged the short term insurance sector over the years. Sydney James, client manager at Centriq Insurance elaborates on the challenges fa
Changing legislation and the far-reaching impact thereof
Pending the outcome of the RE exams, James says that Financial Services Providers (FSPs) will be faced with the prospect of having to debar their representatives. “And this could have serious consequences on their competitiveness within the industry going forward.”
SAM is also expected to challenge the smaller and mono-line insurer in the sense that the overall implementation thereof is extremely costly, time consuming and resource intensive. “Whilst UMAs are not directly affected by SAM, they will feel the impact thereof when they have to assist the insurer in complying with the requirements stipulated in the regulation. To develop an effective risk management framework will furthermore require resources and time, whilst the limited availability of trained non-life actuaries and the overall availability of data are major obstacles these insurers would have to overcome. Operational costs will increase, which in turn will affect the profitability of these insurers,” he says.
This makes consolidation an option for the mono-line and smaller insurers whilst insurers that don’t have a diverse portfolio will have to consider adopting UMAs in their stable to lessen the burden.
Lack of investment in skills and exit of specialist UMAs
James highlights SA insurers’ overall lack of investment when it comes to the training of individuals in specialist lines insurance as a cause for concern. “With the market moving towards consolidation and new legislation such as FAIS prescribing key individuals to obtain formal qualifications to perform their functions in the industry, specialist insurers are exiting the industry. This leaves a vacuum in this space and a scramble for the already scarce skills,” he notes, adding that the industry is very unbalanced at the moment with highly experienced people with no formal qualifications on the one side of the scale, and highly qualified people with little experience on the other end.
Should the specialist UMAs seize to exit, it could have severe implications on the overall competitiveness of the insurance industry. “The specialist UMA is an extension of the insurer, and without that skill an insurer would have to establish an in-house resource at an uneconomical cost,” says James.
Rapidly evolving technological environment
SAM requires insurers to invest in IT systems which would improve the quality and availability of data to the required level. “Technology allows insurers and UMAs to communicate and exchange data for risk management purposes. As such, with data being required on a continuous basis, it is paramount for UMAs to invest time and resources in the changing landscape,” comments James.
He adds that the target market is also changing as far as the use of technology is concerned, and to be relevant and competitive, UMAs need to understand Generation Y. “Generation Y uses digital platforms for communication and prefer Facebook, Twitter and BBM over any other communication tool. The bottom line is simple “if you want to play the game, you have to be in the game,” he says.
Commenting on how UMAs can prepare themselves for the road ahead, James concludes that with the conclusion of the first phase of RE exams, and with the new regulations governing the industry, UMAs have no choice but to be compliant. “UMAs simply have to familiarise themselves with the ever-changing landscape to be competitive and relevant in the industry whilst continuous professional development will maintain, develop and increase technical and professional knowledge in the industry and the UMA environment.” He notes that with data requirements, social networking, and the internet taking centre stage, UMAs will have to focus on and continue to invest in IT infrastructure.
