UMAs prosper as clients look for individualism
Justin Keevy, Camargue Senior Underwriter Commercial and Cyber Crime Division
Bernie Ray, Chief Executive Officer (CEO) of Emerald
Simon Colman, Underwriting Executive at Stalker Hutchison Admiral (SHA)
Christelle Fourie, Managing Director of MUA Insurance Acceptances
The popular feeling amongst many Underwriting Management Agencies (UMAs) is that while 2014 did present some challenges, it was hardly as bad as they thought it would be. Many UMAs are looking forward to an exciting and positive 2015.
When looking back on 2014, the Chairperson of the South African Underwriting Managers Association (SAUMA), Tersia Davey said that for UMAs, 2014 will be remembered as a year of settling down, embracing the regulatory changes and focusing on business improvement and product development within the guidelines of Treating Customers Fairly (TCF) principles.
Making a difference
Product innovation and remaining relevant to a target market that is increasingly calling for personalised insurance products is a trend many insurers are looking forward to embracing, none more so than UMAs. “During 2014, we celebrated the success of new UMAs and new innovative product developments such as cyber liability, the increase in renewable energy project participation, and increased requests from global and financial institutions for our assistance with short-term bonds and construction guarantees to complement their own product offerings. We have also seen a number of new UMA’s particularly in the Agri, Marine and Motor Gap product space,” said Davey.
Justin Keevy, Camargue Senior Underwriter Commercial and Cyber Crime Division, pointed out that product innovation in the UMA sector was very pertinent in 2014. Camargue launched its Commercial and Cyber Crime division, building on the commonality found between the Commercial Crime and Cyber Liability arena. He added that there has been a lot of innovation in the industry over the past two years. “Discovery recently launched a life insurance product where the policyholder can opt for their claim to be paid in US Dollars, thereby hedging currency risk and providing financial security in one of the world’s most widely-used currencies. With the role of President, in 2014 we also saw The Insurance Institute of Gauteng (IIG) being led by the young, dynamic and spirited Justin Naylor, who certainly brought an abundance of fun and youthfulness to the industry,” said Keevy.
Showing resilience
Bernie Ray, Chief Executive Officer (CEO) of Emerald, said that the industry showed a lot of resilience when faced with many challenges. “Plagued by the lengthy strike in the platinum mining industry, the continuing lack of stability in Eskom electricity supply, and a weakening Rand, the South African economy showed low growth for the year. Almost predictably, in June the country’s rating was downgraded to BBB by Standard & Poors, and narrowly missed a further downgrade in December. This difficult economic landscape, exacerbated by uncertainty in the political arena prior to and post the elections in May, created a challenging environment in which to conduct business,” said Ray.
He added that in general, insurance premium rates showed no signs of hardening. This, together with an increasing average cost per claim, and a number of large claims, placed immense pressure on short-term insurers to maintain profitable underwriting margins.
The strength of D&O
Because of Eskoms power struggles last year, which is likely to be a persistent challenge this year, companies may find themselves in a position where they are not able to live up to the commitments that they make to clients.
“Directors & Officers Liability (D&O) has as a result increased in potential claims; claims due to corporate insolvency and allegations of contravening laws,” said Geoffrey de Pinchart, Camargue Senior Underwriter Fiduciary Liability. He adds that D&O may well prove to be a valuable product to have as an industry offering.
Simon Colman, Underwriting Executive at Stalker Hutchison Admiral (SHA), agreed with the growing importance of D&O cover. He pointed out that because the press regularly cover stories where directors are being taken to task, and with the increasing stream of consumer protection related activity on social media, there is a growing awareness surrounding litigation risk.
Opportunities to proper
Despite the challenges during the year, brokers found that there are opportunities for them to prosper in a market which is traditionally specialist in nature.
“The increased risks that companies had to deal with in 2014 resulted in an increase in the size of the market. In many instances, brokers were able to increase premium income by up-selling new covers into the existing database. We have also seen increases in quote requests from smaller businesses for covers that were previously only sold to large corporates,” said Colman.
While this is the case, Davey feels that the industry should not stray too far away from the core objectives of the industry. “Even though we are in a good position with regards to capacities and international exposure we must be more vigilant regarding the consequences. We should all work together to rather build and focus on sustainable business through sustainable rating and support the local market and uphold the good professional image of the short-term industry,” said Davey.
One of the 2014 trends which Davey pointed out as concerning is the amount of UMA’s that are merging with larger companies. The strength of an UMA is its ability to remain independent.
However, there are some advantages when merging with a larger company. Christelle Fourie, Managing Director of MUA Insurance Acceptances, said that entering into an agreement with Telesure has benefitted the company. "One of the main driving factors in ensuring this sustainability is the ability to manage the cost of repairs and procurement. This is done by and largely through the bulk buying power of the risk carrier. We have been able to mitigate the costs for repairs, especially with the continual price increases for parts as a result of inflation and exchange rates," she said.
Investment in IT systems will also be a trend that will dominate the market during the year. “Investment in IT infrastructure is more important than ever. We have a long way to go, with many insurance providers bogged down with legacy systems that prevent them from making real innovation happen. If you cannot keep up with tech innovation, you will almost certainly fall behind to such an extent that it will be almost impossible to catch up,” said Fourie.
Editor’s Thoughts:
The growing desire from clients to have personalised insurance policies creates a significant opportunity for UMAs to grow and prosper. Davey pointed out that an unfortunate trend in the industry is the buy-out or divisionalisation of a number of UMAs by various insurers that changed their business models and partner relationships. This is a trend that will continue in 2015. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts [email protected].
