An industry in flux
According to the second PricewaterhouseCoopers (PwC) survey into South African short term and long tem insurance industry, the primary sources of fraud in the long-term industry are the brokers, followed by policyholders.
By contrast in the short-term industry, the primary source of fraud is the policyholder, followed by internal staff and suppliers.
Survey results also reveal that the short-term industry identifies the Financial Sector Charter (FSC) as its major driver of change, matched by the regulatory environment, and followed by technology. This sector believes that pronounced skills shortages exist for underwriting and actuarial capabilities, as well as both executive and non-executive directors.
In contrast, survey participants in the long-term sector identify the regulatory environment as by far the most important driver of change, followed by the FSC. Long-term insurers are not experiencing shortages of crucial skills at any level.
Other regulatory and legislative challenges revealed in the survey include Black Economic Empowerment, the Financial Advisory and Intermediary Services Act, the Financial Intelligence Centre Act, and Treasurys proposal for industry reform.
Barry Stott, Lead Financial Services Partner of PwC says, "Complaints to the long-term insurance ombudsman have increased by 12 % to close on 9 000."
"Long-term insurers acknowledge that certain of their savings products are perceived as poor value for money and that there are transparency concerns on fees and commissions. They are also currently dealing with the issue of bulking of interest."
But in response to such challenges, the industry is busy designing new products and improving the disclosure of fees, margins and pricing. Companies are already responding by redesigning offerings in various ways that include:
*the introduction of cost-effective, flexible and transparent savings products
*improving termination conditions
*offering simpler products, and
*increasing disclosure of how costs are calculated
Survey participants also acknowledge that product offerings will need to change to serve the requirements of lower income groups. They forecast more co-mingling between life coverage and savings products, and in line with the present low inflation environment, products and performance levels need to be adjusted.
Affinity marketing is now seen as a new distribution channel, especially in the context of developing technology.
The majority of respondents support the National Credit Bill but criticise it for imposing too much administration, offering less protection for the customer alongside increased costs, prohibiting single premium business, and forcing short-term lower-end customers to pay more because of risk pricing.
