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3riskSA Magazine

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regularsin this issueshort-term insurance

Medical

Finance and insurance

Life

Enterprise risk management

Better business

News

Lifestyle

The future of energy: insuring renewables in sA

- renewable energy and the insurance industry

- risk factors: what you need to know

- Green geysers

Understanding the risks of green buildings

i’m so sexy: Making medical aid attractive to the young

Majority rules

Electric avenue: insuring an electric car

Providing for retirement after divorce

sting in the scorpion’s tail: meet the Green scorpions

A cold shower from Treasury

@Lunch with Barry du Plessis

august 2012CONTENTS

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6 riskSA Magazine

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Opinions expressed in this publication are those of the authors and do not necessarily reflect those of the Publisher, Cosa Communications (Pty) Ltd, COsA Media, and or risksA (Pty) Ltd. The mention of specific products in articles or advertisements does not imply that they are endorsed or recommended by this journal or its publishers in preference to others of a similar nature, which are not mentioned or advertised. While every effort is made to ensure accuracy of editorial content, the publishers do not accept responsibility for omissions, errors or any consequences that may arise therefrom. reliance on any information contained in this publication is at your own risk. The publishers make no representations or warranties, express or implied, as to the correctness or suitability of the information contained and/or the products advertised in this publication. The publishers shall not be liable for any damages or loss, howsoever arising, incurred by readers of this publication or any other person/s. The publishers disclaim all responsibility and liability for any damages, including pure economic loss and any consequential damages, resulting from the use of any service or product advertised in this publication. readers of this publication indemnify and hold harmless the publishers of this magazine, its officers, employees and servants for any demand, action, application or other proceedings made by any third party and arising out of or in connection with the use of any services and/or pro-ducts or the reliance of any information contained in this publication.

Publisher & editor Andy Mark

Managing editorNicky Mark

Copy editorMargy Beves-Gibson

Feature writersHanna BarryGrant Cyster

Nicholas krigeBianca Wright

Angelique ruzicka

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Herman DorflingVicki Felix

Regular contributorsJenny Handleykirsten HalcrowClem Chambers

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Jim Henson Walt Disney Masters of Character Creation Imagine the poss ib i l i t ies i f the r igh t par tnersh ips were made. Pa r t ne r sh ips t ha t connec t l i ke -m inded bus inesses , enab l i ng t hem to o f f e r a w ide range o f spec ia l i sed commerc ia l and l i f e i nsu rance . Lombard Insurance bel ieves in these possib i l i t ies and the par tnerships that make them a real i ty. Par tner ing wi th poss ib i l i t y, every day. Brightrock | C3 | Consort | HCV | FMI | F&I | Leppard | PinnAfrica | UMSLombard Insurance Company Limited (FSP 1596) and Lombard Life Limited (FSP 11643) are licensed Insurers and Authorised FinancialServices Providers.

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8 riskSA Magazine

it was with some pleasure that i accepted an invitation to Carl Greaves

Brokers’s 50th birthday celebration last month. To be honest, Carl

hasn’t owned the business for the entire 50 years (he would have

to have purchased the business when he was still at school) but

Carl Greaves Brokers has grown from strength to strength under his

custodianship; and this through some trying times indeed. We at

risksA extend our warm congratulations to Carl and his team.

if your business is celebrating a milestone or other achievement, we’d

love to hear from you. Please drop Nicky a line on nicky@comms.

co.za telling us all about it. space permitting we will try to publish your

story in an upcoming issue of risksA.

Last year we published a story on acid mine drainage. Our piece

quoted various experts who warned of severe flooding and we

predicted that the mineshaft at Gold reef City would be flooded by the

first quarter of this year. While this hasn’t happened (current thinking

is that the acid mine water is rising a little slower than originally

anticipated, giving Gauteng residents a 12-month reprieve), the

solution mooted by government may be as dangerous as the original

threat. Experts are saying that the government’s plan to pump partially

treated acid mine water into our rivers is short-sighted and is going

to create environmental mayhem with our river systems. The partially

treated water will carry concentrations of salt and other pollutants at

many times the safe level. One expert discussing the issue on a recent

Carte Blanche episode reckons as much as seven 20-ton trucks worth

of salt per day will be dumped into our rivers with devastating results.

This green debate continues and, while only the most naïve will still

argue that climate change is a conspiracy, the various arguments and

counter-arguments tend to obfuscate the real issues. For instance, in

my opinion carbon tax is just another way to fleece travellers. Another

misconception is that printed magazines are somehow depleting

natural forests when the opposite is in fact true. risksA is printed on

paper that comes from sustainable forests that have been specifically

planted for the purpose. in fact, most timber suppliers to the paper

industry plant many more hectares of trees than they cut down each

year. if paper demand ended tomorrow, this land would probably

be used for other forms of agriculture, agriculture with a far larger

carbon footprint than the carbon-neutral forests the pulp industry

plants every season.

We hope this green issue of risksA helps to stimulate thinking around

the environment and that you enjoy reading it as much as we enjoyed

putting it together for you.

All the best

Andy

Dear reader,

ThE publiShErFrOM

riskSA

SA

insuring renewables in sa

The fuTure of energy

The sun is at the centre of our solar system for good reason. Mankind’s insatiable desire for energy – whether illustrated through the worship of solar deities for their perceived power and strength, or our attachment to countless electronic devices – has marked myriad cultures throughout history. In the International Energy Agency’s World Energy Outlook 2011, a new policies scenario predicts that the world’s prime energy demand will increase by one-third between 2010 and 2035.

10 riskSA Magazine

Hanna Barry

11riskSA Magazine

This highlights the need to drive investment in clean energy or face heightened energy security concerns and rising expenses in combatting climate change.

The south African Government has made its own renewable energy commitments, which is critical in the context of a very tight supply margin and heavy reliance on fossil fuels. The drive towards renewables is heightened by the need to create jobs and government views the renewable energy market as a means of addressing this need. This has seen exciting developments in the power procurement space and reconfigured insurance solutions to go with it.

Renewable eneRgy and the insuRance industRy south Africa has some of the highest renewable energy potential in the world, particularly in solar. in 2003, the Department of Energy (DoE) released the White Paper on renewable Energy with a target of 10 000 GW-hours of energy to be produced from renewable energy sources by 2013. At 2012, very little of this target has actually been achieved, apart from a few small renewable energy projects and the department’s solar water heater initiative. Enter the renewable Energy independent Power Producers Procurement Programme (rEiPP), which is far more substantial and has been designed to contribute to the target of 3 725 MW to be generated from renewable energy sources, which the minister has determined is required between now and 2016 to ensure the continued uninterrupted supply of electricity. The rEiPP is also aimed at contributing towards socio-economic and environmentally sustainable growth, and to stimulate the renewable industry in south Africa. it is broadly in accordance with the capacity allocated to renewable energy generation in the government’s integrated resource Plan, issued in 2010 and laying out the government’s commitment to invest in renewables until 2030.

The irP proposes that renewables amount to 42 per cent (17 800 MW) of new generation capacity through rEiPP, allocating different output levels to various types of renewable technology, with solar energy and wind energy assigned the largest portion of that, at 8 400 MW each. Other renewable energy sources, such as biogas, natural gas and hydro energy are included, but to a much lesser extent. Bidders for these projects are required to bid on tariff and the identified socio-economic development objectives of the department. By the end of 2011, the department had received 53 submissions in the first round of rEiPP bids

and 28 contracts were awarded. The second round closed with 79 bids in March of 2012, of which 19 were successful. Engineering News reported earlier this year that over 1 000 MW is still available for bidding in the third round, and further capacity could be made available should any projects from round one fail to reach financial closure. The date for this window is not confirmed, as DoE and Treasury intend to undertake a review of the rEiPP process before inviting bids for the third round.

insuRing the biddeRsThe bidders, or independent power producers, are raising their own funds for these projects, and south Africa’s major banks have loaned billions to the projects, with Nedbank Capital and standard Bank funding the lion’s share.

Hence bidders are very concerned to ensure that they have sufficient insurance cover in place. “We have been working with the banks to make sure that our policy meets their requirements,” says Mike robson, CEO of C&G Underwriting Managers, which formed a partnership with global renewable energy underwriter, GCube insurance, last year. The partnership aims to develop renewable energy insurance solutions that are tailored for the southern African market.

C&G has seen the majority of the 28 preferred bidders from round one and quoted on them, having already issued several policies. The loan agreement commonly referred to as the Facility or Common Terms Agreement (FA/CTA), between the lenders and borrowers, or power producers, contains detailed insurance requirements. “The arranged insurance must comply with the insurance schedule in the FA/CTA and it is up to lenders’ insurance advisers (LiA) to undertake due diligence analysis, which includes factors such as ensuring that required lenders’ endorsements are included in the policy. A broker’s letter of undertaking (BLU) from the project insurance brokers requiring them to report material issues relating to the insurances arranged, such as non-payment of premium, material adverse variances in coverage, or cancellation of coverage, is also required,” explains Chris Nivison, renewable energy practice leader at Willis south Africa.

The FA/CTA template commonly utilised internationally needs to be tweaked to cater for the south African situation. “The FA/CTA makes reference only to international credit ratings, such as standard & Poor’s (s&P), and no south African insurer has the stipulated international financial strength rating (Fsr) of s&P A– or the equivalent.

so we have had to persuade the lenders to be more flexible and accept Global Credit rating (GCr) and Fitch ratings to allow south African-based insurers to participate in the risks,” says Nivison. “The internationally utilised FA/CTA template in its original format technically precluded even our major insurers with GCr AA ratings and impressive BEE credentials from participating, unless permission is specifically granted by the lenders. This is clearly an unworkable situation in south Africa.

“After all, our market has the ability, skills and sophistication, capacity and financial strength to underwrite these risks, without having to rely on overseas risk carriers not registered in south Africa, which ultimately results in the exportation of significant premium volumes to non-admitted markets.”

significant local content requirements make it vital for major underwriters to participate. At a recent renewable energy conference in Johannesburg, 60 per cent was quoted as the minimum local content requirement for round three. C&G can play a role in that local content requirement by using its local capacity, together with GCube’s capacity, being Lloyd’s of London. Unfortunately, not all local insurers are at this level and there is some concern that unregistered overseas insurers are seeking fronting arrangements with south African insurers. “The risks and exposures relating to renewable energy can be very high. Many local insurers are wary of taking on these exposures and leave it to the larger international players who have more experience with these types of risk,” says David kirk, partner at kPMG.

“In 2003, the Department of Energy (DoE) released the White Paper on Renewable

Energy with a target of 10 000 GW-hours of energy to be produced from renewable energy sources by 2013.”

42 The irP proposes that renewables amount to 42 per cent (17 800 MW) of new generation capacity through rEiPP.

12 riskSA Magazine

The good news is that some of the major manufacturers and suppliers are thinking of opening facilities in south Africa in the near future, which will assist in meeting local content targets. AEG Power solutions recently constructed an assembly facility in Cape Town for its utility-scale solar inverters and skytron combiner boxes. inverters convert the DC energy from solar panels to AC energy to put back onto the grid. The factory, based in Montague Park in Milnerton, is 3 400 square-metres, with the capacity to produce at least 200 MW per annum. Due to start production on 1 June this year, the facility was ready 15 days ahead of schedule and has already produced the first five or six MW of solar inverters.

As solar parks and wind farms begin springing up across the country, bringing the need to ship overseas equipment along with them, seamless insurance solutions are paramount.

cRadle to gRaveC&G’s journey in the renewable energy insurance sector began two years ago when robson identified that renewable energy was going to get off the ground in a big way in south Africa. “Having been in the engineering construction insurance field for almost 40 years, i had the sense to understand that underwriters in south Africa don’t have any experience in writing renewable energy projects because we don’t have them here,” he explains. After investigating global players in this space, he and his son James, a qualified civil engineer and a member of the C&G team of experts, went over to London in February 2011. After meeting with several companies, they decided to enter into a partnership with GCube, a niche renewable energy underwriter that has been underwriting renewable energy risks for 24 years and does

not write any other form of business. “They have an excellent track record, have extensive statistical data on renewable energy risks and know the business inside out,” says robson. “They have developed tailored products and policy wordings, which have grown over 24 years to be exactly what the renewable energy industry needs from an insurance provider.”

What the industry needs, according to robson, are all-encompassing, cradle-to-grave solutions. This is especially true in south Africa, where much of the technology and equipment is shipped from overseas. in light of this, GCube and C&G’s underwriting partnership provides cover for marine cargo; inland and marine transit; marine delays in start-up; construction all risks; advance loss of profits; operational all risks; mechanical and electrical breakdown; business interruption; third party liability; and employer's liability. since many of the solar panels and wind turbines

are shipped from Europe, America, China and india, if there is an incident in the shipment, this would cause a delay in the start-up and hence a delay in generating electricity and receiving revenues. During the construction phase when turbines are erected and panels installed, there could be a major insurable incident on site, which could ultimately delay connection and result in an advance loss of profits and the inability to repay loans. “We can cover that aspect, as well as the public liability at that stage,” says robson.

Nivison agrees that from an insurance point of view, the key to satisfying project lenders is to have a principally controlled insurance (PCi) programme, covering all the phases of the project. Willis Group is one of the leading renewable energy insurance brokers in the world and is directly involved with 12 of the 28 projects that received preferred bidder status in the first window process. “it becomes very messy if you separate the different insurance covers as there are grey areas in between the various phases, which could result in gaps and/or duplications in cover at different stages. This could leave your client in a situation where a loss falls between two stools, making seamless insurance solutions especially crucial for the larger projects,” says Nivison. “securing cover for a delay in start-up for example, is vitally important for lenders. Lenders are less likely to fund a project that doesn’t have seamless insurance coverage.” some of the benefits of a PCi programme include more effective centrally controlled risk management, wrap-around protection for the benefit of all interested parties, cost savings and the avoidance of delays due to claims disputes, as a result of confusion or duplication of cover.

“Securing cover for a delay in start-up for example, is

vitally important for lenders. Lenders are less likely to

fund a project that doesn’t have seamless insurance

coverage.”

14 riskSA Magazine

in a presentation he gave at a the fourth Wind Power Africa Conference in May this year in Cape Town, Nivison outlined some of the key factors to take into account when placing renewable energy insurance:

• Renewableenergyisnotnew.Learnfromtheexperience and mistakes made by others; be a trail blazer at your own risk.

• Newtechnologieswithouttrackrecordsandaccreditation present new and unique challenges to insure. insurers are not prepared to be the test bed for research and development, and expect design defects to be covered by original equipment manufacture (OEM) warranty.

• Seamlesscradle-to-gravePCIcoverageunderonepolicy is strongly recommended and provides lenders and borrowers with a great deal of comfort.

• Effectiveriskidentification,lossmitigationandrobustrisk management is a fundamental prerequisite and facilitator of financially viable projects, whether at the financing, construction, handover or operational stage.

• SelectionofEPC(engineering,procurementand construction) and O&M (operations and maintenance) contractors and other professional services is of vital importance to both lenders and insurers.

• Thesecurityoftheriskcarrierisparamount.Insurersneed to be able to pay claims.

• Earlyengagementwithaninsurancebrokerandunderwriter is strongly recommended. Project owners frequently engage in dialogue with brokers and insurers in the latter stages of a project, missing out on valuable input.

• Insuranceprogrammesmustbealignedwiththelenders insurance requirements stipulated in the FA/CTA.

1000 MW

Engineering News reported earlier this year that over 1 000 MW is still available for bidding in the third round, and further capacity could be made available should any projects from round one fail to reach financial closure.

On the reinsurance side, the basics of technical underwriting apply to renewable energy projects. “The technical merits of the specific projects, the scope of cover requested and the interests of the stakeholders involved must be understood to come to the risk-adequate premium for such risk transfer. As renewable energy projects rely mostly on components and methods of proven technology, the demand for new insurance products hardly exists,” says Boniface Chiwota and Peter Jakszentis of Munich re. “Tailor-made products are more driven by the risk appetite of the stakeholders involved than by the technology of renewable energy projects.”

The current boom that south Africa is experiencing in the renewable energy market has seen C&G extend its cover at two ends, adding both marine and operations cover to its offering. “Through identifying the needs of local renewable energy projects, we have extended our local treaties to include marine cover and 12 months’ operational cover after the construction phase, which ordinarily wouldn’t be required for local construction projects,” says robson. This ensures that there is no gap in cover between the completion of construction and placing conventional assets coverage.

Although larger claims tend to arise when something is already in operation, a way of managing this increased risk is by doing thorough checks on manufacturers and, according to robson, GCube has a reliable database of manufacturers that assist in managing this risk. Having worked on renewable energy risks for 18 months, which has involved two trips to London and meetings with GCube underwriters to understand project risks, C&G believes it is the local market leader in this area.

“The key to satisfying project lenders is to have a principally controlled insurance (PCI) programme,

covering all the phases of the project.”

11310 Brand Ad 297x210 10/6/11 12:25 Page 2 C M Y CM MY CY CMY K

16 riskSA Magazine

While brokers don’t necessarily need an engineering background, they do need specialised knowledge of renewable energy. The major brokers in south Africa are generally owned by international companies and there is a certain amount of skills transfer from overseas teams that have been working in the renewable energy market for some years. However, the south African insurance market has always been very sophisticated and the major local brokers have specialist construction and engineering teams, which CEO of C&G Underwriting Managers, Mike robson, believes possess the necessary skills to place cover for renewable energy risks.

There are major risk factors to consider when it comes to what have been pegged as the two major sources of renewable energy in south Africa: wind energy and solar power.

what you need to know

risk facTors

The transportation logistics associated with wind energy projects

also present risks. Wind turbines need specialised transportation

equipment and cranes, and there may be a shortage of these.

65m

Transporting turbine blades 65 metres in length from harbour to site is a huge operation.

17riskSA Magazine

solaR panelsWhile hail is a major peril facing solar panels, the majority of solar farms are in the Northern Cape, in areas such as Upington, Prieska and De Aar, where temperatures are high and there is little rain. There are a few in Limpopo and rustenburg in the North West, but panels are generally built to withstand hail under a certain size. Unexpected hail storms, however, remain a risk. in terms of freezing overnight temperatures in some of these areas, James robson explains that technology in the solar panels caters for this and that generally the operating range of a photovoltaic solar panel, the dominant model in south Africa, is from about -40 degrees Celsius.

Fire and particularly copper cabling theft present the most significant risk exposure. Large solar farms will comprise of hundreds of thousands of panels. This is why it’s imperative to ensure that the project has state-of-the-art security measures in place. “in the south African environment, theft of photovoltaic panels may become the biggest claims risk from solar energy installations,” says David kirk, partner at kPMG.

He adds that another real danger in the solar panel market is concentration of risks from technology or manufacturing that proves to be flawed for long-term use. “if there is a fundamental problem with a particular panel design, there could be wide failures and it’s quite possible that the manufacturer could crash quickly into insolvency. The insurer would then be picking up

the tab for systematic problems across a significant portion of their book,” says kirk. “However, the market is relatively stable and it is unlikely that there will be a large number of manufacturers who would produce faulty panels, but price competition could result in sub-standard products entering the market, which could potentially cause issues for the industry.”

“The modular nature of photovoltaic solar parks and wind farms (i.e. many units of the same technology or type) does aggravate the accumulation risk of serial damage due to design flaws and the accumulation exposure to natural perils, like hail or storm, compared to the typical fire or machinery breakdown losses of single units,” agree Boniface Chiwota and Peter Jakszentis of Munich re.

Ongoing technological development of photovoltaic systems serves only to increase the risks of long-run design failure. “The technology in this space is rapidly evolving, and some of it has fine engineering tolerances for equipment that will be left outside facing the elements for at least a decade,” says kirk. “insurers operating here need to carefully manage diversification of risk across geographic areas, across manufacturers and across technologies.”

wind tuRbinesEquipment supply is critical when it comes to wind turbines and equipment has to be proven equipment to be insurable, with accepted accreditations and certifications. Overseas bodies similar to the sABs are able to provide this type of accreditation. The transportation logistics associated with wind energy projects also present risks.

“We’re in a situation where in two weeks’ time we could potentially have 28 projects all starting at the same time, of which eight are wind projects,” robson told us on 2 July. “Wind turbines need specialised transportation equipment and cranes, and there may be a shortage of these.” Transporting turbine blades 65 metres in length from harbour to site is a huge operation. Each turbine, including the tower, nacelle, blades and hub, can take four or more separate trips to transport. Certain traffic furniture, such as overhead road signs, will have to be removed to accommodate this transportation. Fortunately most wind farms are coastal and are therefore closer to ports, but many of these are on farms and will require construction of access roads.

A further risk faced by turbines is the electrical or mechanical failure of gearboxes, as well as blade damage as a result of lightning strikes and fire. While a failed gearbox can be replaced and undamaged blades reused, if the turbine sustains extensive fire damage, a total loss could result. On the plus side, the east, west

and southern Cape coasts where many of these wind farms will be, are not prone to lightning, which is perhaps of greatest concern when it comes to wind turbines.

“Ongoing technological

development of photovoltaic systems

serves only to increase the risks

of long-run design failure.”

With a single wind turbine costing between r20 million and r25 million, depending on size and manufacturer, these are big ticket items. Defective welding can also cause tower collapse, highlighting the importance of quality manufacturing and tested technology and equipment, not least because asset damage will likely result in business interruption and a resultant loss of revenue. Although big wind farms have 30 to 40 wind turbines, and the loss of one or two won’t necessarily make a major difference to output, lengthy lead times pose a challenge. replacing a wind turbine can take anything from six to 12 months. However, robson’s son, James, notes that as more projects come online, more local parts and components manufacturers will start springing up and this will reduce lead times significantly.

18 riskSA Magazine

green geysersThe Department of Energy’s Green Heater Project plans to roll out one million solar water heaters by 2014. The insurance industry is firmly onboard and the South African Insurance Association’s (SAIA) Green Geyser Replacement Project (GGRP) received approval from the SAIA board early last month. This has enabled the association to table its proposal for the solar water heater steering committee in government.

since green geysers can be twice as expensive as ordinary in-roof geysers, the need for government subsidisation is evident. For example, santam launched a solar geyser initiative in 2010, giving clients the opportunity to replace damaged geysers with solar geysers, but found uptake slower than expected due to the initial replacement costs involved. Despite the slow uptake, santam continues to offer the opportunity to its clients, but moved the initiative up to industry level through the sAiA, in order to pool resources. “The benefit to consumers of replacing their geyser with an energy - efficient alternative when they have a valid geyser claim is that they can use the proportionate value paid for their electric geyser claim towards the installation cost of an energy

efficient system,” says Debbie Donaldson, general manager of strategy and planning at the sAiA. “This, coupled with the potential to save on electricity enables the consumer to pay back their capital investment in a much shorter period of time. so instead of a consumer funding approximately 82 per cent of the energy - efficient alternative, this could potentially reduce it to 57 per cent, based on an average priced installation.” However, despite the potential cost savings down the line, Donaldson says it is not at all viable for the insurance industry to pursue a programme of green efficiency alternatives without the subsidy being in place.

While Eskom is granting rebates to insurers for installing solar geysers, some insurers have expressed concerns over Eskom’s

ability to administrate the rebate process to meet the needs of the insurance business model. “This is a critical opportunity, as well as a concern to insurers. The rebate system needs to be electronically based for the insurance industry to facilitate a real time and high volume processing rebate mechanism,” says Donaldson. “Our preliminary investigation has established that we need to allow for a staggered increase in volumes of energy efficient alternative systems so as to facilitate supply chain readiness, specifically of installers, who would need to be suitably qualified,” she adds.

19riskSA Magazine

gReen geyseR RisksHail risk aside, solar geysers can potentially have more failure points than an ordinary in-roof geyser. Direct models have tubes with water flowing through them that is heated via solar power and used directly in homes or buildings. While this is efficient, should the water inside the pipes freeze, the geyser could fail catastrophically. Furthermore, chemicals found in water can erode the pipes, panels, and the geyser, meaning that the parts need to be replaced on a fairly regular basis. indirect models, on the other hand, utilise anti-freeze liquids to indirectly heat water via a heat exchange that is protected from external freezing temperatures. “Whether insurers will cover direct models in areas that are known to have freezing overnight

temperatures is debatable,” says David kirk, partner at kPMG. “There are cases where brokers and underwriters have refused to cover a home because of a solar panel installation. it’s an unknown and it doesn’t appear in the underwriting guide so it’s just automatically excluded. Other underwriters don’t even factor in the possibility that a solar geyser may have different risk characteristics from an electric geyser and often don’t charge a different rate at all.”

kirk says that the risk involved with the installation of a solar geyser for a householder is not significant so it’s probably more reasonable not to adjust the rate. The risks may even be considerably less. Head of brokers at Auto and General, shaun rademeyer, makes the point that the subsequent damage to home contents caused by a burst in-roof geyser can be

extensive. since solar geysers are located on top of the roof, they do not pose this risk. This offsets the hail risk to some extent and could prove less costly for the insurance industry in the long run.

On a slightly unrelated note, kirk thinks it would be interesting to look at how homeowners who install solar geysers differ from other homeowners and whether this could be a rating factor for other risks. “i haven’t seen many insurers looking to analyse this yet. As more data becomes available, this will be an interesting line of investigation.”

With electric geysers accounting for 45 per cent of a household’s electricity bill, the push towards renewable energy alternatives – both from government and the insurance industry – bodes well for south African consumers over the long term.

20 riskSA Magazine

the futuRe of Renewable eneRgy in south afRicaAlthough the renewable energy market in south Africa still has some way to go, the future looks bright and the industry is positive about government’s contribution and commitment to renewable energy. “The general consensus of everyone involved is that the [iPP] process has worked very well and been very transparent,” says CEO of C&G Underwriting managers, Mike robson. “The iPP is the enabler,” agrees Trevor de Vries, managing director of 3W Power/AEG Power solutions south Africa. “Once we reach grid parity, we will see a fast uptake of renewable energy in the country. When the cost of electricity generated by Eskom

is equal to the cost generated by renewables and the industry is no longer reliant on a tariff from government, it will really start to boom and big industrial and commercial companies will invest in power for their own use, in order to get off the Eskom grid,” he adds.

“We have a very exciting and sustainable new green energy industry evolving on our shores with a long life span. As proud south Africans, let’s ensure that we reap the benefits to the fullest possible extent by creating local jobs and boosting our economy in all the relevant sectors. Let’s actively promote a ‘local is lekker’ approach where it is professionally acceptable on all the renewable energy projects in the pipeline,” concludes renewable energy practice leader at Willis south Africa, Chris Nivison.

“We see considerable growth potential in risk solutions for renewable energy within the next

years,” said Munich re board member, Thomas Blunck, after GCube entered into a partnership agreement with Munich re early this year. This was reiterated by GCube’s chief executive officer, Fraser McLachlan, “No-one is under any illusion that 2012 is going to be another significant and game-changing year for the international renewable energy markets.”

in this electric atmosphere, the insurance industry needs to “continue to diversify, while offering high security capacity and new product lines to the market”, McLachlan adds. if past centuries and future predictions are anything to go by, the global demand for energy shows no signs of abating, nor does the acute need to feed this demand sustainably. simply put, the necessity for dynamic insurance solutions to protect and sustain renewables has never been greater.

“In this electric atmosphere, the insurance industry needs

to continue to diversify, while offering high security capacity and new product

lines to the market.”

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tailored to the needs of our clients

and to deliver them with personal care

and attention. Our skills and expertise

are unsurpassed, but it’s our people’s

dedication to your success that sets us

apart.

We call this insuring partnership.

it’s not just about what we do; it’s the way that we do it. With a skilled team of staff members across a network of offices in over 50 countries and clients in more than 170, you can trust us to treat your business as our own.

We value:

☞ INTEGRITY

☞ CLIENT FOCUS

☞ RESPECT

☞ EXCELLENCE

☞ TEAMWORK

We call this insuring the Future.

With an appetite for an in-depth understanding of risk, we partner with our clients to develop customised solutions for their risk management needs.

Our product offering:

☞ Property

☞ Accident and Health

☞ Travel Insurance

☞ Casualty & Financial Lines

We call this insuring total cover.

For more information call Wendy van den Heever on 011 722 5700 or visit us at aceinsurance.co.za.

Visit us at aceaction.co.za.

triple action.ace

insuring progress – taking on the responsibility of risk so that our clients can get on with making things happen.

102 AC

E Insurance/Risk

107 ACE Insurance-Risk.indd 1 2012/06/14 10:51 AM

23riskSA Magazine

M

VALUABLEsvEhIClEBUiLDiNG

woRKPlACEiNFO

P28UNDErsTANDiNG THE risks

OF GrEEN BUiLDiNGs

increasing energy costs a

nd pressure to comply with new sustainable building

standards have convinced companies to sta

rt implementing green technology

in their buildings. But what are the risk

s involved with this n

ew technology?

THE iMPACT OF DriVErLEss C

Ars

ON THE iNsUrANCE iNDUsTry

it is likely to

be a fair while before the firs

t driverless c

ar hits

the road in south Africa, but what will th

e consequences of the

concept be for the insurance industry?

24 riskSA Magazine24 riskSA Magazine

25riskSA Magazine

insuring green buildings brings its own set of challenges, so it is imperative for both business owners and insurance brokers to be aware of the unique features associated with green technology so the correct policy can be written to ensure that all the bases are covered.

Eskom’s recent price hikes have made energy efficiency a priority to everyone, even those who aren’t particularly fussed about the environment, and the growing interest in decreasing greenhouse gases among the people who do care about the environment have made green buildings a hot trend in the commercial real estate space.

“The onset of the green building revolution will also mean that new products and building materials will be developed and designed in order to be eco-friendly as well as aesthetically acceptable. While it is clear that the green building concept will have drastic and positive influences on the environment, it is also likely to have far-reaching effects on the short-term insurance industry,” says George Jennings, senior engineering manager: underwriting at Lion of Africa insurance

real estate investors and companies occupying the buildings are setting goals for greater energy efficiency to save money and show the public that they care, and the cherry on the cake is that the south African Government has written it into law that all new buildings and refurbishments will need to meet minimum standards of energy efficiency. As more and more companies address the unique characteristics of green buildings and building owners move

25riskSA Magazine

26 riskSA Magazine

toward green certification and qualifying for the special tax incentives, insurance companies will have to move with the industry and develop better and more specific services for this emerging market.

Determining a proper valuation, as with insuring most things, is critical for insuring green buildings effectively. Any special coverage that is added needs to be in line with that property’s cost and value. Coverage limits that are set too high, due to ignorance of the broker or the building owner, will make premiums unnecessarily high and will have a detrimental impact on the investment’s profit margin, which makes understanding the unique risks of insuring green buildings imperative for everyone involved. recovery following a loss is limited to the actual loss sustained, so buying a higher-than-necessary limit will not generate a higher claim payment from the insurer.

Because green properties have many unique qualities, enhancements will need to be added to standard property insurance forms and values must be attached to coverage provisions to make sure that the building can be made whole again after a loss. The insured value for these provisions needs to be specifically calculated and the client must be made aware that the value must be determined when the policy is purchased and not when a loss occurs. Premiums are charged on the insured limit that is set, so owners and brokers should seek out the most accurate valuations available to avoid paying premiums on uncollectible limits, or the client may find themselves lacking full coverage after a loss.

sustainable building standards, such as sANs 10400 part XA developed by the sABs and the Green star Awards, utilise strategies that may mitigate risk, like improving indoor air quality but they can also create new risks; air-tight buildings are likely to have increased potential for mould liability claims. To ensure that their clients’ investments in green buildings are protected, brokers must recognise and resolve numerous insurance challenges that aren’t an issue in traditional buildings.

Financial risk The biggest concern to building owners should be the financial risk of going green. if proper research is not done before a new green building project or refurbishment, there is a risk that overall profitability of the project could be affected. The cost of the project and the ability to complete it on time and to a specific budget are concerns as the availability and cost of the required materials is not as guaranteed as more traditional building materials.

This, in turn, leads to uncertainty about the availability and affordability of insurance solutions and this is where the broker should reassure the client with well-researched insurance solutions that are tailored specifically to green buildings.

legal risk

As green buildings are a relatively new concept in south Africa, the legal fraternity is working out who carries what liability; what the compensation should be if goals are not met; and who should pay.

For example, let’s say an architectural firm is contracted to construct a building worthy of the Green star Awards handed out by the Green Building Council of south Africa (GBCsA), which requires a certain performance in terms of energy and water use, but the building uses too many resources. All the liability cannot land on the architects as they have control only over the design of the building, the rest is down to the competence of the contractors and how the building is used by the owners after it is completed. Even the most well-designed building can use incredible amounts of water and energy if it isn’t properly operated, or if lights and air conditioners are left on consistently. Then there is the issue of shoddy workmanship: is it the designer’s fault if the people who are hired to build it are incompetent?

365 The amount of sunlight that falls on the Earth’s surface in one minute is sufficient to meet world energy demand for an entire year.days

27riskSA Magazine

The thing about opportunity is that it has the ability to bring about change while at the same time reminding us of what remains steadfast. We are proud to announce the establishment of The Camargue Group, which has given rise to new vision, new purpose, and a new brand—never to lose sight of the universal truth that knowledge has the power to change the world.

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THE POWER OF KNOWLEDGE

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inferior materials This has the potential to become more of a problem as the green building sector gains momentum. Manufacturers of key building materials like paint and flooring will be increasingly rushed to supply green products to market. We have to consider who will cover the cost if the products don’t live up to what the manufacturer promised and need to be replaced, or even worse, if the poor quality isn’t recognised soon enough and a major incident happens as a result of poor building products.

“insurers and reinsurers may need to carefully review or re-evaluate their risk exposure when it comes to insuring a green

building. Materials and products manufactured and used in the green construction process will be more natural and recycled materials, for example, panelling made from recycled boarding or paper, wooden structures, bamboo and straw, are likely to be widely used. This has an immediate impact on the risks of fire and other hazards or perils such as wind, storm, hail and even earthquake or earth tremors,” Jennings says.

it is imperative for designers to make sure of the quality of the materials, and any additional risks involved with using the green materials to construct green buildings, and it is important for building owners to be made aware of this risk when the insurance policy is being written.

When an insurance policy is being written for a new green building or a non-green building that is due to be refurbished, the insurance professional must understand green-building certification to be able to effectively review the endorsements, coverage limits and sub-limits.

it is critical for the insurance industry to recognise the special needs of energy-efficient properties and to make sure that insurance brokers and agents are aware of all the new features and risks green buildings bring to the table. it is perhaps advisable for brokers to meet directly with the underwriter to discuss modifications to the standard policy form so that the coverage purchased provides maximum recovery to the property owner following a loss.

Accurate value disclosure of all the unique features of the property are vital, as is reviewing potential loss scenarios with underwriters before going to the client with a policy so as to best understand exactly what is and what isn’t covered.

“Because green properties have many unique qualities,

enhancements will need to be added to standard property insurance forms and values

must be attached to coverage provisions to make sure that

the building can be made whole again after a loss.”

28 riskSA Magazine

N i C k k r i G E

The latest word from Google is that the testing of its

driverless car has been a success, with over 200 000

kilometres clocked without a crash. it will likely be a

while before the first pilot-less car hits the road in south

Africa, but what will the consequences of the concept

be for the insurance industry?

THE BENEFiTs OF DriVErLEss CArs

Assuming the system is perfect when it is released and adopted

across the board the instant it is commercialised, the amount of

accidents, and therefore deaths, on the road should drop to just about

zero. That would be a major breakthrough for south Africa, which

typically sees more than 13 000 deaths a year on its roads. “Most

accidents are caused by human error, so the driverless system should

certainly help eradicate careless and negligent driving behaviour.

This concept should also allow for greater capacity on our roads,

by allowing more cars to drive closer together and in a more unified

manner. Furthermore, these robotic drivers should be able to react

faster than humans, not get distracted, not become tired or intoxicated

and, more importantly, should have a 360-degree perception with no

need to blame an accident on the blind spot,” says Warwick scott-

rodger, marketing manager at MUA insurance Acceptances.

As there are fewer requirements for human interaction with the

car, they might be less complicated with significantly less room for

manufacturer error. Fewer accidents will mean less need for safety

features, allowing the cars to be built lighter and more fuel efficient.

The extra utility value the cars could offer would also make people’s

lives easier. The car could pick the kids up from school without the

owner having to leave work; pick up the in-laws from the airport

while the owner cleans up the house; or take itself for a service. The

options are almost limitless.

THE IMPACT of dRiveRlesscaRs on the insuRance industRy

“Most accidents are caused by human error.”

29riskSA Magazine

THE iMPACT ON THE iNsUrANCE iNDUsTry

if driverless vehicles do prove to

be less dangerous than traditional

vehicles, insurance premiums will

naturally come down. in fact, third

party insurance would become

obsolete as there is effectively no

driver of the vehicle. “in theory,

this would make the industry

even more competitive, forcing

insurance companies to include

additional value-added services

to make their respective offerings

more attractive,” says scott-rodger.

since insurance policies are a

contract between the insurer and

the insured, certain terms and

conditions will have to be revisited.

“There may be a need to tweak

the insuring clause to ensure that

the cover is not compromised and

certain exclusions may need to

be removed or introduced,” adds

scott-rodger.

Traditional methods of underwriting

insurance systems for motor

vehicles will have to change as

certain restrictions will no longer

need to be taken into account,

such as the age, sex or driving

experience of the vehicle owner.

it would remove a lot of variables

when calculating and writing

vehicle insurance policies, making

the process easier and ultimately

cheaper for the vehicle owner.

“The principle behind driverless

technology is very positive and

so far the technology appears

to be a success. However,

the phasing in of this type of

technology will take a long time,

especially in emerging markets

where older cars remain on the

roads for far longer.”

On the other hand, the car

manufacturer’s product liability

insurance will go through the

roof as blame for accidents

involving driverless cars

will most likely fall on the

manufacturer or the system

designer. Ultimately, if an

accident does occur in a

driverless car, blaming the

owner would be like trying to pin

the liability of a bus accident on

one of the passengers.

All of which sounds great

for the car owner in terms of

insurance, but the price of the

cars themselves could become

very expensive because of

the level of insurance the car

manufacturers and system

creators would need to take to

mitigate their risk in case of a

problem. it’ll also be interesting

to see if there is an insurance

company that would be willing

to take that risk on if and when

these cars are first introduced,

as any potential mishap could

be catastrophic.

Profiling driver behaviour to mitigate your risk.Tracker is leading the way in driver behaviour, accident management services and predictive modelling of accidents including accident damage. By helping reduce the costs of insurance claims, which is just one of the ways we demonstrate our commitment to our insurance partners.

13 000 The number of deaths on south African roads annually.

30 riskSA Magazine

THE iMPACT ON TrANsPOrT LAWs

Courts will need to decide who is liable in the event of a crash

involving driverless cars. Will the responsibility still lie with the

vehicle owners? That is doubtful, in which case a decision would

need to be made as to whether the fault lies with the driverless

system creator or the car manufacturer. This will be a complicated

process to say the least.

There will also no longer be a need for exclusions on driver’s licenses

for poor eye sight or automatic transmission; there may not even be

a need for a driver’s license at all in fact. People who were previously

dependent on others to get around, such as people with disabilities,

would be mobile.

“Premiums will no longer be based on human driving behaviour and

criteria like age, gender and period of having a driver’s licence.

Furthermore, the model and engine size will have little influence, as

the speed of the cars would most likely be governed by the speed limit

demarcated on the maps installed in the system,” says scott-rodger.

Laws banning people using cellphones while at the wheel of a car or

driving while under the influence of alcohol would become obsolete,

as everyone in the car would be a passenger.

PrOBLEMs FACED By DriVErLEss CAr DEsiGNErs

For this technology to have any real impact on the insurance industry it will

need to be adopted wholesale, across the board, because what insurer

would reduce the premiums for someone who owns a driverless car when

there are still plenty of human-operated vehicles out there? The risk, and

therefore the need for third party insurance, would not be reduced at all.

“There will certainly be little improvement to these ‘robotic’ vehicles’ total

risk exposure should there still be a large number of vehicles on the road

driven by humans, who would not be able to pick up the signals and

react like these cars. Compatibility of all vehicles to enable constant cross

communication with each other is the crux here, as the sizeable benefits

offered by such a system would otherwise to be obsolete. As a result, a

major concern for any insurance company that opts to provide a reduced

premium in response to the driverless system being implemented is that a

sluggish take up of this technology would mean that the risks posed by other

drivers on the roads would remain as rife as before,” adds scott-rodger.

He admits that even with a high take-up of driverless vehicles, without a

universal solution the risks of driverless cars are unlikely to be reduced that

much. “As an underwriter you also don’t want to be caught in a situation

where you have reduced the premium in response to the driverless system

being implemented but because of its sluggish take up, the risks posed by

other drivers on the road are still as rife as before. some critics argue that

the human touch could be catered for in the system design, but then surely

the vehicle is no longer driverless and the whole object is defeated.”

And without trying to sound too pessimistic, the chances of this technology

being accepted and utilised by everyone straight off the bat is very low.

Anyone who has watched Terminator will have an issue with allowing

a machine to drive their kids to school unsupervised. There would be

plenty of nervous parents around the first time a driverless school bus

took a bunch of children on an excursion. As with most new technologies,

everyone would be waiting for someone else to take that first leap of faith

because, as mentioned above, the consequences of it going wrong could

be unimaginable.

Then there is the fact that people just like driving cars; petrol heads would

have more than a few unkind words for any person who tries to tell them

they are no longer allowed to drive themselves around. Adopting driverless

cars across the board would also destroy the market for expensive, fast

cars. if they do not come with a steering wheel and you cannot drive them

yourself, what is the point of an expensive car? “This system may destroy

the car culture. People like to drive their cars, they have developed a love

for a brand, like to work on their cars and often show them off. Are people

buying luxury vehicles or high performance vehicles only to test it on a race

track or would you also want to showcase it on public roads? i guess the

true debate would be whether driverless cars will reduce the speed of some

people’s luxurious lifestyles and be disruptive for the automobile industry or

whether it will transform our modes of transport to one that is safe, reliable,

economical and environmentally-friendly? The future will certainly tell all,”

concludes scott-rodger.

The concept of driverless cars is a good one, and there is little doubt that

we will see a few of them popping up in the not-too-distant future. They

will have a lot of far-reaching and very positive effects on the world. But the

impact they will have on the insurance industry is likely to be fairly minimal,

as it is difficult to see the traditional driver-operated vehicle disappear for

good, which is the cause of most of the liability on the roads.

“There will certainly be little improvement to these ‘robotic’ vehicles’ total risk exposure should there still be a large

number of vehicles on the road driven by humans, who would not be able to pick up

the signals and react like these cars.”

32 riskSA Magazine

EnHAnCE your offErIng To ClIEnTs

One of the offerings in our

diversified solution set is short-

term insurance from Glacier

Asset Protection.

Glacier Asset Protection is underwritten

through Associated insurance Brokers

(Cape) 2006 (Pty) Ltd (AiB), a subsidiary of

Glacier Financial Holdings (Pty) Ltd. AiB is a

licensed financial services provider which was

established in 1983 and is one of the largest

independent brokerages in the Western Cape.

The focus of AiB is on building long-term

client partnerships for short-term products,

based on professionalism, integrity and

personalised service.

These are some of the benefits of

placing your clients’ insurance with Glacier

Asset Protection:

OPEN ArCHiTECTUrE

Glacier Asset Protection offers access to

a range of blue-chip, short-term insurers

including, but not limited to, Mutual &

Federal, santam and Zurich. This allows your

clients to compare different offerings and

personalise their cover through their insurer of

choice. The open architecture nature enables

you to provide a comprehensive offering to

your clients while retaining the backing of a

large, reputable company.

LiAisE WiTH A TEAM OF sPECiALisTs

A team of specialists is on hand to guide

your clients through the process, so that they

can make an informed decision based on the

options available in the market, and against

their particular risk profile. The entire claims

process, from the completion of forms –

where applicable – to the appointment of

assessors through to the claim settlement,

is managed by a dedicated claims

technician who is personally assigned to

your client’s account.

COMPETiTiVE PriCiNG

We have long-standing relationships with all

our partners and are therefore able to obtain

competitive rates and terms in the short-term

insurance market.

ADDiTiONAL rEVENUE FOr yOUr

BUsiNEss

The costs of acquiring new clients continue

to increase, together with a decrease in fees

and commission. By selling more to your

In order to build a sustainable business that will continue to deliver quality service into the future, Glacier realised the need to offer a diversified solution set to meet the needs of its affluent client base. This coincided with the launch of the Glacier brand in 2006. At the time, we predicted that financial intermediaries would come under increasing pressure to meet a broader set of client needs, and also to diversify their income-earning capacity.

Andre krause | National Manager | Distribution | Glacier by sanlam

33riskSA Magazine

existing clients, your business can enjoy enhanced profitability

by reducing acquisition costs. By meeting more of your clients’

financial needs, you can solidify your relationship with them

and experience improved client retention and sustainable

business growth.

NO ADViCE risk TO yOUr BUsiNEss

For those who are not short-term specialists, it makes

business sense to call on the experts. The truth is, the

moment you start talking to your clients about their short-

term insurance needs, you expose yourself to advice risk.

Legislation requires that the policy and insurance terminology

be explained to the client in detail. As an example, if a client

is about to open a business, what advice should you give him?

is he covered if something happens to one of his suppliers?

What about lease agreements – do you know what your client is

responsible for?

This offering is specifically aimed at financial intermediaries

who don’t have in-house short-term expertise or the necessary

accreditation to give advice on short-term products. As Glacier

Asset Protection operates on a referral basis, we take the advice

risk and handle all claims and administration on your behalf,

allowing you the time to focus on your business.

ACCEss TO NiCHE iNsUrANCE PrOViDErs

specialised cover can be arranged for artwork, jewellery, water

craft, franchise operations, engineering, marine and personal

liability. Once again, an example highlights the need for

specialist advice. Art has a changeable value and the client

may therefore be exposed to under-insurance issues. Proper art

insurance will ensure there is no disagreement about the value

at the time of loss.

in addition to domestic insurance, Glacier Asset Protection

also offers a range of products for commercial and industrial

insurance based on your client’s risk status, this includes body

corporate insurance, marine insurance, directors’ and officers’

insurance and small craft insurance.

Through our diversified solution set, we aim to provide a single

service point for the financial needs of your affluent clients,

and at the same time provide tangible benefits to both you

and your clients.

The perfect fit.Looking for a system that suits your needs?

Innovative systems for innovative insurance ideas

A custom built solution can be faster

and more cost-effectivethan you ever

thought possible.

www.innosys.co.za

+27 11 532 8300 | info@innosys.co.za

“The truth is, the moment you start talking to your clients about their

short-term insurance needs, you expose yourself to advice risk.”

34 riskSA Magazine

Following international standards

of personal liability for directors,

there are numerous sections of

the act which look at directors’

accountability, liability and duties:

• Section76codifiestheexistingcommon

law duties of directors towards the

company, increasing awareness of

a directors’ liability among potential

plaintiffs.

• Section157introducestheconceptof

class actions into law, meaning that any

class of persons mentioned in the act or

affected by the company will

be able to potentially claim against

a director.

• Section218(2)introducescivilremedies,

which holds any person who contravenes

the act liable to the person who suffers a

loss as a result of the contravention.

• Section76(4)introducesthebusiness

judgment rule for directors who have

acted in good faith, or in the best

interests of the company, according to

their duty of care, skill and diligence,

and have avoided conflicts of interest. it

is the view of some law academics that

if these requirements have been carried

out, the director would have complied

with the common law duties.

in support of the Companies Act, the king

iii report was released, advising that a new

corporate governance code for south Africa

was to be developed. Applicable to all

companies – private and non-profit – a much

wider range of directors is now affected by

the code.

Compliance with the code is on an apply-or-

explain basis, which means that corporate

governance should not be based only on

compliance, but rather on the consideration

of the manner in which principles and

recommendations can be applied. Therefore,

directors acting in the best interests of a

company should consider whether or not

a recommendation in the report should be

applied and to what extent. Compliance

would then eventuate in the explication of

how the report was applied or not.

With a clear stakeholder-inclusive approach,

the report in general demands that the

board of directors consider the interests

of the company’s stakeholders and not

just its shareholders. When considering

contradicting and synergetic interests of

stakeholders, it advises that this be done on

a case-by-case basis.

New subjects dealt with in the report cover iT

governance and alternative dispute resolution

(ADr). Not just about operations, iT is a

tool that can be used to gain a competitive

advantage. it’s therefore necessary to

implement strategies that safeguard

iT platforms from losing confidential

information. it is the responsibility of directors

to take reasonable steps to mitigate iT risks,

or be held liable at law, if the company suffers

a loss.

The report recommends that ADrs be inserted

into all business contracts, as they allow for fast

and cost-efficient settlements, which protect a

company’s reputation before matters go to the

courts. The board of directors should therefore

ensure that disputes are resolved efficiently,

inexpensively and without media attention, as

this is in the best interests of the company.

in light of these new legislative and governance

changes, no company in south Africa should

be without directors’ and officers’ (D&O)

liability. Camargue Underwriting Managers

offers a range of D&O liability products to suit

every need. An sME scheme option is now

available, too. it’s easy to sell and quick to

underwrite with a simplified proposal form.

THE IMPorTAnCE of Directors’ anD officers’

Lucian Carciumaru | Camargue senior Underwriter

The introduction of the Companies Act No. 71 in 2008 and the subsequent King III Report have left directors and officers in a far more onerous position than ever before. The Companies Act in particular has changed the business landscape substantially.

liability insuRance, in spite of the new companies act and king iii

“When considering contradicting and synergetic interests of stakeholders, it

advises that this be done on a case-by-case basis.”

NAG FP ads 6/27/11 11:40 AM Page 1

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C M Y CM MY CY CMY K

36 riskSA Magazine

Automotive glass producer shatterprufe

sA, told the Financial Mail early last

month that it must cut production costs

by at least 30 per cent over the next

three years. rising domestic labour and

energy costs are putting pressure on the company,

says chief operating officer, Dave Coffey. Pressure is

building as local motor companies, in an attempt to

prove to their multinational parents that south Africa

is an economically worthwhile production base, are

leaning on their suppliers. And Europe’s economic

crisis, expected to reduce new-car sales by up to seven

per cent this year, continues to hurt export demand for

south African companies. shatterprufe exports 36 per

cent of production to Europe and has had cutbacks of

20 per cent. These challenges are causing it to right-

size its local production.

NO rELiEF iN siGHT

shatterprufe is not the only

automotive supply company

taking strain. Government’s

automotive production and

development programme (APDP),

which will govern the industry

from January next year, is not

expected to bring much relief. it

will replace the motor industry

development programme (MiDP),

in place since 1995.

Unlike the MiDP, which restricted

incentives mainly to vehicle

manufacturers, the APDP is

supposed to be more even-

handed and encourage investment

by suppliers. But Jean-Jacques

Wiroth, MD of Goodyear, says the

new programme does not provide

the required investment support

for new production and product

technology. “investment support

is aimed at increased production

volumes, and this is currently

constrained by manufacturing cost

escalation in south Africa, driven

primarily by electricity and labour

inflation,” he explains.

raw material costs are also a

major challenge. schaeffler

sA group MD, Len Terblanche,

whose products include clutch

assemblies, says imported steels

are becoming more common.

Fifty to 60 per cent of schaeffler

sA’s costs are raw materials. since

local prices can be 50 per cent

more expensive than imported

equivalents, schaeffler is importing

more of its raw materials.

APDP planners, who believe

the programme will encourage

suppliers to source more of their

subcomponents and materials

from within sA, should take heed.

“We can’t continue indefinitely to

absorb the costs coming through,”

says Coffey, particularly at a time

when China, india and other

Asian countries are becoming

increasingly cost-competitive.

He adds that the supplier market

is more competitive than ever

before. shatterprufe is about to

spend r40 million on new door-

glass technology.

Contrary to the commonly

expressed view that the

APDP will encourage vehicle

manufacturers to buy more

components locally than

they have under the MiDP,

Terblanche thinks there is

less pressure to localise

components. He adds

that the new programme

is more complex than the

MiDP and will require extra

administration. Coffey says

that in real terms, the company

will be in a similar position to

where it is now. However, with

only six months to go before

the changeover, there seems

to be a lot of uncertainty.

The Department of Trade and

industry and south African

revenue service officials are

still undecided on many of

the details and definitions.

Components and vehicle

producers are hoping for

clarity by the end of the year.

Motor component manufacturers have to drastically cut production costs in order to remain competitive against foreign companies.

FoR MotoR InDuStRy

PrEssUrE TO CUT COsT MOUNTs

38 riskSA Magazine

irma stern’s paintings are no stranger to

multimillion rand price tags – her Still Life

with Gladioli sold at auction for r7.57

million and at the time was a record

for south African art. Other well-known

proponents of local art and highly desirable

pieces include works by Pierneef, Boonzaaier

and Laubser.

“The theft of cultural objects and works of art

affects developed and developing countries

alike and the FBi and interpol have established

dedicated units to deal with this escalating

threat. The growing trend in illicit trafficking

of cultural heritage and art is a transnational

crime that is sustained by the demand from

the arts market, the opening of borders,

improvement in transport systems and, in some

instances, the political instability of certain

countries. south Africa has not escaped the

growing incidence of art theft and with the

growing love affair between collectors and

south African artworks, it’s a trend that art

owners should be concerned about,” says

Mandy Barrett of Aon south Africa, leading

insurance brokerage and risk consultants.

it is a source of pride to all south Africans that

the art and culture of the country is receiving

increased interest both at home and abroad,

but the hard reality is that the more something

costs, the more likely someone will want to

steal it.

it’s a view echoed by Gordon Massie,

managing director of specialist underwriters,

Artinsure. “Fundamentally risk arises

from theft, loss or damage and typically

cover involves the likes of all risks, away

from premises cover, transit cover and

depreciation. The reality is that as prices soar,

art and cultural property theft is a rapidly

growing criminal enterprise in south Africa,

the magnitude of which has been highlighted

by the recent thefts of valuable and culturally

symbolic art pieces.

“Thefts are taking place from galleries,

museums and private collections by highly

organised syndicates who are finding fertile

markets for their stolen pieces. south Africa

has been hit recently by two highly organised

“Thefts are taking place from galleries, museums and private collections by highly organised

syndicates who are finding fertile markets for their stolen pieces.”

39riskSA Magazine

syndicates that deal in sought-after, commoditised art and

are playing on buyers’ greed to ply their trade.” it is therefore

imperative that art owners receive specialised insurance

valuations for expensive art pieces, as a general valuation

will not take into account the complexity that surrounds these

appreciating assets.

“A specialist insurer knows how to effectively manage any

potential claims in respect of art and, most of all, understands

that your asset is an appreciating asset,” says Massie.

Aon’s Mandy Barrett adds: “Among other factors, art prices

are determined by the nature of the piece, the size of the

collection and the risk management applied to protect the item

or items. Factors such as the value of pairs and sets have to be

understood and correctly priced to ensure adequate cover.”

Thirty-two artworks have been placed on Artinsure’s theft

register for south Africa in the last three months and, according

to the FBi, art theft is a lucrative criminal enterprise with

estimated losses running as high as $6 billion (about r40

billion) annually worldwide.

“Moreover, the art world has been rocked recently by

cases of fraud and it has become necessary to provide for

defective title cover for ownership dispute to protect against

cases such as this.

“it’s all about specialised knowledge and experience. This

market is very different when compared with insuring everyday

household items or physical assets such as vehicles or property.

it’s all about providing a true value proposition based on a

working knowledge of the art business. With thousands of

south Africans now owning art collections and their importance

as asset portfolios growing, there is a need for world-class

insurance solutions for those who collect, sell, create, restore,

exhibit or transport works of art, antiques, collectables and

other high value memorabilia,” explains Barrett.

“More and more risk is being written locally and that has

helped to contain premiums. The old practice of insuring art

as part of the contents of a home or an office is long gone. in

light of the appreciating values of so many local artworks and

the demand for them, specialised cover for rare, valuable or

collectable pieces is essential,” concludes Massie.

financial disaster?

Are South AfricAn houSeholdS

one Step AwAy from

The Momentum/UNISA Household

Financial Wellness Index pinpoints financial

instability as a typical characteristic of many

South African households.

Momentum, in conjunction

with UNisA, recently

launched the Momentum/

UNisA Household Financial

Wellness index. The index

will be an ongoing snapshot into the financial

wellness of south African households. it is the

first independent, credible and comprehensive

research of its kind to present an invaluable

benchmark in understanding the state of the

nation’s financial wellness.

The research was undertaken by the Bureau

of Market research (BMr) and the Personal

Finance research Unit (PFrU) at UNisA.

The research presents financial advisers with

a benchmarking mechanism against their

own clients’ financial wellness, which would

ultimately assist them to render appropriate

financial advice.

The data below, presented by an index

score of four categories, indicates a dismal

household financial wellness state:

Anchored unwell, at 4.8 per cent of the

population, indicates that a household is

deeply rooted in a financially unwell position

with little chance of improvement, without

major outside assistance.

Drifting unwell, the largest sector at 48.5

per cent, represents a household that is

unstable and leaning towards negative

circumstances or is influenced by adverse

events. With some attention to positive

influences, the household can shift upwards to

a Wellness category.

Drifting well, the second largest

category at 30.5 per cent, is again

unstable with the potential to drift

downward into a negative footing.

Again an adverse event can be seen as

a catalyst to a downward spiral. Equally

with a small amount of application,

this grouping can move towards being

financially stable.

Anchored well is where everyone would like

to be. With 16.2 per cent of the population

secured in this category, households here

are firmly financially well.

The data indicates that an adverse financial

event could immediately drift/place a person

into a lower category.

Pieter Erasmus, head of marketing, sales

and distribution at Momentum short-term

insurance, says, “such occurrences are

very likely to happen in the absence of

appropriate short-term insurance cover.

House and business break-ins, theft and

vehicle accidents are some of the common

risks we face at any point in time and

they can cause a major dent in a person’s

financial wellness state.”

Erasmus advises that if comprehensive cover

is not affordable to the client, brokers must

advise their clients to consider cost-effective

cover that is now widely offered in the

industry, in both personal and commercial

spaces. The objective of adequate short-term

insurance cover is to restore a client to the

exact state as before the incident.

it is anticipated that the index will provide

financial services professionals, consumers

and policy-makers with a meaningful

overview to better understand and interpret

the current state of financial wellness of

south African households. With the right

plan in place, peace of mind and assurance

of coverage, more families may become

financially secure.

Once the journey towards financial wellness

has started, clients will be able to assess if

they are anchored well, or drifting towards a

situation of irreversible risk. This awareness

provides a starting point towards a

considered, long-term plan, with the urgency

to seek out professional financial advice.

As part of that plan, adequate short-term

insurance can offer an essential safety net in

times of trouble.

The index has shown, that the drifting

categories, which are the most populous,

are where consumers need the most help

and stand to benefit the most, by seeking

out solid financial advice. Momentum

wants to use the Financial Wellness index

to encourage consumers to seek out

professional financial advisers.

40 riskSA Magazine

Are South AfricAn houSeholdS

one Step AwAy from

42 riskSA Magazine

tHe art Of entertaininG at HOMe

Hosting a function such as a birthday party, wedding, charitable event, or work-related occasion at their house or on their property is becoming an increasingly popular choice for many clients, not only because it saves on costs associated with renting a venue, but it also provides a more intimate environment with fewer restrictions when it comes to decorations.

However, many homeowners may be placing themselves at risk of a

number of liability issues if they do not fully understand their insurance

policy. Therefore, it is a good idea to inform your clients that they

need to ensure that they have adequate liability cover in place before

hosting their big event. Once they are certain they have sound liability

cover with the required sums insured in place, there are a few key tips

you can provide to your client ahead of their event to ensure it is not

remembered for the wrong reasons.

EMPLOyiNG TrUsTED sErViCEs

if the event involves outsourcing services such as

entertainment, catering, waiting staff, a cleaning

company or other service providers, it is crucial that

your client takes the time to ensure the supplier is

licensed and insured. it is always best to use a service

provider that has the required workers compensation

insurance that covers their staff before, during and

after the event.

remind your client to ensure a signed contract that

clearly describes the services to be provided by the

vendor is kept for record purposes. A very large or

complex event might even necessitate the advice of

an attorney to assist in the negotiation process when

the contract is drawn up, as well as specialist liability

events insurance.

Christelle Fourie | Managing Director of MUA insurance Acceptances

making suRe youR clients aRe coveRed duRing those special events

43riskSA Magazine

PArkiNG CONsiDErATiONs

Not only will your client’s guests be

impressed by an organised parking

schedule as it makes their lives easier and

safer when they arrive and leave the event,

but it mitigates the chance of collisions on

your client’s property while assisting in the

prevention of traffic violations due to the

blockage of roads or thoroughfares.

An effective parking plan must be made

well in advance to ensure compliance with

local zoning restrictions. Tell your client to

consider hiring a valet service or parking

attendants for very large events, to avoid

the stresses of managing the process.

it is important that your client ensures

that adequate lighting is provided in the

driveway and parking areas to ensure the

safety of guests and vendors.

sAFE ENTErTAiNMENT

FACiLiTiEs ArE A MUsT

While entertainment for an event

can range from a ballroom floor,

marquee tents, inflatable children’s play

structures, waterslides or equipment

such as paint ball guns, it is critical

that all safety precautions are adhered

to and supervision, when appropriate,

is present at all times to best mitigate

injuries or accidents.

Before hiring entertainment equipment,

your client must always consider the ages

of participants in order to take necessary

precautions. it is important to ensure that

all the appropriate safety equipment is

readily available. sometimes professional

supervision, such as lifeguards or security

guards, may be necessary. For clients

with expansive properties where all areas

are not easily monitored, it is essential to

advise them to store all-terrain vehicles

(ATV) such as quad bikes, in a locked

facility as these can often result in injury.

CAUTiONAry MEAsUrEs FOr

sErViNG ALCOHOL

Most events are hosted in order to

celebrate an occasion, so naturally

your client will most likely be serving

some form of alcohol. it is important

to make them aware of the fact that

should a guest become injured as a

result of another guest’s intoxication,

the injured person may file a law suit

against the host.

As a result, your client must adhere to the

law at all times and never serve alcohol

to minors. your client also has the right

to decline to serve alcohol to any guest

who has already had too much to drink

or intends driving home. Perhaps suggest

they hire a bartender who can monitor

drinking behaviours and always ensure

good lighting in food and beverage

serving locations to ensure guests can be

easily observed for over-intoxication.

By keeping your clients informed, it will

ensure that their party remains a happy

memory and they will be grateful for the

insight you have provided ahead of an

already stressful situation.

ENsUrE yOUr CLiENT’s EVENT

is sAFE

• Tellyourclienttoinviteonly

people whom they know.

• Alwaysensurethefoodprovidedis

filling and there is an availability

of non-alcoholic beverages.

• Avoidactivitiesorentertainment

that revolves around alcohol,

as guests are more likely to

get overly intoxicated, placing

everyone at risk.

• Transportationorovernight

accommodation should be

arranged for guests who are too

drunk to drive home.

• Stopservingalcoholwellbefore

the end of the party.

• Informyourclienttoalways

stay alert and remember their

responsibilities as a host.

ENsUriNG A FOOL-PrOOF VENUE

injuries that result from slips or falls – typically

on stairs or polished floors – are one of the

leading causes of liability claims arising

from events hosted at a house or residential

property. Therefore, it is essential to ensure any

walkway, high traffic area or staircase contains

no obstacles, ice or debris that could result in

someone becoming injured.

Ahead of the event, it is a good idea to place

a rug or another type of temporary non-slip

covering over a polished floor in order to create

traction and to also put up signage at the top

and bottom of all staircases alerting guests to

mind their step. Another preventative measure is

to ensure sufficient lighting is always available

in high traffic areas and staircases.

“It will ensure that their party remains a happy memory and they will be grateful for the insight you have provided ahead of an already

stressful situation.”

44 riskSA Magazine

The project will initially target all

taxis and commuters within the

Grange and Westgate, ridge

Park, Buffer, kwaNyamazane,

Alexandra road Extension,

richmond Crest, Pelham, France and

Napierville areas. After a test period and

once the system has had any issues ironed

out, the project will be extended across the

District of uMgungundlovu.

The current cash-based system employed by

taxis has meant that issues such as vehicle

condition, driver behaviour and passenger

safety have been difficult to manage,

monitor and enforce, and this new system

could revolutionise the industry for the

uMgungundlovu regional Taxi council, its 40

taxi associations and the 500 000 people

who travel with them on a daily basis.

Boy Zondi, regional chairperson of the Taxi

Council, says: “The time has come for our

commuters and citizens to see our taxis as a

safe, affordable, convenient and eco-friendly

means of commuting. The taxi industry has

grown over the years, and the District of

uMgungundlovu is proud to be among the

first in the country to embark on a project

that will see the implementation of controls

and rewards for good driving behaviour

within the taxi industry.”

Pierre Bruwer, managing director of TAP-i-

FArE (DigiCore’s associate company), states:

“The DigiCore group is very pleased and

proud to be part of this exciting initiative with

Translog and commends the executive team

at Translog and the regional taxi council for

the bold initiative. Our technology enables

and supports the convenience and safety

factors around electronic fare collection for

both the owner and commuter. We expect

to make similar announcements in other

provinces in the very near future. Having

partnered with Absa and MasterCard

obviously makes things so much easier for

us, in providing the transit industry with

a solution that meets all government and

legislative requirements,” concludes Bruwer.

THE PrOJECT iNVOLVEs THE FOLLOWiNG:

• Fittingafleetmanagement/tracking system to every taxi that will alert operators and the management centre regarding speeding, route violations, accidents, theft and hijacking.

• Fittingasmartcard(EMV)system,administered as part of their social development mandate, by DigiCore, Absa and MasterCard. it requires no FiCA (hence it is ideal for schoolchildren, rural commuters and pensioners), and commuters can use it to purchase goods at retail outlets with a personalised pin.

• Fittingonboardcamerastoensure the safety of passengers with real-time viewing of drivers, routes and passengers. This is the critical tool monitoring the safety of all passengers.

DigiCore Holdings has concluded an agreement with Translog Management, which will see the installation of its electronic fare collection solution into approximately 3 000 taxis in kwaZulu-Natal over the next two years.

THE BENEFiTs OF THE FLEET MANAGEMENT sysTEM

• Drivingbehaviourwillbemonitoredatacentralcontrolroomand

owners of vehicles will be notified by sMs of any violations by their

drivers. Through this management system, driver profiles will be

managed and good driving rewarded.

• Theprovisionofa24-hourcommutercallcentrethatallows

commuters to register queries regarding the new system.

• TheKwaZulu-Natalprojectfollowsthesuccessfulpilotprojectfor

electronic fare collection in the public transport environment in

Cape Town.

kzn TAxIsto be fitteD with electronic fare collection

46 riskSA Magazine

Because of the huge crime problem in south

Africa, many people purchase insurance

protection for their valuables. in doing so, they

get peace of mind by transferring the risk to the

insurer. At the same time, at the insistence of the

insurer, they often must incur expense to have

their homes, valuables and vehicles secured.

insurers play a big part in the south African

economy and provide jobs for many. They

are in business and operate with the intention

to make a profit for their shareholders while

maintaining a reasonable solvency margins in

order to pay claims, as well as their business

expenses and employee salaries.

The basic requirement for a client to effect

insurance is the submission of a proposal form

or a memorandum, either directly to the insurer

or via an intermediary. These documents give

full details of the risk which forms the basis of

the contract for insurance cover. it is expected

that prospective clients will exercise the basic

principles of good faith. They have a duty to

disclose all the material facts (including that the

property to be insured does, in fact, exist). The

underwriter will evaluate the risk and ascertain

if the basic principles have been respected. The

evaluation of physical and moral hazard also

plays a big part in the acceptance of a risk by

the underwriter.

in the event of a claim, many factors are

taken into consideration before it is paid

including proof of loss, cause of the loss

(insured peril), contribution, insurable

interest, underinsurance and average.

The practice of submitting a proposal

form has evolved. A client can now

communicate telephonically with certain

insurers or brokers to request cover, thereby

dispensing with the need to submit any form

of documentation at application stage.

Many insurance companies also accept

the telephonic reporting of claims. it has

become very important, if not essential,

that the conversation between the client

and the insurer is voice recorded and easily

recoverable if needed in the future.

The basic principles of insurance are

equally applicable with this method of

insuring. in the event of a loss, the claim

will be examined very carefully, including

any of the voice recordings, for any

inconsistencies. These could include proof

of loss; insurable interest; underinsurance;

physical and alarm protection of the

property; security of the vehicle, which

differs from what was disclosed (for

example, where the vehicle is kept during

the day and at night); who the usual driver

of the vehicle is; and what the vehicle is

used for.

When insurers provide the client with the

policy document and schedule, it makes

sense to also provide a copy of the proposal

form or memorandum that was submitted,

and to recommend that the client check the

contents carefully, to avoid any problems

should a claim arise. if the client changes

any detail, this should be conveyed to the

broker or insurer so that they may amend

their records which will form the basis of the

insurance contract.

Claims are often rejected because the client

has neglected to observe the basic principles

of insurance when effecting cover. Obviously,

this has a negative financial impact on

the client, but it also contributes to the

poor perception of the short-term industry.

Misleading and untruthful statements are

normally detected by the insurer only when

a claim is submitted. By then, the client

has often forgotten what they disclosed at

proposal stage. But, it is the small print in

the insurance contract that is blamed.

What a wonderful world it would be if

declarations were accurate at both inception

and claims stage.

THE IMPorTAnCE of proper DeclarationJimmy Fermor | risk Manager | renasa insurance Company Limited

“The system is now accessible by small- to

medium-sized brokers via the web and gives

them the ability to manage their portfolios

of insurance clients in a hosted environment

without the need to invest in expensive

computer infrastructure,” says André symes,

Genasys Technologies group brand manager.

The broker has to capture information only

once, while the system interacts with insurer

and product providers, ensuring the free-flow

of information.

Brokers can access both the domestic

and commercial products of several blue

chip insurance brands using the system

to manage quotations, underwriting and

claims fulfilment. The quotation process is

electronically enabled and fulfils underwriting

requirements, allowing brokers to provide

clients with a full policy schedule immediately

and in an electronic format.

Premium collection and the commission

disbursement process are priced in an all-

inclusive pricing model, which enables the

earning of additional fees through agreements

as per binder regulations. The technology

solution enables brokers to be FAis compliant

when it comes to system management and

control. “skiHost is focused on the provision

of cloud computing capability and distribution

channels of selected blue chip and niche

insurance products, which are sourced and

approved by these product providers. it is

aimed specifically at the brokers, falling within

the binder regulations, and conforms to the

data access requirements,” says symes.

ADDED VALUE FOr BrOkErs

Automated renewal processing applies

automatic renewal rules, such as escalation,

NCB management and client lifetime

values, according to the product provider’s

specification, which is used as the basis for

renewal negotiations. With various automated

processes, such as task management, rules

processing and Personal Lines Compare

Quote, brokers can increase productivity for

multiple insurers on a single platform. skiHost

and its products have been approved by the

major insurance companies.

ADDED VALUE FOr iNsUrErs

skiHost gives insurers new marketing

opportunities to promote products through

the broker channel. standard processing

and product configuration increases the level

of skill of the broker, guarantees consistent

underwriting, reduces errors and omission and

ensures product integrity and ease of access.

some of the key offerings:

•Tightintegrationintoinsurerlineofbusiness

systems and access to information.

•Improvedqualityofinformationfor

underwriting specific risks.

•Achoiceofproductspresentedthrougha

comparative quoting tool.

•Supplyofacentralisedandauto-

provisioning framework for billing and

premium disbursement.

•Enablesinsurersandbrokerstoaccess

modern distribution channels for obtaining

and maintaining new business.

software company, Genasys Technologies has adapted its ski (software key to insurance) enterprise system to help brokers manage their insurance portfolios better, using a simple internet connection and PC.

Regrets and “if only’s” won’t see to your or your family’s wellbeing in the event of your disablement or death in a motor accident. But we will.

“Can’t happen to you?”

DID YOU KNOW?: Every month more than 1 000 people die and more than 23 000 are injured on our roads. 70% of accidental deaths in SA result from motor accidents.

Source: RAF Annual Report 2010 & National Injury

Mortality Surveillance System

For further information call us on 021 872 8782 or visit us at www.vipinsure.co.za

Vehicle Injury Protection (Pty) Ltd – Acting as a juristic representative for Infiniti Insurance Ltd an authorised financial services provider and short term insurer – FSP 35914.

Underwritten byInfiniti Insurance Limited

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will ski enable IndusTry To fly?

48 riskSA Magazine

it is vital that consumers make sure that

their insurers are not only reducing the

value of their insured vehicle during

annual policy updates, but also that the

correct value is chosen.

recent comment that south Africa’s insurers

routinely rip clients off by failing to reduce

vehicle values during annual policy updates is

only partially correct. Many insurers do in fact

automatically revalue vehicles downwards each

year, using data published in the Mead and

McGrouther Auto Dealers’ Digest.

But if a vehicle does not appear in the digest,

insurers will not know what it is worth. in this

instance, vehicle owners will need to advise

their insurers of the amount that their vehicle’s

value should be reduced by each year, advises

Gari Dombo, managing director, Alexander

Forbes insurance.

While the basis of settlement values will vary

from insurer to insurer, most will use either retail

replacement value or an average between trade

and retail values as published in the digest.

Apart from paying too high a premium, correctly

valuing your vehicle is especially important in the

event of write-offs, hijacking and theft claims.

For accident write-offs, Alexander Forbes policies

state that a vehicle will be written off when the

cost to repair damage exceeds 70 per cent of the

retail value, or 70 per cent of the sum insured if

that is less. “so, if the sum insured on the vehicle

policy is less than its retail value, the insured stands

a higher chance of having the vehicle written off,

with the settlement amount being less than what

the vehicle can be replaced for,” says Dombo.

in the case of hijacking and theft, especially

where there is no quick recovery, the insurer

will pay out as if written off. if, however, the sum

insured on the vehicle is less than its retail value,

the settlement amount will be less than what

the vehicle can be replaced for, warns Dombo.

if there is a quick recovery and the vehicle has

been damaged, then the write-off factor could

again come into play. “should the vehicle be

repairable following a hijack and some damage,

we will authorise repairs.”

These instances will show that a seemingly simple

thing like valuing your vehicle correctly, or at least

correctly understanding how it is valued, can

help consumers avoid unpleasant surprises as

well as ensure that they receive the best and most

reasonable vehicle cover from their insurers when

they update policies and revalue their vehicles

each year.”

the importance ofvAluIng vEHIClEs CorrECTly

50 riskSA Magazine

B i A N C A W r i G H T

MakinG Medical aid attractive tO tHe yOunG

so sexyi’m

From gym rebates to discounted movies and money off your grocery bill, medical

schemes are coming up with interesting and innovative strategies to attract the

young and healthy and secure their loyalty. We take a look at who is doing what

and how successful they have been. Plus, we speak to the young and healthy

themselves, and get the skinny on what they think and know about medical aid.

sEEiNG THE LOGiC“Understandably, young adults are inclined to

see cars, computers, gadgets and the latest

cellphones as more attractive choices, confident

that a medical aid plan is something they don’t

need at this point in their lives,” says Dr James

Arens, clinical operations executive at Pro sano

medical scheme.

For this reason, medical aids have had to

introduce targeted approaches, options and

incentives to attract the youth. “The need to

provide holistic healthcare and well-being to

young, up-and-coming members has forced

medical schemes to rethink and restructure their

offering. To appeal to this market, it has become

vitally important that medical schemes include

value-added benefits to their overall healthcare

benefits while including lifestyle and loyalty

benefits that cater to the live-fast-and-live-now

generation,” says Mark Arnold, principal officer

of resolution Health Medical scheme.

youth, they say, is wasted on the young.

One of the pitfalls of being young is often a

sense of invulnerability, a notion that often

means that young people do not consider

it necessary to opt for medical aid, save

for retirement or invest in life insurance.

recognising this common idea, many

medical aids have introduced a variety of

incentives and rewards to appeal to the

young and healthy and, hopefully, secure

their business.

“The need to provide holistic healthcare and well-being to

young, up-and-coming members has forced medical schemes to rethink and restructure their

offering.”

51riskSA Magazine

He notes that the dawn of

Generation y, and more

recently Generation Z,

brought with it a strong

focus on instant gratification,

fast and efficient customer

experiences and a move

towards holistic well-being.

rEsOLViNG TO TArGET THE yOUTHresolution’s approach is to

offer enhanced programmes

that include additional benefits

of particular relevance to

young adults. Through Agility

Channel’s Zurreal wellness

and loyalty programme,

members of resolution Health

have access to three tiers of

wellness and lifestyle benefits,

with the entry level option,

Zurreal4life, being available to

all resolution Health members

at no additional charge.

“Providing basic loyalty benefits

at no additional charge forms

part of resolution Health’s

Embrace Life strategy and

serves to position the scheme

as a leader in areas that

matter to the youth, namely

education, environment and

entertainment,” Arnold says. it

also allows all income brackets

to enjoy the benefits of a

loyalty programme.

Another example is that

resolution Health offers

discounts on educational

courses as well as access to

a debit card facility for day-

to-day healthcare expenses

which they can fund simply

by ensuring they monitor their

health annually. The debit

card facility can be used at

any healthcare provider and

is ideal for young adults who

are seeking hospital cover

and want to make some

provision for day-to-day cover

without making a substantial

financial commitment.

Arnold says resolution Health

is furthermore embracing

technology in the form

of web-enabled portals,

websites, electronic and

mobile communication as

well as advanced systems

which streamline the claims

experience for the member.

“The scheme currently has an

excellent age profile with the

average age of beneficiaries

only 32.56 years, which is

among the youngest in the

industry, indicating that we are

definitely moving in the right

direction,” he says.

AT LiBErTyLiberty Medical scheme (LMs) has also targeted the youth as a

specific market. “young people are our future. The better we care for

their health, the more we set them free to make the world a better

place. As care is at the heart of what we do, we take time to listen

to their healthcare needs and to respond meaningfully,” says LMs

executive principal officer, Andrew Edwards.

LMs has introduced a number of efficiency discount options – the

select range of options, tailor-made for the younger market. “LMs

wanted new members to have the same access to quality care

as other members, but in a way that was even more affordable,”

Edwards says.

The introduction of these three discounted select options will save

new members 10 to 13 per cent on their contribution. The select

options, which are more cost effective, have the same benefits as

the full options, with the exception of chronic medication which is

obtained from public facilities, and planned in-hospital procedures for

which a select LMs network of private hospitals is utilised.

“Young people are our future. The better we care for their health, the more

we set them free to make the world a better place. As care is at the heart of what we do, we take time to listen to

their healthcare needs and to respond meaningfully.”

M

52 riskSA Magazine

MAiNTAiN THE MOMENTUMDr Craig Nossel, head of Vitality Wellness, says,

“several peer-reviewed research papers in leading

health journals have shown that highly engaged

Vitality members have lower healthcare, shorter

stays in hospital, and fewer hospital admissions

overall compared to Vitality members with no or low

engagement. in addition to the tangible financial

benefits of a decrease in healthcare costs, Vitality

has also served as competitive advantage and

differentiator for Discovery and has engendered

loyalty among our members. The programme

provides significant customer value from both a

financial and health perspective.”

Momentum Health offers its members a number of

incentives. One of these is the option to save up to

30 per cent on your contribution without sacrificing

any benefits by using Momentum’s preferred

providers. Members of Momentum’s wellness

programme, Multiply, receive discounts from more

than 30 providers, such as Virgin Active, NuMetro

and Garmin. Members can also earn up to r5 400

in cash from Momentum’s Healthreturns programme

if they follow the required steps such as going for a

free health assessment, complying with appropriate

treatment, where applicable, and being active.

Johan Lombard, actuarial specialist at Momentum

Health, describes Momentum’s Healthreturns

programme as a one-of-a kind innovation which

enables members to earn up to r1 800 a year

simply by taking ownership of their health status

and being active. Those who elect to have their

Healthreturns paid into their Healthsaver account

(which supplements members’ medical savings

accounts) can earn double Healthreturns (up to

r3 600 per year) to fund any uncovered healthcare

expenses, including things like cosmetic surgery

and Lasik surgery.

“Momentum Health’s Health Platform

Benefit was the first of its kind to cover a

range of preventive screening tests and

check-ups. This assists those who are

currently healthy with the opportunity to

monitor their health without having to

deplete their savings account,” he says,

adding that a range of maternity benefits

is also included in this benefit, making

Momentum Health very attractive to young

families. “Our unique Healthsaver benefits

also give members the flexibility to design

their day-to-day benefit to their needs.”

Momentum Health’s Mobisite provides easy

and quick on-the-go access to Momentum

Health members when having to track,

update or authorise certain medical aid

information. its “search for a provider”

functionality furthermore enables a member

to find a service provider. This is particularly

convenient in the event of an unforeseen

illness when the family may be travelling

away from home.

FrOM THE MOUTH OF BABEsWhile schemes have started targeting

this important youth market aggressively,

it is unclear what the youth think of

these approaches.

Thirty-year-old Chris kitsopoulos, who

battled cancer in his twenties and is now

cancer-free, says that incentives and

rewards, while a nice-to-have, are not the

core focus in his decision-making process.

“For the most part these rewards require you

to pay an additional fee but then need an

obscene amount of effort on your part to

see any savings. so i don’t attach too much

value to them,” he says.

kitsopoulos adds that, for him, price is

important. “it’s a case of: what benefits and

cover do i get for my money versus: is it the

cheapest medical aid,” he says.

Honours student Ceba Mlandu, 24, talked

through the medical aid options with his

mother when they joined a medical aid

seven years ago. “As for tactics attracting the

youth, i sometimes forget they exist. Many of

my friends are on Discovery as they pay for

gym memberships and supplements which

will appeal to the men,” he says. “Bonitas

is the one we’re on now as it offers the best

plan for the premiums paid.”

Twenty-six-year-old Waldo Oosthuizen also

considered price in his choice of medical

aid. “i chose GEMs because i receive a

higher subsidy from my employer because

of this,” he says. “it is very important to me

that i will not be financially ruined if i were

to become ill or injured. i chose an option

with good hospital cover as well as chronic

illness cover.”

He adds that while he cannot change his

medical aid because of the subsidy he

receives, he would like to have incentives

that reward healthy living. “it would be nice

to have a medical aid that would reward me

if i lost weight or lived healthier. incentives

are only attractive if they are sensible and

aid good service, cover or lower costs.

rewards and incentives make me feel

appreciated. it is also unfair if people

who are reckless with their health pay the

same as people who try to be healthy. Car

insurance rewards you for taking care of

your car; is your body not more important?”

Marketing and reward gimmicks may attract

initial interest but it is value that ultimately

wins the consumer, even the young

consumer. As Arnold says, “Purchasing

medical scheme cover is a grudge

purchase. Ultimately, what sets one scheme

apart from another is its benefit richness,

affordability, value-add offering and client

service. it is by ticking all these boxes that

medical schemes can attract younger

members, which ultimately bodes well for

the risk of the scheme and the customer

satisfaction of its members.”

“It’s a case of: what benefits and cover do I get for my money versus: is it the cheapest medical aid.”

47190__297x210.indd 1 2012/07/05 11:17 AM

54 riskSA Magazine

national health insurance

Medical schemes believe that National Health

insurance (NHi) alone is not the solution to

south Africa’s healthcare problems as working

conditions first need to be improved and a

total overhaul of basic resources should take

place before the new system is implemented.

Only a quarter of the participants agreed

that the introduction of the NHi system would

change the current state of healthcare if it was

implemented in accordance with the focus

contained in the NHi Green Paper.

The NHi is viewed favourably by a majority of

respondents when asked whether they think

that NHi will increase access to healthcare,

improve service delivery to the previously

disadvantaged, and improve medical risk

cover for the entire population. However,

medical schemes do not believe that the

NHi will reduce the cost and complexity of

compliance, improve financial integrity across

the industry, result in the better use of funds

allocated to healthcare, and lead to better

consumer protection.

several challenges for the medical schemes

industry were identified if the NHi system

is to be introduced. These include the

maintenance of membership of younger

and healthier members, changes in the

conditions of employment of members, the

affordability of cover provided to members,

sustainability of current funding levels and

cost structures, and the consolidation of

medical schemes.

Mountains lie ahead for Medical scHeMesS

outh African medical schemes cite a number of significant challenges in the coming

years, including the government’s ambitious National Health insurance scheme,

increased regulation and the demarcation between health insurance and medical

scheme cover, according to a survey.

PwC’s first edition of the strategic and Emerging issues in the Medical scheme industry survey

2012 was carried out among principal officers of 20 schemes registered in south Africa and

one from Namibia, covering 53 per cent of the south African industry, based on 2010 average

principal members.

“Several challenges

for the medical

schemes industry

were identified if

the NHI system is

to be introduced.“

55riskSA Magazine

inFormation technology

schemes cited managing data and data quality as

the major technology weaknesses within the industry.

Almost half of the schemes have considered the role of

e-health in reducing costs and improving accessibility.

regulation

A significant percentage of participants (70 per cent)

expect the intensity of regulation of medical schemes

to increase substantially over the next three years. This

is likely as a result of the pending Medical schemes

Amendment Bill, as well as the increasing scrutiny of

schemes by the Council for Medical schemes. French

says this is also not unexpected given the recent

developments in respect of the payment of PMBs. Half

of the schemes surveyed currently spend between one

and five per cent of their annual gross contributions

on compliance. This is expected to grow with the

increase in intensity in regulation.

solvency and risk managementThe majority of participants (81 per cent) believe that the

current solvency margin calculation is inappropriate and

are in favour of a more risk-based solvency approach.

Furthermore, a significant percentage of schemes (62

per cent) are not in favour of the new insurance contract

accounting standard (iFrs 4 Phase ii).

Top-ranked risk challenges include member attitudes

towards medical cover, which may indicate that the

target market may not realise the need for cover or

is not be willing to purchase cover. Compliance and

regulatory requirements were also recognised as

significant challenges.

Medical schemes face a daunting list of changes to

deal with over the short to medium term. The NHi

may expand coverage, but the question is: can the

stakeholders lower the cost of treatment in south

Africa to make medical schemes and NHi sustainable

into the future?

medical scheme operating costs

The issue of medical scheme trustee compensation made headlines last year

when the Council for Medical schemes (CMs) accused trustees of lining their

pockets. steven Mmatli, the head of compliance and investigations at the

CMs, says that payments to trustees had increased dramatically, had deviated

from the original idea of a stipend, to a full-on salary, and that being a

medical scheme trustee was now considered a career and not the part-time job

originally implied. in spite of this, only 24 per cent of medical schemes thought

their trustees were paid too much. sixty six per cent of respondents believed

that a zero to five per cent reduction in current operating costs was the only

realistic figure that could be achieved.

scheme perFormance

A significant percentage of medical schemes

(71 per cent) had contribution rate increases of

between five per cent and 10 per cent for 2012,

with hospital and specialist expenses driving these

increases. south Africa’s Competition Commission

is considering an investigation into healthcare

costs and most medical schemes are in favour

of this. More than half of medical schemes were

of the opinion that such an investigation could

be useful, while 38 per cent believe that such

an investigation is long overdue. The majority

of participants (95 per cent) were of the view

that Prescribed Minimum Benefits (PMB) paid

in full result in excessive benefits being paid by

medical schemes to the detriment of members.

respondents said the absence of tariff controls

meant the provider could overcharge schemes.

Members’ benefits may be at risk due to possible

unwarranted, uncontrolled expenditure.

market environment

in March 2012, National Treasury issued draft regulations on the demarcation

between health insurance policies and medical schemes. The purpose of the

regulations is to define more clearly what is classified as health insurance and

ensure that consumers understand the nature of the service being provided to

them in instances where there appears to be uncertainty and ambiguity in the

legislative framework. PwC medical schemes leader for southern Africa, ilse

French, says that the proposed regulations are likely to lead to a review by most

providers of medical insurance to ensure compliance.

“A significant percentage of participants (70 per

cent) expect the intensity of regulation of medical

schemes to increase substantially over the next

three years.”

M

56 riskSA Magazine

MajOriTy

rulES“The majority of members with chronic conditions will

be accommodated through this process as formularies are not vastly different across most schemes.”

Bianca Wright

57riskSA Magazine 57risksA Magazine

When companies shift medical aid providers, the company may be getting a better deal but what of the staff member who

may not receive cover or is excluded for a period of time because of a pre-existing condition? When employers move from one medical scheme to another, certain of their employees’ chronic medication and treatment protocols may be undermined if the receiving scheme does not offer the same benefits. While the majority might benefit, one or two individuals may end up having to fork out an extra r300 a month for chronic meds. We investigate why this happens, how medical schemes could help clients avoid this dilemma and how brokers should advise employer groups that are considering switching schemes.

An important roleAccording to the Council for Medical schemes, the employer may determine whether or not the employees are entitled to belong to one or more schemes or whether the employees have total freedom of choice of scheme. “The employer also determines, generally within the framework of conditions of service, negotiations between the workforce and organised labour, such as trade unions, personnel organisations or staff, what level of subsidies will apply to different categories of employees or in general. Therefore, employers are not admitted to membership but they play an important role in collecting contributions and ensure payment to the scheme concerned,” the CMs says.

kenny Williamson, a financial adviser and a member of the institute of Business Brokers, says that employers may wish to change medical schemes for a number of reasons, including poor claims payment experience, billing issues or the desire to have one provider for all company benefits. Another reason may be that specific products have benefits that your staff members want to use.

Medical schemes are faced with the constant balancing act of accommodating the needs of new membership while ensuring they protect the existing membership from additional risk. This is particularly true in the case of taking on multiple members through employer groups where membership transfer includes members with pre-existing conditions as well as higher pensioner ratios.

Regulatory frameworkJohan Lombard, – actuarial specialist at Momentum Health, explains that the underwriting protocols that medical schemes may utilise are strictly regulated by legislation (Medical schemes Act). “Depending on the duration of previous medical scheme cover (less or more than 24 months) and whether there was a break in membership of more than 90 days, medical schemes may impose either a three-month general waiting period or a 12-month condition-specific waiting period,” he says. This would exclude claims relating to a particular pre-existing condition(s) for a 12-month period.

section 29A(6)(b) of the Medical schemes Act of 1998 states that medical schemes cannot impose waiting periods when the application is for an employer group transferring medical scheme membership of all covered employees if:

• Thetransferoccurson1Januaryeachyear.

• Reasonablenoticeisgiventothenewmedical scheme.

• Themovetakesplaceinside90daysfromthe date of termination of the previous scheme.

Lombard adds that, for those joining a medical aid for the first time after age 35, schemes can also impose a late-joiner penalty on their contribution, based on the number of years without cover since age 21.

A balancing actMomentum Health accommodates groups moving onto the scheme with underwriting concessions (i.e. no or lesser underwriting) if the health risks presented by the group as a whole looks favourable, compared to that of the scheme currently.

“Meeting the needs of members coming onto the scheme while ensuring the overall risk of the scheme is not adversely affected can be tricky,” says Mark Arnold, principal officer of resolution Health Medical scheme.

it is for this reason that communication between the broker and the scheme plays an important role in providing the employer group with a quotation that is based on risk, age of the membership as well as pensioner ratios. “Where these factors are in line with that of the scheme, a decision could

be made to forego individual underwriting and provide group underwriting which may include waiving the waiting periods for members with some or all pre-existing conditions,” says Arnold.

Examining the optionsThe next step would be to have a look at the chronic breakdown of the membership and compare the medicine formularies of the current scheme with that of the scheme the members are moving to. “The majority of members with chronic conditions will be accommodated through this process as formularies are not vastly different across most schemes. However, where members are on medications not on the formulary, the scheme will contact the doctor to discuss whether the member in question can be treated with a medication on the formulary. The final decision in this regard rests with the doctor,” adds Arnold.

On the rare occasion that all members are not accommodated through these processes, the scheme will consider the condition of the member as well as other factors and will decide whether it will fund the medication of the member.

“The same process applies to cases where the current treatment protocols of the member differ from those of the scheme,” Arnold says. “Ultimately the transition to the scheme is made as smoothly as possible by accommodating the new member and protecting the existing member pool to the benefit of all concerned.”

it is vital, therefore, that employees obtain all of the information prior to any change and that the unions are involved in the negotiation of changes to the medical schemes so that the best interests of the members as well as the employer are served.

M

59riskSA MagazineiNSuraNCEFiNANCE

sALEstREnDSEVENTs

nEwSiNFO

sA VEHiCLE iNDUsTry DEFiEs

TOUGH ECONOMy

The south Africa

n automobile industry

has resisted

a faltering global eco

nomy

by posting consistent growth since th

e end of 2011. We ta

ke a look at how it h

as

defied the odds.

ELECTriC AVENUE: iNsUriNG AN

ELECTriC CAr

While green

consumers should be re

warded for their eco approach,

electric c

ars may co

st more to

repair. W

ill south Africa

n electric c

ar

owners benefit f

rom their green

choice or pay a prem

ium?

P62

Fi

60 riskSA Magazine

dEfIEs TougH EConoMy nick Krige

The south African automobile industry has resisted a faltering global economy by posting consistent growth since the end of 2011. We take a look at how it has defied the odds.

sa vehicle inDustry

61riskSA Magazine

the used vehicle market Used car sales were up 12 per cent in 2011, which was to be expected as tough financial conditions will force people to look at more affordable options. According to TransUnion Auto information solutions, the used vehicle market experienced a further increase of between 10 and 12 per cent in the first quarter of this year.

This is in large part thanks to a value gap that appeared between new and used cars at the end of last year, which allowed used cars to represent significant value for money. However, the rate of decline of used vehicle prices is slowing down, while new vehicle prices remain stagnant. “The value gap between new and used vehicles, which opened up briefly through the last quarter of 2011 driven by diverging price level changes, appears to be closing again,” says Mike von Höne, CEO TransUnion.

Despite that the used car market is in good shape. “Market sentiment is steady and volumes are improving with around 40 000 to 45 000 vehicle financing contracts signed every month,” Von Höne notes.

TransUnion is expecting steady growth of between eight and 10 per cent in the used vehicle market throughout 2012 thanks to the continued recovery of consumers’ financial health, banks being more willing to lend money, the continued low interest rate and renewed consumer interest in buying cars.

However, Von Höne stressed that it was just a prediction and the volatility of the global market could cause the situation to change, “A further international economic crisis (bought on by renewed sovereign risk worries or perhaps even by conflict in the Middle East) could derail current expectations for both business and consumer confidence with negative spill over to the new and used vehicle market.”

Encouragingly, the fuel price coming down by nearly r2 a litre in the last couple of months and news of the diminishing threat of additional tolls on south African roads will help to fuel growth in the sector going forward.

the vehicle export marketTraditionally Europe is the major destination for the exporting of south African cars, which puts the market in a precarious position as the situation in Europe seems to be sitting on a perpetual knife edge. “As far as export sales are concerned, there remained some uncertainty regarding the extent of the potential impact from economic turbulence in Europe and softer growth in other international markets,” says the National Association of Automobile Manufacturers of south Africa (NAAMsA).

The first quarter of the year still showed seven per cent growth in vehicle exports overall, but that growth could disappear quickly if things get much worse in the Eurozone. Thankfully south Africa has managed to make inroads into the African export market, despite intense competition from Chinese and indian vehicle exporters, as well as second-hand vehicles supplied by Japan. The anticipated high economic growth projections for Africa should support growth in south African vehicle exports to African countries, but that is likely to be offset by the recession in Europe impacting negatively on export sales to the Eurozone.

the new vehicle marketDespite indications that the domestic economy is slowing, perhaps even stagnating, new vehicle sales have performed remarkably well so far this year.

Like the used car market, new car sales are helped by low interest rates, improved demand for credit by households and businesses, and an increased willingness from the banks to supply credit. The new car market is also being spurred on by pre-emptive buying by customers looking to take advantage of the weaker exchange rate in the beginning of the year, and the continuing affordability, in real terms, of new cars thanks to a highly competitive trading market.

“The recent sharp depreciation in the exchange rate is also likely to cause pre-emptive buying over the next few months as consumers seek to purchase vehicles to avoid the possible impact of the lower exchange rate on new vehicle prices,” according to NAAMsA. “Continued growth in consumer expenditure and public sector infrastructural investment would also support domestic new vehicle sales,” the organisation said.

The ongoing introductions of new models, especially in the budget car section, will support the demand of domestic sales and simultaneously promote growth in the industry. A swarm of new entry-level vehicles, boasting an array of features found previously only in more expensive cars, have also provided a push to the entry-level new car market.

“According to information received from TransUnion Auto, the inflation on new-car prices has been significantly reducing and is currently well below the national consumer price index figures,” says WesBank sales and marketing executive head, Chris de kock

“Couple this with a couple of salary increases for the average Joe since 2009 and it almost seems that new cars have become more affordable. Vehicle manufacturers have also made new cars a lot more attractive by adding maintenance plans to lower segment levels and by trade-in assistance programmes which have also become an industry norm,” he adds.

The first quarter of 2012 recorded an improvement of 10 per cent in new car sales, or 10 109 vehicles, compared to the first quarter of last year, which is well ahead of NAAMsA’s prediction of 7.5 per cent for the year.

“Domestically, sales of commercial vehicles over the balance of the year could surprise on the upside, supported by the roll-out of infrastructural development projects,” NAAMsA says.

The future looks bright for the south African automotive industry as the next few months are traditionally when the car rental industry begins to re-fleet, so an additional boost to the industry is expected from that sector. But with reports that the south African economy is beginning to stagnate, it would not be a massive surprise if the impressive numbers the industry has posted already this year begin to dip throughout the rest of 2012.

Fi

62 riskSA Magazine

Bianca Wright

insuring an

63riskSA Magazine

Being environmentally conscious should not mean that you are punished. On the contrary, green consumers should be rewarded for their eco approach, but will south African electric car owners benefit from their green choice or pay a premium?

Electric cars are not currently available in south Africa, despite the fact that our country is ranked 13th or 14th (depending on which stats you choose) in the world in terms of carbon emissions. Our own electric car, the much-touted Joule by Optimal Energy, is dead in the water with little hope of revival, according to latest reports. This means that south Africans looking for an environmentally-friendly electric car will have to wait for the likes of the Nissan Leaf or Chevy Volt to reach our shores. With the current green trend, though, it seems likely that electric cars will be an option for south Africans sooner rather than later.

As in most other industries, insurers around the world have been accommodating increasing demand for environmentally-friendly products. The question is whether the insured party will benefit from their sustainable choice or not?

shaun rademeyer, head of brokers at Auto and General, says that when you look at vehicle insurance you need to take into account the following risk: regular driver, area, theft and the repair of the vehicle in the event of an accident.

“With an electronic vehicle, your normal process on rating for regular driver, risk area, write-off and theft will probably remain the same,” he says. “However, when you take into account that less than two per cent of motor claims are actual write-offs, you need to start looking at what the cost to repair the electric vehicle will be.” The cost will include the entire repair process from towing, assessing, parts supply, actual repair process, car hire and so on.

rademeyer says that it is possible that these vehicles will need specialised staff for assessing and repairing them. “your vehicle could also take longer to repair as manufacturers might not have the parts available, resulting in an overall higher claims cost,” he says. “The electric vehicle could cost the consumer more to insure compared to a traditional motor car.” He advises that, despite this, there are insurers like ibuyeco that can assist customers with ecologically-friendly vehicles with affordable insurance premiums.

south Africa’s first green insurer, ibuyeco, is underwritten by Dial Direct and offers eco-friendly insurance products for cars, homes and offices. While the products do not currently offer incentives for choosing environmentally-friendly vehicles, two per cent of an ibuyeco policyholder’s monthly insurance premium will be paid into a trust and the funds from this trust are then donated to various eco-charities and organisations.

“By supporting an eco trust, policyholders will, therefore, offset their CO2 emissions,” explains Bradley Du Chenne, spokesperson for ibuyeco.

“We have a special interest in going green as our industry will be hard hit by climate change if sea levels rise and unpredictable weather conditions escalate,” says Du Chenne. “Climate change is our concern and more should and must be done to safeguard the sustainability of our planet for our children.”

internationally, niche green insurance products like ibuyeco have also sprung up. Pluginsure, a Uk electric car insurer, for example, provides cover for the latest electric car technology from Mega, Dalys Electric Vehicles PLC, Tesla, GEM and G-Wiz, as well as new battery electric cars such as the Mitsubishi i-MiEV, the Vauxhall Ampera, the Nissan Leaf, renault’s Twizy or ZE and the smart Electric Car.

information on insurance for electric cars is often conflicting. A 2008 study by insure.com found that it was more expensive to insure a hybrid vehicle in the Us than a non-hybrid. A Honda Civic compact that gets 15.31 kilometres per litre on the highway costs $412 more a year to insure than a Honda Cr-V, a small sport-utility vehicle that gets 11.48km per litre, the study found. Another study by the Highway Loss Data institute found that overall insurance costs for crash damage were higher for 11 of 12 hybrid cars and sUVs than for their fuel-only counterparts. Conversely some international insurers have been rewarding consumers for choosing green options. Farmers insurance Group of Companies offers a discount to its auto insurance customers who own a hybrid or alternative fuel vehicle.

The issue is that there is little data available on the safety of electric vehicles. in April, the insurance institute for Highway safety (iiHs) announced results from its first-ever Us crash evaluations of plug-in electric cars, and both the Volt and Nissan LEAF earned the top rating of ‘good’ for front, side, rear, and rollover crash protection. south African data is not currently available.

in an interview with TheDetroitBureau.com, Lori Conarton, spokesperson for the insurance institute of Michigan, says, “insurance is just another factor which changes for drivers of these vehicles featuring cutting-edge EV technology. These owners can expect to pay a little more to insure them, compared to an otherwise comparable car. EV owners might want to shop around for insurance because some companies are offering discounts on the high-tech cars.”

“The electric vehicle could cost the consumer more to insure compared to a traditional motor car.”

“Insurance is just another factor which changes for drivers of these

vehicles featuring cutting-edge EV technology.”

Fi

64 riskSA Magazine

New regulations which propose

a graduation year for new

driver’s licence-holders and

biennial roadworthy tests

for vehicles older than 10 years could

result in lower car insurance premiums,

says Helen szemerei, CEO of integrisure.

inexperienced drivers and unroadworthy

vehicles are among the biggest causes

behind vehicle-accident claims.

if adopted, the regulations would give new

drivers a provisional 12-month licence,

which may be suspended for two years

if they transgress by driving under the

influence of alcohol; are guilty of six traffic

offenses; or drive between midnight and

04h00. szemerei says, “As a result, we

would expect newly qualified drivers to

adhere more strictly to traffic regulations

in order to avoid having their license

potentially removed.”

she says that should this graduation year

assist in improving driver behaviour, with

a resultant reduction in motor-accident

claims among newly qualified drivers, then

the upside would be a possible relief in

motor insurance premiums for the rest of the

insured market, as they would be at less risk

of being involved in an accident.

“Conversely, younger drivers who have just

qualified may be subject to higher premiums.

opinion DiviDeD on drIvEr’s grAduATIon yEArA D r i A N k A y

65riskSA Magazine

in most insurers’ claims experience, it is often the inexperienced drivers who are the

main cause of accidents. Although not all insurers will consider granting cover during

the graduation year, those who do could possibly impose premium loadings and may

then opt to remove the loading once they are fully qualified. it is general practice

among most insurers that with every added year of driver experience, premiums are

lowered, subject to a good claims history,” says szemerei.

The draft regulations will also require motor vehicles older than 10 years to

undertake a roadworthy test every two years. More frequent roadworthy tests should

also prove to be a positive for the motor vehicle industry. Currently there are a high

volume of unroadworthy vehicles on the roads, which contributes to the high number

of accidents in south Africa. “Poorly maintained vehicles such as those with smooth

tyres or those that are prone to engine failure certainly contribute to road accidents

that could otherwise have been avoided if the vehicle was regularly tested and not

permitted on the road in a non-roadworthy condition,” says szemerei. “in the Uk,

every vehicle must undergo an annual Ministry of Transport (MOT) test in order to be

legally allowed on the roads. if adherence to such laws is applied effectively, then we

are also likely to experience a reduction in the money spent on claims as a result of

fewer accidents and will therefore see a likely reduction in insurance premiums.”

risksA asked our readers what they thought about the government’s attempts to

make roads safer in this country. responses were mixed with some saying the new

regulations would help create safer roads and others saying existing laws should

merely be enforced to ensure road safety.

“First-time drivers are not necessarily the real culprits. They are not completely at

ease nor experienced and drive very defensively in the beginning,” says Pieter de

Milander of Parklands insurance Brokers, based in Cape Town.

De Milander urges motorists to get back to the basics. “if road users simply abide

by the rules of the road, there will be no need for new laws.” He says that road

safety is often a matter of respect for fellow road-users. “respect your co-road

users’ rights. They have the same rights you have. They can’t be blamed when

you are late or in a hurry.” He adds that drivers need to control their tempers.

One respondent who preferred to remain anonymous accused the government

of barking up the wrong tree. “rather get rid of all the unlicensed drivers on our

roads and vehicles that will never pass a proper roadworthy test. That will be

positive action to reduce accidents on our roads. Let them get the traffic officials

out from behind desks and out of parked vehicles onto the roads with road blocks

all over the show and watch the result.”

Joanne Christensen of CMH Datcentre Highway, supports the government’s proposed

regulations and applauds any attempt to make south African roads safer. “There

are too many school leavers who start partying up a storm in the first year of having

their license and there are far too many deaths as a result. it will make new drivers

responsible for their actions,” says Christensen.

road safety is an ongoing issue with accidents, deaths and damage to property

unacceptably high. The knock-on effect is higher claims on insurance and higher

premiums. south Africa has made progress in road safety and we can only benefit

from having further discussions on how to reduce the carnage on our roads.

Always visibleusing just one sms...

“It will make new drivers responsible for their actions.”

Fi

66 riskSA Magazine

According to the National

Association of Automobile

Manufacturers of south Africa

(NAAMsA), new vehicle

sales showed solid growth

by registering double digit growth in June

compared to the same month in 2011.

Aggregate industry domestic sales

improved by 7 015 units – a 15.6 per cent

growth – to 51 891 vehicles from

44 876 units in June last year. Total

domestic sales for the first half of calendar

2012 remained 10.5 per cent ahead

of the first half of last year. Export sales

registered more modest growth at seven

per cent, rising 1 767 units to 27 061.

Overall, of the reported industry sales of

49 108 vehicles (excluding Mercedes-Benz

south Africa (MBsA)), 86.2 per cent (42 340

units) was sold by dealers, 5.9 per cent was

sold to the vehicle rental industry, while 4.1

per cent was bought by government and 3.8

per cent by industry corporate fleet sales.

sales to car rental companies will increase

in the middle of the year as that is when the

rental industry traditionally starts to re-fleet.

Assisted by new model introductions,

aggregate sales in June remained relatively

strong at 35 918 units (including MBsA),

reflecting an improvement of 4 480 units or

14.3 per cent compared to the same period

last year. year-to-date new car sales were

11.8 per cent ahead of the same six month

period in 2011.

including estimates for MBsA commercial

vehicle sales by segment, sales of industry

new light commercial vehicles, bakkies and

mini buses had reflected strong growth at

13 421 units during June, with an increase

of 2 425 units, or 22.1 per cent, compared

to last year.

sales of vehicles in the medium truck segment

also boast double digit growth at 11.7 per cent,

while heavy truck sales growth was at a much

more stagnant 1.4 per cent.

south Africa exported 27 061 locally produced

motor vehicles, including MBsA export sales

data, in June, which represents a seven per cent

increase from the 25 294 vehicles exported

in June 2011. The outlook for the export of

south African vehicles looks good as well with

momentum of the industry expected to improve

over the balance of the year as various vehicle

export programmes are ramped up. The

industry’s export performance will rely heavily

on the direction of the global economy, but

a drop in vehicle exports to Europe could be

offset by higher exports to African countries

and Australia.

New vehicle sales have performed remarkably

well in the face of the Eurozone crisis and

further slowing of the domestic economy.

The factors in favour of the domestic market

for vehicles are historically low interest rates,

continuing improvement in vehicle affordability

in real terms, improving demand for credit by

households and businesses, as well as further

pre-emptive buying by consumers in response

to the weaker exchange rate in recent months.

The highly competitive trading environment

and ongoing new model introductions would

also support demand. in terms of domestic

sales, the industry remained on track during

2012 for single digit growth in the range of

eight to 10 per cent over 2011.

“The disappointing figures could be a sign

of underlying economic weakness, a lack of business

confidence and certain inventory constraints.”

rEMAIn sTEAdy new car sales

67riskSA Magazine

The VPi reveals a

statistically insignificant

0.1 per cent upward move

in used vehicle inflation

to 2.4 per cent, while new

car inflation slowed from 3.6 per cent

in the first quarter of the year, to 2.9

per cent in the second.

“The new car market continues to be

relatively strong as consumers are

enticed by excellent new car deals,”

says Mike von Höne, CEO of vehicle

risk intelligence company, TransUnion

Auto information solutions. “However,

this is placing even more pressure

on used dealers, particularly the

independents, as more consumers are

choosing news cars over used vehicles.”

The VPi measures the year-on-year

price inflation of new and used

vehicles, drawing on data received

from all the major banks and vehicle

finance houses, as well as monthly

sales returns from thousands of dealers

throughout the country.

Used vehicle financial registrations for

May 2012 reveal year-on-year growth

of around seven per cent, but used car

dealer profit margins are still under

pressure, which means that dealers are

being forced to buy in stock at less than

the trade value indicated in the Auto

Dealers’ Guide. This means consumers

are getting progressively less for their

trade-ins.

“Dealers have to do this in order

to be able to maintain sustainable

margins. We do not anticipate this trend

reversing in the foreseeable future,” Von

Höne adds.

Most pressure is being experienced

in the high-volume, low-margin,

budget end of the used car market

where competition with new car sales

is fiercest. There is also considerable

pressure in the premium end, where

dealers traditionally could rely on

solid margins, but where demand has

declined as consumers continue to

buy down.

on used car market intensifiesPressure

THE sLOWDOWN iN NEW CAr PriCE iNFLATiON HAs iNCrEAsED THE ONGOiNG PrEssUrE ON THE PrE-OWNED CAr MArkET, ACCOrDiNG TO TrANsUNiON’s sECOND QUArTEr AUTO VEHiCLE PriCiNG iNDEX (VPi).

Fi

68 riskSA Magazine

AUTO iNsUrErs GET THUMBs UP FrOM CONsUMErs

According to the JD Power and

Associates 2012 Auto insurance

study, overall customer approval

with auto insurance companies

has reached an all-time high

thanks to satisfaction with policy

offerings, and billing and payment

practices.

The study measures customer

satisfaction with auto insurance

companies across five factors:

interaction; price; policy offerings;

billing and payment; and claims.

On the 1 000-point scale, overall

satisfaction with auto insurance

companies is 804, up 14 points

from 2011. satisfaction levels in

2012 are the highest since the

study was launched in 2000.

“Although satisfaction with price

remains consistent from 2011,

auto insurance companies have

made great strides in all other

areas,” says Jeremy Bowler, senior

director of the insurance practice

at JD Power and Associates.

“Among customers whose insurers

meet or exceed all their service

expectations, modest rate increases

appear to be well tolerated.”

Discussing rate increases with

customers and offering options

seems to have a positive effect on

satisfaction. Of auto insurance

customers receiving a rate

increase, 56 per cent were not

notified prior to the renewal notice

and satisfaction was markedly

lower than customers who were

notified prior to a rate increase and

had a discussion with their insurer.

The 2012 Us Auto insurance

study is based on nearly 35 000

responses from auto insurance

customers. The study was fielded

between March and May 2012.

TOyOTA BUiLDiNG TAXis AGAiN

Toyota south Africa Motors (TsAM)

is officially reviving its minibus taxi

assembly in south Africa after a

request by government to restart

local minibus production, which

was halted in 2007.

The r70-million investment will

enable TsAM to produce the

semi-knockdown (skD) 16-seater

Quantum ses’fikile and create 90

F&I

69riskSA Magazine

direct jobs at Toyota, and 210 jobs at suppliers and service providers. About 40

taxis will be assembled a day on a single shift operation, which amounts to 10 000

units a year.

Trade and industry Minister, Dr rob Davies, noted at the opening of the assembly

line at Toyota’s Durban plant that the investment would receive government

support under the Automotive investment scheme (Ais). He added that a local taxi

assembly industry could feed vehicles into a broader African market, especially

under a pending free trade agreement, still being negotiated, between 26 countries

on the continent. His department was also pushing for preference to be given to

locally assembled taxis under the Department of Transport’s taxi recapitalisation

programme, which provided financial support to the taxi industry in replacing their

vehicles with newer, safer products.

south African National Taxi Council (santaco) general secretary, Philip Taaibosch,

notes that it had always been the council’s ambition to again see taxis assembled in

south Africa, especially as it contributed to job creation. “We must compliment Dr

Van Zyl and Toyota on the decision they have made to again assemble taxis locally.

We are delighted.”

ALL VEHiCLEs MUsT CONFOrM TO sAME sTANDArDs

All vehicles and automotive components will need to meet the same specific standards

if they are to be used on south Africa’s roads, according to National regulator for

Compulsory specifications (NrCs) automotive technical specialist, Dries van Tonder.

if companies are going to choose to import parts from overseas because they are

cheaper than locally produced products, they will need to ensure that they are of a

suitable quality to meet industry standards. “Products manufactured abroad might

sometimes be cheaper than their locally manufactured counterparts; however, approval

of the products mentioned is measured against the requirements of the relevant

compulsory specification and the monetary value of a product is not considered during

the approvals process,” Van Tonder explains.

Each model of vehicle destined for operation on south Africa’s roads has to go through

the NrCs’s verification process to ensure that it meets the requirements set out by

government. This means a sample of the new vehicle, along with the necessary test

reports to verify that the vehicle complies with the standards, has to be presented to the

NrCs. Additionally, the test results will be valid only if the testing facility itself meets the

regulator standards.

The process does not end after the initial approval has been granted; the NrCs

sends inspectors unannounced to the sites where the vehicles and components

are manufactured or imported to ensure the products are of the same standard as

the approved sample. if vehicles or components are found not to comply with the

standards, corrective action will be taken.

“Products manufactured abroad might sometimes be cheaper than their locally manufactured counterparts;

however, approval of the products mentioned is measured against the requirements of the relevant

compulsory specification and the monetary value of a product is not considered during the approvals process.”

Fi

71riskSA Magazine

liFE | pENSiON | rETirEMENT

WHAT WiLL B

E, WiLL BE

Death is not something that people g

enerally want to talk

about. As a broker, however

, it is vita

l to ask your clie

nt

whether they h

ave a will and what the co

ntents are, to

ensure they h

ave enough savings and insurance fo

r their

dependants should the worst h

appen.

Li FELiFE

PEnSIonrETirEMENT

InSIghtiNFO

PrOViDiNG FOr rETirEMENT

AFTEr DiVOrCE

The number of divorce

orders submitted

to retirem

ent fund

administrators has increa

sed over the past fe

w years. W

e take a

look

at how the Pension Funds Act re

gulates this practice

and how brokers

should be advising their c

lients in this sit

uation.

P74

72 riskSA Magazine

providing For retirement aFter divorceIn South Africa, around 50 per cent of marriages end in divorce and one website claims that between 28 924 and 37 098 couples got divorced each year between 1999 and 2008.

When couples head to the divorce courts,

particularly if they are married in

community of property (COP), assets

generally get divided equally and

increasingly even pension funds get divided

between the member and the non-member spouse. While the

number of absolute divorce orders submitted to retirement

fund administrators is still very low, Alexander Forbes says

it has seen an increase in the number of divorce orders;

43 per cent on average over the past three years. John

Anderson, head of national consulting strategy at Alexander

Forbes, says the increase can be attributed to changes in

the legislation affecting retirement benefits on divorce and

increasing awareness by non-member spouses of their rights

to a share of the benefits.

Under the Pension Funds Act, the non-member spouse has the

right to decide how the pension interest award should be paid.

On presentation of a valid divorce order, the fund has 45

days to request that the non-member spouse decides how the

pension interest due must be paid. The non-member spouse

has 120 days in which to make a decision.

Angelique ruzicka

“Brokers could recommend a preservation fund.”

73riskSA Magazine

What a pension fund pays out to the non-member spouse also depends on the

type of fund. Macpherson explains that with pension, provident or preservation

funds, what you see is what you get. However, when it comes to a retirement

annuity, pension interest includes all the contributions that the member paid from

inception of the contract plus gazetted simple interest at the date of the divorce.

“A retirement annuity is different as there is no such thing as a withdrawal benefit

and, if you don’t get divorced, you are entitled to your benefit only at the age of

55,” she adds.

The trend of non-member spouses accessing a member’s pension fund is likely

to increase. “We have estimated that funds receive divorce orders in one out

of 10 divorces at present. Divorce orders are increasingly being used to access

retirement benefits; that is, people get divorced purely to access retirement funds,”

Anderson says.

Pension interest means that non-members can share in the withdrawal benefit

at the date of the divorce. Non-members can access any kind of pension fund

including a provident fund, annuity fund or government employee pension fund.

However, this depends on how the couple is married. “if your client is married in

community of property or antenuptial with accrual, they have a right to share in

the member’s pension interest. if they are married antenuptial excluding accrual,

then they don’t have any rights to the fund itself,” advises Geraldine Macpherson,

legal adviser at Liberty. “The marital regime would logically dictate what the

non-member spouse is entitled to. For example, in community of property, the

non-member spouse is entitled to at least half. But couples can decide prior to the

divorce to a greater or lesser amount.”

the broker’s roleDivorces can get very emotional and messy and brokers may feel inclined

to give their clients space during this very tumultuous time. However, experts

believe that it is crucial for brokers to step in and provide advice to both

parties regarding their financial well-being. some brokers are privy to news

of such proceedings very early on.

While couples may be hiring lawyers to deal with the divorce proceedings,

brokers have a vital role to play. “Very often not all attorneys are as aware

about members’ rights when it comes to pensions. A broker can advise

clients on what could happen, where the exposure lies and how much they

are entitled to,” says Macpherson.

While experts guard against accessing pensions before retirement, the reality

is that non-member spouses often choose to take the pension fund money as

cash instead of preserving it in a fund to ensure their financial well-being on

retirement. “We tell brokers not to become too personally involved as they

usually have to advise both parties. But the broker is obligated to encourage

the non-member spouse to preserve the money and provide guidance on

how to access the money when the divorce is finalised and where to invest

the money in a tax-efficient way,” says Macpherson.

Brokers can also help to ensure that the divorce agreements are correctly

structured. Claims on a pension can be rejected as a result of the wording in

the divorce decree. “i would suggest that the agreement

be correctly structured. The three things that should be

included are the reference to pension interest; the name

of the pension fund; and the portion that the person is

claiming. At payment they should again be advising the

client that the money be transferred into another pension

fund and not be drawn down as cash,” says sore Cloete,

legal manager for Old Mutual Life Assurance Company

(personal financial advice). Not all spouses who claim

a pension fund will heed this advice. However, Cloete

suggests a way around this. “Brokers could recommend a

preservation fund where clients have one withdrawal option

should they need the money before retirement. The amount

they can withdraw from a preservation fund is subject to the

rules of the fund so they must choose carefully.”

Brokers will have to guide the member spouse too

as there will be a gap in their pension savings. “The

member spouse will need to save to make good on

the retirement. Even though there will no longer be two

people living off the income, things like inflation could

knock the remaining benefits,” explains Macpherson.

changes to the rulesWhile clients can claim from each other’s respective

pensions, the government is looking to change the

rules. The reason is that most people do not take steps

to preserve their money when getting divorced. “Only

2.87 per cent of non-member spouses who receive

a share of a former spouse’s retirement savings are

preserving the money in retirement-savings vehicles; the

rest are taking the cash,” says Anderson.

The government wants to limit the amount of pension interest

that may be awarded to non-member spouses. “in May,

National Treasury issued one of its first discussion papers on

retirement reform and one of the key findings was the lack

of preservation when it comes to retirement funds. it made

specific reference to those who get divorced and who don’t

preserve. i think in the future, clients will no longer be able

to withdraw the whole benefit,” says Macpherson. With rules

changing only in the distant future, the broker’s role will be

vital during and after divorces are finalised.

“A retirement annuity is different as there is no such thing as a withdrawal benefit and, if you don’t get divorced, you are entitled to your benefit only

at the age of 55.”

74

The topic of death is often a touchy subject to bring up in conversation as it’s not something that people generally want to talk about. However, as a broker, it is vital to ask your client whether they have a will and what the contents are. This helps to ensure that you are giving the client the best advice and that they have enough savings and insurance for their dependants should the worst happen.

A n g e l i q u e R u z i c k a

riskSA Magazine

“If the client is a varsity student they probably don’t have much need for

a will. However, as soon as they have accumulated some kind of wealth,

liabilities or started working, it’s essential to have a will to bring some clarity.”

is able to draw up a valid will

Any person of sound mind over the age of

16

what will be,WIll BE

75riskSA Magazine

Brokers need to be involved in the estate

planning as they are aware of the client’s

financial situation and could advise if

there are any gaps in coverage or savings

products. Clients can be approached

about a will at any age. “Any person of

sound mind over the age of 16 is able to draw up a

valid will. if you have something to leave and someone

to leave it to, you should have a will. Wills are thus not

limited to wealthy or married individuals,” says Tiny

Carroll, fiduciary specialist at Glacier by sanlam. “There

are also certain life stages where it’s critical to have

a will; once clients get married or have children, they

should create a will. And it should have a testamentary

trust in it if the children are still minors,” adds Geraldine

Macpherson, legal adviser at Liberty.

if clients are hesitant to talk about their passing, the

consequences of not having a will should be laid bare.

“if you don’t create a will you will be dying intestate.

Without a valid will, you will have no control over who

inherits your assets and the executor will have to decide

what to do with it. if you don’t have an executor, you

put your loved ones in the difficult position of having to

find an executor and follow intestate succession, which

is completely undesirable,” says Lizl Budhram, advice

manager at Old Mutual.

There may be some instances where a client may not yet

need a will, says Macpherson. “if the client is a varsity

student they probably don’t have much need for a will.

However, as soon as they have accumulated some kind

of wealth, liabilities or started working, it’s essential to

have a will to bring some clarity.”

Under intestate succession law, spouses could lose out.

if your client is married, the spouse will get the greater of

r125 000 or a child’s share. “They are guaranteed

r125 000. if the spouse is young and has children it’s

not really that much at all,” says Budhram. if there is

no spouse everything will go to the children and if there

are no children, the estate assets will go to the parents.

Following that, it will go to brothers or sisters or if there are

no siblings, to other family members. if there is no-one to

claim from the will, the estate will be forfeited to the state,

which is again not ideal and should be avoided.

thE RolE oF thE ADvISER

There’s no denying that the will is an important

instrument and link to the estate plan. “They [brokers]

must ensure that the will adheres to all the requirements,

that the testator has signed on every page, that there

are competent witnesses that have signed and witnessed

the document. They need to ask if the will is being kept

in a safe place and that it is accessible in the event of

a client’s death, that clients know where the document

is. Then in terms of all the considerations that a client

needs to think about when constructing a will the adviser

should be able to go through the pertinent points with

the client. if the client has children, it is important that

the issue of trusts and guardianships are discussed and

the disadvantages and advantages of creating a trust is

conducted,” says Budhram.

This is why the broker needs to be familiar with its

contents and who needs to be provided for in the

event of a client’s death. “Financial advisers are there

to ensure that there is sufficient money left over for the

surviving spouse and children and that there is enough

life cover to pay for the bond in the event of a client’s

death. They need to ask if the client’s liabilities will be

addressed at the time of death. Brokers will ensure that

the will coincides with the estate plan and that it’s a valid

document,” explains Budhram.

thE RolE oF thE ExECutoR

it’s essential that the client picks someone as an

executor to ensure that the wishes of the will are

carried out. There’s nothing stopping a client from

appointing the broker as the executor, however, experts

are generally against the broker being appointed to

this position.

However, brokers must cast a critical eye over the

documents to ensure that there are no errors. “Brokers

need to make sure that when a will is read that it is

understood. it must be set out in plain and simple

English. Brokers should ensure the will is signed by

independent witnesses, that it is dated and that their

client and the executor know where the will is lodged or

kept,” Macpherson concludes.

“iF you don’t create a will you will be dying intestate.

without a valid will, you will have no control over

who inherits your assets and the executor will have

to decide what to do with it.”WIll BE

Data compiled

by income

protection

specialists,

FMi, shows

that three

out of 10 people before the age

of 60 are likely to suffer some

kind of temporary disability

which could seriously affect their

ability to meet routine financial

commitments. The same data

shows that temporary income

protection (TiP) is alarmingly

undersold in south Africa with

only six per cent of disability

cover in this space.

Brad Toerien, FMi’s CEO,

says the industry is not paying

nearly enough attention to vital

TiP cover. “The truth is that

temporary interruptions to cash

flow from illnesses and accidents

can have huge knock-on effects

for the client’s financial well-

being as they damage credit

ratings, upset small business

stability and can force people to

return to work too soon for their

own long-term good.”

Toerien believes that it’s in the

interests of both clients and

advisers to reassess disability

portfolios and ensure a proper

weight of temporary cover in

the disability cover mix. “At

FMi, we have a number of

examples where temporary

disability cover has proved if

not a life-saver then, at the

very least, a lifestyle saver. A

commission-earning salesman

suffering from disabling

depression for several weeks; a

fitter and turner with something

as simple as a broken finger

which prevented him from

working until it healed; a car

mechanic who was the gunshot

victim of crime and needed

eight months to recover; and

people from almost every sector

who have suffered debilitating

back ailments and were unable

to earn essential income were

supported during these crises

by their FMi policies.”

For the small business owner

or self-employed client, a

commonplace temporary

disability might mean an

interruption in cash flow or

sacrificing expenditures such

as insurance, investments and

medical aid cover, which can

result in business failure or

future insurability problems.

Toerien’s view is that generic

industry thinking on disability is

reinforced by most current FNA

a hot tip for financial aDvisers AND THEIR SELF-EMPLOYED CLIENTS

tools which are used to simply calculate a client’s disability needs,

with an emphasis on permanent cover. “Consideration is rarely

given to understanding the impact of a temporary interruption of

income which means that temporary disability income continues

to be misunderstood and undersold.”

The obvious solution for self-employed clients (and wage earners

with standard disability benefits seeking extra cover) is to have

both temporary and permanent disability insurance, especially as

the TiP offerings have increased markedly in flexibility and ease

of payment in the past few years. There is now a range of policies

which offers great security and rapid response for clients on the

full spectrum of premiums and benefits.

Toerien emphasises that effective TiP cover is also in the interests

of advisers because it means less risk for them as insurance

premiums are protected and lapse rates are minimised while

ensuring the long-term financial health of their valuable clients.

When considering disability cover, financial advisers need to be more aware that the real risk to income for their self-employed clients lies in frequent temporary interruptions rather than a single long-term disabling event. Standard disability benefits don’t cover temporary or illness-related claims and tend to carry a three-to six-month waiting period which means an obvious gap in the conventional financial planning process.

76 riskSA Magazine

3 Three out of 10 people are likely to suffer from some disability before 60.

78 riskSA Magazine

Rob Rusconi

rob rusconi is General Manager of Lombard Life, a licenced long-term insurer that seeks to meet customer needs through partnerships like Brightrock and FMi. Lombard Life is a member

of the Lombard insurance Group.

Most regulatory

developments come with

incomprehensible names

that collapse neatly into

three-letter acronyms.

Treating Customers Fairly (TCF) meets one

of these standards but expresses itself so

clearly that one suspects a catch.

No, no surprise. TCF indeed aims to

ensure that … well, that insurers treat their

customers fairly. We have to wonder how

this might affect you and your customers,

but need to address a more fundamental

question: will it make a difference at all?

OUTCOMEs-BAsED rEGULATiON

key to understanding and assessing TCF is

an appreciation of the philosophy behind

the initiative. While TCF will stipulate

a number of rules, it is fundamentally

principles-based. The regulator will expect

of insurers demonstrable evidence that

outcomes have been achieved rather than

task boxes ticked.

six such outcomes must be in evidence:

• Confident customers. insurers must be

able to show that their clients are positive

that their interests are central to all of the

decisions and actions of the insurer.

it is not sufficient for an insurer to run a sound

customer-care function and to create products

that put the customer’s needs first, pay out claims

quickly and answer the phone promptly, preferably

with a real voice not a computer. These customers

must believe that this and everything else that the

insurer does puts them first.

Furthermore, because regulatory success depends

on the outcome, the insurer must provide

unambiguous evidence of this customer belief,

so it must make the effort to ask its customers

the right questions and receive the right answers.

it follows that the insurer should be able to

demonstrate exactly how it would respond to

customer responses that are anything less than

satisfactory. This will take quite some doing.

Five more outcomes are to be demonstrated:

• Purposeful products. The products

that insurers design and sell must meet

the identified needs of the specified

targeted customers.

• Enlightened clients. Disclosure to

customers must be clear. These customers

must be appropriately informed at all

stages in their interaction with the insurer;

before, during and after the sign-up point.

remember that insurers will need to be able

to show that this is the case.

• Appropriate advice. Not all customers

are given advice, but where they are, this

assistance must be suitable to the recipient,

taking account of their circumstances

and the match of the product – and any

alternatives – to their needs.

• Performing products. The insurer’s

offering must perform in line with the

expectation that it creates in the mind of

the customer.

• Smooth modification. The customer

must be able to change their product

smoothly, switch away from the insurer

without undue hardship and find it easy to

complain or claim.

sUBsTANTiAL CHANGE

Why is TCF needed? surely, insurers are

already behaving in the interests of their

customers; in an efficient market, the penalty

for failing to do so would be severe. The

Financial Advisory and intermediary services

Act (FAis) already puts a significant emphasis

on the quality of advice and products. is this

not sufficient?

A glance at the personal finance pages

suggests that the reputation of long-term

insurers, perhaps not at the lows of a few years

ago, could do with further polishing.

A recent Financial services Board (FsB) report

on its assessment of TCF readiness suggests that

there remains a gap between perception – of

the insurers themselves – and reality. Many of

the insurers claimed compliance with the first

outcome in terms of their attention to client

care. This is not sufficient, responds the FsB in

the summary of its findings; you must make an

effort to establish whether the customer believes

that their interests are core to your activity.

second, international best practice demands an

initiative like TCF. in this regard, countries like

the Uk and Australia present significantly more

challenging environments for insurers – and

advisers, i daresay – than south Africa.

What does all of this mean for advisers

and their customers? it really is hard to tell.

insurer costs will probably rise, as the burden

of evidence under the principles-based TCF

regulations lies on these insurers. it is hard

to predict, however, whether the additional

cost is marginal or, as some suggest, really

substantial. if the additional expenditure is

significant, then shareholders may wish to see

some of this passed on to customers. i haven’t

seen any analysis by the FsB assessing the risk

of this happening.

For the adviser, though, TCF is surely good.

For those who suggest a somewhat adversarial

relationship between insurers and their

intermediaries, TCF should bring some focus.

Prioritising the customer surely helps to align

the interests of the insurer and intermediary.

A tough road lies ahead of us all as the FsB

determinedly drives through an extraordinary

set of changes. it is difficult not to worry about

collateral damage. Those who focus on their

customers and can demonstrate that they do so,

will thrive, and the same is to be said for the

intermediaries who behave similarly.

treatinG your customers fAIrly?

79riskSA Magazine

The number of smokers in

southern Africa is steadily

declining. Therefore, it

is important that brokers

make sure their ex-smoking

clients are aware that they might be

overpaying for their life insurance.

statistics from the Tobacco institute

of southern Africa show that there

has been a 30 per cent decline in the

number of adult smokers over the past

10 years, and government’s plans

for stricter regulation of smoking will

only result in even fewer smokers.

However, many of these people may

be overpaying for their life insurance if

they have quit for over a year, but have

not informed their insurance provider.

if someone has stopped smoking and

ceased to use nicotine-replacement

products for over 12 months, they

should qualify for a reduction in the

cost of their life insurance, according

to Gavin Came, chairman of the

financial planning committee at the

Financial intermediaries Association of

southern Africa (FiA).

Came says smokers are likely to pay

a higher cost than a non-smoker due

to the associated health risks. “The

actual premium a smoker would

be required to pay is dependent on

a number of factors, including the

number of cigarettes they smoke each

day. On average, however, a smoker

is likely to pay between 25 and 120

per cent more for life insurance than

a non-smoker.”

“smokers pay a far higher price for their

life cover, as well as other ancillary benefits.

in the current environment, with costs such

as electricity, fuel and food constantly

increasing, it is vital that former smokers

take the time to advise their broker or life

insurer of a change in their circumstances

as it could make a significant impact on

their finances,” he adds.

Came says it is also important for

consumers to evaluate other changes

they may have made to their lifestyle

such as regular exercise as this

can have a positive impact on the

cost of financial services products.

“Consumers who make an active

decision to lead a healthier lifestyle

should speak to their financial adviser

to determine exactly how this can

benefit them financially. For example,

a heavy drinker will likely pay higher

premiums due to the health risks this

would pose. However, if they have

stopped drinking for a sustained period

of time, they should be able to review

any loadings or exclusions.”

Came warns, however, that while

companies are likely to reduce the

cost of premiums for clients who

have quit smoking it is essential that

clients do not lie to their insurer to

receive preferential rates, and that they

understand the risks of them doing so.

it is also important for consumers to

remember that if they start smoking

again after informing their insurer

otherwise, they must update their

details or risk having a potential claim

repudiated due to non-disclosure.

WE’R

E NO.1

WE’RE NO.1

2012 FIA LONG TERM INSURER

OF THE YEAR – RISK PRODUCT

Quit smoking and save

80 riskSA Magazine

public enemynuMBEr onEin the April issue of risksA, we investigated how and to what extent recognised stress and mental disorders are covered by disability insurance. The results in certain cases were encouraging, but what about ‘ordinary’ burn-out? We spoke to richard Hawkey of Equilibrium solutions (Pty) Ltd, a man on a mission to educate and advise south Africans on the dangerous effects of stress and how to find balance in their lives.

Like so many south Africans, richard Hawkey

was a man happily married with two children

and a house in the suburbs, firmly entrenched

in the corporate treadmill until about 18

months ago when he suffered from burn-out

and slipped into a severe clinical depression.

Classified “temporarily disabled” by three

doctors, he went through his employer’s

temporary disability claims, a traumatic and

dehumanising process. After eight weeks of

filling in forms and providing costly doctors’

letters, he gave up the process and wrote a

book about his experiences, entitled Life Less

Lived, to create awareness. He spent the next

year working with several doctors to develop a

confidential, online self-awareness tool so that

employees can assess the commonly ignored

symptoms of excessive and negative stress in

their lives.

Understanding stress

since Vitals was launched in september 2011,

the results have been staggering, Hawkey said,

proving that the physiological symptoms of

stress are becoming more and more pervasive.

81riskSA Magazine

Clinical psychologist and scientific chair of

the south African Depression and Anxiety

Group, Dr Colinda Linde, describes the

situation as follows: “if we drove our cars like

we drive our bodies – 24/7, over-revving, in

the wrong gears and without regular services

– there would be very few cars left on the

road. We need to remember that our bodies

and brains are vehicles that will signal wear

and tear and become less efficient if we do

not actually rest and refuel them when they

need it.”

Hawkey explains that when we detect danger,

the major systems in our bodies are readied

to either fight ferociously or run away. This

fight-or-flight response is a survival mechanism

that floods the body with powerful hormones

such as adrenaline, noradrenaline and cortisol

which fundamentally affect bodily functions

such as heart rate, blood pressure, digestion,

concentration, immune system and sight.

“The problem occurs when we experience

this response for situations which are not life-

threatening,” Hawkey says. “As much as we

like to believe we are sophisticated, intelligent

creatures, we react instinctively before we

analyse.” Most often we are not even aware

of this reaction; getting angry sitting in

traffic, becoming upset when guests are late

or feeling nervous prior to a performance

review. When the fight-or-flight response starts

kicking in 20, 50 or 100 times a day, it’s easy

to understand why it is estimated that as many

as two-thirds of GP visits are related to stress.

While many definitions of stress exist, Hawkey

points out that it is important to understand

that it is a stimulus to which our bodies and

minds respond (events, situations or items)

that is either perceived or real. As a result,

what causes one person stress does not

necessarily do the same for another. Nor is all

stress bad. Eustress is a positive, motivating

stress that keeps humans moving forward;

for example, at the start of a new project

or when asking someone out on a date.

However, modern lifestyles are characterised

by distress, hyper-stress (over stimulation) and

occasionally hypo-stress (under stimulation).

“The first step on the path to managing

stress and building resilience is to be aware

that you are (negatively) stressed in the first

place. Once you acknowledge that, you can

work on identifying the causes and invoke

an appropriate stress-management strategy,”

Hawkey adds.

The bottom line

Despite society’s conditioning that stress is

just something modern man (and woman)

needs to cope with, stress is a risk issue

that should be addressed by every business

and organisation. The Chartered institute

for Personnel Development in the Uk now

refers to stress as “the black plague of

the 21st century”, and the World Health

Organisation has stated that unipolar

depression (a common consequence of stress

and the disorder Hawkey suffered from) will

be the second-largest cause of disability

worldwide by 2020 (with HiV/Aids predicted

to be holding 10th place and heart disease

remaining number one).

it is said that an organisation is only as

strong as the sum of its parts. if then, as

survey results suggest, 58 per cent of your

employees are verging on exhaustion and

suffering from sleep disorders, 37 per cent

are experiencing unexplained chest pains,

49 per cent of your staff is demotivated and

as many as 51 per cent totally disengaged

and merely living for Fridays, how strong is

your organisation?

Is your organisation practicing safe stress

Equilibrium solutions is offering the

readers of risksA the opportunity

to take a confidential stress self-

awareness survey. it shouldn’t

take more than five minutes and

is free for risksA readers. The

survey’s results will be aggregated

and analysed in a future article.

To take part, simply go to www.

vitaltest.com and enter risk497 as

the employer code and follow the

onscreen instructions.

www.marsh-africa.com

A NEW PAN-AFRICAN LEADERMarsh, the world’s leading insurance broker and risk advisor has acquiredAlexander Forbes Risk Services, Africa’s pre-eminent insurance broker.

MARSH AFRICAwww.marsh-africa.com | 011 506 5000An authorised financial services provider | FSB/FSP: 8414

Marsh’s global industry practices and risk specialities ensure our clients receive the best solutions tailored to their particular needs, helping them

.

Industry Practices: Agriculture, Automotive, Aviation & Aerospace, Chemical, Communications, Construction, Education, Energy, Entertainment, Financial Institutions, Fisheries & Aquaculture, Forestry & Integrated Wood Products, Food & Beverage, Healthcare, Hospitality & Gaming, Infrastructure, Life Sciences, Manufacturing, Marine, Media & Technology, Metals & Minerals, Mining, Power & Utilities, Public Entities & Government, Private Equity, Rail, Real Estate, Retail & Wholesale.

Risk Specialities: Aviation & Aerospace, Casualty, Employee Benefits, Environmental, Financial Risk Products, FINPRO, Marine, Product Recall, Project Risk, Property, Mergers & Acquisitions, Surety, Trade Credit & Political Risk.

MANAGE RISK FOR GROWTH

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RisksSA_July2012

03 July 2012 09:32:51 AM

83riskSA Magazine

MaNagEMENT

FiGHTiNG Fir

E WiTH FirE…

Or TECH?

The risks a

ssociated with forestry plantations are va

st. While s

ome

foresters prefe

r natural methods of risk management, su

ch as controlled

burning, others have tu

rned to technology.

ENVirONMENTAL DisAsTErs risk

south Africa is in

a precarious positio

n when it comes to

liability and

compensation for oil pollution from tankers. We ta

ke a closer l

ook

at the Eihatsu Maru, which ran aground in late June on Clifton Firs

t

Beach, Cape Town, and speak to

sMiT A

mandla Marine, the m

arine

services

company in charge of salvage operations.

P88

ENTErPrisE r

isk

sTrATEGiCPLANNINGoPERAtIo

nS

MAnAgEMEntiNTErNALCONTROL

RISKManageMenTiNFO

www.marsh-africa.com

A NEW PAN-AFRICAN LEADERMarsh, the world’s leading insurance broker and risk advisor has acquiredAlexander Forbes Risk Services, Africa’s pre-eminent insurance broker.

MARSH AFRICAwww.marsh-africa.com | 011 506 5000An authorised financial services provider | FSB/FSP: 8414

Marsh’s global industry practices and risk specialities ensure our clients receive the best solutions tailored to their particular needs, helping them

.

Industry Practices: Agriculture, Automotive, Aviation & Aerospace, Chemical, Communications, Construction, Education, Energy, Entertainment, Financial Institutions, Fisheries & Aquaculture, Forestry & Integrated Wood Products, Food & Beverage, Healthcare, Hospitality & Gaming, Infrastructure, Life Sciences, Manufacturing, Marine, Media & Technology, Metals & Minerals, Mining, Power & Utilities, Public Entities & Government, Private Equity, Rail, Real Estate, Retail & Wholesale.

Risk Specialities: Aviation & Aerospace, Casualty, Employee Benefits, Environmental, Financial Risk Products, FINPRO, Marine, Product Recall, Project Risk, Property, Mergers & Acquisitions, Surety, Trade Credit & Political Risk.

MANAGE RISK FOR GROWTH

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RisksSA_July2012

03 July 2012 09:32:51 AM

84 riskSA Magazine

environmental Disasters rIsk

At 05h30 on saturday, 20 June 2012, Clifton First Beach on the Cape Town coast played host to an unexpected and uninvited guest. A Japanese fishing vessel, the Eihatsu Maru, ran aground, kick-starting a series of events that would trigger an insurance stand-off to the tune of r7.5 million. The south African Maritime safety Authority (sAMsA) launched a salvage operation, deploying

the specialist marine services company, sMiT Amandla Marine, to render the necessary assistance. As at the writing of this article, the owners of the vessel have failed to produce a single cent.

To what degree is the south African National Disaster Management Centre (sANDMC) prepared to tackle these kinds of logistical and

environmental challenges? What are the insurance implications associated with this scenario?

Patience Dlikilili is the head of communications at the department of local government and highlights three areas of observation.

1. the present state oF readiness“The current preparedness level for maritime

disasters is adequate. The incident involving the

Eihatsu Maru was not deemed to be a disaster

as this accident was taken care of as a normal

maritime emergency. The sectorial responsibility

for shipping accidents (emergency and/or disaster)

is that of the national department of transport,

and specifically sAMsA. Only if the department of

transport, with its own resources, is unable to cope

with a specific incident, will it request that a disaster

be declared (within the ambit of the Disaster

Management Act). it is at this stage that the disaster

management fraternity, namely the City of Cape

Town’s Western Cape provincial government, as

well as the National Disaster Management Centre,

is activated for the purpose of co-ordination and

monitoring of the incident.”

Dlikilili says that when a disaster declaration

is required, the maritime disasters contingency

plan will be activated which elevates the

incident to a higher level of unified command.

This allows for the national contingency reserve

funding to be accessed under the auspices of a

disaster declaration.

There are currently adequate disaster

contingency plans in place for maritime

disasters, and these plans are reviewed on an

annual basis. During the mentioned maritime

incident, officials of the City of Cape Town’s

disaster management centre (DMC) monitored

the situation and supported sAMsA where

it was required. The head of the provincial

DMC, Colin Deiner, requested that a sANDF

helicopter assist with rescue and relief activities.

The helicopter was made available.

G r a n t C y s t e r

“It is at this stage that the disaster management

fraternity, namely the City of Cape Town’s

Western Cape provincial government, as well as the national disaster

management centre, is activated for the purpose

of co-ordination and monitoring of the

incident.”

85riskSA Magazine

2. weaknesses

“No weaknesses in disaster

responses were recorded. The only

problem that has to be addressed

is the monitoring of shipping

traffic along our coastline and the

necessary risk reduction measures

that will prevent a similar incident

occurring in future,” says Dlikilili.

3. owner’s insuranceDlikilili adds, “The Western Cape

has adequate resources and

disaster management capacity

to deal with the consequences of

maritime disaster. since 2000, the

Western Cape has demonstrated a

very good track record in handling

similar maritime-related incidents

and/or disasters. The only aspect

that might require urgent attention

is the compulsory shipping

owner’s insurance coverage

which, according to recent news

reports, is totally inadequate as

currently specified in south African

legislation. This is an issue that

needs to be addressed by the

national department of transport.”

proFessional insight into marine insurancerob Hoole, a specialist in

maritime law, serves as legal

and insurance adviser to sMiT

Amandla Marine. He says that

there are essentially two main

types of marine insurance

procured by most vessel owners.

Protection and indemnity (legal liability) insuranceThis cover is procured on a

vessel by vessel basis. Protection

and indemnity (P&i) cover is

provided either on a mutual

basis or on a fixed premium

basis. Mutual P&i cover is

largely provided by mutual

insurers which are part of the

international group of P&i

clubs. About 90 per cent of

the world’s shipping tonnage

is insured via mutual insurers

which are members of this

group. P&i insurance covers the

vessel owner’s legal liability to

third parties and would include

liabilities arising out of injury to

passengers or crew members,

damage to cargo, damage to

fixed or floating objects, wreck

removal and pollution. it would

generally also include a ship

owner’s liability for damage

caused to another vessel in the

event of a collision with the

insured vessel.

“No weaknesses in disaster responses were recorded. The only problem that has to be addressed is the monitoring of shipping traffic along our coastline and the necessary

risk reduction measures that will prevent a similar incident

occurring in future.”

86 riskSA Magazine

hull and machinery (asset) insurance

This insurance covers the vessel itself (both

its hull and its machinery) for accidental

damage or total loss.

Hoole says that in the case of salvaging

operations like the one involving the Eihatsu

Maru, the owner of the vessel in distress is

primarily responsible for all costs related to

salvage or emergency services rendered.

“salvage services can be offered on a

commercial basis (such as via a Lloyd’s

Open Form – no cure no pay – salvage

agreement) or the appropriate state body

(such as sAMsA). if the circumstances

demand, it can instruct the master of a

vessel in danger of polluting the south

African coast to take specific actions

(including the taking of an emergency

tow) to prevent pollution. in the latter

case, sAMsA has the necessary authority

to recover from the vessel’s owner any

costs it may incur in assisting the vessel

or preventing pollution. Generally, in

maritime law, a party which has rendered

salvage services has a maritime lien over

the vessel. This lien acts as security for

the claimant. if the vessel owner does not

provide the necessary security for the claim,

“This liability could, however, be limited by contract and the tug owner would also, in certain

cases, be entitled to a statutory limitation of its liability.”

the claimant can arrest the vessel

and can eventually sell the vessel in

execution of its claim.”

As for the cover that a company

like sMiT Amandla Marine

requires, given its involvement in

the salvaging operation, Hoole

adds, “in principle sMiT Amandla

Marine would be liable to the

vessel owner (of any vessel to

which it renders services) for any

damage it causes to that party’s

personnel or property, and would

also be liable to third parties for

any pollution it causes, even if

the services were being rendered

in an emergency situation. This

liability could, however, be limited

by contract and the tug owner

would also, in certain cases, be

entitled to a statutory limitation of

its liability. Ultimately this liability

would generally be covered by

the tug owners P&i cover, under

a specific extension which allows

for the rendering of salvage and

towing activities.”

in the view of Mike Brews, chief

operating officer of santam

division, associated marine, the

amount of vessels stranded along

the south African coast serves as a

warning to local ship owners in the

business of sending vessels out to

sea without the necessary insurance

cover in place. it is an issue that

Brews feels could adversely affect the

local maritime insurance sector.

in an open letter dated 8 June

2012 to the south African Minister

of Transport, the head of shipping

law at the University of Cape Town,

Professor John Hare, stated that

limits of compensation available to

European maritime states affected by

oil pollution was increased to r9.3

billion. This increase in compensation

was spearheaded by an EU effort,

subsequent to a long list of costly

shipping disasters. However, as Hare

went on to say, south Africa is in a far

more precarious position.

referring to the risk of future

disasters, Hare says, “We still do

not sleep easy in south Africa. if

the somewhere is here, and the

sometime is before our government

gets its act together in relation to

liability and compensation for oil

pollution from tankers, all we will be

able to claim in compensation is a

paltry r180 million from the owner

or insurer of the stranded ship.”

Clearly, south Africa has got some

way to go in readying itself for a

possible shipping catastrophe that

could cost taxpayers billions. Until

such time that relevant legislation is

modified to guarantee the necessary

safeguards, our beautiful and fragile

coastline remains vulnerable to a

future calamity.

The sky is the limit?Says who?

Into the future means into the unknown. Many dream of braving the voyage.But it takes knowledge to get there in one piece. Knowledge is the fuel thatpropels an idea — like gravity pulls a satellite — forward. At Munich Re, it’s the fuel that drives us to think the unthinkable, to make the undoable doable. To find out more about how to navigate the future with confidence,visit our website at www.munichre.com

NOT IF, BUT HOW

MR_Satellite_CI_GB_210x297+3_RZ03_ICv2.indd 1 09.06.2010 18:43:49 Uhr

The sky is the limit?Says who?

Into the future means into the unknown. Many dream of braving the voyage.But it takes knowledge to get there in one piece. Knowledge is the fuel thatpropels an idea — like gravity pulls a satellite — forward. At Munich Re, it’s the fuel that drives us to think the unthinkable, to make the undoable doable. To find out more about how to navigate the future with confidence,visit our website at www.munichre.com

NOT IF, BUT HOW

MR_Satellite_CI_GB_210x297+3_RZ03_ICv2.indd 1 09.06.2010 18:43:49 Uhr

88 riskSA Magazine

if you stack the timber that south Africa produces each year

from end to end, it would be enough to circumnavigate the

globe at least 10 times. This is according to wood company,

Cape Pine.

The sA forestry industry plants 360 000 trees every working

day – more than 90 million trees annually – and contributes 8.7

per cent of the gross value of south Africa’s agricultural output.

Activities and products such as paper manufacturing, charcoal and

woodchip production rely on the raw materials from commercial

forestry. But in 2008, 84 000 hectares of land were destroyed and

instead of being the net exporter of timber, south Africa became

the net importer. risksA takes a look at the south African forestry

industry and the risk management being implemented to reduce

the risk of this happening again.

M i k h a i l a C r o w i e

Fighting

sa in the danger zoneForestry south Africa claims that over the past

25 years, our country has lost an average

of 14 000 hectares of forest each year.

Unfortunately most regions are situated near

ecosystems, vulnerable to wildfires. ruth

Bezuidenhout, plantation manager at safire

insurance Company Limited (safire), says

because south Africa is prone to drought, we

are considered a high fire risk area, naming

Mpumalanga, Limpopo, Tzaneen and knysna

as areas most at risk. The challenges of

climate change pose a threat of increased

incidence in fires as the decreased amount of

rainfall has been prevalent in many regions of

south Africa.

Mpumalanga and kwaZulu-Natal host the

largest forestry plantations in the country.

However, in 2008, 22 000 hectares of land in

Mpumalanga were destroyed by an estimated

49 runaway fires. so devastating, it was dubbed

the forestry industry’s own 9/11. Fires ruined

plantations in parts of the Cape, kwaZulu-Natal

and, most notably, the areas surrounding sabie

and Graskop, the main timber-growing areas of

Mpumalanga. Propelled by high-speed winds,

the flames jumped over fire breaks with ease.

While there is debate surrounding whether these

fire were caused by nature or arson attacks,

Bezuidenhout says most fires are accidental.

“The arson numbers are inflated. in my

experience, most fires are accidents caused

by kids, who are not educated properly

about fire risks, playing at the edge of the

forest.” Bezuidenhout advises that charges

of arson should always be followed up with

an investigation.

A closer look at the areas around Graskop

and sabie in 2008 revealed besmirched earth

and burnt timber. Before each winter, a tour

around sabie is accompanied by smoke-filled

air as foresters prepare and burn fire-belts.

The high peaks overlooking the plantations

are patrolled daily.

“We want our system to be useful outside the fire season and have picked up on instances of timber theft, cycad

theft and poaching.”

…or tech?Fire with Fire

89riskSA Magazine

Fire management successsafire offers a wide spectrum of insurance products to the national

market and services the agricultural sector. The company’s Crop

Protection Co-operation is a comprehensive and tailored plantation

programme to help clients protect against the financial losses of

fire damage, harvesting costs when a crop is damaged and debris

removal cover. While insurance cover is essential and mitigates

devastating losses as a result of fires, Bezuidenhout stresses that

landowners have the obligation to use the resources available to

prevent fires on their property and notify fire prevention authorities

and neighbours if a fire spreads. “Make sure staff members are well

trained if ever you need to leave the area unattended, and ensure

all fire equipment is in working order. When you plant your species,

always consider the prevailing wind conditions and the layout.”

south African forest fire expert and Forestry solutions consultant,

Ben Potgieter, emphasises that south African foresters need to

accept that changing weather patterns are a reality. To counter the

risks, land owners need to monitor weather patterns and carry out

detailed risk assessments. He says that ultimately fire management

success is a result of planning, readiness, early detection and a

quick response.

The destruction caused by fires in 2008 interrupted the 23-

year cycle, which is the amount of time it takes for trees give a

sustainable yield. This means the industry is faced with years of

replanting. But as the co-owner of Daybreak Timber Marketing,

Lance Cooper, explains, “This is a long term industry and we’re

already getting on with it.”

nature vs technologyWhile some patrols operate in the lookout areas in sabie, others are

equipped with sophisticated remote-controlled camera equipment. This

equipment monitors plantations and relays images to a command centre,

from where threats can be detected. A software system, developed

to monitor environmental changes in Antarctica for the space Physics

research institute, has been used internationally to monitor potential

fire threats. Managing director at Envirovison solutions (EVs), Dr Gavin

Hough, used this system to develop ForestWatch, which is being utilised

by kwaZulu-Natal and Mpumalanga fire associations.

A fire detection service, ForestWatch, uses multiple cameras mounted

on a 100-metre tower, feeding live video streams to a control centre

using satellite communications. The system’s wide performance

monitoring application measures the response times to smoke alarms,

the delays associated with manual inspection when an operator takes

control of the camera and tilt-zooms into potential or actual fire events.

Using geographical information systems (Gis) software, the camera

can pinpoint the position of a fire and transmit a single frame to the

control centre via satellite. The system uses high-resolution camera

equipment to scan the surrounding environment; these cameras are

linked to a software programme, integrating real time and space data.

The programme enables the operator to detect any changes in the

landscape, such as appearance or the movement of smoke, enabling the

fire protection officer to evaluate the threat based on the fire’s location.

While the system is used to detect fire threats, it is also resourceful in the

post-mortem investigation of fires, as well as unrelated threats. “We want

our system to be useful outside the fire season and have picked up on

instances of timber theft, cycad theft and poaching,” Hough explains.

Although technology has worked effectively for some, others prefer to use

Mother Nature’s resources. The process of mulching, brushwood clearing

and firebreaks has its advantages. “i’ve seen that when a fire spreads to

an area that has been mulched, the fire immediately extinguishes. While

i am not sure of the long-term impact on the soils, the process is neither

too costly nor labour intensive,” notes Bezuidenhout.

Mulching is a process of inbred fertilisation composed of certain

decomposed organic materials to blanket an area in which vegetation

is desired. The procedure enriches the soil for stimulated plant

development while at the same time preventing erosion and decreasing

the evaporation of moisture from the ground. Fire breaks involve a strip

of land where vegetation has been removed or modified to contain or

reduce the spread of fires before they enter a property.

“A fire detection service, ForestWatch, uses multiple

cameras mounted on a 100-metre tower, feeding

live video streams to a control centre using satellite

communications.“

90 riskSA Magazine

maria teixeira

Maria Teixeira | Manager: Trade Credit, Surety and Political Risks at Aon South Africa.

Volatile trading conditions have

made payment protection, in

the form of credit insurance, an

imperative rather than a luxury,

according to Maria Teixeira,

manager: trade credit, surety and political risks

at Aon south Africa.

The looming fallout of the Eurozone, growing

corporate insolvencies and extended payment

delays are all factors that are exerting

tremendous pressure on the long-term

sustainability of businesses across the country,

regardless of their size.

“Bleak economic reports coming out of credit

insurers are on the mark. Creditors and all

suppliers should not underestimate the dire

implications for their business if major debtors

default. Job losses and retrenchments are on

the up again as businesses struggle to maintain

high sales volumes. Drastic cost reduction

programmes seem the order of the day, as

companies seek to avoid compromising their

long-term sustainability. The lack of spending

and extended non-payment of accounts by

government is also exacerbating already volatile

markets,” says Teixeira.

“Under these conditions, credit insurance

is becoming a survival necessity rather than

a luxury for many companies. Despite tight

cash flow controls and working capital,

companies would be foolhardy not to have

payment protection in place given the tough

trading conditions. Business rescues are

becoming commonplace, with the most

recent application filed by sanyati after its

shares were suspended. sanyati is owed long

outstanding payments from three provincial

governments totalling r79 million.

“statistics indicate a sharp rise in voluntary

applications for business rescue from

companies. Business rescue claims to

various insurers average around r30

million in total. it is affecting all industries

and companies of all sizes, and lately the

trend is that the bigger the company, the

harder it falls. There is no longer a ‘safe’

company to deal with in today’s economic

climate,” warns Teixeira.

The rise in the number of business rescue

applications should be of serious concern

to all suppliers. When a company is

placed under business rescue, payments

to suppliers and creditors are put on hold,

usually for months until a plan is approved

by all stakeholders. This creates serious

cash-flow problems for suppliers. Couple

this with lack of payment or delayed

payments by any other debtors and it

becomes a vicious circle.

“suppliers or creditors with credit insurance

will benefit in such situations from their

insurance pay-outs that occur promptly after

a debtor has gone into business rescue. They

also benefit from the insurer’s expertise in

handling the business rescue proceedings,

including attending all the creditors meetings.

This becomes vitally important as there are

few companies that successfully exit business

rescue and avoid ending up in liquidation,”

says Teixeira.

“in addition, many businesses are looking

to the rest of Africa for growth which is

hardly surprising in light of our sluggish

growth, which is hovering around 2.8 per

cent versus five per cent for the rest of the

sub-saharan African economies. For any

business considering trade with Africa, export

insurance is an absolute must along with

complementary products such as guarantees.

Exporters will need to do some serious

homework and select markets and sectors

where they are most likely to get paid.

“Payment protection through properly

scoped credit insurance is a non-negotiable

given such volatility and threats to business

sustainability,” concludes Teixeira.

creDit insurance vital in unCErTAIn fuTurE

Warwick is an authorised Financial Services Provider www.warwickwealth.com

As many successful brokerages across South Africa will tell you, a partnership with Warwick is a win-win. If you’re interested in discussing a way forward for your business call Roy Wright on

I know what I know; my clients trust and respect me

I know there will be more exams to come

I’d love to just do what I’m good at - and leave compliance and regulation to someone else

COULD THIS BE THE LAST EXAM I EVER TAKE?

REGULATORY EXAMS:

or roy@teamwarwick.com0800 50 50 50

93riskSA Magazine

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buSiNESSBETTEr

TECHNOLOGybEStpracTIseETHiCs

tRAInIngLEGisLATiO

N

A COLD sHOWEr FrOM TrEAsUry

P108ism

ail Momoniat, D

eputy-Director G

eneral of the National

Treasury, was highly cr

itical of the short-te

rm insurance sector

in his address a

t this year’s i

nsurance Conference. We unpack

some of his critici

sms and find out what the industry has to

say

about them.

sTiNG iN THE sC

OrPiON’s TA

iL

ArE GrEEN BUiLDiNG TAX

rEBATEs WOrTH iT?

The Green scorpions is charged with the responsibility

of monitoring and

policing big corporates and their enviro

nmentally hazardous waste. W

e take a

look at what this specialist

unit has been up to over the last fe

w years.

Government is offering businesses ta

x rebates fo

r greening

their buildings. We find out how the rebates work a

nd what

else is being done to make south Africa

’s buildings m

ore

energy efficient and sustainable.P116

in the scorpion’s tail

stinG There is an old native American adage which says it is only once the last tree is destroyed, the last fish consumed, and the last stream polluted, that those obsessed with money will realise that their fortune cannot be eaten. It is a sentiment that often rings true in South Africa in the face of environmental protection protocols that at times appear to be inadequate at curbing the swelling tide of pollution. A group called the Green Scorpions is charged with the responsibility of monitoring and policing big corporates and their environmentally hazardous waste. We take a look at what this specialist unit has been up to over the last few years.

94 riskSA Magazine

95riskSA Magazine

fighting the good fight“The Environmental Management inspectorate (popularly referred to as the Green scorpions) is not defunct. The EMi continues to monitor compliance with and enforce the specific environmental legislation it has been mandated to enforce in the designations by the Minister or relevant MEC,” says Albi Modise, chief director of communications for the Department of Environmental Affairs.

in response to a question about whether or not the Green scorpions has been provided with the resources and authority necessary to effectively carry out its mandate, Modise went on to say, “The EMi network has experienced its own set of challenges in the past five years. insufficient funding, capacity and resource constraints are some of the most serious challenges. The EMi also competes with the private sector for competent and dedicated staff. Managing the EMi across

the different institutions, while trying to ensure a national profile, has its own tribulations.”

As it relates to the policing of large south African businesses and their environmentally hazardous waste, Modise says, “Depending on the nature of the waste according to the waste classification document, the EMis within the national department would essentially be responsible for regulating industries that generate hazardous waste. Those industries which generate, store or use general waste are regulated by the EMis within the provincial environmental departments.”

in a media statement for the Environmental Compliance and Enforcement Lekgotla held in March this year, Modise said that since the last Lekgotla, which took place in February 2009, some important initiatives have been undertaken to support the work of the Green scorpions. These initiatives were aimed at developing a framework within which the Green scorpions and other key role players could operate,

and include the publication of an EMi Operating Manual; production of a Magistrates’ Bench book to provide guidance to judicial officers in dealing with environmental cases; an update of the Prosecutor’s Guidelines; specialised EMi courses on priority compliance and enforcement topics and 559 learners that underwent basic training through various institutions, which were responsible for training of EMis.

Perhaps one of the most significant areas of progress recorded was with regard to the effecting of legislative amendments that strengthened the powers of the Green scorpions and also increased penalties. For example, there are now maximum fines of r5 million and r10 million depending on the offences that have been committed. in the silicon smelters case in Witbank, a fine of r3 million was issued in August 2011 and the facility spent r13 million on improvements to minimise the impact from the site on the community and the environment.

Green scorpions is the name given to over 600 environmental management inspectors in south Africa. its mandate is to enforce environmental law and to investigate and hold those who fail to comply with it accountable. The key areas that they are meant to enforce include pollution, waste, protected regions and biodiversity. They are also responsible for conducting marine and environmental impact assessments.

in terms of legislation, the mandate of the Green scorpions is to enforce the National Environmental Management Act (NEMA), along with its stipulated regulations like the Protected Areas Act, the Air Quality Act and the Biodiversity Act. Appointments to the Green scorpions are limited to individuals who are employed by the Department of Environmental Affairs and Tourism (DEAT), provincial environment departments, municipal governments, or quasi-government organisations such as sanbi and sanparks.

“Insufficient funding, capacity and resource

constraints are some of the most serious challenges.”

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96 riskSA Magazine

compliance enfoRcement statisticsThe following figures illustrate the progress made in anti-pollution enforcement over the last four years:

• Atotalof9404criminaldocketsandadmission of guilt fines were registered.

• Since2007–2008,atotalof6986arrestswere recorded.

• Thenumberofwarningletters,pre-directives,pre-compliances, final directives and final notices issued, as well as civil court applications launched, peaked in 2009–2010 with a total number of 385 in 2008–2009 to 1 260 in 2009–2010 followed by a slight decline in 2010–2011 to 729.

it is true that numerous companies in this country make no attempt to manage their toxic waste responsibly unless faced with enforcement action. However, there are encouraging indications that the Green scorpions is actively addressing this issue; and while the battle is far from over, significant inroads are being made towards securing a cleaner and safer environment for all.

For further information on the work of the EMi in the last two years, read the National Environmental Compliance and Enforcement reports (NECEr) for 2009/2010 and 2010/2011 at:http://www.environment.gov.za/sites/default/files/docs/necer2010_11report.pdf.http://www.environment.gov.za/sites/default/files/docs/necer2009_10report.pdf.

Background information on the EMi is available at http://emi.deat.gov.za/.

The Waste Classification document can be viewed at www.sawic.co.za.

healthcaRe Risk wasteThe Green scorpions has communicated its adoption of a zero-tolerance policy with regard to healthcare risk waste (medical waste) which has led to an integral transition towards compliance among companies in the medical industry. in the aforementioned media statement, Albi Modise says, “The most important criminal case in relation to healthcare risk waste is the case of medical waste buried in Welkom, which will probably come before the High Court in Bloemfontein only towards the end of this year. The clean-up operation associated with this waste (which involved the removal of 18 000 tons of waste and soil at a cost of approximately r55 million) was undertaken over a period of 10 months in line with a compliance notice issued by the Green scorpions.”

the industRial sectoRA significant focus has been placed on proactive industrial compliance and enforcement work over the last five years. included in this effort are the ferro-alloy, iron and steel industry; refineries; cement; paper and pulp; and hazardous waste facilities. During the original inspections, numerous non-compliances were identified and the responsible facilities were confronted with the requirement of correcting inappropriate practices. Over the last 24 months, the Green scorpions has embarked on many follow-up inspections in an effort to determine if levels of compliance have been raised by the companies in question. in the March 2012 media statement, Modise goes on to say, “The enforcement action taken by the Green scorpions against ArcelorMittal Vereeniging, which required the implementation of measures to address the significant fugitive emissions, resulted in the commissioning of a secondary extraction system at a cost of r220 million. Assmang Cato ridge also commissioned its r100 million extraction system in response to enforcement action taken by the Green scorpions back in 2007.”

According to Gail smit of the institute of Waste Management of southern Africa, “The greatest challenges in municipal waste management are financial management, equipment management, labour (staff) management and institutional behaviour (management and planning); the lack thereof. There is a perception that government monitoring and policing is aimed at large companies while the municipalities get away with 'murder'. Large companies are usually isO 14000 certified in order to operate in a competitive market. One of the requirements for isO certification is that a company needs to comply with environmental legislation. There is no similar incentive for municipalities to comply. Co-operative governance is quite often used as a scape-goat so as not to take action against non-compliant municipalities. The national waste management strategy lacks practical action plans for implementation. it will help a lot if such action plans could be formulated."

R55 million

The cost of the clean-up operation associated with

18 000 tons of waste.

98 riskSA Magazine

insurance for a susTAInABlE fuTurE

Aimed at propelling sustainable development, the Principles for Sustainable Insurance (PSI) present a United Nations-backed global insurance industry initiative to support the development of a green economy and resilient communities. Launched at the United Nations Conference on Sustainable Development, known as Rio+20, which took place in Rio de Janeiro, Brazil from 20 to 22 June, the PSI are a result of a six-year global development process carried out by the United Nations Environmental Programme’s Finance Initiative (UNEP FI).

H a n n a B a r r y

99riskSA Magazine

“These principles are of great significance to the global insurance industry. They address systemic risk and

change, and how to ensure that the sector remains sustainable in the face of profound change in, for example, socio-politics, climate, regulatory and public

policy environments.”

Close to 30 leading companies from the insurance industry, worth

over $5 trillion (r40.8 trillion) in total assets and representing over

10 per cent of the world premium volume, together with insurance

associations from different regions around the world, have signed

the Psi. signatory companies will publicly disclose their progress in

implementing these principles on an annual basis. south African

insurers, sanlam and santam, are among the founding signatories.

“These principles are of great significance to the global insurance

industry. They address systemic risk and change, and how to ensure

that the sector remains sustainable in the face of profound change

in, for example, socio-politics, climate, regulatory and public policy

environments,” says ian kirk, CEO of santam. “As a founding

signatory of the Psi, we recognise that insurance plays an active role

in promoting pragmatic and collaborative systemic risk management

in society and the economy.”

The world is facing increasing environmental, social and governance

(EsG) challenges changing the risk landscape considerably. As risk

managers and risk carriers, the insurance industry plays an important

role in fostering sustainable economic and social development.

CEO of sanlam, Dr Johan van Zyl, says that sustainability is an

overriding objective of sanlam. “We believe focusing on long-term

competitiveness rather than short-term profit ensures that we do not

borrow from the future. For this reason, our decisions are made to

safeguard the sustainability of our business. As an industry, we could

play a bigger role in driving sustainability more broadly. The global

adoption of the Psi is a step in this direction, to our collective benefit.”

a road-map For risk managementAccording to the UNEP Fi, the principles provide an holistic approach to managing

a wide range of global and emerging risks in the insurance business, from climate

change and natural disasters to water scarcity, food insecurity and pandemics. They

also represent the first-ever global sustainability framework, tailored for the insurance

industry, which takes into account the fundamental economic value of natural capital,

social capital and good governance.

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100 riskSA Magazine

“For years, insurers have been

at the forefront of the corporate

world in alerting society to the

risk of climate change and, more

recently, threats such as the loss

of biological diversity and the

growing pressures on forests,

freshwater and other essential

ecosystems,” says UN secretary-

general, Ban ki-moon. “insurers

are also increasingly recognising

the need to develop products and

services that address the needs

of a rapidly changing world,

including inclusive insurance

that caters to low-income

communities, people with HiV/

Aids or disabilities, and ageing

populations.”

“The Principles for sustainable

insurance provide a global

road-map to develop and expand

the innovative risk management

and insurance solutions that

we need to promote renewable

energy, clean water, food security,

sustainable cities and disaster-

resilient communities.”

Official discussions at the summit

focused on two main themes:

how to build a green economy to

achieve sustainable development

and lift people out of poverty,

including support for developing

countries that will allow

them to find a green path for

development; and how to improve

international co-ordination

for sustainable development.

stakeholders at rio+20 included

governments, the private sector,

NGOs and others.

unpacking the principlesThe Principles for sustainable insurance are:

1. We will embed in our decision-making environmental, social and

governance (EsG) issues relevant to our insurance business.

2. We will work together with our clients and business partners

to raise awareness of EsG issues, manage risk and develop

solutions.

3. We will work together with governments, regulators and other key

stakeholders to promote widespread action across society on EsG

issues.

4. We will demonstrate accountability and transparency in regularly

disclosing publicly our progress in implementing the Principles.

The global insurance industry has mainly focused on refining the

quantification, differentiation and pricing of the risk exposure of

insured assets. However, the findings of a recently published santam-

sponsored research study in the southern Cape’s Eden district call

into question a sole reliance on this risk assessment strategy, and

identify the need for a more proactive risk management approach.

it is in this vein that the south African insurance Association’s

strategic risk Forum (srF) was established. Chaired by executive

head of risk services at santam, John Melville, the srF is aimed at

identifying some of the systemic drivers of risk in the local landscape

and devising strategies to combat these. involving a number of local

insurers and insurance associations, the srF was shared across the

UNEP Fi members and regions and several other associations are

following sAiA’s lead, notably in south America and Australasia.

The sAiA has joined as a supporting association of the UNEP Fi Psi

and will manage the industry response to the Psi from a collective

perspective. Birthed in parallel to the Psi, the srF shares the same

overarching objectives and ethos. Melville presented on the srF

at the annual insurance Conference in June, in an address on the

sustainability of the short-term insurance sector.

psi and srF: connecting the dotsThe srF was formed following the recommendations of a strategic project that santam’s executive head of strategy, Vanessa Otto-Mentz, ran for the sAiA

in 2009/2010. “The project’s aim was to develop recommendations for the board of the sAiA on how to respond in a pragmatic and collective way to

the sustainability challenges the industry is facing,” explains Otto-Mentz. The findings, which involved wide stakeholder consultation in the industry, made it

clear that the short-term insurance industry needed to adopt a proactive risk management position in south Africa, by identifying key shared risks across the

industry, where a collective response could result in shared benefits for the industry at large.

santam’s active membership of the Psi work group flowed over into the sAiA board deliberations and influenced the shaping of the mandate of the srF

and the inclusion of the Psi into its charter. “The srF charter requires a participant in the insurance industry to identify and address relevant EsG risks to the

business; work with others to address the risks across the value chain; and be transparent about its commitments and progress,” says Otto-Mentz.

“Official discussions at the summit focused on two main themes: how to build a green economy to achieve sustainable development and

lift people out of poverty, including support for developing countries that will allow them to find a green path for development; and how to

improve international co-ordination for sustainable development.”

101riskSA Magazine

in 2011, the sAiA did a survey of CEOs and

senior risk executives in the insurance industry to

get a sense of what they considered to be the key

risks to sustainability of insurance in south Africa.

Ten strategic EsG risks were identified, most of

which correspond at some level with many of

the key risks identified by the National Planning

Commission in its diagnostic overview, highlighting

the need for collaboration across sectors. “Early in

the process we recognised that for any approach

to strategic risk reduction to be effective and make

the best use of resources, there must be strong

collaboration between key role players that can act

to reduce risks,” explains Melville.

The srF undertook to understand how these

risks operate systemically and interact with

one another on the ground. This involved

engaging with other stakeholders who share

some of the same concerns and establishing

what kinds of partnerships could develop risk

mitigation strategies that would work to reduce

multiple risks and the impact of these risks, so

optimising the efforts of the insurance industry.

Through this process, the forum gained a

deeper understanding of the risk landscape,

what partnerships could impact in different

areas and how the industry’s efforts should be

directed, whether through initiating something

new or leveraging off and supporting an

existing initiative.

it then developed a framework, out of which

came nine initial focus areas. These include: a

sustainable agricultural insurance environment;

national fire risk management strategy

implementation; enterprise development; the

uninsured majority; resilient buildings/cities

(sustainable buildings and green geysers);

insurance talent (human capital and skills

development); a systemic or 360-degree view

of the changing risk landscape (data and

information management for tracking sTi risk

drivers); an extensive review of motor peril-related

information; and crime.

The members of the forum are nominees drawn

from the leadership of members of the sAiA and

Financial intermediaries Association of southern

Africa (FiA), which established the srF alongside

the sAiA. key stakeholder representatives have

also been drawn from the Financial services Board

(FsB), the insurance institute of south Africa (iisA),

south African Underwriting Managers Association

(sAUMA), Treasury, National Planning Commission,

the Department of Co-operative Governance and

Traditional Affairs, which includes sALGA; and the

Disaster Management Centre.

in addition to partnerships, some of the key

principles of the srF include playing to the industry’s

strengths, drawing on its core areas of expertise,

focusing on areas that have specific sustainability

outcomes for insurance and limiting duplication as

far as possible by refocusing or influencing existing

initiatives. in other words, collaborating to increase

the industry’s collective impact and in so doing

reducing effort.

The srF and launch of the Psi mark the dawning of

a new era for the global insurance industry, and for

the billions of private individuals and entities that it

insures. “We look forward to ground-breaking work

and insights as we move forward on the sustainable

insurance journey,” concludes kirk.

“Early in the process we recognised that for any approach to strategic risk reduction to be effective and make the best use of resources.”

102 riskSA Magazine

Growing concerns about natural disasters has led the insurance industry to develop new tools, technology and solutions to protect populations and assets, according to rowan Douglas, chief executive officer of global analytics at Willis Group Holdings.

The ongoing financial crisis and worsening economic environment

may reduce the ability of countries to cope with the costs of natural

catastrophes and heighten the need for countries to incorporate

better preparedness and financial risk transfer mechanisms.

“Leaders in technology, science, finance and public policy need

to develop practical ways to increase resilience against natural

disasters,” says Douglas. “The insurance sector is at the very heart

of this process, integrating new knowledge into decision making,

setting policy standards and enabling populations to share risks at

local and global scales.

“That is the role that the insurance industry has played for centuries

and the need has never been greater. some may say we are

entering a new ‘Age of insurance’ in the face of growing risks and

uncertainties. Harnessing the insurance mechanism and enabling

us all to gain some financial security and resilience against

natural disasters is critical for enabling investment and providing a

platform for sustainable growth.”

speaking to an audience of 500 business and policy leaders from

85 countries at the World Bank’s Bi-annual Understanding risk

Conference in Cape Town, Douglas highlighted how we are all

natural Disaster risk inspires nEW AgE of InsurAnCE

“It is clear that we are entering a new era of knowledge about extremes, natural hazards and the vulnerabilities of the built environment and exposed populations.”

united by the challenges of confronting natural disasters. “The

events of 2011 showed that even the most prepared countries

within the developed world are vulnerable to natural disaster,

while these events impacted us all through our supply chains

and dependencies on key components and commodities.”

Meanwhile the growing importance of natural disaster

management is evident within the agenda of national and

international institutions like the G20, European Union

and United Nations. “it is clear that we are entering a new

era of knowledge about extremes, natural hazards and

the vulnerabilities of the built environment and exposed

populations,” continues Douglas.

“Advances in mapping are revolutionising our ability to

access, fuse and deploy data from disparate sources to

manage risk and provide better services to customers. These

mapping tools and technologies are at the heart of our

competitive advantage at Willis and an ongoing priority for

the company, together with our development partners in

science and industry.

“Data is now being integrated from major satellite

platforms and high resolution climate models, powered by

supercomputers, together with input from millions of other

contributors via crowd sourcing and social networks. This

fusion of macro and micro sources combined with spatial

referencing and mapping is helping the insurance industry to

become more resilient.”

He highlights a new global earthquake model called

OpenQuake, which will enable countries, companies and

communities to understand their earthquake risk more clearly

and make sensible choices on how to manage it.

Douglas points out that the insurance market has continued

to function normally despite the second-largest year of insured

losses in its history. “This is due in large measure to the role

of improved modelling in the last 20 years, coupled with

an emerging convention that an insurance policy (and the

company that backs it) should be able to tolerate at least the

maximum probable loss that could be expected over a one in

200-year return period.

“There is still much to do, much to learn and much to improve,

but the industry is making enormous strides in this area of

innovation and it is being recognised and respected by our

sector’s customers and stakeholders,” he concludes.

hits insurer boardrooms

103riskSA Magazine

The ongoing nature of the

Euro crisis means Germany

is in as much trouble as

France and italy, despite

its reputation as the stable,

economic ‘power haus’ of Europe and

there is yet to be agreement on how to

solve the crisis.

German Chancellor Merkel amplified

this tense position by arguing that

the proposed solution of Eurobonds,

supported by other key Euro economies,

would not happen “as long as i live”.

Outside the Eurozone, this creates

substantial problems for both Uk

insurers and banks. For some banks

over half of their debts are to be

collected from the Eurozone; for

London-based multinational insurers,

such as Aviva, this adds another

dimension to its current difficulties as a

high proportion of its business comes

from this troubled area. This creates

a situation where insurers may face a

lack of credit and an inability to secure

revenue; a frightening situation but one

that we have got used to.

While the crisis seems to have become

part of the everyday life of the western

economies, for some shareholders things

are starting to change, with shareholder

revolts sweeping across the London

market and leading insurers facing the

anger of investors.

As Q2 ended, Aviva shareholders voted

by a majority of 54 per cent to oppose the

company’s remuneration report. The angry

shareholder meeting lead to Aviva’s chief

executive, Andrew Moss, resigning only days

later. it seems not only elected politicians

can be removed by protests.

This emergence of shareholder activism

presents listed insurers with a further

headache to add to the Euro challenges.

What remains to be seen is how firms

can balance restoring the company to

growth, in already difficult waters, while not

upsetting shareholders and creating internal

difficulties. Aviva says that the search for a

new chief executive will last at least till the

end of 2012, meaning that the company

will go through a strategic review, aimed

at refocusing the business, building capital

and relocating funds to increase returns,

without one.

The clear intention of reviewing and

improving the business will please existing

and potential shareholders, but news of the

revolt and resignation resulted in Aviva’s

share price hitting a 2012 low of 251 as the

quarter ended with only a mild recovery so

far in Q3.

The lack of a chief executive at a time of

reviewing the business and an unsettled

Eurozone isn’t exactly the ideal conditions

for a share price recovery. The company

cites positive Q1 operating profits but it is

clear that there is much work to be done,

with s&P warning that the company’s credit

rating may see a Q3 downgrade.

it is unlikely that the old expression,

“The pound is sinking, and feeling quite

appalling” will turn out to be true; but after

so many years of financial problems, you’d

be forgiven for thinking along those lines.

The summer is a boring time in the market

even when there are crises everywhere. We

have experienced the first summer slump

and in Europe and the Us there has been a

nice recovery.

The question remains: will there be

another slump in a few weeks and will

Euro politicians grind through the currency

crisis to unify Europe? Only until all the

necessary paperwork is signed for deep

fiscal unification, temporary bandages will

be applied. The crisis continues, both in

markets and in the boardrooms.

hits insurer boardrooms tHe crisis

“It is unlikely that the old expression, the pound is sinking, and feeling quite appalling’ will turn out to be true; but after so many years of financial problems, you’d be forgiven for thinking along those lines.”

CLEM CHAMBErs | CEO ADVFN

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104 riskSA Magazine

cenTriq ceoGareth Beaverrecently appointed as CEO of Centriq insurance, Gareth Beaver chatted to risksA

about the insurer’s future and some of the things that make him tick.

centred on

105riskSA Magazine

on transformation, what’s it like living in Johannesburg? Johannesburg is so vibrant and the pace of change, renewal and development has really accelerated over the last 10 years. Probably the most exciting and encouraging aspect of life in Johannesburg is the integration of people from all different cultures and backgrounds.

what have been some of the most defining experiences in your life? Having kids is probably the most defining experience. it fundamentally changes how you see the world, yourself, your purpose and responsibilities.

would you recommend a career in the insurance industry to your kids? Absolutely. it is such a dynamic industry; risks evolve and with that the required products to solve these problems. The industry plays a significant role in creating security and stability for a large percentage of the world’s population, in a world that is more complex, and sometimes more fragile, than ever.

we hear you’re something of a health freak. what does the family eat when it’s your turn to cook? Eating healthy food and exercising regularly is just a way of life, but i am not that rigid and i indulge quite regularly. i love cooking, but hardly find the time to do so. Work, kids, cycling, golf and socialising make it difficult. i will cook the odd curry (if i have time to buy all the ingredients), but simple things like hamburgers or a fillet steak on French baguettes will do for now.

you recently took part in the Pondo Pedal Cycle tour. was it as gruelling as it looks? Are you quite the mountain-biking fanatic? On day two it took us seven hours to cover about 24 kilometres; we hiked for 20 kilometres carrying our bikes and rode for four. it was an adventure and you learn about yourself when faced with these kinds of challenges. Mountain biking is a great way to keep fit. you get fresh air, you experience beautiful parts of south Africa, which you will never see or experience by car, and it is a great way to spend time with friends and make new friends.

what about rugby and cricket? i played rugby, hockey, cricket, golf and tennis at school. After school i continued with hockey for some time and still play golf. i am a disillusioned Lions supporter and will always support the sharks if the Lions are not playing. i am terribly competitive and hate losing.

And your passion for renovating houses? where does this come from? i’ve never renovated an old house, but every house i have bought to live in (four to date) has been a new house and i’ve been intimately involved in each building project, in terms of design and all the detailed finishes. This fulfils the creative side in me and i love seeing something go from an idea, to a plan and then into reality.

off the back of a successful career and personal life, would you say you have a fear of failure? success is a relative concept as it is all dependent upon whom or what you measure yourself against. if i measured my career achievements against ivan Glasenburg (founder and CEO of Glencore), then i am a failure. As a result, i don’t see myself as successful and that creates a whole lot of ongoing pressure but it keeps me relatively humble. i do have a fear of failure and that holds me back because it has meant that too often i have not taken on personal risk in terms of business opportunities. This is something i need to overcome.

Gareth Beaver

you’ve been at the helm of Centriq for just over three months. has it been fairly smooth sailing? Pretty much. The business was in relatively good shape, but not surprisingly we have our challenges and opportunities and these have not changed, so it is a case of continuing the journey ahead and making things happen.

what challenges lie on the horizon? The market is incredibly competitive and Centriq had lost its touch in achieving top line growth as we had become very internally focused over the last three years. We need to get back onto the front foot in terms of innovating products, building closer relationships with our existing distribution channels and developing new distribution channels where appropriate in an effort to grow our market share profitably.

Do you think that increasingly onerous capital and solvency requirements mean the end of smaller insurers and uMAs? i am not yet convinced that the new capital requirements that we will see under sAM are alone going to have such a material effect. it will be the combination of the overall increased costs imposed upon insurers in order to comply with the raft of legislative changes (including sAM, TCF, POPi, etc.), as well as tighter capital requirements, which will cause a number of the smaller players who do not have minimum levels of critical mass or a highly profitable market segment to throw the towel in. We can expect to see consolidation, impacting upon both smaller insurers and a certain number of UMAs.

what plans does Centriq have to diversify its current niche market position? We are currently planning to launch our own personal lines product via a community-based marketing strategy, borrowing some insight from our affinity insurance knowledge and experience. We are also considering potential options in the commercial market segment and, depending upon the outcome of these investigations and research, we may launch something where our go-to market strategy will be different to our current business model.

you mention that doing insurance business from the heart and with the best brains in town is one of the ways in which you plan to lead Centriq and keep it sustainably competitive. what does this look like? if our people genuinely love what they do and it is not just a job, then we’re well on our way. The next piece of this puzzle is delivering to our customers more than just a great product, at a great price and backed by service beyond expectation. We need to delight our customers; be an inspiration to them, connect at an emotional level, be human and be humble.

why the decision to move out of an auditing environment into the insurance industry? i hated auditing. it is an important function in the lives of corporate stakeholders, but it was just not me. i like creativity and we’ve all seen how creative accountants in the Us almost brought the house down some years ago. i must admit that i gave my decision to enter the insurance industry very little serious or strategic thought. The father of a good mate was an executive at a large insurance broking company; he thought i had some talent and offered me a job to start up their alternative risk financing venture. He drove nice cars, lived in a nice house, had a lovely holiday home, but importantly seemed to have a lot of fun. He was not one of those very rich but overworked, dull bankers. That was my consideration at the time.

As co-founder of black-owned and managed Dipeo Investments, what are your thoughts on transformation in the insurance industry? i believe we still have a long way to go, not only in the insurance industry, but across all industries in south Africa. Unfortunately, we lost many precious years as the focus in the early stages of BBBEE was on the wrong objectives. That said, we must recognise what has been achieved by the industry and take cognisance of the fact that businesses have had to transform without any respite from shareholder return expectations. Government has also failed dismally in its duty to deliver the expected improvements required in educating our youth and i find this sad as knowledge brings real empowerment.

“The insurance industry plays a significant role in creating security and stability for a large

percentage of the world’s population.”

bb

106 riskSA Magazine

Carol Holness | Associate at Norton rose sA

The Ombud for short-term insurance aims to resolve disputes between policyholders and short-term insurers who are members of the ombud’s office by way of recommendation, arbitration, mediation or conciliation. The ombud is a voluntary scheme recognised in terms of the Financial services Ombud scheme Act, 2004, and the short-term insurers who are members of the Office of the Ombud have agreed to be bound by its terms of reference and decisions.

“The ombud can also consider certain commercial insurance

complaints by policyholders who are juristic persons,

sole proprietors or traders, partnerships or trusts whose

annual turnover does not exceed R25 million.”

some key points for insurers

oMBud for sHorT-TErM InsurAnCE:

107riskSA Magazine

The ombud is required

to operate within the

framework of its terms

of reference. Currently,

the ombud can hear

complaints only where the amount

in dispute does not exceed r2

million in total, except in respect of

home owner or building policies,

where the amount in dispute

must not exceed r4 million. The

ombud can also consider certain

commercial insurance complaints

by policyholders who are juristic

persons, sole proprietors or

traders, partnerships or trusts

whose annual turnover does not

exceed r25 million.

The Ombud for short-term

insurance may not formally

consider a complaint which has

become prescribed either in

terms of the Prescription Act or

in terms of an enforceable time

bar provision contained in the

applicable insurance policy. One

significant consequence of a

complaint being lodged with the

ombud is that this interrupts any

contractual time bar provision

contained in the insurance policy.

From the time that the complaint

is lodged until the complaint is

finalised, the contractual time

bar provision in the policy will

not run against the insured

and if litigation is subsequently

instituted, the insurer cannot

rely on the contractual time bar

clause against the insured for

that period. Once the ombud

has dismissed a complaint or

made a ruling, the insured has

either 30 days or the balance of

the contractual time bar period

(whichever is longer) to institute

legal proceedings. significantly,

the lodging of a complaint

with the ombud does not affect

prescription in terms of the

Prescription Act and the insured

must institute legal action

within the applicable statutory

time limit.

Accordingly, if an insured makes

no effort to pursue the complaint,

it is in the insurer’s interest to ask

the ombud to make a ruling or

dismiss the complaint so that the

contractual time bar provisions

can start to run again. The ombud

may also not hear a complaint if it

is the subject of existing litigation

or in the hands of an attorney

for contemplated ligation, unless

the attorney is simply assisting

the policyholder to prepare the

complaint. if the policyholder

bb

instructs an attorney or institutes

litigation relating to a pending

complaint, the ombud must

withdraw from the matter.

The ombud’s rulings must be

based on the law and equity

and the factors to be considered

include prevailing case authority,

legislation and legal policies;

the policyholder protection rules;

fairness and equity; proper

insurance practice; and the

facts of each individual matter.

The ombud can make a ruling

only where all the material facts

have been agreed or established

on a balance of probabilities.

The rulings are binding on the

insurer and cannot be appealed

or reviewed. They are not

binding on the policyholder

who is entitled to institute legal

proceedings against the insurer

before or after the ombud has

made a ruling or dismissed

the complaint.

The ombud’s rulings are not

binding precedents, so the

ombud is not obliged to follow

previous rulings. However, a

review of the rulings suggests

that the ombud will tend to

follow previous formal rulings.

The rules of natural justice

require consistency from

the ombud.

Policyholders seem to be

referring more complaints to the

ombud and so it is important for

insurers to be reminded where

they stand as members of the

office of the Ombud for short-

term insurance.

“Once the ombud has dismissed a complaint or made a ruling, the insured has either 30 days or the balance of the

contractual time bar period (whichever is longer) to institute legal proceedings.”

108 riskSA Magazine

it was called a “cold shower” by Munich re Africa CEO,

Junior Ngulube. He reiterated what many were thinking at

this year’s insurance Conference, after ismail Momoniat,

Deputy-Director General of the National Treasury, gave his

address. Momoniat said that the market conduct practices

of the short-term insurance industry were poor and even

disgraceful and industry supervisors must be much tougher than

they have been in the past.

He pointed out that while prudential compliance is critical, the

industry needs to remain customer-focused. “The insurance

industry will be exempted from the Consumer Protection Act

only if the industry adopts higher and tougher standards.” He

questioned whether the industry has really made an effort to

provide more affordable policies and said there needs to be

greater transparency, as well as more simplified products with

standard terminology and comparability. “Most short-term

insurance companies are not really prepared to incorporate TCF

(Treating Customers Fairly) principles into their practices, and are

still stuck on a compliance-based approach,” Momoniat noted.

“The short-term insurance industry is behind the curve on its

focus on the fair treatment of customers.”

He went on to say that insurers should be obliged to publicly

disclose claims received and claims rejected. “Why should

government consider compulsory insurance for say motor

vehicles if the industry is not transparent about its costs and

claims procedures? The principles of proportionality and fairness

are not applied in many cases, as the system is designed to

reject claims in total.”

reForming the ombud systemTreasury doesn’t believe that the industry ombudsman

is sufficiently independent. “Governance and funding

of the ombud must be free, and be seen to be free,

from any interference.” This includes the appointment

and reappointment process of the ombud. Treasury is

considering a system of compulsory levies to fund the

operation of ombud offices, together with minimum

norms and standards. “The number of complaints

reflects on the failings of internal complaints

procedures of companies.”

beyond market conductMomoniat questioned whether the short-term

insurance industry has transformed to reflect new south

African realities. “Are short-term insurance products

appropriate for the needs of township dwellers and the

younger market? Are pricing models really free from

redlining and who subsidises whom?” He said there is

insufficient diversity in the sector, no new blood and not

enough expansion into the continent.

H a n n a B a r r y

froM TrEAsurya colD shower

industry speaks outWe asked people in the industry about their views

on some of the issues that Momoniat raised.

Does the industry have poor market

conduct practices?

“some of the comments made by the National

Treasury during the 2012 insurance Conference

were off the mark, especially when it comes to

the industry’s alleged poor conduct practices and

lack of transformation and innovation. Auto &

General has a strong culture of service excellence

that has been entrenched with our service charter

for customers and brokers. The company also

has an internal initiative in place which measures

our customer satisfaction on a daily basis. Our

score is above international benchmarks and the

initiative receives continual focus.”

−LeonVermaak,CEOofAuto&General

Insurance

“Mr Momoniat is one of many in the country who

have this perception of the insurance industry. if this

is not true, the industry should not take a reactive

stance on the matter, but should set about ensuring

that there is a more positive public perception.”

−Gay-LynnRheeders,RhedOlivInsuranceBrokers

“yes, there are those insurers that do not act

fairly. We should see this published by the OsTi,

so that consumers can see which insurers these

are. All that is needed [to address poor market

conduct practices] is that the existing FAis Act

and general code of conduct be applied.”

−ArnoldvanderLinde,vice-presidentoftheFIA

“The members of the south African insurance

Association abide by a code of conduct which

upholds fair treatment of its customers. in addition,

the short-term insurance industry is regulated by

various pieces of legislation, including market

conduct-related legislation, and all financial services

providers must comply with such legislation.”

−KwaneleSibanda,SAIAcommunications

manager

Is the oStI independent and what does an

increase in claims with the oStI suggest?

“As far as i am concerned the Office of the

Ombudsman is in fact totally independent from

the insurance industry.”

−DennisJooste,OmbudsmanforShort-term

Insurance

“No. Having insurers on the OsTi board makes

no sense. They even give themselves awards,

which is crazy. The increase in claims is mainly due

to the OsTi being more known to the consumer as

a watchdog.”

−VanderLinde

“if companies sort out complaints reasonably with

clients, these will not get to the OsTi. i find it absurd

that the OsTi gives an award to the company that

subsequently resolves the most of its own OsTi

complaints. if the company was so good at resolving

complaints, why did they get to the OsTi in the first

place? Would it not be more appropriate for the

OsTi to recognise publicly those companies which

have the least number of OsTi complaints?”

−Rheeders

“The ombudsman is an independent body with

representatives from the industry, the Financial

services Board as well as several consumer

representatives on its board.”

- Sibanda, SAIA

“When one considers how much legislation and

regulation already exists and how purposefully it

has been implemented to date, criticism of our

regulators may be unfair. in our opinion, there

is sufficient legislation and the regulators are all

doing a very reasonable job of supervising the

south African insurance industry.”

− Jurie Erwee, CEO, Marsh Africa

Does the industry need to simplify its

products and become more accessible to the

low-income market?

“There are a variety of offerings for all the

different markets. The challenge is to carry them

into the market, for which we need to develop

more representatives and advisers.”

−VanderLinde

“Companies need to understand the markets

they are selling into and whether the products are

appropriate to these markets. Financial services

providers need to communicate with clients and

manage their expectations. One of the big risks is

that all the disclosure happens upfront and then

none takes place further down the line.”

−LeanneJackson,headofTCF,FSB

“The sAiA and its members are committed to

providing affordable insurance products to all

markets in south Africa; however, premiums

are linked to risk and cost. in this regard, we

are committed to collaborate with all relevant

authorities to address factors that influence

risk and cost in order to find a way to serve all

south Africans.”

−Sibanda, SAIA

The sAiA has since initiated actions in order to

address the concerns expressed, either through

information or change. “The sAiA is proud

of the contribution the short-term insurance

industry makes to society to our economy, and

will do everything in its power to address any

perceptions and/or shortcomings which may

have a negative impact on the image and

reputation of the industry.”

bb

110 riskSA Magazine

We will examine these metrics in more detail in future articles.

Revenue – growth and mix metrics

Expense management and efficiency improvement

Assets and investment strategy

Measurement focus areas and metrics

New business from existing channel relationships; new business from new markets and relationships; business retention; casual factors for business growth or decline; loss ratio from attritional, large and catastrophe losses; rate strength

Cost to serve ratios; level of automation and iT enablement; head count ratios; organisation structure and span of control; operational risk; branch and head office structure

Asset utilisation; return on capital; economic profit; investment risk and reward appetite; reinsurance and capital structure

Dependency revenue – growth and mix metrics

Pricing approach; product mix; distribution model; lifecycle stage; target segments

Business operating model; processes; systems; structure; distribution model; geographic footprint; centralised/decentralised models

Credit rating requirements; appetite for volatility and return; diversification benefits/risks; capital adequacy

karen miller | executive: underwriting at mutual &

federal

As mentioned in last month’s

contribution, utilising a

balanced scorecard (kaplan

and Norton, Harvard

Business school Press, Boston

Massachusetts, 1996) approach to establish

and monitor key metrics in a short-term

insurance company facilitates the balance

between medium to long-term strategic goals.

it also provides lead and lag indicators of the

organisational performance.

This article deals with the financial metrics,

which are one of the four key categories of

the balanced scorecard. Financial metrics

should encourage business divisions to align

their business unit strategy to the medium to

long-term corporate strategic aspirations. The

metrics utilised in the financial category should

encourage the implementation of appropriate

actions to ultimately achieve the financial

objectives. Thus the metrics measure the actions

required to achieve the ultimate strategic goals.

Typically in short-term insurance companies,

financial metrics measure revenue (retention

and growth), underwriting profit, asset

utilisation and operational efficiency (expenses,

productivity and risk).

Financial objectives are linked to the company

or business unit life-cycle stage. Accordingly,

a business unit may wish to aggressively grow

market share, or it may wish to retain market

share without much growth, and the tactics

to achieve these goals differ from revenue

and profitability perspectives. in terms of the

current life-cycle stage of the business unit, we

should consider the bigger strategic picture, so

investment may be required to fund a start-up

which produces profit only after three years.

Businesses may follow growth, turnaround,

stability or divestment strategies. Growth

strategies may pursue:

• marketpenetration

• marketdevelopment

• productdevelopment

• diversificationstrategy

• integrationstrategy

• strategicalliances

Turnaround strategies may downsize a

company, in order to ensure economic

sustainability of the organisation. stability

strategies may right-size an organisation and

focus on efficiency gains in order to improve

or sustain economic viability. Divestment

strategies may occur when a business is

insolvent or when a business exits a segment.

it is important to consider the dynamic

nature of strategy. Business may move

between growth, sustain and harvest stages

in the business life-cycle. in addition, core

competencies within a business change

over time and the business operates

within a changing economic environment.

Accordingly, business strategy should be a

living dynamic process, which adjusts to the

environment. similarly, the business should

focus on building skill-sets and capability

within the business to achieve future success.

The key areas of financial focus are around

revenue growth and mix of business;

expense management and efficiency

improvement; as well as investment strategy

including asset deployment.

The following table provides an indication of

key areas of measurement for a short-term

insurance company.

balanceD scorecarD for a short-term insurance company: fInAnCIAl METrICs

Revenue – growth and mix metrics

Expense management and efficiency improvement

Assets and investment strategy

Measurement focus areas and metrics

New business from existing channel relationships; new business from new markets and relationships; business retention; casual factors for business growth or decline; loss ratio from attritional, large and catastrophe losses; rate strength

Cost to serve ratios; level of automation and iT enablement; head count ratios; organisation structure and span of control; operational risk; branch and head office structure

Asset utilisation; return on capital; economic profit; investment risk and reward appetite; reinsurance and capital structure

Dependency revenue – growth and mix metrics

Pricing approach; product mix; distribution model; lifecycle stage; target segments

Business operating model; processes; systems; structure; distribution model; geographic footprint; centralised/decentralised models

Credit rating requirements; appetite for volatility and return; diversification benefits/risks; capital adequacy

112 riskSA Magazine

palesa mafoko client manager at centriq

insurance

in a hardening traditional insurance

market, many companies may not be

able to get the insurance cover they

require as higher deductibles may be

imposed, for example, forcing them

to retain more of the risk themselves, or the

cost of traditional insurance cover may be

too expensive for them to absorb. in such

cases, companies may opt for alternative risk

transfer (ArT) solutions in the form of finite risk

insurance programmes.

Palesa Mafoko, client manager at Centriq

insurance, says finite risk or spread loss

insurance provides continuous and full

protection to a client from inception of the

insurance programme for a multi-year period

of time at a premium that is payable annually in

advance. she explains that these programmes

are multi-year and multi-risk contracts in which

premiums are tied to anticipated losses over the

fixed period of time. The intention is to insulate

the company’s balance sheet against massive

losses in any one year, by spreading the risk

over the fixed term of insurance. “Finite risk

arrangements are complex, both legally and in

terms of accounting rules,” Mafoko says.

RISK PROFILES AND CLAIMS HISTORY Mafoko explains the prediction of the

expected losses is a critical component in the

structuring of the finite risk policy at the right

level. Therefore, loss trends and exposures to

provide suggested risk retention and risk transfer

attachment should be carefully analysed. “The

optimal attachment point, with reference to

reinsurance pricing and the client’s capacity

and appetite to retain risk should be tested

and verified.” The optimal solution – structured

according to each client’s unique requirements

– may be to integrate the finite risk with a

conventional insurance programme, or to

structure it as a stand-alone to complement

and provide additional insurance cover where

needed. “An understanding of the exposures

and their relationship to the historical losses is

essential to the structuring process.”

CREDIT RISK AND CREDIT RATING Credit worthiness is a vital factor in the shaping

and pricing of the finite risk programme.

information required for the credit assessment is

the client’s latest audited financial reports as well

as their credit rating, if available. you should be

aware of the following when considering finite

risk programmes as an ArT solution:

• Thepremiumchargedonthistypeof

programme is significantly higher than

traditional insurance premiums.

• Duetothecreditrisk,theclientrequires

cash and income statement strength.

• Theinsurerinconsiderationneedstohave

balance sheet strength, the

required technical skills in accounting,

actuarial and underwriting.

Finite risk insurance programmes are ideally

suited for:

• Insuringhighseverityandlowfrequency

losses where losses are expected to

occur once or twice every three to

five years, for example, but where the

premiums are spread over a three-to

five-year period to accommodate the

estimated cost of risks identified.

• Insuringexcessbuy-downswherethere

are substantial deductibles, for example,

a client who has a high deductible but

who can afford to finance losses only up

to a certain amount without impacting

negatively on their balance sheet.

• Clientswhowanttobuildupretentionover

time but need capacity from inception.

• Netaccountprotectionforwholly

owned captives.

“The programme has great benefits for

companies seeking financial protection and

budget certainty,” concludes Mafoka.

spreaD loss insurance ProvIdEs EnHAnCEd ProTECTIon

113riskSA Magazine

A global trend of large

companies and

government organisations

taking longer to pay small

and medium enterprises

(sME) for their services is putting small

companies at significantly higher

credit risk, according to Jacqui Jooste,

operations director at Coface.

The trend is as rife in south Africa as it

is abroad and statistics released by the

National Treasury from March 2012 show

that in the Free state, 63 per cent of debt

owed to creditors was older than 90 days;

in Limpopo 56.3 per cent was older than

90 days; and 44.7 per cent was older

than 90 days in the North West.

Municipalities owed their creditors r9.7

billion at the end of the third quarter

of 2011 and that figure had risen as

much as r1.4 billion by March this year,

showing that those debts just aren’t

being paid.

Due to their lower overheads, sMEs are

generally more competitive in their pricing

and, as a result, they are often considered

in preference to larger companies.

When an sME is approached by a large

customer or by government to quote or

tender, they will do so at the best possible

price. However, what the sME often does

not taken into consideration is the cost of

credit should the terms be extended.

if the customer contributes a large

percentage to the sME’s turnover, and

delays payment or, even worse, defaults in

payment entirely, it will have a detrimental

effect on the business. This is not only

applicable to sMEs, smaller companies

are particularly vulnerable because they

generally do not have the cash reserves to

fall back on in the event of non-payment.

The effect on the sME’s business is further

aggravated because management’s focus

is on collecting the money that is overdue,

making it easy to lose focus on the

day-to-day business. in tough economic

times, sales and ultimately growth are

top priorities for businesses to cover

overheads and make profits.

it is important to ensure that sales and

growth are not chased at the expense of

profit, to try make sure that the company

doesn’t rely too heavily on one or two

big clients and to take the cost of credit

into account if payment for services are

delayed, especially in the case of sMEs.

smes shoulD beware of relyinG on biG clients

2361

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eseH

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Businessevolution is paramount

“Municipalities owed their creditors R9.7

billion at the end of the third quarter of 2011

and that figure had risen as much as R1.4 billion

by March this year, showing that those debts

just aren’t being paid.”

bb

114 riskSA Magazine

M i k H A i L A C r O W i E

are numbered

days of The

if you’ve always wanted to be more creative with your company’s website, that day has finally come. The well-known domain names of .com, .org and .co.za, may soon be replaced by .cocacola, .nestle, and perhaps even fly.mango.

The impending expansion of the global web address regime by the

internet Corporation for Assigned Names and Numbers (iCANN)

may initially cause confusion among south African consumers.

However, it can also be seen as a significant brand-building

opportunity for many local businesses. iCANN’s board of directors

approved the generic top-level domain suffix program (gTLDs) and

this may mean greater marketing exposure for the insurance industry.

However, it might compel insurers to apply for domain names such

as the term ‘.insurer’ or its equivalent in another language, as this is

a sought-after keyword for advertisers.

“Now every business and brand can be represented at a global level, based on their type of business or

product offered.”

115riskSA Magazine

The impact of the addition of hundreds of

new top-level domains (TLD) – the concluding

part of an internet address which informs

you about the sort of site you are visiting –

needs to be carefully considered by south

African businesses. John Ginsberg, marketing

director of Ensight, an international multi-

channel marketing company, says there will

be more TLDs instead of just a handful. He

explains the goal of the domain names is to

turn computer-readable into human-readable

and memorable names. “Most of the more

obvious choices – ‘car.insurance’, ‘pet.

insurance’ and ‘home.insurance’ – will be

snapped up fairly quickly, so getting in early

would be a good idea.” if two parties apply

for the same domain name, the user who

has completed the process before the second

party will be delegated the name on a first-

come, first-serve basis.

internationally, the American Bankers

Association and Financial services

roundtable of America have made a bid

to take control of the pending ‘.bank’ and

‘.insurance’ top-level domain names.

Ginsberg says the benefit of this approach

is that over time, consumers can be taught

to trust advisers whose address ends

in ‘.insurance’ or ‘.bank’ and to reject

communication from all others. “This

may help to reduce the global phishing

pandemic, while opening up new channels

of communication that the insurance industry

has typically shied away from.” He says

south African consumers will turn to search

engines and social media to help them work

out which is the most reputable source.

“Companies like Google, Facebook and

Twitter are going to score the most from this

change, as anything that makes internet

addresses more baffling will drive people to

type information into a search box.”

From a business perspective, Ginsberg says the

expansion of the global web address regime

will be a benefit to certain local brands who

want to own a TLD rather than be stuck with a

country-specific option. “Now every business

and brand can be represented at a global

level, based on their type of business or product

offered.” However, while iCANN has received

thousands of applications worldwide, only 13

were received from south Africa and none were

from insurance companies. “south African firms

should spend some time looking through the

list of proposed domains to see which one may

impact their businesses or industry, and plan

their domain strategy so they are ready when

the first few registrars are appointed in the next

18–24 months.”

The application fee for a TLD will cost r1.5

million. Once the application is approved, a

further r204 985 is needed annually to attain

the domain name.

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13However, while iCANN has received thousands

of application worldwide, only 13 were received

from south Africa

116 riskSA Magazine

Are Green building tax rebates

in November last year,

the south African

Government set a

minimum standard of

energy efficiency that is

compulsory for all new buildings

and refurbishment projects

to adhere to. This standard is

called the sANs 10400 part XA,

developed by the sABs. it was

a massive step towards creating

a more sustainable future as

buildings represent a substantial

percentage of energy usage

around the world, and it was the

first time a minimum requirement

for energy efficiency in buildings

has been set in this country.

Manfred Braune, technical

executive at the Green Building

Council of south Africa (GBCsA)

explains that sANs 10400 part

XA addresses the way buildings

are built and refurbished

by setting requirements for

things like shading, insulation,

air-conditioning, glazing, hot

water and lighting. There are

a few options for compliance,

so constructors will not be

completely limited, but any

building plan will need to be

submitted to a municipality

for approval.

Green building regulations have

transformed the construction

industries in countries like

Germany, which first introduced

a green building standard in

1975. south Africa can learn

from those nations’ 37 years

of experience and hopefully

circumvent any teething issues.

The GBCsA uses the sANs

204, on which a lot of the sANs

10400 part XA regulations are

based, as the minimum energy

requirement for projects wishing

to be granted a Green star sA

certification. The GBCsA’s Green

star sA certification isn’t the only

thing up for grabs for buildings

looking to be greener; the

south African Government has

instituted a rebate for companies

that make an effort at cutting

energy consumption in their

buildings. The sANs 10400 part

XA and sANs 204 documents

can be purchased from the sABs

website (www.sabs.co.za).

Under the National Energy

Act, 2008 regulations on the

allowance for energy efficiency

savings, companies can submit

certificates of energy savings,

issued by accredited persons,

to sArs for a credit on their tax

return, providing even more

reasons to cut down on energy

consumption along with the

Green star sA certification and

the ever-increasing price of

electricity in this country.

N i C k k r i G E

worTh iT?Government is offering businesses tax rebates for greening their buildings. We find out how the rebates work and what else is being done to make South Africa’s buildings more energy efficient and sustainable.

“This is a sector where the GBCSA hopes to play a significant role through its Operational

Energy and Water Benchmarking Tool, currently under development and set to be

launched in mid-2012.”

117riskSA Magazine

But this is where it starts to get a little bit more complicated; interested

parties will need to register with the south African National Energy

Development institute (sANEDi). They will then need to appoint a

certified measurement and verification professional to put together

a report of all the energy-saving methods being employed and how

successful they have been. This report must be submitted to sANEDi,

which will send back a certificate. This certificate is submitted to sArs

which calculates the relevant tax return.

All of this suggests that the process could be relatively time

consuming and expensive since extra personnel is required to

complete the process, and that’s before the cost of the green

technology is factored in.

Another problem with sANs 10400 part XA is that it doesn’t really

offer anything for pre-existing buildings, which is where most of

the energy is used anyway, and the GBCsA sees its Green star sA

certification as a plug for that hole.

“This is a sector where the GBCsA hopes to play

a significant role through its Operational Energy

and Water Benchmarking Tool, currently under

development and set to be launched in mid-2012.

“The GBCsA sees this tool working hand in hand

with the sANs 10400 part XA which addresses design

of new and refurbished buildings, while the GBCsA’s

benchmarking tool will apply to existing buildings,”

says Braune.

Brian Wilkinson, CEO of GBCsA, says it fully supports the initiative

by government as it further incentivises sA businesses to reduce

their energy consumption. “For many, being able to see a tangible

monetary reward or return for energy efficiency is the ultimate ‘carrot’

and the catalyst that will afford change.”

But is it enough of an incentive for companies who own existing

buildings to rip out expensive, perfectly workable technology just for

the sake of a tax bump and a certification?

Fred de Wit, operations executive, summit Management services,

the company who owns the building where Zurich is headquartered,

doesn’t think so, because greening buildings at the moment is still too

expensive. “We’ve done what we can. We installed air-conditioners

that utilise an air-cooling system, rather than water-cooling, and

installed energy-saving bulbs throughout our buildings. But most

of our buildings are between 20-and 37-years old. it is incredibly

expensive to replace systems

that have been in place for that

long,” says De Wit.

There are certain elements

that are easier to incorporate

in buildings such as replacing

normal light bulbs with LED

lighting or energy-saving light

bulbs, but wholesale changes

to existing buildings do not

seem like a viable option at

this stage. “We have torn

out technology that wastes

electricity, but for now the most

cost-effective way for us to save

energy in our buildings is just

to make sure lights and air-con

units are turned off in rooms

that aren’t being used,” adds

De Wit.

There are some technologies

that are beginning to emerge

as stand-out options in the

quest to save energy, such as

LED lighting. “Obviously LED

lighting is the future, and we

have seen a notable difference

in the buildings where we have

incorporated LEDs, but it is

too expensive to be viable as

a wholesale option, especially

for buildings that have existing

light fittings,” continues De Wit.

The vast majority of existing

structures use energy

inefficiently. reducing energy

consumption of existing

buildings is essential to

making a real impact on south

Africa’s carbon footprint. But

persuading owners to spend

thousands, or even hundreds of

thousands, to replace perfectly

functioning equipment in their

buildings, will probably be

quite difficult. Building owners

are often hesitant to spend

limited resources on projects for

functioning products, especially

in cases where the building

is not owner-occupied, so

the benefits of more energy-

efficient buildings go directly

to the tenants rather than the

owners who have to fork out the

financial investment.

Additionally, since green

construction is a relatively

new industry in south Africa,

quality controls and standards

haven’t quite caught up with

the demand for green products.

“it is worrying that there doesn’t

yet seem to be any sABs

or Eskom standard for LED

lighting, so even though we are

using them in our buildings,

there is a safety concern until

a standard quality can be

established,” concludes De Wit.

it is a positive step towards

south Africa reducing its

carbon footprint, but at this

stage that is all that it is. At

the very least new buildings

will require far less energy, but

there needs to be a lot more

thought and discussion about

how to reduce consumption

of older buildings or how to

incentivise their owners to

implement green technologies,

if south Africa is going to take

going green seriously.

To find accredited persons

who can verify energy savings

according to the sANEDi

regulations, visit the Council for

Measurement and Verification

Professionals of south Africa’s

(CMVPsA) website at www.

cmvpsa.org.za.

“For many, being able to see a tangible monetary

reward or return for energy efficiency is the ultimate

‘carrot’ and the catalyst that will afford change.”

118 riskSA Magazine

in line with this month’s green theme, we’ve put together a list of ways to go green in your office, and we are not talking about eating bad sushi, wearing a green scarf, being jealous of your co-worker’s new stapler or growing grass on your desk.

be bright about light

Lighting can account for approximately 20–30 per cent of an average company’s carbon footprint. However, there are

ways to reduce light usage and at the same time reduce electricity costs. investing in energy-efficient lighting such as

LEDs or energy-saving light bulbs could reduce electricity usage by up to 90 per cent.

Make it a habit to turn off the lights when leaving any room for 15 minutes or more and take advantage of natural light

when you can. Natural light is energy efficient and cost-effective and can energise employees and lift their moods.

be wise, digitiseAccording to sappi, south

Africa recovers over 1.1 million

tons of waste paper each year,

representing a recovery rate of

about 58 per cent. Although

recycling is starting to gain

momentum through municipal

programmes, more can be done.

it seems fitting that since we are

in the digital age, we should take

advantage of technology that is

readily available to us. However,

offices are still consuming an

enormous amount of paper, but

why use paper at all? The greenest

paper is no paper. The more you

do online, the less you need paper.

• Keepfilesoncomputers

instead of in cabinets. This

makes it easier to make

backup copies or take

them with you when you

move to a new office.

“Making your own cleaning supplies can be very effective and non-toxic. It

saves money and time and improves the quality of air indoors.”

D E B B i E B O L T O N

less enerGy

MorE Work,

119riskSA Magazine

business travelling tipsNot all business trips need to involve flights,

rental cars and hotels. it can sometimes be easier,

cost-efficient and kinder to the world to partake

in video conferencing or telecommunication.

Hold meetings through technological advances

that were created for this specific reason. Make

it a policy to invest in videoconferencing and

other technological solutions that can reduce

the amount of employee travel. Teleconferences

mean less aeroplane trips, which create a huge

CO2 burden.

However, if you can’t avoid the travelling, try

to use public transport instead of hiring a car.

if hiring a car can’t be avoided, then choose a

rental agency that offers hybrids and other high-

mileage vehicles.

maximise computer eFFiciencyFor many businesses and employees the

computer is the central tool for work. it

should be a habit to turn off your computer,

as well as the power strip it’s plugged into,

at the end of the day. you are still burning

energy even when electronics are switched

off but plugged in.

During the day, setting your computer to go

to sleep automatically during short breaks can

cut energy use by 70 per cent. remember,

screen savers don’t save energy.

recyclingTo encourage employees to recycle, it needs

to be made easy. Faffing around in a dirty bin

rummaging between paper and plastic is no-one’s

idea of a good time. Make it simple to recycle at

work. Get as many recycle bins as possible and

set them up in areas of the office that are readily

accessible and logical.

recycling is so much easier if you hire someone to

collect it all for you, and there are companies that

do this. recycling companies have become more

and more popular and a quick internet search will

point you in the right direction.

green cleanMaking your own cleaning supplies can be very

effective and non-toxic. it saves money and time and

improves the quality of air indoors.

Mix a half a cup of vinegar and a quarter cup

baking soda into two litres of water to make an all-

purpose cleaner.

Home-made cleaning supplies can provide less

harmful substitutes for many commercial products.

They are less expensive and a safe alternative.

get involved sharing tips with your colleagues will boost morale

and lighten the atmosphere. Utilise more natural

light and use the stairs instead of the lift; you will feel

better for it.

Working towards an achievable goal can be fun and

save you money.

• Reviewdocumentsonscreen

rather than printing them out.

• Sende-mailsinsteadofletters.

lunch time

The greenest, not to mention

healthiest way to eat at work is to

bring food from home in reusable

containers. Takeouts inevitably

result in mini mountains of

wasted packaging.

However, sometimes you just

yearn for take away food. inviting

co-workers to join you will result

in a large order, which is more

cost-effective and will minimise

waste. investing in reusable cutlery,

crockery and napkins (ditching the

paper plates and cups) will also

result in less wastage.

smart printing instead of throwing your printer

cartridge away when it runs

out of ink, use recycled printer

cartridges. They not only lessen

businesses’ carbon footprint, but

many recycled printer cartridge

stores and online stores will give

you a discount on a replacement

recycled cartridge. This will help

reduce the amount of printer

cartridges that end up in landfills.

Printing on both sides of the

page will decrease the amount of

paper usage.

commuting to work Using cars to get to work is time consuming and, with the skyrocketing petrol

price, expensive. Getting people from point A to point B using trains, buses,

bikes and on foot is much more environmentally-friendly and considerably

cheaper. Unfortunately, not enough south Africans use public transport;

therefore, there is not enough investment by the government to improve the

quality of service and capacity to support large volumes of commuters. start

nagging your public transport network to implement changes. if everyone

puts the pressure on, it will make a difference.

if you are dead-set against public transport, carpooling is another option.

Whether you’re going to the same office or the same neighbourhood,

carpooling will save you money and save the environment from harmful

CO2 emissions.

bb

120 riskSA Magazine

New you image Consulting is based in Cape Town. Formerly an award-winning journalist, owner Georgina Hatch held several senior positions in the publishing and communications industry before forming the company.

Georgina’s passion is working with people to enhance their personal image and personal brand, thus empowering them to present themselves positively and confidently. Apart from offering personal and professional one-one-one image consultations to both women and men, Georgina is a popular public speaker and also runs workshops and seminars on personal branding and corporate image, style and presentation. Georgina trained as an image consultant with the renowned Colourworks international and is affiliated to the south African image and style Academy.

she is a member of the Professional speakers Association of southern Africa and the author of the book, Change your Image, Revamp your Life.

www.newimageconsulting.co.zageorgina@newimageconsulting.co.za

georgina hatch new you image consulting A

ll business people need an elevator speech – the perfect pitch that you can deliver in just 60

seconds that will impress the heck out of the ViP and convince him to spend money on your business.

An elevator speech is a short description of what you do, or the point you want to make, presented in the time it takes an elevator to go from the ground floor to the top floor (or vice versa). We may prefer to just stand there looking sheepish, speaking to no-one and yet we have a captive audience for that very short period of time. The idea of having an elevator pitch is to have a prepared presentation that grabs attention and says a lot in a few words. By relating your core message, you will be marketing yourself or your business in a way that makes people want to know more about what you do.

For example, my elevator speech goes something like this: “Hi, i’m Georgina Hatch and i am a personal image consultant and public speaker. Because i believe that personal image is more than skin deep, i help people believe in themselves and feel confident about who they are, so that they can look great, feel good and attract personal and business success. Everyone is entitled to feel better about themselves. Could we exchange business cards and perhaps set up a meeting?” When i deliver this pitch, nine times out of 10 the answer is: “Well that sounds interesting – yes, let’s get together to chat.”

i could just say that i am a consultant but that would mean nothing.

your elevator speech should answer the following key questions:

• Whatisyourproductorservice?• Whoisyourmarket?• Whatdoyoudothatsetsyou

apart from your competitors?

An elevator speech is a mini business presentation and you get one chance to get it right. in the interests of all who would like to wow with words, here are my top seven practical tips for capturing your investor’s attention with the perfect pitch.

1. F ind a hook: Open your pitch with a statement or question that piques the other

person’s interest.2. Keep it short: your speech

should not be longer than 60 seconds – that’s no more than 225 words.

3. Keep it simple: Don’t overwhelm with technical jargon or statistical terminology.

4. be passionate: investors expect passion and energy.

5. Make a request: At the end of your pitch, ask for something – a business card, a meeting or a referral.

6. listen: know when to stop talking and listen to the other person’s response.

7. Practice: rehearse your elevator speech so that when the opportunity arises, you can deliver it smoothly.

An elevator speech is not meant to be a full-blown business plan. it’s an introduction, an overview to capture the attention of the potential investor. it’s handy for any occasion where a concise presentation is appropriate; you can even use it in an e-mail.

Challenge yourself. An elevator ride is a short one but who knows, you could turn it into the ride of your life.

imagine that you have just got into an elevator and

the only other person inside is your ideal investor.

you have tried to arrange meetings with this person

to no avail. you have left countless messages with his

secretary without results. yet suddenly, here is the perfect

opportunity to speak to this very important person. you

have about 60 seconds to think of something to say that

will blow their socks off. What do you say?

the perfect PITCH

121riskSA Magazine

A well-structured interview

can tell you more than

a CV and any other

screening tool used in

the recruitment process.

Any person who is doing interviews

should run them as an information-

gathering process. All the information

gleaned from an interview helps in the

final decision to hire.

Prior to any interview, the interviewer

must have a clear picture of what they

are looking for in the candidate being

interviewed in relation to the job

requirements. A good idea is to have

a clear list of what the candidate must

have and a list of wants which would

strengthen the candidate’s chances,

but are not mandatory.

Now the interviewer has to gather

information, form an impression,

pinpoint unique characteristics and

study physical appearance as an

accurate expression of personality

and establish whether or not the

person can express himself or herself;

learn something of the person’s

desires, needs and motivation.

Assess whether or not the candidate

is compatible with the company and

the team. Take your time to work

through the applicant’s past, as well

as opinions and ideas related to

leadership, work ethic, dependency,

adaptability, stability and motivation.

Always remember that interviewers,

like the job applicants are human.

As a result, their objectivity can be

swayed by the personal interplay

within the interview situations. To help

you maintain a balanced overall view

of the candidate in relation to the

employment position, take caution.

Be as pleasant as possible to establish

an early rapport. if you are going to

make notes tell the interviewee the

reason and reassure the applicant

that all information will be treated

in professional confidence. Ask your

questions clearly and concisely, while

keeping your tone conversational.

interview, don’t sell. Don’t ask

questions that can be answered

by a yes or no. Probe for in-depth

answers, but avoid leading or loaded

questions. if you find contradictions

in the answers, probe to find the

reasons. The most important rule of

all is keep your own personal opinion,

bias or prejudices out of the interview.

in interviewing, as with any

worthwhile skill, practice makes

perfect. Conducting a good interview

is demanding, yet the results are

rewarding, as you watch former

applicants transformed into productive,

achieving employees. Therefore, follow

these guidelines to constantly improve

your interviewing techniques.

Managing Director: EMPS (PTY) LTD | (011) 678-0807 kirstenh@emps.co.za | Visit www.emps.co.za

interview FOR SuCCESS

“If you are going to make notes tell the interviewee the reason and reassure

the applicant that all information will be treated in professional confidence.”

122 riskSA Magazine

One of our most common

problems is that we are far

too trusting of everyone

having played their part

in the insurance process,

whether it is the client, broker, insurer or

UMA. We take it for granted that because

we told someone something that they will not

contest it later and that we can resolve all

matters on a gentleman’s handshake.

Although that was how the business of insurance

started, society at large has changed. Now

unless everything is documented there is

very little hope of resolving matters on a

gentleman’s handshake.

Documenting conversAtions with clients

i had a personal experience recently in which

i received a quote from a broking company.

On the quote the vehicles were stated, but

there was no mention of whether the vehicles

would be covered for market value or retail

value. When i queried this with the broker,

he stated that it would be retail value. i

asked him where that was indicated on the

quote, and he replied that it isn’t, but that

vehicles are always covered at retail value.

Being the sceptic that i am, i took this further

to reconfirm this with the executive of the

company, upon which i was told that vehicles

are not covered for retail value only for

market value. With this confirmed, i decided

not to place my business with this company as

i could just see there would be a dispute if a

vehicle claim was necessary.

The FAis Ombud and court approach is that

if there is no record documented, then it is

as good as the issue never having being

discussed. Therefore, from an industry

perspective it has become critical to ensure

that we document all discussions we have with

clients, or send a summary of the discussion

to the client, confirming the detail of the

discussion. This would provide the client with

the peace of mind that all the detail has been

noted, as well as provide the industry with

peace of mind that all we needed to say has

been said, explained and documented.

where will DocumentAtion stop? it won’t.

We have accepted the practice of

documenting details and conversations at

point of sale. To a large extent, however,

when we do renewals we tend to go back

to our gentleman’s handshake. Please

remember that it is necessary for your client

to be reminded of basic insurance principles

again at renewal. Matters of non-disclosure,

updating of values, and the risk of being

underinsured are all issues that we need to

remind the client of again, and record the

details of the conversation.

it is so easy to forget that our clients are not

insurance regulars, and therefore they do

not know the meaning of concepts that are

perceived to be basic insurance principles.

retrieving of recorDs

Many of us make use of e-mail, client files,

client documents or broker notes to take

notes and record details. However, some use

telephonic voice logging systems, or third

parties to help us keep records. Test your

retrieval system and call for a client record,

to ensure that you will be able to recollect

the record. There have been a few instances

in which records were not available for

retrieval, either due to unco-ordinated filing

practices of third parties, or technological

difficulties in retrieving telephonic

conversations. it is one thing to put systems

in place, it is another thing to test those

systems and ensure that they work, especially

during critical times of investigations.

For both the protection of the client and

ourselves, we need to test these systems and

ensure that we will be able to retrieve the

details for queries, complaint investigations

and regulatory inspections.

trAnspArency

Do not be shy to send clients copies of the

notes you have made for confirmation, and to

share your records with your client.

it only helps your client to know that you

have all the important details noted, and

they are certain of the advice and cover you

have recommended.

Keep it simple

Lastly, it all seems so onerous, but peace of

mind is priceless. Make your record-keeping

process simple. Find an easy method that

you can use to ensure documented records

are made, stored and retrieved for the

convenience of your own day-to-day process

and for the benefit of your clients.

LookoutforPartVnextmonthon

Continuous Professional Development.

what youR client needs to know (part iv)

C H A r M A i N E k O C H

Did you note everything i presented as a client?

123riskSA Magazine

someone who is verbose, long-winded or tells a good story or joke is not necessarily a good communicator. Entertaining is not communicating in the business world. you need to

provide information.

Here are some thoughts about what contributes to becoming known as an effective communicator:

• Beingabletodiscussdisputes,notjustexchanging pleasantries.

• Meetingtheneedsofanaudienceoncetheirneeds have been established.

• Workingoutwhypeoplesaythingsandlearning to read between the lines.

• Managingtopackageamessageconciselyand succinctly.

• Definingakeymessage.• Stimulatingactionandreactionratherthan

just a gentle response, creating a good level of understanding.

you have to learn to speak the language your audience wants to hear. in turn, you need to give them the information they want, not merely communicate what you want.

some people are accessed more easily when language is visual, others numeral, some sensory. some need to have their left brain accessed to appeal to the logical side of their nature. The opposite applies to those who are more creative. right-eared people listen more to content; and left-eared people to the emotion that underpins the verbal word. Music and participation provide added interest in the delivery of a message. Most importantly, you need to speak the language of solutions. Ask yourself what your customer, client, staff or boss wants. Provide a solution to their needs, not just yours.

One of the aspects of my work which i love is the diversity of industries in which we are invited to operate. The exciting challenge for me is to find out what happens in their world, what language do they speak? What is important to them, their trade associations, publications, competition, pricing structures, and governing bodies? in addition, if possible, before presenting a proposal i like to know something about them as individuals and their learning modality. Do they want me to present face to face without auditory or visual distractions, or do they love PowerPoint? Perhaps a combination will be best. Determine what type of animal you are presenting to so that you offer your brand to the audience appropriately.

Monkey see, hear and do:

see – give visuals, bright pictures. Use PowerPoint, look the part and present visual examples of your work.

Hear – use your voice effectively in terms of tone, volume and pitch. Add music. Don’t forget silence, pause.

Do – tactile people like to feel. They connect emotionally and like to create rapport. i say use gut feel with these prospective clients or employers.

i never allow a situation in which they can turn straight to the page of costs. Those get handed out later, once i have outlined the return on investment for them. sadly in the pursuit of business one can present a proposal that includes an intellectual property clause and it may be ignored. The only way to guarantee confidentiality and trust is a non-disclosure agreement. The optimum situation is to balance these with times when you really want the business and are prepared to take a risk. Aim to utilise your credentials, experiences, case studies and testimonials instead of having to pitch for business. Always communicate honestly and clearly and become known as a person of your word. My favourite words are “yes” and “now”! My least favourite words are “no” and “wait”. Think about yours.

in addition to the ABC rules of good communication (accuracy, brevity and clarity),

there are some rules about the language of self-talk.

They are:• Tellyourselfoftenhowgoodyouareand

how good you can be. • Focusonwhatyoucandoratherthanon

what you have not done. • Ifyoukeepongivingyourselfgood

messages, it will resonate in your actions.

start speaking the language of self-belief. Then start listening to that inner voice called intuition and learn to respond to it. it is a wonderful tool.

Jenny Handley is a brand specialist and owner of a brand and performance management company. A member of the London Speaker Bureau, Jenny has addressed a wide variety of international audiences. She offers unique individual brand management consultations for top executives, leaders and entrepreneurs, based on her book raise your Profile. Jenny facilitates brand and performance management, leadership development and communication workshops, with a focus on social media strategies. She has her own weekly column in the Cape Times.Visitwww.jennyhandley.co.za for details.

“Think like a wise man but communicate in the language of the people.” – William Butler Yeats, Irish poet and dramatist

WhaT CONSTiTuTES a gOOD COMMuNiCaTOr?

124 riskSA Magazine

M&F achieves Level 2 BBBEE rating

Mutual & Federal, a member of the Old Mutual

Group, has achieved a Level 2 BBBEE rating on its

implementation of Broad-based Black Economic

Empowerment. This rating is the second highest

level out of a possible nine levels as set by the

Department of Trade and industry.

Vuyo Lee, executive of brand, customer and

transformation at Mutual & Federal, says: “We

are proud of reaching this level as its shows

that our plans to become a truly transformed

south African company are bearing fruit. We

have moved from a Level 4 in 2008 to Level 2

for our performance in 2011. This is a major

achievement for us, as for the first time it puts us

on the same level as the rest of the Old Mutual

Group, namely Old Mutual and Nedbank.”

NEWSGenesis reaches Level 1 BBBEE status

Genesis Healthcare Consultants (GHC)

announced that it has achieved a Level

1 BBBEE status.

Genesis said in a statement that it will

continue to support the idea of creating

a more equitable distribution of wealth,

skills and resources in south Africa. The

healthcare consultancy has improved its

standing from Level 4 in 2011 to Level

1 in 2012.

Level 1 recognition is awarded to

companies who score greater than

100 points against the BBBEE Codes

of Good Practice. The codes assess

management control, employment

equity, preferential procurement and

socio-economic development.

GHC says it has worked closely with the

National Empowerment rating Agency

(NErA) over the past few months to

ensure it fulfils all the requirements.

s&P gives Lion of Africa A- rating

A prudent investment strategy and

reasonable return on investment were

among the praises standard and

Poor’s (s&P) ratings services credited

to Lion of Africa insurance (LOA), after

it adjusted the short-term insurer to

a zaA- financial strength rating on its

south African national scale (BB+ by

international standards).

According to Adam samie, CEO of

LOA, the company has firmly established

itself in its market and has the highest

rating of any south African short-term

insurance company that is wholly run on

black empowerment principles.

s&P says that the company’s

high status as a verified Level 1

contributor differentiates it from the

competition and indicates that it has a

supportive shareholder with the same

empowerment ethos. This competitive

strength helps to offset certain

weaknesses.

s&P says that LOA is well placed to

benefit from solvency Assessment and

Management (sAM), although it is

concerned over the significant burden

that it expects the new regulatory

framework will impose on companies.

The ratings agency says that the stable

outlook on the company reflects its

opinion that the company will continue

to develop its competitive position

in the south African market in both

new and existing lines of business, as

well as grow its presence in the wider

African market. “We also expect Lion

to maintain its capitalisation at least

at a good level, with interest and

coverage ratios maintained within

current tolerances.”

“We also expect Lion to maintain its capitalisation at least at a good level, with interest and coverage ratios maintained within current tolerances.”

125riskSA Magazine

O’keefe and swartz scoops seven awards

Telemarketer O’keeffe and swartz has scooped

seven awards at the 2012 Contact Centre World

EMEA regional Awards held recently in London.

As a finalist in the first online round, O’keeffe

and swartz was invited to present at the awards

in London, where the company and its candidates

walked away with six gold awards and one silver.

The gold awards included Best Outbound

Campaign; Best Workforce Planner Professional;

Best iT support Professional; Best QA (Quality

Auditor); Best sales Professional; and Best

supervisor. The silver award was for Best sales

Campaign.

The ceremony benchmarks entrants against the

best in the Europe, Middle East and Africa region

and are considered by many in the industry to

be the ultimate awards. The company’s regional

winners now qualify to present at the finals of the

Contact Centre World Awards in Las Vegas in

November 2012, where they will compete against

the best in the world.

Automated risk management comes to sA

“Cs stars, a subsidiary of Marsh, has launched the sTArs Enterprise platform

from an automated claims handling system into a business-wide, predictive,

risk-intelligence, management and delivery tool,” says Louisa de Freitas, sales

director, Cs sTArs, EMEA, Marsh (Pty) Ltd.

risk in any modern business is constantly shifting, with the business, with

global events and across geographies. risk is also varied, ranging from

the very simple to the hugely sophisticated. recognising this, “The sTArs

Enterprise, risk, claims and compliance management system can have as few

or as many functions as a business requires,” explains De Freitas.

At the most simple level, sTArs Enterprise can act as an online risk

management system, allowing businesses to track incidents, risks, claims

and policies, and conduct compliance audits depending on the nature of the

business and its need to input and track risk trends.

A slightly more sophisticated use allows companies to record incidents

relating to safety, health or environment and quality, in real time, allowing

businesses to follow and support post-incident care, response or rehabilitation

in line with company risk policy or legislation.

Lee explains that achieving Level 2 means that companies that procure

from Mutual & Federal receive r1.25 worth of recognition for every

rand of their BEE spend.

The areas where Mutual & Federal scored particularly well coincide

with the areas of strategic importance to the business. These include the

socio-economic development (sED) and skills development pillars.

Lee explains: “Our sED contribution, through our corporate social

investment programme, has seen us becoming more involved in community

upliftment initiatives focused on education, social welfare and agricultural

socio-economic development.”

Mutual & Federal has been previously recognised in the short-term industry

as having one of the most progressive skills development programmes for

its staff, including training and employing people with disabilities.

World risk Day’s virtual portals well attendedWith 1 200 delegates participating in over 18 hours of live and pre-recorded

presentations, panel discussions and question-and-answer sessions, the first ever World

risk Day was the largest ever online event for the risk industry. The virtual summit involved

12 live webinar sessions spanning multiple time-zones, starting in Australia and ending in

the UsA, and 25 speakers from around the world and across industries.

The presentations and content from the day – featuring submissions from institute of

risk Management south Africa Exco – is now available for on-demand viewing at www.

worldriskday.com/virtual-summit/.

World risk Day will remain live at www.worldriskday.com and a World risk Day resourses

Centre, including a new enterprise risk management readiness guide, is available.

World risk Day 2013 will be held in May 2013.

Munich re hosts Lagos energy seminarMunich re hosted a symposium on renewable energy in Lagos on 28

June 2012. The audience included 50 high level insurers, and speakers

Boniface Chiwota (Munich re of Africa), Thomas Pohl (Munich re,

Munich) and Peter Jakszentis (Munich re, Munich) were inundated with

questions from a highly engaged audience. This was the second in a

series of symposia covering renewable energy by Munich re. in February

a similar size group was presented to in Addis Ababa, Ethiopia, and the

next one will be in Johannesburg on 2 August 2012.Speakers at the symposium, from left to right: Junior Ngulube, Munich Re Africa CEO; Peter Jakszentis; Boniface Chiwota; and Thomas Pohl.

126 riskSA Magazine

NEWs

AUM to change to in-house claims modelAquarius Underwriting Managers

(AUM) will move to a more

traditional in-house claims model,

replacing its existing model of

outsourcing. The changes took

effect from 1 July 2012.

AUM believes that the more

hands-on approach will be more

proactive, while at the same time

enabling it to manage claims

costs and service providers more

directly. AUM will handle all motor

and non-motor claims from its

randpark ridge offices.

PrOFiDA’s latest software displayed at conferencessoftware developer, PrOFiDA has

completed exhibitions of its latest

products on the industry conference

circuit this year.

With exhibits at the FPi Annual

Convention and the insurance

Conference 2012, both of which

were well attended, PrOFiDA was

able to take its products directly to the

market to demonstrate the capabilities

of its software and to promote

enhancements to the latest editions.

Most product enhancements this

year were around data integration

and the sharing of data between

insurer and binder holder, as well

as between financial advisers and

investment firms.

LMs rated AA-

Liberty Medical scheme (LMs) claims-

paying ability has earned it a rating

of AA- from Global Credit rating

(GCr). The scheme rating outlook

has also been upgraded to reflect a

stable position which confirms the

sustainability going forward.

“The scheme also comfortably

maintains reserve and solvency levels

well above statutory requirements,

all of which will give members the

assurance that their money is in

good hands and managed with care

and diligence,” says LMs executive

principal officer, Andrew Edwards.

“Despite difficult trading conditions,

the high claims payment capability

remains firm, which translates

to high levels of protection of

members’ benefits. This rating not

only affirms the commitment to

the well-being of LMs members,

but its solid financial performance

sets LMs apart from other industry

players,” Edwards stresses.

Plans are underway to ensure that

LMs reaches more markets and

that its product offering caters to

the needs of all income groups,

tailor-made for the different stages of

peoples’ lives.

in memoriam: John Hill (9 March 1943 – 08 July 2012)Nautical Underwriting Managers, acting as agents for Centriq insurance, is saddened

to announce the passing of John Hill. John greatly contributed to the insurance

industry, working in the sector for 50 years, of which 40 years was in the marine field.

The knowledge, insight and skills he gained from serving in London, Nigeria, Hong

kong and south Africa (for the last 20+ years) put him in a class of his own. As one

of the founding members of Nautical Underwriters in the Centriq stable, John will be

sorely missed by all at Centriq and Nautical who had the privilege of knowing and

working closely with him.

Always willing to share his knowledge with those around him, John was an executive

member and past-chairman of the Association of Marine Underwriters in south Africa

(AMUsA) and lectured part time at UNisA in marine insurance.

127riskSA Magazine

Norton rose

international legal practice Norton rose south

Africa announced that Charles Ancer has

joined the Johannesburg office as a director

in the corporate mergers and acquisitions

department. Ancer specialises in the mining

and energy sectors and has extensive

experience in advising both domestic and

international clients in relation to corporate,

regulatory and transactional matters.

PPs Holdings

Ebrahim Moolla has been appointed the

new chairman of the PPs Holdings Trust

Board. Moolla, who first joined the board on

11 March 2002 and was appointed as the

deputy chairman of the board on 23 June

2004, is an attorney and senior partner of

EB Moolla and singh.

Dr sybil seoka has been appointed the

new deputy chairman for the PPs Holdings

Trust. Dr seoka first joined the board on 15

August 2005, holds a PhD in pharmacy, and

is currently the managing director of Ample

resources (Pty) Limited.

Dr David Presbury, who has served as chairman

with distinction from 23 June 2004 to 11 June

2012, has stepped down as chairman of the

trust, but remains on the board as a trustee.

ACE insurance

ACE insurance south Africa, a provider of

specialist insurance, has appointed two

new members to its management team.

Mike de Jong has been appointed senior

manager of ACE’s accident and health

division, while Neil Beaumont takes on

the position of manager of the classic unit

within the accident and health division.

Centriq insurance

shawn Lombard has been appointed

as client manager at Centriq insurance,

while Faiza Maasdorp takes over as client

service representative.

Lombard worked as part of Constantia

insurance Company Limited’s technical

accounting team before joining Centriq as

client manager.

Maasdorp holds a senior diploma in

paralegal studies and was key accounts

manager for Telesure. she is currently

studying towards a BCom in general

management.

NEW appOiNTMENTS

Mike de Jong and Neil Beaumont

Charles Ancer

Faiza Maasdorp and Shawn Lombard Ebrahim Moolla, Dr Sybil Seoka and Dr David Presbury

to our loyal sponsors for

making this year's conference such a

great success!

128 riskSA Magazine

The Financial Planning institute

(FPi) hosted several local and

international speakers in various

fields at the 2012 Annual FPi

Convention, from 20 to 21 June at

the sandton Convention Centre. This year’s

message to delegates was, ‘Put yourself a

decade ahead of the pack and learn how you

can adapt your mind-set and embrace change

to succeed in an ever-changing world’.

Godfrey Nti, CEO of the FPi, says he is especially

excited that this year’s convention followed on the

launch of the FPi’s new strategy and introduction

of a designated consumer advocate, educating

consumers on the benefits of financial planning,

as well as the importance of seeking advice from

certified financial planners. The FPi has also

relaunched its magazine, the Financial Planner.

Digital copies can be downloaded on the FPi’s

website and hardcopies subscribed to.

“in addition, we are proud to announce that

we have recently been admitted as an affiliate

member of the Organisation for Economic

Development’s (OECD) international Network on

Financial Education,” adds Nti. “This, coupled

with our representation on National Treasury’s

Consumer Education steering Committee, not

only creates a strategic partnership for the FPi

and its members, but helps put the FPi at the

forefront of reinventing the financial services

sector to serve all south Africans better.”

A forum for provocative and informative

discussion, the largest annual event on the

south African financial planning calendar

attracts just under 1 000 delegates each year.

The keynote sessions covered a wide range

of financial planning topics and included

practical workshops and panel discussions. An

exhibition afforded companies the opportunity

to showcase their products.

This year’s speakers included:

- Dr David rock, one of the thought leaders

in the human performance coaching field,

addressed delegates on transforming

thinking and performance through

neuroleadership.

- Uk strategy consultant Phil Billingham

shared useful tips on building better and

more profitable relationships with clients.

- Motivational speaker and internationally

recognised professional surfer, shaun

Tomson, shared the story of his success.

- Celebrated mountaineer sibusiso Vilane

challenged delegates to reach the top of

their mountains.

- Barrie Brambley provided insights into what

social media can do for business.

- scenario planner Clem sunter provided a

rare gaze into the future.

Other expert speakers included Errol Meyer, Jerry

Botha, Walter Geach, Gerhardt Meyer, John

Campbell, kim Potgieter and Marius Botha.

Top: Front row, from left: Shaun Latter, Jan-Carel Botha and Colin Long. Back row from left:GodfreyNti,SollyKeetse,LauraduPreez,Wessel Oosthuizen and Paul Rabenowitz.Above: Paul Leonard (second from left) was announced as the 2012 Media Award winner, which highlights him as the most media active CFP professional who carries the FPI and CFP designation in all media communication.

changing mind-sets:FPI Convention 2012

Altrisk is an authorised financial services provider (FSP 9869) and a Hollard associate company.

Jan-Carel is the cat’s whiskersHere’s to the FPI of the year 2012, Jan-Carel Botha. As the FIA’s Long Term Risk Insurer of the Year 2012, Altrisk is proud to be associated with Jan-Carel and we congratulate him on this great achievement.

So from one winner to another... Well done.

129riskSA Magazine

FiNANCiAL PLANNEr OF THE yEAr ANNOUNCED

The FPi announced Jan-Carel Botha, a CFP at Ultima Financial Planners, as Financial

Planner of the year 2012. A finalist for three years running, Botha holds a BCom degree

in economics (UNisA) and a postgraduate diploma in financial planning (UFs). He has

been a guest on summit TV’s, The Summit Investor, and regularly features as a studio

guest of Wealth through Financial Planning on local radio station, impact radio 103FM.

Botha believes that constant improvement and adoption of global best practices in

financial planning is vital to stay relevant and offer clients lifelong peace of mind.

As the national winner, he will be appointed as the 2012 FPi and CFP professional brand

ambassador, effective 20 June 2012, and receive media training to serve as the brand

and industry spokesperson. His prize includes a return economy air ticket and attendance

costs to attend an international financial planning conference of his choice, as well as free

attendance at one FPi annual convention.

The competition comprises three rounds. in the first round, an independent panel of

judges marks a detailed financial plan based on the FPi’s six-step financial planning

process. round two involves a visit to the entrants’ businesses and assessments on all

aspects of FAis compliance, practice management, as well as all client documentation

and the financial planning processes. The financial plans are further authenticated

during these visits. The final round requires entrants to present on a selected topic to the

panel, who then questions each finalist on a variety of industry trends, topics, technical

information and legislative changes.

The other finalists for the award were shaun Latter and Colin Long. Latter founded

Quaestor Wealth Management, which specialises in retirement planning and investment

advice. He is actively involved in the FPi and currently serves as vice-chairperson for the

client engagement industry sector group (isG).

After eight years at Old Mutual, Long joined forces with Craig kiggen to start the firm

Consolidated Financial Planning. in 2007, Consolidated Financial Planning merged with

another financial planning business to become CONsOLiDATED. Long has served on

the kwaZulu-Natal regional committee of the FPi for the past nine years. He is currently

vice-chairperson of this committee and the investment planning isG committee.

“On behalf of the FPi i would like to extend a warm thank you to the judges for ensuring that the

judging process progressed smoothly, under the guidance of their insightful expertise,” says Nti.

LouisvanVuurenreceivedthe2012Chairman’sAward,whichrecognisesanindividualwhohas made life-long significant contributions to the FPI and the financial planning profession. They must embody the FPI’s ethics and principles of client first, integrity, objectivity, fairness, professionalism, competence, confidentiality and diligence.

“On behalf of the FPI I would like to extend a warm thank you to the judges for ensuring that the judging process progressed

smoothly, under the guidance of their insightful expertise.”

130 riskSA Magazine

IRMSA AgM

On a chilly Tuesday morning on 26 June, over 100 irMsA

members gathered at the Johannesburg Country Club for the

ninth annual general meeting. The institute has been under the

leadership of CEO, Gillian le Cordeur, for exactly a year.

Amendments to the constitution were interrogated at length and

later put to a vote. The majority of members were in favour of

the amendments, which are in line with the Companies Act.

Chris Hart, the chief strategist from investment solutions, shared

his views on the nature of the tribulations affecting financial

markets and the unfolding opportunities.

A number of high ranking industry officials were nominated to

join the irMsA exco and the following nominees were voted

onto the executive committee, pictured below, from left: Chris

Brits, Faizel Docrat, Bheki Gutshwa, sheralee Morland, Mark

robins and Hennie Thessner. They will join the four remaining

executive committee members who did not have to stand down

for this election: Nico Bianco, Berenice Francis, Alicia swart and

Philip Tillman.

Pieter le roux, chairman of the education and technical

committee, did not stand for re-election and was thanked for his

service to the committee and the institute.

EvENTS

Fromleft:RISKSApublisherAndyMarkandCarlGreaves.

Legends having a good time with great friends.

lIvIng lEgEnDS

On 28 June, legends of the insurance industry braced the cold and

gathered at Pimentos in illovo, Johannesburg to network with peers,

reconnect with old acquaintances and make new friends. Hosted by

Collective Dynamics Administration, the event was supported by various

underwriters, brokers, insurance- and banking-related companies.

Legends was started about two years ago by a group of friends and

colleagues aiming to reconnect on a quarterly basis. Growing beyond

expectations, each new event brings new faces and businesses into

this circle of friends. The evenings are informal with the usual suspects

keeping the spirit of Legends alive until midnight.

if you are in Johannesburg during september, contact Janine

(janinem@collectadmin.co.za) for details of the next legendary evening

or to receive updates on future events.

“CARl gREAvES” tuRnS 50

Carl Greaves Brokers celebrated its 50th birthday in July with a lunch

at the Devon Valley Hotel in stellenbosch. Hidden in a peaceful

corner of the stellenbosch winelands, the hotel proved the perfect

venue for this significant occasion. Clients, suppliers, staff and friends

were treated to a three-course meal and enjoyed connecting with one

another and celebrating with Carl.

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132 riskSA Magazine

iNTErNATiONAL nEwS RounD-uP

UsACrash avoidance technology could lower premiums

Crash avoidance features on cars which

warn drivers when they’re at risk of an

accident appear to be working, according

to a study by the insurance institute for

Highway safety.

Experts believe that this will result in lower

insurance premiums in future, once the success

of the technology is quantified. “Our new study

shows that some of these features are, in fact,

preventing crashes,” says David Zuby of the

insurance institute for Highway safety.

Forward-collision avoidance systems,

which hit the brakes before you crash,

show some of the biggest crash-reduction

successes, while adaptive headlights, which

automatically shift direction going around

corners, have also shown a significant drop

in night-time crashes. “The interesting thing

is that only a small proportion of all crashes

involved multiple vehicles at night on curvy

roads, so it’s a little surprising that we are

seeing such a large effect in the insurance

data,” Zuby adds.

Fewer crashes mean fewer damage claims

and that could lead to insurance discounts

for drivers who use the new technology. But

that’s not going to happen right away.

At least one research company, Celent,

predicts lower rates in the next five years. The

company projects a nine per cent drop in

premiums between 2013 and 2017 and adds

that the premiums could drop by up to 26 per

cent between 2018 and 2023.

CAMBODiAwestern insurers sink teeth into Cambodia

British insurer prudential will follow

Canada’s Manulife as the first totally

foreign-owned insurers in Cambodia.

Prudential will open offices in the southeast

Asian country as it attempts to build its

footprint in the region, considered to be

essential to future growth.

Unlike other southeast Asian governments,

which place limits on foreign companies,

Cambodia allows foreign insurers to own

100 per cent of their businesses.

Manulife, which once leaned on Canada

and the United states for the bulk of its

revenue, now derives a third of its sales from

Asia. For Prudential, the region became the

largest contributor to its operating profit last

year. As the developed economies in Asia

become saturated, insurers such as Manulife

and Prudential are flocking to southeast

Asia, drawn by its young populations and

lack of insurance policyholders.

Until now, the industry has largely ignored

Cambodia, a country with a population of

14 million and a per capita GDP that the

World Bank estimates at $750 (r6 000).

But the disproportionate number of young

BriTAiNSCoR wins reinsurer first prize

sCOr has won the reinsurer of the year

award at the London Market Awards

2012. The awards are based on votes cast

worldwide by insurance and reinsurance

professionals and was organised by

Reactions magazine.

The good news continues hot on the heels

of its ratings upgrade between March and

June to A+. recently, sCOr has been a

regular winner of awards internationally,

which it puts down to its strategic plan

“strong momentum V1.1”, which has

included the successful integration of

the Transamerica re business acquired

in August 2011, and the good Non-life

renewals conducted by sCOr since the

beginning of 2012.

Motor injury claims on the rise

Motor accident injury claims in the Uk have

risen in spite of less accidents taking place

this year. Claims totalled r5.2 billion last

year, although vehicle accidents fell by 11

per cent during the same period.

Personal injury claims were up by 18

per cent and the new figures suggest an

insurance premium rise is on the cards for

drivers. Most bodily injury claims last year

came from people in northwest England,

with this area overtaking the worst regions

of the Us in terms of the proportion of

accidents involving a bodily injury claim.

133riskSA Magazine

iNTErNATiONAL nEwS RounD-uP

people in the country – with the majority

of the population under the age of 30 –

coupled with the pace of economic growth,

will continue to lure western insurers.

siNGAPOrEAsian business rush for new markets, credit insurance

Asian businesses are increasingly

venturing into foreign markets to

grow and are fast taking out credit

and business risk insurance to cover

their bases.

The international Credit insurance and

surety Association (iCisA) says some

Us$1 billion to Us$2 billion was spent

in Asia for such cover last year, and it

expects this to grow 15 to 20 per cent in

the coming years.

kheng keng Auto, a singapore auto-

recycling sME, has ventured into East

kenya, Libya and Botswana, exporting

used engines for buses and vans. With 11

offices and a marketing network spanning

54 countries, the company’s expansion

strategy has been supported by trade credit,

shipment and operational insurance.

According to managing director, Cher

kwang siong, the trend for sMEs in Asia

taking up trade credit insurance is on

the rise, with more companies venturing

offshore into riskier markets.

MALAWiMarsh acquires Alexander Forbes Risk Services

Marsh has acquired Alexander Forbes risk

services in Malawi. This transaction follows

Marsh’s acquisition earlier this year of

Alexander Forbes’ south African insurance

broking operations, Alexander Forbes risk

services (AFrs). Marsh also acquired its

ancillary operations, as well as Alexander

Forbes’ insurance broking operations in

Botswana, Namibia and Uganda.

Jurie Erwee, CEO of Marsh Africa,

comments: “Our previously announced plans

to expand our presence across sub-saharan

Africa are advancing and we are very pleased

to welcome Malawi into the Marsh Africa

family. With its impressive economic growth

rate and expanding appetite for insurance

products and services, Malawi is an attractive

market for us and we look forward to building

a leading presence there.”

Brian Blake, vice-chairman of Marsh Africa,

says that Malawi’s rapid development,

especially in such important sectors as

telecommunication, mining and energy,

increasingly requires companies to adopt

more advanced insurance solutions and

risk management practices to meet their

particular needs.

Donbell Mandala, who has been

appointed head of Marsh’s operations in

Malawi, says, “We are excited at becoming

part of the strong management team at

Marsh Africa. My colleagues and i look

forward to making Marsh Malawi the

country’s insurance broker of choice as

we harness Marsh’s exceptional resources

to provide Malawian clients – from

multinational companies to indigenous

enterprises – with the innovative, industry-

specific risk management support they need

to succeed.”

NiGEriAold Mutual heads for nigeria

Old Mutual is to start operations in Nigeria

before the end of the year, according to

group finance director, Phillip Broadley.

Old Mutual plans to acquire Nigeria’s

Oceanic Life. Broadley noted that the West

African region showed the strongest growth

on the continent with Nigeria and Ghana

showing the fastest rates in Africa. “Our

current focus is on being able to start our

business in Nigeria and then we will look

beyond that,” says Broadley.

Old Mutual has 1.2 million customers in

Namibia, Zimbabwe, kenya, swaziland,

Malawi and Botswana and 3.3 million in

south Africa. Old Mutual’s African market

contributed three per cent of its r12 billion

pre-tax profit last year.

135riskSA Magazine

STylE

@LUNCH WiTH BArry DU PLEssis

,

MANAGiNG DirECTOr, TrUsTC

O

FiNANCiAL sErViCEs

risksA is out to lunch once a

gain with the movers

and shakers of the

industry. This m

onth we caught up with managing direct

or of Trustco

Financial service

s, Barry du Ples

sis.

GrEEN GOiNG

The buzzword for the 21st century has to be ‘g

reen’. Th

e choice

of eco-frie

ndly alternatives

to a range of technologies i

s growing

rapidly. But just how green

are these

green gadgets?

P136

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136 riskSA Magazine

risksA AND GLOBAL CHOiCEs ENJOyED PrEMiUM sTEAk AT THE GriLLHOUsE iN sANDTON, TOGETHEr WiTH MANAGiNG DirECTOr OF TrUsTCO FiNANCiAL sErViCEs, BArry DU PLEssis. BArry TOLD Us ABOUT His WiFE’s (AND His OWN) COOkiNG skiLLs; WHAT iT’s LikE TO BE A BULLs sUPPOrTEr iN JOHANNEsBUrG; AND His ADViCE TO yOUNG BLOOD iN THE iNDUsTry.

M A n A g I n g D I R E C t o R | t R u S t C o F I n A n C I A l S E R v I C E S

Tell us about your fanatic love for golf. Have you been playing from a young age?

i would not call it fanatic, but

i do have a passion for the

game. My father’s passion for

the game rubbed off on me

and one of my brothers. As

children, we used to carry his

bag on saturdays for some

pocket money and then i started

playing when i was in the army.

i try to play every saturday

morning. We have a family four

ball teeing off between 07h00

and 08h00. Between my

brother and i and our sons, we

normally manage to get some

competition going.

We hear that you’re given a hard time for being a Bulls supporter. Did you play rugby at school and in the army?

At school and even in the army i

could never play rugby. i was too

small and a year younger than

all my peers. i actually played

provincial hockey while i was in

the army.

As a passionate Bulls supporter

i am always in the wrong place

at the wrong time. i work in

Johannesburg and although

my colleagues are a good mix

of Bulls, Cheetahs, Lions and

stormers, i usually play golf with

Lions supporters and i get invited

to Lions games at Coca-Cola

Park too.

When you don’t have a beer and biltong in hand, what’s your favourite dish as prepared by your wife?

i am fortunate in that my wife is a

very good cook and loves making

food. she comes from a big,

traditional family where everyone

had to cook and sew. My two

favourite dishes, which are always

in high demand, are Malva

pudding and ‘pampoen koekies’.

137riskSA Magazine

Brought to you by

lS

How do you stay in such good shape despite her delicious meals?

Discipline is a key factor. i get up at

04h10 in the morning to fit in my exercise

programme and get to the office before

07h00. i train at home where i have a fully

equipped gym. i must be honest; my wife

does not enjoy it when i get up early over

weekends as well. But it’s a habit that you

cannot switch on and off.

are you much of a whiz in the kitchen?

i started cooking at a very early age as my

mom got very sick when i was 11 years old.

i was the eldest of four children and with a

father who had a demanding job, i had to

do the cooking. i can cook up a great three

course meal in no time. i still get my turn

in the kitchen, but my favourites are braais,

potjies and baking bread.

Let’s talk a bit about your career. How did you become the public relations officer of a clinic for alcoholics and how has this experience equipped you for the work you do today?

i was very unhappy with my job at the time

and received an offer from the head of

the organisation. The attraction was the

opportunity to do marketing and part of the

satisfaction was to do it for a worthy cause.

i learnt a lot about people’s behaviour.

Depression and stress are a lot more

dangerous than we make them out to

be. A lot of people simply cannot cope

and start looking for some form of relief.

Alcohol is not the answer to help you

cope. The message is that there is always

hope and a solution.

You also ran an indoor sports arena around the same time. What was that like?

That was fantastic. The springs indoor

sport Centre was the first of its kind at the

time and i was privileged to get it going.

i started the centre as part of an ongoing

fundraising project in 1984. We had indoor

soccer, hockey, cricket, netball, bowls and

a fully functional biokinetic centre. We had

rock concerts, musical shows and even choir

competitions where 12 000 people took

part. it was hard work but very rewarding.

Before opening your own brokerage, you worked as an agent’s assistant. Tell us a bit about your journey from assistant to MD; what would you say to new blood in the industry with similar aspirations?

When the sport centre started losing

sponsors (the conservative party tried to

prevent black people from using the centre

and that was the end of it), i had to find

another means of income. i started finding

leads for an agent selling short-term

insurance. in 1991, i started working for a

big brokerage as a sales manager but with

very little knowledge of the industry. That

was great fun and a big learning curve. Two

years later i was on my own specialising in

commercial insurance.

short-term insurance can be a boring

business for people with no ambition. it is,

however, very rewarding if you are eager

to learn and if you put in the effort to get

to know your product. My message to new

blood is to build a good reputation from

the start. There are no substitutes for smart,

hard work, honesty and integrity.

speaking of new blood, what’s it like having grandchildren?

i love every minute of it. i have been

blessed with five of the most beautiful

grandchildren in the world. i have always

loved children. i love their fearlessness

and absolute trust and zest for life; they

are inspirational.

photography has recently become a favoured pastime of yours. What do you most enjoy taking pictures of?

i would say scenery. Mountains and water

fascinate me. i have recently taken some

awesome pictures in Clarens. i also enjoy

portraits of people.

What else do you do for fun?

i did skydiving, bungee jumping and motor

racing earlier on in my life. Now, when i get

a chance, i do a bit of abseiling, 4x4 trips

and quad biking.

If you could plan a holiday anywhere in the world, where would you go and why?

i would like to go on a proper tour of

the Americas. i have been to Argentina,

Chicago and New york. That was just

enough for me to want to see more of

these vast continents with all their diversity

and beauty.

“The attraction was the opportunity to do marketing

and part of the satisfaction was to do it for a worthy cause.

I learnt a lot about people’s behaviour. Depression and stress

are a lot more dangerous than we make them out to be.”

“In 1991 I started working for a big brokerage as a sales manager but with very little knowledge

of the industry.“

138 riskSA Magazine

The buzzword for the 21st century has to be ‘green’. As we become more aware of the significant and costly impact that we are having on the Earth, the need to make significant changes has become all the more apparent. Our techno-addiction has been one of the core factors influencing the destructive impact of human beings on the planet and it is vital that sustainable, ethical and eco-friendly alternatives are explored at every level, from the neighbourhood townhouse to the office to the industrial park. The question is, just how green are green gadgets? The choice of eco-friendly devices is growing and consumers are able to make socially conscious choices that don’t break the bank and still offer the functionality of traditional items. Here we explore a few of the options.

green going

Bianca Wright

please call meLiving without a cellphone in this day and age seems like an impossibility, but mobile phones are not environmentally-friendly. The actual manufacturing of the phone, power usage during its lifetime and its disposal all have a negative impact on the environment. A study published in the international Journal of Life Cycle Assessment found that 40 to 50 per cent of the environmental impacts over the life of a cellphone – including its production, use and disposal – occur during the single process of manufacturing printed wiring boards and integrated circuits. it suggested that extending the service life of the phone from one to four years decreases the environmental impacts by about 40 per cent.

recycling and extending the life of the phone is important, but so is choosing the right phone in the first place. Eco-friendly phones are not as common as their non-green counterparts but they can be found, even in south Africa. The sony Ericsson J105 Naite is part of sony Ericsson’s Greenheart range, which means reduced packaging, recycled plastics, waterborne paints, and an electronic in-phone manual instead of a paper booklet. it’s not the sexiest but it is one of the most eco-friendly options. it retails for just under r1 900 at CACell (www.cacell.co.za).

139riskSA Magazine

wooden you like it?Plastic gadgets are not environmentally-friendly; choose paper or wood instead. iamgreen (www.iamgreen.co.za) stocks a range of UsB flash discs made from renewable bamboo or natural wood. The company will do bulk orders of 200 or more. These gadgets make a good investment for the office or as corporate gifts for clients as they can be branded.

Another option is the Eco Friendly Computer Mouse from Eco Friendly Gifts (http://www.ecofriendlygifts.co.za). This mouse, with retractable cord, has a power-saving key enabling sleep mode. it also stocks an optical mouse made from bamboo.

The impecca Designer keyboard, available from Want it All (www.wantitall.co.za) for r1 208, is hand-carved from 100 per cent natural biodegradable bamboo material and connects via UsB port. it is compatible with Windows 2000/Windows XP/Windows Vista/Windows 7 and Mac.

if you’re looking for portable computing power, Asus has produced a range of bamboo notebooks; its Asus Bamboo series which retails for just over r10 000. At the time of going to press, kalahari.com was out of stock of this item.

“...It is vital that sustainable, ethical and eco-friendly alternatives

are explored at every level.”

lS

140 riskSA Magazine

ask the right QuestionsHow do you know that a product is truly a green offering? Mason Complete Office solutions suggests the following guidelines for assessing your purchases:•Thelighteraproductis,thefewerrawmaterialsareused to produce it.•Thelongeraconsumercanusethisproduct,means that it will be some time before he has to replace it, so fewer raw materials are used.•Localmanufacturingshortensthesupplychainforproducts, resulting in less transportation fuel and less environmental impact.•Recycledproductsusefewerrawmaterialsfromnon-renewable sources.•Recycledplasticforthewritinginstrumentsandrecycled paper for paper based accessories.

it is important to research the manufacturing process to determine whether the energy efficiency or other eco features are negatively offset by the environmental damage as a result of manufacturing. Also look for energy saver or energy smart labels and choose electronics that are PVC-free. PVC stands for polyvinyl chloride and is one of the most often produced types of plastics. Many organisations offer products that comply with PVC regulations. For example, HP has an eco-range of printers that are PVC-free.

Green products may cost more upfront but often save money in the long run, while also saving the planet. switching to green alternatives is not only the right thing to do, it’s the smart thing to do because of these long-term savings.

where to shopFinding green gadgets can be trickier than it should be, but there are a few great sites that make choosing eco-friendly that much easier:

• The Green Shop (www.green-shop.co.za): it offers a range of eco products, from LED lighting to clocks and rechargeable batteries.• Mason Complete Office Solutions (http://www.mason-cos.co.za/): Mason stocks a range of solutions for offices wanting to go green, including green cleaning products and recyclable office consumables.• Sustainable (www.sustainable.co.za): Billed as the oldest south African environmentally-conscious store online, sustainable offers the eco-consumer a range of home and office options in solar, wind and other alternative energy sources, as well as products that cut environmental damage in other areas as well.• Faithful to Nature (www.faithful-to-nature.co.za): it offers a section dedicated to green gadgets and eco-friendly toys as well as a variety of ethical clothing ranges, organic food and other environmentally-conscious products.

guarding the powerLeaving devices and appliances plugged in and on when you are not using them is wasteful. One option is the Power Guardian smart switch, which reduces electricity consumption by switching appliances off when no-one is in the room.

The process is automatic and applied to each workspace individually; it is also linked to workspace occupancy, rather than to time. According to sustainable, “On detecting a person in the workspace, an electronic unit is activated. This device controls the lights, air-conditioner, heater, fan or any other selected electrical equipment. As long as the workspace is occupied, the electrical supply is not interrupted.”

The Power Guardian smart switch – which must be installed by a registered electrician – retails for r1 600 including tax from sustainable (www.sustainable.co.za).

green computingreliance on computers is a reality of business, but it does not mean you cannot choose to go green in this area, too. Green computing can save a business up to 50 per cent in energy costs, according to intersect Computing specialists. One option is to choose intel’s Xeon processor 5600 series, which automatically regulates power consumption and intelligently adjusts server performance according to application demand, thus maximising both energy cost savings and performance.

intel claims that its T and s series Core i5 processors offer incomparable processing power while saving energy. in addition, all second generation Core i5 and i7 processors have a graphics processing unit on-die, which not only reduces the need for additional chips on the motherboard, but if you are not a graphics intensive user, it seriously reduces your carbon footprint by negating the need for an additional add-on graphics card altogether.

As intersect states on its website, “Not only are you using less power in general usage, but when you buy one of these lower power chips, you are sending a message to intel that people are willing to do their bit for a greener world, and that its innovations have not gone unnoticed.”

Following your (carbon) Footprintsknowing exactly what impact your business is having on the environment is an important step in going green, but it can seem impossible or at the very least like a great deal of hassle. To take the trouble out of the process, sustainableiT (www.sustainableiT.co.za) has developed the Carbon report, a cloud-based offering designed to enable participation by all businesses, large and small, in measuring their carbon emissions and producing a carbon footprint audit report.

According to sustainableiT, “The solution is designed to take a business through a defined process of ring fencing the boundaries of the audit, identifying its emissions-producing activities, data gathering and finally the production of a report based on the Greenhouse Gas (GHG) Protocol Corporate standard.”

Visit www.thecarbonreport.com for information.

Future FocusGreen gadgets are popping up every day and while not all of them are available in south Africa, here are a few we’d love to see here:

the Eco AtMpremiered at the Consumer Electronics show (CEs) this year, the Eco ATM incentivises recycling by giving the consumer money in exchange for recycling. it is an automated self-serve kiosk system that uses advanced machine vision, electronic diagnostics and artificial intelligence to evaluate and buy-back used electronics.

the Samsung Replenish The first eco-friendly Android phone designed for sprint, the replenish is built with recycled plastics and organic packaging, but offers the same functionality as traditional smartphones. south African consumers can import the phone through Want it All (www.wantitall.co.za) for just over r2 000, but this means additional carbon emissions from transporting it from the Us and the need for an adaptor as it comes fitted with a Us plug.

greensmart laptop bagsGreensmart takes plastic bottles and turns them into trendy, stylish laptop bags in a range of colours. They are pricey but certainly worth the investment for the eco-friendly consumer. Visit http://www.greensmart.biz/index.html for more information.

the Infinit Solar Charger bagA 2.4W photovoltaic solar panel on the outside of the bag harvests the sun’s rays and then stores the power in a high capacity 2000mAH lithium-ion battery, housed inside a pouch. The battery can then be used to power everything from a Nintendo Ds to a GPs or iPhone.

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Located in the heart of the vibrant Victoria & Alfred Waterfront, sun international’s Table Bay Hotel exerts a magnetic pull on visitors to one of the world’s most picturesque harbours. Opened in May 1997 by President

Nelson Mandela, guests have included the likes of Charlize Theron, richard Branson and, most recently, Michelle Obama.

Celebrating its 15th birthday this year, the Table Bay was admitted to the exclusive ranks of the Leading Hotels in the World within six months of opening. A directory that includes the ritz in Paris, the Plaza in New york and London’s Claridges, the Leading Hotels of the World brand is internationally recognised as the definitive mark of excellence in hospitality. The Table Bay’s more recent accolades include the World Luxury Travel Award for Best Luxury Coastal Hotel in south Africa and the Condé Nast Traveller’s Top 20 Hotels of the World in 2011.

The hotel has weathered the past 15 years graciously and the maritime spirit extends to each room. Designed to inspire, its beauty is marked with a liberating sense of luxury, ensuring your every comfort and convenience. Added to the beautiful boudoirs and excellent personal service, the Table Bay hotel is a premier conference and incentive destination for global achievers. Catering for the business traveller, it offers conference facilities for groups of up to 350.

The 195-square metre Victorian-style pavilion is the ideal venue for banquets and receptions, accommodating up to 120 people for a cocktail function and 60 seated at tables. A spectacular ballroom, complete with crystal chandelier, can be divided into two separate areas, each 150 square metres. Undivided, the ballroom will seat 200 for dinner.

An a la carte dining experience in the Atlantic Grill restaurant features freshly prepared and locally inspired cuisine in a stunning, turn-of-the-century setting. indulge yourself further at

the Camelot Health spa, staffed by personal trainers and experts in holistic treatments, which include shiatsu, sea-wrapping and aromatherapy. High tea is served daily in the lounge, where a sense of occasion is combined with delectable treats and a traditional Viennese sachertorte takes centre stage.

Only a minute’s walk from some of the city’s finest restaurants, shops, galleries, boutiques and other major attractions, the hotel is an ideal base from which to get a taste of the scenic winelands, enjoy coastal drives to simon's Town with its colony of penguins and explore the delights of Cape Town itself.

The Table Bay Hotel’s appeal is worldwide, but it also takes its corporate responsibility seriously and gives back to the community regularly. it is a prime supporter of the upliftment of Cape Town’s street children; gives monthly financial support to the Little Feet soup kitchen in Lotus river; donates goods to Athlone North Primary and Green Point Clinic; and plants trees at schools.

The best address in the CapeThe Table Bay Hotel

Tel: 021 406 5000 E-mail: tbhres@za.suninternational.com

put foot Rally 2012

wRap

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put foot Rally 2012

wRap A N D y M A r k

the

It was always going to be about more than the rhinos. What we didn’t realise is just how much impact we were going to make. The emotion caughtusbysurprise,too.Therewewere,thethreeTeamRISKAFRICAboys, swallowing hard to keep the tears from rolling down our cheeks.

Part of the Put Foot Foundation’s work was to donate school shoes to needy kids en route. We ended up paying

for a new borehole pump, laying floors in classrooms and painting the walls inside the rundown school

buildings in this remote Zambian village.

Everyone was there; politicians, elders from the surrounding villages, and even a local beauty queen. it was

when the politician, dressed in her finest, fell to her knees in the dust in front of all of us with tears of genuine gratitude in

her eyes, that i felt a little guilty at just how little we had done; and a little irritated at our politicians back home with their

seven series BMWs, missing school books and sandton mansions. i found myself sitting on a chair in the sweltering sun

trying to find a pair of shoes for the chapped and dusty feet in front of me. Once, when i managed to find a particularly

scarce size that we thought had been ‘sold out’, i was rewarded with a spontaneous hug from a little girl who will never

remember my name, but whom i will never forget.

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144 riskSA Magazine

The Put Foot rally was about all of

this and more. When news came

through that we had cracked the

r500 000 mark for foundation

causes and Project rhino (with

the help of an Etana donation

which nudged the final tally over

the half a million mark at the

Malawi checkpoint), and when

we heard that our efforts would

make it possible to equip anti-

poaching teams with ground-to-air

communications; pay for a pilot to

fly surveillance over critical areas;

and equip ground crews with

badly needed equipment for the

anti-poaching teams back home,

we were especially grateful to our

sponsors Pro sano Medical scheme

and Altech Netstar for making our

incredible adventure possible.

Of course, there was also the fun and

adventure of taking a 17-year-old

Land rover through Africa. The old

girl never gave us a second’s hassle,

rumbling into life and running for up

to 10 hours a day without complaint.

Okay, so maybe there was that water

crossing in Mozambique where i tried to drown her during spring high tide, but it was nothing a little

Q20 water-displacing spray couldn’t fix.

We made some incredible friends, delivered riskAFriCA magazines to out-of-the-way insurance readers

and made a tiny difference to one little girl and her school in Zambia. And, of course, we provided the

tools for crack anti-poaching teams to win the war on rhino poaching. All-in-all a pretty satisfying three

weeks’ work.

“We heard that our efforts would make it possible to equip anti-poaching teams with ground-to-air communications; pay for a

pilot to fly surveillance over critical areas; and equip ground crews with badly needed equipment.”

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Thanks to the following for supporting

risksA and the Put Foot initiative.

Alan Stitzer

Altech Netstar Staff

Andy Mark

Brokersure

Carel Nolte

ETANA

Johan Barnard

KimGallus

Nick Evans

PG GLASS

Sandra Dunn

Steve Symes

Tracy Feakes

Willis SA

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146 riskSA Magazine

ThE brOkEr’S

WiFE

A comedy of errors

Did you hear about the recent claim involving a

truck driver, some sheep and a shotgun? A truck

driver got lost on a farm at night and took out a

herd of sheep. The farmer started shooting to scatter

the sheep, but the driver mistakenly assumed that

the farmer was shooting at him and so kept driving,

killing even more of the unsuspecting fold. The

farmer’s insurance policy only provided cover for the

first lot of sheep that were killed and not the second,

possibly because the farmer unintentionally played

a role in their demise. Now there’s one to stump a

claims clerk.

The fabulous 40sI’ll never forget my 40th birthday party. My then

husband threw me a massive bash at the Palazzo

in Montecasino and it ended … well, I can’t quite

remember how. It turns out I’m not the only one

who likes to party. Kim Hatchuel from Wheels

Underwriting Managers and Stephen Hanssen of

Catalyst Insurance Consultants celebrated their

40th birthdays on 29 May and 1 June respectively.

Sources close to the two said that the morning after

the night before was not very kind to either of them.

For the young and beautiful

A little birdie told me that some of the young

bloods in the industry are launching the under 35s

club once again. I think it’s a brilliant idea and I

remember, only vaguely as it was some years ago,

when the industry used to have a club like this. We

had such fun. If you’re lucky enough to fall into this

age group, look out for an upcoming Facebook

page. I do hope I’ll be able to sneak into a few of

their events; perhaps after I’ve gone for my regular

Botox shots.

Of leaks and Land Rovers

I’m not supposed to know what went on during the

Put Foot Rally where our boys helped raise over

R500 000 for charity. Who would have thought that

the ‘what happens on tour stays on tour’ poppycock

they drummed into us at boarding school still applies

to adults. Anyhow, little did the boys realise that

there was some leaked footage on the ‘Net featuring

RISKSA marketing director Michael Kaufmann with

a ‘leaked’ appendage showing through a tear in

his jeans after white-water rafting the Zambezi. The

poor waitress couldn’t bear to watch as she cleared

the table after the event. Tut-tut Michael, really.

And then there were reports which filtered back from

the event that despite travelling 8 970 kilometres

without missing a beat, the RISKSA publisher

managed to flood the electrics on Mad Max, the

team’s uber reliable 17-year-old Land Rover. This

ordinarily wouldn’t be a big deal – a quick squirt of

water displacing silicone I hear is what is required

in those situations (and silicone has plenty of other

uses too I might add) – but no, what warrants a

mention in this instance is that fearing a notation

in the ‘penalty book’, Andy had no problem with

encouraging a blonde passenger to sit behind the

wheel in case witnesses came by. So sorry Andy, but

nothing misses the attention of the Broker’s Wife, my

spies are everywhere.

A wee too much wine

After a recent industry event, some poor

dear from a prominent insurer, let’s call

her the Vineyard Vamp, had a bit too

much wine to drink and drove her car into

a nearby vineyard. While the damage to

her vehicle was R20 000, the little ‘oopsy’

ruined a special cultivar and caused well

over R150 000 damage to the vineyard.

I do hope the farmer had crop insurance,

and that the Vineyard Vamp had some sort

of liability cover in place, too.

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